I don't have any experience trading prop. That said I have a good deal of experience in business and a good deal of trading experience. I find your opinion odd. Assuming a trader walks in the door with a dynamite methodolgy that not only puts up big numbers on the board but fits a risk profile they can live with, can you explain to me why they would not put someone on reversing engineering it? Even if that process only revealed certain aspects that allowed them to tweak things they were already doing it would have value. What am I missing here?
I agree. it's very easy to reverse engineer a strategy. You can start by narrowing the type of stock they are trading, the ranges, the volumes, the spreads, etc and then see the chart patterns to figure out their entry/exit strategy. in the prop world, the way they put their order in also implies a lot about the strategy - the routes they used, the price action, etc. etc.
could always acquire a loan from friends and family.., lets say it totals 100k in loan money, Pay them 5% interest per year (5k), then you add your trading capital (35k for example). then you have 135k of trading capital which translates to 540k of standard buying power (4:1 margin). somehow guarantee to your friends and family that your 35k of capital will be the first to disappear and you will return the 100k plus 5k in interest. go for 100% on your capital..thats a 135k profit target then pay your investors 5% interest = 130k.
You can put a caveman on inventing a rocket ship, that doesn't mean he will succeed. Reverse engineering a truly original idea is the stuff of hack science fiction stories, not real life. If reverse engineering was so easy, there would be no need for industrial espionage. Just look at what the competition is doing better than you and magically "figure it out". LOL
Imdustrial espionage, by and large, is meant to fugure out what your competition is working on now that will be released next year ... not to figure out what they released last year. A freakin' nine year old can figure that out! And who said we were talking about a truly original idea? It could well be a tweak (or two tweaks) to an idea that many know about but those tweaks could be working gangbusters now. Those tweaks could be the afterburners. Nothing lasts forever but no one in their right mind wants to shar something about a trade is very profitable in an instrument like CL that has limited liquidity at times. And we are not talking about cavemen. We are taking about guys that own prop firms and have access to other guys that went to schools like MIT and CalTech. Cavemen? Not so much. Why throw out the straw man argument and make a fool of yourself? Just sit tight and shut up until you see a subject you know something about.
Look, as someone who HAS traded prop for over 10 years and knew the owners of all the firms I worked for very personally and intimately, trust me, they have no interest. One of the reasons they have no interest is because it really doesn't exist for the most part. The only edge I have seen that really lends itself to this type of stuff is trying to front run someone like Carl Icahn. If you hear so and so is looking to accumulate a large stake in say TSLA, and you know that TSLA has a large short interest and small float, that information is valuable. But seriously, most good traders at the end of the day are just good at execution. They have a good eye, they recognize patterns. They at times take large calculated risks. There is no magic formula. No moving avg combination, or candlestick pattern. Guys like to believe in this stuff for the same reason religious people like to hear stories about the Virgin Mary was seen in a cloud formation. It gives them "hope". Nothing wrong with that, but in trading, you are just going to chase a rabbit hole. I think I told this story many times on here back when I worked at one of the most notorious daytrading trading firms on Wall Street, I had a guy in our group who was struggling and I was making bank every day. So we sat the guy right next to me. I turned my screens so he could see them. I even called out every single execution as I hit the button. All he had to do was piggy back. At the end of the day, I made money and he got killed. It's a lot harder then it looks. The truth is, having been in this business as long as I have, these prop firms just want the commish. It's just too fat. That's the easy. It's stupid to take risk and throw the free money away. I mean think about it, if you had a risk free way to make a shitload of money every day, would you honestly take swings at stocks or Gold or Bonds or whatever? A bird in the hand...
Mav, I'm not suggesting that there is a "special sauce" that will make anyone rich or that two guys working what appears to be the same way won't have radicaly diferent results but I can -- and do -- understand why some guys like to be discrete about what they do and how they do it. And this nonsense that has been said about how hard it is to reverse engineer is real idiocy. I once saw a picture of an onion that looked like Groucho Marx but no Virgin Mary.
This isn't 1999 anymore. You assume that the trades are being copied manually and not using an algo that interprets data from the top performers. I don't think reverse engineering strategies is a common thing but the technology is there for programs to be run to copy the performance of profitable traders. The same technology is used in risk control at firms everyday and could be implemented if the broker chose to you use this data. With 95% losers, it's not hard to find the consistent performers.
OK, let me try this approach. There is a trillion dollar industry out there called the fund of funds industry where professional money managers actually seek out and allocate funds to the best hedge fund managers. They go through their track records with a fine tooth comb and select only the best of the best. And the result? LOL. In a word...lousy. Horrific under performance. Even without the added fees, almost none of them outperform the index. It's not as easy as it looks.