Again, I don't really believe the premise. Here's the thing, at most of the "true prop firms" they have a structural edge. Not an edge in strategy. In other words, they haven't found a magical moving average or secret doji formation, they make money through technology for the most part. I know just about every prop firm in Chicago and 98% of what they do stems from some part of structural edge. It might just be speed, it might be from having access to cash markets to spread against futures, it might be from having 20 programmers writing new code every day, but it's not because they have some magical strategy that no one else knows about. Firms like SMB have no desire to get in that game. There is no strategy you can just teach someone to make them money. Trading is 1000 times more complicated then that. You know that. Just the psychology alone of making discretionary decisions is very tough. I use to teach guys in my office a solid trading strategy. These guys were all smart, all driven, showed up every day, listened to my feedback but lacked the psychological makeup to be in this business. I tried my hardest to get these guys over the hump and I just couldn't do it. Thank God I didn't back them. SMB also knows this. You can't make someone into a successful trader no more then you can make someone be a quarterback in the NFL. You can show them how to throw a tight spiral. You can get them in top physical shape, but you can't make them. Where you have a fighting chance is where you are a market making firm, order flow provider or HFT firm where 90% of the pieces are in place and then you just have to teach the trader how to execute. Even that is difficult. But at least the odds are much more in your favor.
If you make a ton of money in the first 2 hours of trading, is there a reason you must sit there until the day ends? Everyone is obsessed with the 9-5 workday. Firms don't care how long you work as long as you are doing your job, which is to make money. Seems like unneeded stress if you are happy with what you have. More hours doesn't necessarily equal harder and smarter work.
This is kind of true. Most guys I know who work for firms have very set hours. In fact, I know guys who work in the grains who are out having beers at Ceres everyday at 1pm where the guys who are independent are still at their computers at 8pm at night in the office trying to figure out how to turn their p&l around. This is kind of complicated. When guys are independent and are making money, yes, they can get complacent and sure, you'll see them running off to play golf at noon or go to a cubs game. But if they are not making money, that is usually not the case. Most firm traders who are backed have a job. I'm not sure they are working hard per se, they tend to work the same hours every day. I never see them staying in at night going over their trading stuff. Yes, they have to make money and yes they will be fired if they don't but that does not mean they are really putting in more hours then the independent guys. I've been on both sides of the fence and I've busted my butt with both but guys who get paid a check every month are usually more complacent. They shouldn't be!!!! But they tend to be. It's just how people are in general.
You make great points Mav. At the end of the day if a trader is not disciplined and doesn't have very good risk management skills, he isn't going to make it. That "can" be taught at a firm. Will it be followed? That's where the risk comes in on the backing firm. You can show a guy a great strategy, but if he isn't disciplined he will fail. The psychological part? I agree. that really can't be taught. If you can't deal with the roller coaster of trading you are going to fail.....and probably blow up at some point. I have been around Ivy league guys who were beyond smart and seen them crumble under the pressure of a bad trading streak. I have always said that trading a majority psychological. Trust me..I am not the sharpest apple in the bunch, but over 20 years went through a lot of ups and downs trading. Over the years I have become beyond unemotional while trading. I got stopped out on an AG trade last week that literally hit my stop to the tick, then rallied 2% within minutes. A lot of people would probably have planted the keyboard through their screen. Me...I just accepted it's part of this demented game we play for a living I think in a strange roundabout way you and I agree on this topic.
I guess my point is just because one is not trading their own capital doesn't mean they won't work their ass off. The firms I have been with never paid a salary. You were backed with a large amount of capital and got a monthly cut of the profits. If you were complacent you got paid nothing, and eventually shown the door. I was not implying independent guys don't work just as hard. A lot of them worked their asses off. Some of my buddies who went off on their own did become complacent hitting Cubs games at noon. Then get hammered at High Tops....then ended their night at that strip club right by Weed Street. And this was on a Tuesday......lol. Ceres........damn. Been a long time since I went there. That place is evil. Nothing good ever comes from a day drinking at Ceres. Do they still serve drinks with the booze in a separate glass? I remember ordering my first Jack and Coke there years ago...I was like WTF? This is great !!!
I am not an Ivy-leaguer or a Physics doc. so I have never had the chance to work for a true backed firm but the experience I had with them at the bank I used to work for was not too good. They would definitely spend a lot of hours at work analysing and looking at every possible thing that could go wrong... So much that they would never actually trade meaningful money because they were so terrified of losing... If they lose they would get fired. This I think is in large part bank's fault: they make it so hard and so competitive that getting a job on one of these trading desks is like the objective in itself... Once you are there who would want to risk getting kicked out? So the ones I have seen would pocket their base salary and maybe make 5% of actual returns for the whole year... Of course I do not have Maverick's experience but that is what I have seen from the professional traders...