A matter of perspective and the trader's view of him or herself. Some people like the security of a job type arrangement, some are willing to take more risk. My brother was an accountant for a Fortune 500 company for 10 years when he decided to pack up his wife and 3 young children to move to Las Vegas to see if he could make a good living playing blackjack. After a year of playing small (proof of concept) he moved up his bet sizes and made $millions over the next couple of years. It became more and more difficult to play due to being barred everywhere, so after 3 years he moved his "game" to the Options floor (1978), brought me in 1979. We've been very fortunate, but without that feeling of "risk reward" we would likely still have jobs (I was in public accounting, yuk, LOL). We had to buy seats of course, but the same business model we engage in now is what we enjoyed back then. If a person wants to become a trader, I think that the same route Bob and I followed is a good one. Stay independent, get free or cheap use of adequate capital, take some small amount of risk, and work your a$% off for a few years. Much better than attempting the strictly retail course, IMO. As exchange members we were able to do things that retail could not, which obviously helped us. Same today, again, IMO. Cons of our business model? Depends greatly on the Firm, of course. You have some monthly overhead, and you may have to pay some exchange fees. Overall pretty minor. And, 99.9% of those who want to get into trading for a living won't be able to find a group with $10million to donate to the cause, again, IMO. It's much easier to start a business with a bit of risk capital (no franchise fees, the money is still yours unless you lose it). Don
A trader with $25,000 to risk is certainly not trying to make 15% per year of course. And, if you used even $5 million and made only 10% per year, you make $500k...after a while it adds up. $25k downside, basically unlimited upside with proper scaling and risk control. (Still a good discussion, I'm won't lose my bias, and I cop to it, but again, we were both on the other side for years). Don
I totally agree about meeting the coolest and strangest people in the hedgie world. every character and international financial rouge with a phone is trying to get a piece of the pie. some real...some far from real but all have tales to tell! this is the greatest business in the world. however I disagree with one being able to demand those fees just based on performance... it takes more than performance these days to raise capital and demand huge fees....you need an edge and a unique strategy to get anywhere in the hedgie universe. performance without edge is written off as chance or a lark unless its over a very long period of time. good luck! surf
Don, What are the requirements for joining your prop firm? Also, under which conditions would you allow a new trader to trade overnight in the futures, forex, options & option futures market? Thanks, Walt
Basic around $20K, Series 7. Never ever Forex, except for FXE, FXY, etc. for those who like to trade currencies. Options are ok after a very short verbal discussion. Overnight futures? Doubtful, even the Bright's rarely take that kind of risk. Use the SPY, DIA instead. Don Edit/Add: Please understand that we simply put together the same business model that worked so well for us for so long. Except our traders don't have to buy seats on the exchanges to get the same benefits. I'm happy to discuss specifics with anyone on the phone, I think we had a pretty good discussion here, on topic.
Name a prop which will allow you to take $10MM directional positions and allow 2 months of 4% drawdowns = 800k loss.
Now, this IS the MOST important factor here. IMO maybe 1 in 10,000 traders could get 10mm to manage! The other benefit is the hand holding of the prop. Not easy to manage an HF and trade at the same time. Now on the other hand, what is exactly the benefit of using a prop anyways? I am totally against utilizing max risk. After a couple of decades I have learned to use the Min. possible leverage but to increase the per trade profit. So although I am doing like 2% avg. daily in 08 on a small 10k pilot account but would be excessively stressing myself to increase the capital since the additional leverage and risk would totally cloud my judgment as it has in the past when traded 30 ES contracts. My other question to Don is, if 95% of traders are unsuccessful then how does that affect your business and the risk of providing them the leverage unless you strictly cut them off period as soon as their deposit runs dry?