Hi guys, I just read Market Wizard Tony Saliba's profile. Here is a part of it: "I asked the guys in the [broker's] office, Who makes all the money in this business? They said you have to be on the floor. Right there I decided to go to the Chicago Board Options Exchange. On the floor, I met one of the traders I had caddied for years ago, and he grubstaked me with $50,000." It seems to me, the key to making a lot of money trading is using OPM (Other People's Money). What are some ways to find investors/backers to fund my trading? From your experience, are they typically traders too? or are they doctors, lawyers? Thanks
If you are trading liquid products, then it's true. You make more money by simply trading more size. No-one is going to fund a random peasant though. If you can't produce consistency on a small account, you are unlikely to perform any better with larger account. You need a proven track record of your performance before even thinking about this. We like to get ahead of ourselves though
Warren Buffet, at his office with coworkers, once they came to him with bag of papers on potential investments. He quickly run through all of the papers, turned to them and said no. People in a slight shock : ,, - But Warren, those are great companies'' ,, I know, i know...But come back to me, once they have first earnings''. When you start showing fruits (profits), birds will fly to you themselves. Im not sure if going for the big accounts right away, is a good approach. More likely - unlikely to come into reality. Better let it grow, start small. When i took some money from my mom, and brought her back some profits, it became way much easier to persuade her, to give me 1/3 of her life savings. My grandma joined as well. Sisters family about to come into the party. Then other close relatives will follow, meanwhile, some friends are ,,waiting in the line''. And one day... Then, most likely, you will get those doctors and lawyers. But it's only my perspective, maybe you will travel straight to that point. All the best tho.
You just ask them. One of the New Market Wizards said: There are three types of people: 1. Will not give you money no matter what. 2. Will give you money after asking questions (doing some DD) 3. Will hand over money with very little or no questions asked. You want the third kind, just ask enough people!! The third kind must be the type who fall for those nigerian scam emails and send money to complete strangers without even knowing or seeing them. Also the type who fell for the infamous south sea bubble scam: "For carrying-on an undertaking of great advantage but no-one to know what it is!!" People actually invested in that one.
Backers are generally from the successful trading community. Easiest in cities that have had exchanges or trade desks at one time. What distinguishes you from the other folks looking for backing? Be prepared to answer that(not here). Look at the career listings on Bloomberg for Vancouver - if you need to make a friend with Bloom access. Look at the Family Office community - Seattle is pretty much the Capital, but it also has a great many well-pedigreed folks. That sector has been growing like a weed. Consider an entry-level role to get you in the door. Tony was trading in Teledyne then and went bust a couple of times before he figured it out.
Exactly that. We back a fair number of new(ish) traders, mostly guys running systematic or "process-driven" strategies. It's a process, a lot of questions to be answered and a lot of concerns to be addressed. I'd venture about 5 out of 10 people we talk to have no alpha and get weeded out right away. Another batch gets weeded out when they don't want to have a serious conversation about risks or aren't able/willing to explain what they are doing (without going into details). That leaves 10%ish percent of people who are worth investing with.
How do I get people to grubstake me? AKA how do I find investors? Brag about investment performance at family and friend gatherings! That I find is the most sure way of attracting investors. Drop a few %'s and they will flock to you. Good luck!! But if you are a good trader though, you make money either way whether it's YOM (your own money) or OPM. Money is money, no matter the source, the key is growing it.
I was offered a stake of 1mm and turned it down cause I think I would have lost it. Instead I went to work for the trader who offered me that as his systems guy. Glad I went that route cause I learned so much about really making money and more the whole psychology you have to have to be successful trading. During the years I was employed, we often funded several traders who looked good on paper and most failed and a few over performed. But "NO ONE" lasted past the initial first few months, the longest was nine months. They all blew up eventually, we learned valuable lessons about better due diligence. To get back to my turn down of 1mm and why I was offered that. I was also one of the guys this big trader threw money at, but I was different. They had requested to shadow some of my trades and I let them for several months, little did I know they were trading size where I was trading one lot's. At first they offered me a job and when I turned that down they offered me 1mm and then it struck me. I wanted to work for this fund and learn their secrets rather than take money and go back home. I am glad I took the job and not the money, I was only offered the job because they had a huge desire to automate and I could program. It was a win win for the firm and myself, I was given money to trade immediately and was flipping 150 - 30yr bond at a time for the firm and allowed to trade the spoos all I wanted in other experimental accounts with absolutely no pressure of profits or losses. My only responsibility was to be truthful and diligent with my research to find the holy grail. A holy grail is a set of rules that are followed which results in actual real money profits that can be replicated over a long period of time with risk parameters that are tolerable to the end user.