I think Nitro made a very valid point several times in this thread, which no one seemed to respond to. That is the psychological aspect of trading one's own funds as compared to trading firm capital. I once did a post about how I was consistently able to be profitable trading the money of others. As a firm trader, as a money manager, and as a floor trader (employee). While I struggled and managed to be pretty consistently unsuccessful trading my own account. I attributed it to accountability. But the truth of the matter is there was another element. And that element, for me, was simply fear of losing. When I traded on the floor of the CBOE, and was paid a salary plus performance bonuses, I quickly got very used to trading very large size and was totally comfortable with it almost immediately. I knew I would receive a salary, and hopefully bonuses. There was no fear. Win, lose or draw, I was going to have an income. As a money manager, I felt no pressure to trade unless there was a real reason. So while the size of my trades were large, the frequency was very small. Selectivity and accountability served me (and my clients) very well. As a firm trader with Schonfeld, again, there was no fear because there was no downside. It bothered me not at all to only get a relatively small percentage of the profits. Where else was I going to get the enormous buying power I got there and the freedom to trade pretty much as I wanted? As things changed there, and I started making less money and got the itch to trade derivatives and not be confined to equity trading only, I went with another prop firm. I had to put up some of my own money, but felt there was no risk to my capital since I intended to use strategies that virtually eliminated any downside. It turned out to be a mistake. My approach was fine, but the inability to get executions was something I did not foresee. So I found myself trading stocks as I had with Schonfeld, and have not had much success. Fear of losing has been a big detriment to my trading. It is certainly just an emotional thing, but that makes it no less real. I have often quoted Mark Douglas' premise that you must trade without fear. And that is very different from being reckless. But it is easier said than done. So I am a living example of what Nitro was talking about. while I have a very long and successful track record, trading my own money is just not in my repertoire. Maybe I am not mentally tough enough. Maybe I have convinced myself I am not able to trade my own funds. The reasons do not matter. Only the results. It is crucial to know yourself. To admit to yourself (as I have here) your weaknesses. They are more important to recognize and deal with than our strengths. So trading pro, prop or retail is something that is dependent on each of us. All have advantages and disadvantages. All have appeal or lack of appeal. But it is a very personal thing. What is right for one guy is irrelevant to the next. Peace, RS
Lets just put it this way, if I had couple of million dollars this is the business I would get into. Get a bunch of bright young traders, they will fight for their financial life, some will make money so the firm comes out ahead; the ones that don't make it, you hope to keep them long enough go generate enough comm to come out ahead. One poster mentioned the overhead, the cost of platforms, data vendors etc. If you do the math a few hundred in overhead is small potatoes as to what some of these short term day trader scalper types generate in comm.
Guess that is why there are so many profitable prop shops right now. You are making it out to be easier than it is. There are a lot of factors involved that everyone on this board knows about, but I wouldn't want to have the sole financial stake in a prop shop right now. With the rates have been coming down and how competitive it is, your profit margin is shrinking and shrinking. Also need to take into account the risk of having a lot of "bright" young traders trading with your money.
We switched posts (quarterly? can't remember the rules now...been a long time). We were not really in it to make markets, but more as speculators. To comply with our percentage requirements, one of our three posts was always OEX. We did huge back spreads to keep in compliance with the volume rules. The other 2 posts varied. Usually IBM 'cause it too had a lot of volume and we could do a lot of "safe" trades without much haircut. Was really a game to stay within the rules. And to keep FOC happy with risk. (Another game). Fortunately I was pretty tight with Tim Mullin (don't know if he was still there when you were, or even if you cleared FOC.....but most of us did). He cut me a lot of slack when I needed it. Great guy! I was there 1987-1990. Peace, RS