On Don Bright & his trading methods

Discussion in 'Prop Firms' started by Lucias, Jun 15, 2011.

  1. Lucias


    I thought I'd list a collection of quotes that traders have told me about Don Bright or his opening strategy. Also, he has a contention that traders don't call direction and I feel I'm very good at that, so I'll include quotes about that. I'll not list sources but you may find them here on Elite or on the web or in some cases they were from personal friends. Quotes are just estimates, I don't remember them exactly.

    On Don Bright
    A trader I respect to the utmost said this,
    "If he were so profitable why would he need a pikers 25k?".

    A day trader I highly respect said this,
    "Don Bright is the real deal. If you just do exactly what he says."

    "Don Bright is one of the good guys."

    On the opening only strategy
    "Ask Don how many times his daughter blew out her account trying that."
    "The opening only is another gimmick. I knew guys who made millions doing that who won't try it today because there isn't any money in it."
    "Yes, some NY firms specialize in that."

    On calling direction -- this is rather important to me because I excel in this.

    A trader I respect to utmost said,
    "Most of the traders (I know) at Chicago firms focus on directional trading."

    Don himself has a negative view of calling direction and calls is gambling.

    Maverick said,
    "All the Chicago firms are doing spreads/pairs just Bright focuses on that more." I find this at odds with what my friend said about the Chicago firms, an expert on that. So, Maverick if we can get more info then that would be very nice if you can expand on that. Maverick also suggested that using a hedged directional plays were effective but not the pairs trading for mean reversion.

    A quant I know said,
    "I'd be surprised if there significant edge in pairs because that's been around for years. Probably have to look elsewhere.."

    A professional full time systematic futures trader said,
    "Pairs has a very low rates of return."

    Maverick also said,
    "Oh really Don, you made money trading stock or was that arbing options?

    Collating all the information together, my best guess is that Don Bright is a very good broker -- above the rest but a broker. There doesn't seem to be a lot of confidence in their proprietary strategies. I think it is a very good question why they claim to be the floor trader model when it is not obvious what type of floor trading benefits they have, i.e order flow in the pit or whatever and why they claim to be a prop firm when they don't provide all the firm capital. They claim the floor trader model but floor trader means you get CME seat right? It has to mean something. It means you are in the pit. I don't believe Bright provides free CME seat?

    The evidence seems to suggest the opening only strategy sometimes work and sometimes doesn't. It used to work better in the past -- probably has a huge tail risk associated with it. I doubt many of the best traders are making their profit from that.

    One more thing that is interesting while Don says "we risk our capital" basically on you, the truth any losses come out of your pocket. So what is very interesting is that if you choose this strategy then basically you are risking your money on it when even Bright doesn't consider it valuable enough to keep exclusive to themselves. Basically you are trading a strategy that they are giving away and don't trade completely. So, in other words you take the first 25k of tail risk. Very interesting and quite at odds with what they claim.. you take the first 25k tail risk, they take the rest. This is not exactly what the promotional literature sounds as like. I also find it a good question why Bright wants the 25k if they are such great traders. It is a good question and I know Bright has talked about 10k (on here) but every time I email him about that then he explains that is only for select cases.

    At any rate, if such simple methods really worked that well then I find it very odd that I spend my life time become the best at reading the market when it only it took the ability to set limits at the open. Also, it would make all the other traders who do own research like Tudor look very foolish too.

    Look forward to discussion on the opening strategy, % of directional plays in prop firms, etc.
  2. emg


    More than 90% of small traders lose. They just lose!
  3. Maverick74


    Hmm, looks like I might have to go back into the witness protection program. LOL.

    I'll address the quotes I have made.

    The prop firms in Chicago specialize in spreading futures markets for the most part as well as options. This is not really the same thing as pair trading but both strategies fall under the stat correlation umbrella. Over the years the space got very crowded and the returns were getting miniscule and firms were forced to trade with greater and greater leverage.

    Market forces are now pushing a lot of these firms back into the directional space, or what I like to call, the "risk space". Most prop firms in Chicago now do a little bit of everything. They do your old school stat correlation, directional stuff, even global macro stuff, market making and of course HFT.

    Stat correlation was a very natural space for the Chicago firms to get into due to their low costs, their technology and their access to all the various exchanges.

    Look, we all know that Bright Trading is in the brokerage business and there is nothing wrong with that. The Brights have made a lot of money over the years on commish and to their credit they came up with a genius model with the pair trading as they got twice the vig with half the risk. They don't make anyone join their firm so the trader has to take responsibility for their success at Bright Trading.

    If I had to take a wild guess how much of the Bright's net worth came from what they made on the floor of the CBOE and their commissions as a percent of their total, I would say it's about 90%.

    They had a license to print money back in the 80's on the floor of the CBOE and of course the commission model is a money machine. The way I see it the commish model gives them a free call to take some punts on some size trades that Bob likes to put on from time to time and it gives them some flexibility in backing some experimental programs.

    To their credit, the Brights have persevered. They discovered the holy grail in this business and it's something that everyone on this board can learn from. If you keep your risk down and stay in this business long enough, you start to see all the angles. And your experience allows you to profit from that. But you have to put in the time, a lot of time.

    A lot of guys are looking for the quick buck in this business, but the real money is made over time. Don and his brother have been in the business since the 70's. Almost 40 years. While everyone else on this board is too busy trying to pick tops and bottoms, Bob and Don opened up shop every day with a sign that read, "Yes, we're open" and they stayed open for 40 years.
  4. LEAPup


    I don't trade the open. Just doesn't work for my personality. Some guys can, and do well. Just not me.

    As far as Don, I have exchanged messages with him numerous times, and if I were to U4 with his Firm, he's always been very flexible with my trading style, and is ok with me holding overnights. He may not do that for brand new traders (I wouldn't), or traders who have excessive drawdowns, but for the style I have he was ok with the above.

    He seems that he would be very hands off as long as I wasn't sounding any risk alarms.

    He likes to trade pairs, but not all of his traders trade pairs. He seems like a stand up guy to me.
  5. Of course they do, that's the point silly! Always new blood coming in everyday....and the cream will rise to the top in every class, that's just the way it goes.

    You took your lumps...now it's time to move on?

  6. Trying it today, by hand? Sounds like a good way to learn trade management.
  7. Wow, my name on yet another ET thread, I am either honored or cursed....and I have Maverick on board with some solid reasoning again.

    First and foremost in trading, IMHO, is "change" and "adapting" - having gone from options to futures, etc. all the while trading equities in many forms....I have to say that it's not just the instrument or the strategy...because, for us, both have changed a zillion times over the years.... traders really need to stop trying to find "a way" or "the way" to make money... be open to see what simply is working in the present tense. This is one reason why I am so skeptical of the books about "how I turned XXx dollars into XXX millions" (back in whatever decade)... this is just silly. Comparing the markets of 2008 to 2011, must less trying to compare 2011 to the 1990's or 1980's..come on everyone, we all know better.

    I have been fortunate, in so many ways... I have a brother and a firm with a lot of successful traders...so I can easily see what is actually working vs. what so many "wish" would work, based on their history or books, or whatever.

    The opening strategy is still working for many, but many have found that the "throwing spaghetti against wall" simplicity of the old days is not there...we have to do more work these days. Pairs are working, mergers are working, dividend plays are working, MOC plays seem to be coming back (again more work involved).... order routing has come back into the forefront due to the changes in January for pay to take liquidity etc.

    I realize that I've been around a long time, but I still think that some of you may enjoy reading (maybe "re-reading") this article I wrote back in 2003. http://www.stocktrading.com/adaptingx.html

    Anyway, try to stay current, keep your alternatives open, and never close your mind to learning from those who actually do well... I can say with certainty, that they continually "adapt" to the markets...

    all the best,

  8. What is the intention of this discussion-

    I am slow fill me in ... are we bashing bright or asking a question

    are you debating the Opening only trading style? are you debating pairs-

    is it a quote hightlight reel? where are you wanting to go with this and why?
  9. Lucias


    @Don Thanks for that. I find that true and useful.


    No the purpose was not at all to bash Bright. The purpose of this thread was 2 fold: to gather more information from both Don and Maverick and second to point out what I feel is an inconsistency in Don's story, which obviously bothers me. If the Bright narrative was that he was an above board broker for the semi and professional trader then that would ring very true based on the traders I've spoken with. However, the Bright narrative is in my opinion a different narrative.

    And this is kinda what it gets at, is that you take the top prop firm firms then they pay a full salary and really do risk their money on you. Example would be First New York. Your second tier props either pay a draw or risk money on you without capital contribution: examples would be Chimera or Kershner. You see Bright claims to be a proprietary firm and technically they are. But, they aren't in the sense that we use them.

    Bright talks about the 100% payout (or did before JVC/new rules). But, you see that cuts both ways. A real prop firm has a VESTED interest in your success. What is Bright's interest? It isn't to see you make a huge profit and take excessive risk. Brights interest is to acquire break even traders. I'm not saying that's Don's personal interest but his BUSINESS interest is to have break even traders. Traders who don't take any risk but make enough to keep trading. Now I expect some 2nd or 3rd tier firms are just interested in break even traders too. But a firm paying a salary at 50k per year has a very different sort of interest in the trader then Bright does. This is very relevant. You, also, see firms who make most of their money from training which is also not the "true prop" model. It isn't about whether the training is good or not: it is about the business model. What is the business model and what is the business model's primary interest.

    Bright talks about the floor trader model. But floor traders have unique edge that I'm not convinced Bright offers. For example, a floor trader in the e-mini can get member rates and cheaper commissions. I'm not an expert on this but I'm not sure what type of exclusive floor trading edges they offer. Don, I'd like you to expand on what FLOOR TRADING specific edges you offer.

    Don, you may use this to talk about your JVC program. I'd like to learn how that is going? What is the issue on the payout % as of now, as well?
  10. Our business model has been, and still is, to allow traders with limited capital to have access to capital, and full market access. the so called "true prop" model is fine, but it appeals to a different sort of trader....the employee type, who is looking for a job..which is fine....our model appeals more to the entrepreneur type who prefers to invest a bit of their own money to make money within a solid structure of professionals.

    There are a few firms that will still "hire" traders, but very few indeed. And, the zero down 30% or so type profit share firms may still be around, but most serious traders see the downfall of giving away most their profits in lieu of putting up a few bucks of their own, as most serious business people understand.

    I remember, way back...waaaay back, when my brother bought a lounge (ok it was a beer bar, LOL), and the pool table vendors said they would put in 3 tables..."free of charge" and only keep half the money coming in. Well, my brother figured that in a couple of months he could buy the tables, and keep all the profits....a "no brainer" as they say.

    What really concerns me, is that so many people have no respect for their time, their education, their discipline, and all the other things that are required to make money. They are willing to spend years giving up profits, using the excuse that they have "nothing at risk" well, in my opinion, my time (as is my traders time) worth a lot....and should be considered in any business venture. OK, put up zero, lose only a year or two of your time in a venture where the firm will only keep you if you make money, or they simply fire you. At least when you're a real partner in the venture, YOU choose when you want to go on, keeping your profits, or when you choos to leave.

    One old example: Put up zero, make 10,000 per month, give your firm 70% (pick a number), after a few months, you actually have Tens of thousands of what would have been your money in the hands of the firm anyway...why not just put up a few bucks into YOUR business....take money out when you want....once a week or whatever...not be in the hands of a "quasi-employer".....

    Anyway, as I've shown several times... different strokes for different folks...LOL.

    All the best,


    Edit: the firms that pay $50k or so are great, and I like to think that FNYS is one of the best... I haven't checked in on them recently, but I recall that they are terrific. The son of the president (not sure of exact title, but main guy) actually did his internship with us a few Summers back.

    Hey Maverick, please tell me where you agree or disagree... your opinion means a lot, seriously.
    #10     Jun 16, 2011