risktaker, I agree with most of the points you added but I'd like to clarify a couple of things from my perspective. 1) I did not mean to imply that trading is easy. It is certainly harder and more complicated than running a fast-food restaurant. But each type of business has its challenges and risks and they can be very different across varying industries. 2) I did not mean to imply that the main challenge in trading is to come up with capital (although the last part of my email may have been understood that way). What I meant is that there are many fixed and variable costs one has to take into account when starting a trading business. Just like you have to pay for the franchise and the training for a restaurant, you have to pay the costs of learning to trade, which can amount to tens of thousands of dollars. And even once you've paid these costs, you still have no guarantee you'll succeed in trading, just like you have no guarantee your restaurant will succeed after doing all the training programs. 3) Finally, I have to partially disagree that once you have a restaurant that works, it will continue to work. I think it's true that a trading approach can stop working much faster than a restaurant, leaving you less time to turn around. But a restaurant can also quickly go downhill for many reasons: a new diet takes off like wildfire, a larger/better/cheaper competitor opens shop across the street, consumer trends change, recession, etc. McDonald's closes restaurants on a regular basis and operates company-owned locations that are not profitable but that they consider landmark locations and can't really close. I know of one case where someone opened a sandwich franchise and it worked pretty well the first year, but then the franchiser authorized too many other locations in the same area of town and some were much bigger. Needless to say they cannibalized each other's businesses while the franchiser collected from all of them. I am not trying to argue with your points but all businesses have ongoing risks associated with them. Trading has more drastic ones than others but there are always risks. Check out Blockbuster on Yahoo Finance. I almost can't believe how badly they're getting beat up... And they almost had a monopoly. You all have a great day! Alex
are afedoro and ristaker the same person? thanks for the comments,, I remember in B School, we had the detailed project assignment of taking on a franchise and all the work and details of contract negotiation and business positioning both from the perspective of a franchise and from a start-up without corporate standards controls (i.e. franchise).... worthy exercise that most seriour business owners should go through in the classroom scenario instead of the real world, at least first before putting time / money at risk... you have accurately discovered through your conversation, that trading is an endeavour that is fraught with complexity the likes of which either gets easier with association or affiliation with a prop shop or harder to the point of failure.... wonder why Waxie and other Paltalk discussion threads have such trader success? hmmmmm
but ... in issues/markets where I care about intraday movemement this is actually an advantage. I in fact can watch this behaviour: its extremely (laughably) predictable. Imagine, somebody really thinks that they can simply do weighted reversals in their progams in response to certain types of orders and its going to trick the other side (person of program). Once you confimr a few of these behaviours their existance becomes an extreme advantage.....
congradulations! you have found the gem in the discussion thread..... this is what I used to succeed, given all the headwinds prevailing against one to succeed in fact, a number of the Institutional Traders, that I have had discussions with, who went to the better/best B Schools and have had the benefit of being the chosen ones who were allowed to sit on the trading desks of the Goldman Sach's, Lehman Brothers and others, have said that once they left that environment, they had the hardest time in recreating that environment that gave them the platform for the successes that they were able to achieve.... long statement, short version is what you just said. outstanding comment... wonder how many others have discovered same in their respective trading niches?
It is quite amusing how a lot of posters here including recruiters of prop firms always validate the viability of their "trading" business by comparing it to opening a fast food franchise. I agree with most of the points in comparing prop trading vs. restuarant in terms of capitalization, leases,etc. But there are multitudes of businesses one can start w/ 3-5K and not the 250K subway/ Yankee candle franchise ( I still can't get over how much $ u have to put up for Yankee Candle!) . About 10 years ago I bought a comp system that does medical billing, took a 3 credit college course about med coding, got 1 doctor , 1 year later expanded to 25 with 4 employees, sold the "book "for 6 figures to a bigger billing firm. Total initial inv - a lot of sweat equity and $3K. Not knocking the comparisons just reframing the debate.
outstanding! G A Trader probably provided you the seed capital to start trading full time? amazing how fast $100,000 can be blown on regular day expenses and stuff, huh?
My expenses: 1. 5k initial cont. 2. .004/share charge, ECN fees per share, SEC fees per share 3. $50/month NYSE Open Book Fee 4. $125/mo. Esignal. I don't understand all these guys talking about all these ancillary expenses. I'm at a PROP firm. They pay for ac, heat, internet connectivity, computers, etc. What are you guys talking about?
limitdown you are so right.If you don't think it is easy to blow 100k, try having 3 kids. specially when they get off the kids menu and start ordering from the grown up one.!!! LOL I did not think the packaged,franchised med billing was right. You need to drop 15-25k to own a billing franchise seemed high, so I just bought the system, printed my own materials.Got my primary care doc for free for 1 month, learned and got other thru referrals. So is the business legitimate-you'd be suprised how big medical groups use them. If you've ever gone to a doc in your town and got a bill wherein you send a payment to Iowa-that is his billing service.
Some of my personal favs -Charge for the T1 and redundant T1's that are being mainly used by cutomers (roughly 25-30k per annum) -charging for front ends that are being provided for free due to instability of said platform (Roughly 10k per annum) - having traders absorb costs of exchange membership applications (roughly 10-20 k one time charge) -Swapping of computers with out depreciation every 3-6 months even though the computer is just being moved to another trader -Charging individual insurance when the company is getting the group rate (anywhere from 6-18k depending on frequency) -for cash bond guys; never giving the exact figure on rebates and cuffing 60% plus of that (easily 75k for a low volume trader) -Data feed being charged full when it is split 4-5 ways (10k per annum) These are on top of a desk fee and a per trade fee that is being charged. I believe the term that was used was ala carte.