hedge fund trader vs. daytrader

Discussion in 'Prop Firms' started by flybynight, Nov 2, 2006.

  1. Hedge fund traders aren't asked to put up capital, and they make a base salary. Hedge fund traders can take any time frame they see fit on a given position, and have unfettered access to systems, research tools, etc. What's the advantage of working for a daytrading firm? Are daytraders basically not good enough at their craft to trade at a hedge fund?
  2. MTE


    Hedge fund traders can NOT take any time frame they see fit on a given position, they trade according to the fund's strategy.

    Hedge fund traders can be daytraders and daytraders can be hedge fund traders, the two are not mutually exclusive.
  3. Our experience over the years has shown to be the opposite, for the most part (there are always exceptions). Good traders seem to prefer to keep all their profits and expand by hiring others to help with longer term strategies, thus developing more income streams. We have had several traders who, for whatever reason, just couldn't seem to make much money...and they went off to start hedge funds (of sorts, some call getting money from friends and family a "hedge fund"), generally with disaserous results.

    Now, that being said, if you're able to raise $100 million or so, then it makes sense...if you think you can reall beat the street with results, and keep the 2% no matter what. But to borrow a couple million and give away 80% or so, just doesn't make sense to me (maybe it's just me).

    I agree that someone who just "daytrades" is going to have a serious problem, no matter what. The "day of the daytrader" has been long over. Good traders adapt to market conditions and change strategies as more opportunities come along. Our top people have a lot of automation, engage in long term strategies such as pairs and mergers, and still try to maintain a "surrogate specialist" technique to provide liquidity to everyday markets.

    The only two ways traders make money, when all is said and done, is to provide liquidity (not the pay for liquidity sense, but that does help now with ARCA paying for listed stocks)...and by seeking our and correcting disparities in pricing between stocks and sectors (pairs and mergers).

    I realize that there are still some firms that don't allow large overnight positions, and are clinging to the "daytrading" strategy, but more and more the traders are coming around, doing a bit more work, and expanding their horizons.

    All the best,

  4. Hedge fund traders aren't asked to put up capital, and they make a base salary.[/QUOTE]

    Why make a base salary when you can trade and make much, much more?

    Hedge fund traders can take any time frame they see fit on a given position[/QUOTE]

    So can a prop trader.

    and have unfettered access to systems, research tools, etc.[/QUOTE]

    So do good prop firms.

    What's the advantage of working for a daytrading firm?[/QUOTE]

    Keeping 100% of your profits (as opposed to the usual 20% for HF managers) and being your own boss (no investors to deal with).

    IMO, I don't think it's worth it to start a hedge fund unless you can raise a MINIMUM of 10-15 million.
  5. I am talking about working as a trader for an established hedge fund with at least $100 Million under management (a very small $ amount these days). I receive a base salary of say 100K, and a bonus that is typically 10% of my profits. So, if I am responsible for $30 Million of capital and can make 20% net of commish on that money, I'll get a bonus somewhere in the $600K range. Please explain how I can daytrade on a few million of prop firm capital and realistically take home that same kind of income?
  6. the differences the way i see it------

    day traders work for themselves

    day traders risk their own capital

    hedgE fund traders usually have more money


    day traders children are generally far superior in sports
  7. lescor


    Don and Longhorns are right on the money. I put $2-5M of the firm's money into play on an average day, divided up into multiple strategies over multiple time frames. If you work out the ROI on capital deployed, it's probably only about 10 or 12%, with very small drawdowns due to the relatively short term nature of the trades and the strategy diversification.

    If I can do 12% on $4M, or 1/2 a million a year profit, why would I want to give away 80% and make only 100k? The advantage of prop firms is the leverage IF you know how to use it. Taking huge directional bets is not the way to do it.

    Running a fund makes no sense unless- a) you can raise a huge amount of money AND your strategies are scalable enough to take advantage of it. b) you aren't a very good trader, but can still raise a lot of money and make something on your 2% management fee. c) you are worried about blowing out and would rather risk someone else's money than your own. d) you trade for reasons other than money (you think being a HF manager carries some status or satisfies some other inner need you have).

    I know several guys making mid 6 figures a year trading prop and using the firm's capital at little to no cost to them. Seems like a no-brainer to all of us.
  8. "I agree that someone who just "daytrades" is going to have a serious problem, no matter what. The "day of the daytrader" has been long over."

    with all due respect, this is utter rubbish.

    the day of the daytrader is not over. one merely has to (had to) adopt to a chang(ing) paradigm and adapt your methodology to the current market.

    people who are still stuck in a 90's (tech based) go-go high beta bull market are gonna have issues playing failed breakouts, etc.

    but as somebody who makes a nice living daytrading, i think your bias is obvious, and maybe a result of your business methodology (my way is the only way) syndrome.

    these are the same markets they have always been in that they are 2 way auction markets always trying to discover value.

    personally, i trade index futures, and am incredibly thankful for the opportunities present in the capital market.

    there has NEVER been a better time to trade, in terms of technology available, speed of connection, transparency, etc.

    but yes, you cannot apply a 90's bull market methodology to this market. the market is ever changing. but it ALWAYS offers opportunities to a trader willing to study his market, adapt to it, and trade what he sees.

    and the same psychological (and to a lesser extent - economical) principles that result(ed) in trading opp's since the dawn of 2 way auction markets continue.
  9. lescor


    If you can daytrade $30M into $6M, it should be even easier to daytrade $3M into 600,000. But if someone will give you a $30M line with a salary and no risk to you, it might be a good gig.

  10. Well nobody here is getting offered that deal. That’s not common and why do you think someone would trust you with 30 million bucks? Why do you think it’s so easy to make 20% off that to boot. You sound like a kid.
    #10     Nov 2, 2006