producing volume plus other fairy tales

Discussion in 'Trading' started by andrasnm, Sep 4, 2001.

  1. In chicago amongst the futures community there is a term I use often - "juice firm"

    "Juice firm" supplies the funds to it's commission producers.
    Clearly economically viable traders who trade a lot and trade
    big will be worth to any firm their "weight in gold".
    economically viable means simply not blow out big, break even.
    scratch a meager living in odd months.

    This is repeating itself in the prop firms for stock trading.
    Food for thought, traders. Who do you trade for ? You or the
    firm ?
    Overtrading can make someone rich but it may not be you !!!!
  2. Rigel


    I agree. It looks like many traders are really no more than cheap labor, producing commissions (volume, order flow) for their employers. The age old carrot on a stick routine. It reminds me of the gold and oil rushes. A very few people made a huge amount of money from the gold or oil they found. It was seen to by the promoters that the general public heard about these few wild success stories, that were constantly paraded before them, and would be encouraged to try their luck. The promoters then went into business selling picks, shovels, land, drilling equipment, etc. at huge markups and CLEANED UP. The average prospector ended up working themselves half to death and being CLEANED OUT, physically and financially. When the first wave of prospectors had given up and gone home there was always a new group of green, gullible ones to take their place.
    This is a myth and there are other variations of it in corporate America. I have seen it told to new employees when they go to work for a company. It goes something like this. "Look at Fred. He came to work here 10 years ago and started at the bottom. He worked 80 hours a week for the first five years and made a total commitment to the company and now he's making over $100k a year". Many people will buy into this speal and work their tails off for years, and most of them will end up with next to nothing to show for it. My advice is that you don't rely on promises. There are people in this world who have made a career out of selling promises. Because the promise costs them nothing unless it is kept, they can make many tens of thousands of dollars on each one by simply not fulfilling it when the time comes to pay up. I think there may be a moral to this story and it's that there is really only one promise that you can count on being fulfilled. And you get to figure out what that is. As for your career and financial affairs, manage them according to the credo "money talks and Bull$$t walks".
    :D Rigel
  3. Interesting.... At the same time. If you work hard at anything, and have some mental capacity, you'll be successful. Not just at trading, but at anything in life. If you have motivation, you'll be successful. When I first started, I really spent 15 hours a day practicing and going over every chart and every trade all night long. Now I just do about 20 mins each day besides the trading day, and find time when things get slow to do my "research". I also do maybe one 6 hour session each weekend. I guess in the end it's maybe 8-9 hours a day so I guess I still put in 50 hours a week. Which isn't that bad I guess. I'm gonna do 6- figures this year. At the same time, my broker has made a nice multiple on what I've made this year (which really annoys me, especially b/c they only provide the conduit for me to succeed). That's like owning a business where your rent and utilities are 80% of your total revenue, you end up with just the scraps of what's left of your effort, and the other guys who do almost no work get your hard earned $. Unfortunately, the system IS fixed, and I see no way around it (at least at this time).
    As long as I make more at trading than I can in any other business, I'll continue at this.
  4. carreer or a job they hate. Seriously. I think for a well funded
    serious trader LIFE is a peach. I agree. Just that I know why some
    will take the plunge. When it all adds up it's just as stressfull
    and harder than most stupid jobs. I am a software contractor
    and I have not had a real job for over 14 years. No bosses
    no politics, no BS yet I was striving to be a trader for so long.

    All in all it's all the same, except even when I screw up I still get
    60-90 per hour. When you screw up you could wipe out your
    life's savings, and never make it back.
    And I am a trader if I make money number of years running, I don't have to live on it exclusively.
    I was curious of the average background of the posters here and I admit most a smarter, more educated than the average schmuk out there. What makes you common - I suspect you all hate to have a boss, hate the rigors of working for someone else and want to be rich and free to enjoy it. I had a chance to work on a bank of america basket
    desk for a salary (100k plus) and you know what I turned them down !!!!! why you ask - I have more freedom now than I would
    have working on the desk from 5am to 6pm like a dog !
  5. dozu888


    Totally agree with the previous posts. Just look at the traders on this board... P2 is probably among the top 2% in terms of trading skills, still contribute most of gross profit to the house. Hitman is probably among the top 10%, half of his gross goes to the house.

    Sure, if you work hard enough, with mental capacity and some luck, you can succeed at almost anything... the difference is the odds of success and potential reward. Under the current conditions (market volume and daily range), the odds of success and reward potential is probably not as good as doing multi-level marketing for Avon.

    That's why I have given up intraday stocks a few months ago, and have been focusing on mechanical systems development on futures and currencies, and have been a strong advocate of the above on this board.

    P2, yes, there is probably no easy way to go around paying a big chunk to the house, but at least I think a trader can minimize his effort for the limited reward out there. I mean come on, sweat out everyday like a foot soldier and pay half of that gain to the house? I would rather get an office job.

    Regarding working for somebody else vs. working for yourself, the difference is all in your head. (Please go read "live rich, die broke"... Forgot who the author is, but he changed my view of a job/career and taught me how to work for myself with an office job).


    Just took a look at Amazon, here is the book:
  6. Rigel


    Good points. There are always costs associated with running a business. A trader is successeful, in my opinion, if he is earning enough profit to pay himself a wage that he is happy with and that is at least commensurate with the time he spends at it, while at the same time paying for costs associated with inventory, capital expenses, and overhead. In the trading business carrying costs can be thought of as the costs you accrue by tying your money, your capital, up in your trading account. The reason it costs you money is because that capital could be making money for you if it were somewhere else, like in a CD earning 4.5%, or invested in property. So a trader does have carrying costs. Capital expenses for this business are really low. All that is required is a $900 computer. What I personally worry about a lot, in considering going whole-hog into this business, are the costs associated with overhead. In a normal small (one man) business overhead consists of a telephone bill, electricity bill, water bill, and other assorted small items that rarely total more than 15 - 20% of your gross income. In the trading business overhead consists primarily of commissions, and from what I gather, a lot of traders are paying close to 100% or more of their gross income into commissions. In other words, their overhead is equal to or greater than their gross income. With so many people willing to pay overheads this high, the only conclusion I can come to is that they are not being reasonable. The nature of this business is conducive to unreasonableness. Sort of like gambling. I want to keep this idea constantly in mind, otherwise I will end up working for someone else while at the same time suffering under the false illusion that I am working for myself. That's a trap I don't want to fall into. It sounds like you've avoided it. That should be the goal of every trader. I am mainly papertrading at this point in my trading career. If I can prove to MYSELF that I can profit from it, then I will start trading for real. If the evidence of my papertrading demonstrates to me that I can't profit, then I won't do it. Papertrading is sort of like a business plan. You use it to try and demonstrate the validity of your proposal. In the case of a trader, the person you demonstrate to is yourself. This is why it is often said that successeful trading has a lot to do with psychology. In order to be succcesseful a trader needs to take a very close, and sometimes I believe painful, look at themselves. I don't believe too many people are willing to do that.
  7. RE: Paying a big chunk to the house ------ I certainly agree wiuth dozu, the futures are the way to go from many standpoints, most definitely including commissions. At IB you pay $6 a round turn ----- that's 2 complete trades for the price of ONE SINGLE e-mini TICK. I can't imagine paying anything even remotely close to 50% of my gross in commissions trading e-minis. 10% - 15% or so would be a reasonable maximum on a choppy day with a lot of small gains. Most days would be a significantly less. Futures are indeed the wave of the trading future, at least for daytraders, very much including the soon-to-be-introduced single-stock futures.
  8. Excellent topic, andrasnm.

    Any trader who is forced to (over)trade as a result of informal or contractual pressure by the trading firm SHOULD LEAVE IMMEDIATELY. Commissions are a necessary evil, but should should never be a determinant of trade frequency. Some days I may do no trades, some days 5 trades and some days 50 trades; it is this flexibility which helps to build a successful trading business.

    Larry Williams (whose trading techniques I don't have much respect for) gains some respect from me for a comment in one of his books:

    "Rogue brokers are a problem for one reason - money, or the lack of it, tempts us all. Individual brokers make their living off the commissions generated on their books. No commissions, no money at the end of the month ...
    ... A general brokerage firm rule is an account should produce in commissions what its starting value is in any 12 months. Ponder that for a minute ... not counting winners and losers, most traders have to make over 100% on their account value just to cover commissions"

    Solution: trade when you perceive the odds to be in your favor, not because your broker (this is particularly true of prop. firms which provide traders with capital and take the commissions out) expects you / requires you to generate commissions.
  9. Magna

    Magna Administrator


    Commissions are a necessary evil, but should should never be a determinant of trade frequency.

    Agree completely. Hopefully you won't find this intrusive, but I was wondering thru what firm you do most (all?) of your trading. Is it one of the per-ticket companies (i.e., $15 at CyberTrader or MB Trading, etc.) or per-share (i.e., Echo, IB, etc.)
  10. WarEagle

    WarEagle Moderator

    Wait 'til you graduate...the income potential in the lucrative field of Roman History will be hard to turn down. :) (I am only kidding of course.)

    Perhaps, but I would rather set my hair on fire than work for Avon or any other MLM scheme. Its not about income least not for me. Its about passion...what do you have a passion for? Praetorian is passionate about his trading...Hitman is passionate about his trading...passion is evident in many others here too. The fact of the matter is that there is NOTHING in the world I would rather do than trade. I hear a lot of people talk about the "McDonald's money" that is made early in a trading career. But you weren't working at McDonalds, you were trading. That's the difference. You were doing something you loved to do. When that happens, the money is secondary, unless your only determinent of happiness is money. Its not like that at all for me.

    Remember, you only live once. There are no "do overs" if you get to the end and regret anything. If your passion is to trade, then educate yourself of the risks and go in with both eyes open and give your dream a shot. I would recommend this for anyone who has a passion for something, even if its to work for Avon...

    #10     Sep 5, 2001