Please review I welcome all advise

Discussion in 'Prop Firms' started by bkktrading, May 27, 2009.

  1. I have been developing a plan to trade in Thailand. In my previous posts I discussed my desire to trade in Bangkok. Well the plan has taken a turn. Now I am looking to open a proprietary trading firm in Thailand. Please review my business plan. I am looking for any constructive support or criticism. If you would like the data that I used to present this information I would be happy to share. Also if there is anyone with expert advise please PM me.

    Below is a very brief overview of my business plan. I have 2 spreadsheets to support the cost saving I have listed below. The reason I am confident my business plan will be successful is 1) I have over 10 years experience trading futures, 2) I understand how Thailand works, and 3) I have a background in education.

    1. I have traded futures for over 10 years. My experience includes E-mini, interest rate, and energy futures. I believe my best asset is my understanding of the mind of the successful trader.
    2. My wife is Thai. I am going to move my family to manage the firm. I have been working on this business plan for over 2 years.
    3. I have a degree in Education. I am currently taking courses in Special Education. I know how to train and motivate traders.

    You asked what the edge would be?

    Managing expenses is the edge (Strict Money Management)

    1. There is a large pool of unemployed college graduates who would work for $50-$100 a month with 10% commission. For example, my wives (she is Thai) cousin is a college graduate who is making $200 a month WITHOUT POTENTIAL COMMISSION. All new traders would trade on the simulator until they showed consistent profitability. If I started with 10 trader trainees it would cost $1,000 a month.
    2. KEEP COST LOW INCLUDING DAILY RISK CAPITAL. The trader would have $100 a month draw. As a result, there is no hurry to force profitability. I think the best strategy would be to have very small loss limit - per day and per month. All beginning traders(showed profitability on SIM) would begin trading with $100 daily loss limit. Their monthly loss limit would be 400-500. If they hit monthly loss limit they go back on the simulator. Ideally 1/3 p/l ratio per day would be goal(loss limit $100 profit target $300).

    All new traders begin on small tick size contract such as NQ, Emini Dow, 10 year, financial spreads, etc. They have to be able to make 3-5 trades before hit 100 loss limit. For example NQ has $5 tick, $20 point. A trader would have to make 5 losing trades in a row to hit loss limit. LOSS LIMIT INCLUDES COMMISSIONS.

    Very important to hold on to the cost savings. The business plan will have very low loss limit for each trader on daily and monthly basis. It would be very unprofessional to risk employee cost savings with wide loss parameters.

    25 traders averaging $25 profit a day over 250 days firm makes $28,750. (PROFITABLE AT $25!!!!!!!)
    25 traders averaging $25 profit a day over 250 days firm makes $-680,450. (PAINFUL!!!!!!)

    25 traders averaging 300 profit a day over 250 days firm makes $1,651,000. ($1,070,000 difference!!!!!)
    25 traders averaging 300 profit a day over 250 days firm makes $588,300.
  2. tradethetrade

    tradethetrade Vendor

    Hi there, good luck setting up the office. I do own an office here in São Paulo, Brazil so I know more or less what you are trying to do.

    First and foremost, work out all the legal portions of the biz. This was my first mistake. I survived and I hope you too.

    Make sure the biz is legal and that money transfering is done in a sound way. This has to be meticulously studied to avoid headaches especially the currency rates.

    In my country there aren't laws created to operate our type of biz.

    Having this part solved, then you will have to be really good to keep your traders motivated. Looks like you already have a good set of skills there.

    From a personal perspective, don't become too close to your traders and treat everyone professionally and just professionally. You won't believe what people can become when money is involved so treating them like employees will spare you some grief when they are told they suck.

    Be flexible with the stop losses you set because the market as you know more than I do can get very crazy or very tame.

    Let me know how it goes. Bangkok is cool.
  3. While I haven't been in this particular business, I thought I'd still add my thoughts from experience in similar lines of business.

    Your biggest expense will be your people. The bad ones blame you and leave. The good ones get good and leave. Expect high turnover.

    Consider a non-compete agreement. Where I live, they're almost impossible to enforce, but at least it is one hurdle that makes the employee think twice about going it alone, or worse, taking your team with them.

    While employees will be a constant weight, risk management will be looming. One hole in your safety net and your company, and perhaps yourself, will be crushed. Do plenty of research on the subject, and design systems that keep track of everything. EVERYTHING.

    Hiring people is often a 50/50 proposition. They guy with the shining resume and personality can be a pile of crap. The goofy teenager can be your prize possession. You just never know until you invest.

    As with trading, attempt to cut your losses quickly, and hold on to your winners.
  5. the idea is interesting, good luck with your plan.
    a couple of comments:

    i am not familiar with the proprietary trading firm model.

    but you need to be able to explain it to the layperson, in simple terms.

    in particular, i could not understand from your discussion where exactly you want your cash flow to come from:

    1) is it (a) a marketing-based model, where you sell educational products, knowledge about futures, or (b) pooling of other people's capital? is it both?

    if you do not have an established brand, people would not want to bring their capital to you, to try their luck at trading. so you can't do both (a) and (b) at the same time.

    2) you need to focus on the markting side of things first, to get the engine running, get some brand recognition

    i think the best way to do it is through the internet, it's inexpensive to establish a site. the problem is getting it filled with good content, and then promoting the site.

    3) if it's a local Thai site, you should know better how to 'pitch' the local target audience

    write some articles, write a book, promote your content, build a brand with some recognition

    4) in the information age, i don't think it's very difficult to build a business from the ground up.

    but you have to know what people want before you do it. get someone to do an inexpensive marketing study on how many people may be interested in your content.

    i would definitely start with a site. it's simple, and you can start building some good content, brand recognition around it.

    you don't have to pool capital, you may sell the content-only project to someone else. like in the US, some trader sites, built from the ground up, for example,

    both very good sites, built by individual traders - got into a deal with stocktwitts. i don't know what exactly the deal is, but i think they must've capitalized on the quality of their content and brand.

    another example:

    all of these projects have been built from the ground up, by individual traders.

    so your plan should be:

    1) establish a site (maybe even a forum, why not)
    2) write educational content, articles, books, videos
    3) build brand recognition
    4) sell project


    5) get additional capital into the project (pool traders' capital, or partner with a larger firm etc)

    Good idea! Good luck!

    Varima Garch
  6. This is not an edge, plain & simple. You need an edge you can teach to newbies. You do not have one. Sorry, but your operation is likely to end in losses, albeit, not big ones.

    This is not a new idea and you're a bit late to the party. This was best executed in a few ex-USSR republics, when there was a simple edge you could teach to new guys.
  7. I actually don't think newbies need to be taught an edge. They need an overview of the markets and their mechanics.

    What is Brian Shannon's edge, per se? None, in the traditional (and probably useless) sense of the word . . . Just quality analysis, not forum blah-blah-blah . ..

    Yet it's a hugely successful project, bought by Stocktwitts . . .

    What is Linda Raschke's "edge"? Being energetic?

    It's all about discipline, discipline and relaxation . . .
  8. No offense, but you don't know what you're talking about.

    I know the region. This stuff is happening there NOW, and it's very vibrant, a lot of opportunities there NOW.
  9. 1. There is a large pool of unemployed college graduates who would work for $50-$100 a month with 10% commission.

    Somehow, I am thinking of the story that if you had thousands of monkeys pounding away on typewriters, eventually they would accidentally type something that made sense.

    I have a feeling several years from now, you are going to regret doing this... [/B][/QUOTE]

    This is very funny analogy :D
  10. Great I do not mind being stupid and in second place.

    Please clarify. Do I not know what I am talking about because plan sucks? Or do I not have idea of current opportunities??
    #10     May 31, 2009