Maverick....i couldnt have set it any better u da man also...lot of people rag on stock guys here in ET..but judging from the trader PL thread...i dont see too many future PL's on there and i also know TONS of guys that tried futures and have migrated back to stocks......its a perfect market.....and we try to capture in-efficiencies anyways...good job maverick d
Also...i dont work at Schoenfeld . but i know a couple guys there and i know the 20% of GROSS sounds like a joke...but when u put no money up and have 4,000,000 bp at ur disposible and return 10% GROSS its a lot more than 100% of 100k d
Maverick, while I do agree with you on most of your points...i also think you are blindly unaware of the fact that there a good number of people that actually make a nice living trading futures...with that said, the number has been shrinking for the past 4 years & i believe it will continue to shrink. what you heard at the IIT lecture is quite accurate...as a result, the inefficiencies traders exploit today will become drum tight as the market continues to evolve in the electronic arena. to contrast, i also see the possibility that the eventual saturation of black box programs in the markets will create new inefficiencies/opportunities. In any case, I do happen to know several people, including myself, that have been able to make a much better than average living trading futures. Products ranging from bunds to eminis to oil to t-bond & notes. in good prop rooms all around the city there are guys pulling out $1000/day+. and they're not taking 20%, its more along the lines of 40% to 50% to start. as you cross predefined net dollar levels your percentage increases. usually after $1M a trader gets 70%, 60% after 500k, or some derivation of that. I also agree with the lecturer you talked about in that trading is becoming a system based task...but as long as there is a bid/offer there is an opportunity for any person with a plan to capitalize. i know that sounds cliche, but i believe it to be absolutely true. to footnote, i did stop full-time futures trading about 1.5 years ago to finish my mba. about 2 or so yrs ago i came to the realization that i could not see myself trading electronically for another 15-20 years--> thats a long time to make money consistently, especially when the market keeps getting tighter. anyway, i moved to the management side of futures & still trade abit...a career choice...btw, i did begin trading in 1997, and was profitable each year until i stopped in late 2004.
Maverick74: So true. I have seen this first hand. And even if you have the knowledge and experience, it will still be hard to get a quant/systems development job without an ivy league education or prior experience at a big hedge fund or institution (which you can't get without the ivy league eduation or prior experience at a big.....). For many people, that means trading for yourself is the best and only option.
I should also add that hedge funds and institutions had a bad year last year. More money flowed out of hedge funds in Q4 than into them. And returns were lackluster. The same is true at the institutions, which are basically private hedge funds. Therefore, they aren't hiring as much as they used to. But if you've got that Ivy League PhD in the right subject, you'll make big bucks.
Can you clarify some more when you mean discretionary traders have no edge? How do you arrive at that conclusion, even for the 2% of guys who you know that actually make money?
very good post. but the pro-athletes metaphor may be pushing it a bit. yes there are more, but the demand and desire for one (pros) is quite a bit higher than that of trading as a living. ~RT there are more brain surgens than astronauts.
"but when u put no money up and have 4,000,000 bp a"t ur disposible and return 10% GROSS" BP means nothing espically when you can't deploy 4M Any daytrading firm can give you millions, Too bad there are very few equitys that can handle the size for you to make gains.
Edge. I usually put edge into three categories. One is capturing a spread such as a market maker on the floor for options. Where he can buy on the bid and sell on the ask and capture the difference. This is an edge because we can't do this and he can. Therefore he has an advantage over screen traders. Second edge is technology. Being able to execute faster then everyone else. Or being able to do arbitrage baskets or complex orders using sophisticated algorithms. This is an edge because again, if everyone doesn't have the ability to do this, they are at a disadvantage to you. Third edge is order flow info. Again, this applies to guys on the floor or guys working OTC desks where they can see large orders and see where the market is going. You don't have this edge and they do. An edge is something that usually cannot be replicated by other traders, hence an advantage. This is why I laugh when people refer to TA as an edge. Any moron with tradestation can optimize moving averages all day long and can come up with the pattern of the month that everyone seems to be keying off of. That is not edge if everyone can do it. Most futures traders don't have an edge. They are trading on feel and gut. There is nothing wrong with this, its just not an edge.