Not sure I understand the question. At the 60% level, their gross revenue is 40% of say 1k or 400. Out of that, if you are asking what do they net? I think zero. I think profit split plus commission markup is still less then total operating expenses. The combine fees need to make up for it. The formula for the combine fees is complicated as they pay out $35 to the exchange for the data. So on a 10 day 30k combine that grosses $150, their net alone on this is only 115. This means if a trader earns a rollover, TST actually loses money on the combine fee the 2nd time around. Or let me put this a different way. If a trader does the combine that cost $150, and gets 4 free rollovers, TST will actually lose $25 net on the total 5 combines. Now as I said before in my response to Pekelo, I believe the rollover ratio is 40%. So we can do some basic math here. For every 10 combines, 6 pay, 4 roll. The 4 roll generate a loss of 4 * 35 or 140. The 6 that pay generate a net of 6 * 115 or 690. That leaves a net of $550 for every 10 combines. I think their payroll is 30k a month. Not counting office space, utility cost, legal cost, marketing cost, etc that gives us these numbers: 30,000/550= 54.5 54.5 * 10 = 545 combines. That's how many combines they need a month just to breakeven. No way in hell!!!!!! Now, let's bring that down some and say of those 12 live traders, 6 of them pull out 1k a month in withdrawals. That is fair, half probably are not making anything and the other half are probably trying to build their cushion but will take out 1k. That is 6k coming out in which TST will get 2400. Let's say they make 2k in over rides on the commish. That's 4400 in revenue. So that lowers the operating expense down say 25k. 25,000/550= 45.5 * 10 = 455 combines to breakeven!!!! This does not include office expense, utilities, marketing, legal, etc. I'm telling you, I've gone over these numbers every which way. I honestly thought about starting a similar model on my own several years ago when they came out with this. The numbers just don't work. No matter how I tweak or manipulate them. My guess is they are doing 100 combines a month tops. I've asked a few people from ET how many are in the live chat room since at the beginning, that was actually a requirement for the combine. I've heard ranges from 10 to 50 depending on the day and how the market was. I think this could theoretically work if one person, and one person alone ran the whole business with little to no over head. In other words, ran it out of his basement. If you keep your overhead close to zero, there "might" be a way to make this work. For the love of God it's certainly not making millions like Pekelo and Volente suggest. That is a farce. I'm being dead serious, if this made even 500k a year net I would drop everything and offer a competing service. I could run this with my eyes closed. But I doubt this model is even profitable....yet. Now maybe the plan down the line is to grow this into the next optionetics. That was a very different model but this thing has to morph into something else then what it is now. Before anyone attacks me or my numbers, please provide DATA that supports your argument in terms of operating expenses, total combines, gross revenues and costs. Don't just scream like a child "they are making millions, it's not fair!" LOL.
BTW, I completely left out all the losses they had to sustain from the traders who passed and went live and flamed out. Sure it's only about 1500 on the cheap combine but that could include 50 to 100 traders over the last 4 years. That's another 75k to 150k in losses!
Very well said Mav. From personal experience, operating expenses will eat your bottom line like a dog eating fresh steaks. I took a summer job operating a seasonal enterprise this summer, basically directing and overseeing everything that is going on. The owner put down a sizable chunk of cash to get everything in place. It has generated close to the amount that the owner has laid out....however, the layout money was just that, starting money, that does not count my salary (although he has factored that in), and the salary of the 3/4 other workers that are with me. When I print out the cash register receipts every night and I look at the total revenue brought in since May, then subtract what is left of that after all of the workers take our cut, it does not look good for the investor this year. Nobody seems to understand that TST has infrastructure costs, they are run out of a downtown office in Chicago (correct me if I am wrong), thats not cheap. Factor in the losses when people blow up. The directional punters should not be so critical of the prices, just play the game and use the resource to your advantage. Its saving everyone thousands in losses for your $200 fee every month
Traders should concentrate on trading and think less of anything else. A bit of luck won't hurt either. Discussion that makes sense is IMHO is why so many funded traders fail if there is only 12 live traders on the roll. This is what should be discussed. From my perspective and experience psychology is probably the major issue.
So basicly they are a charity organization and they are doing us a favor. Got it... Somehow the accounting always leaves out how much money they COULD be making by piggybacking certain (not all) traders. I advised them long time ago, but did they listen? So there they are, going most likely bankrupt soon...
"Imitation is the sincerest form of flattery.": http://www.surcaptrading.com/mt4programme/ What I find surprising that these imitators also copy the 55% daily win rule. I would like to know, why? -------------------------------------------------------- Don't forget to sign up for the $35 Candy Challenge, only 1 day left!
Shiko, I have tried several times to start this dialogue before the Pekelo's of the world interrupt with the "scam" BS and the owners are making billions. What you are asking lies at the crux of the matter. And in the end, it reveals the real issue. The fact of the matter is, most of the guys getting backing probably got lucky to begin with. Remember, it was Pekelo early on who was instructing guys on how to "cheat" the system to "win" the combine. In which I responded what is the point to "winning"? The point is NOT to win but to learn. Because winning in and of itself serves no purpose. I think what happens with a lot of the live guys is they just kind of lose interest. I mean, some guy without an edge gets lucky and passes. Let's say this guy is a very disciplined trader. So he'll hang in there and have his good days and control his bad days. But then what? Say he is 28. Say he is engaged to get married. Say he has some student loan debt. I mean the guy is not making money. At some point, time is the real enemy. This is not just true of TST but really trading in general. I've been on this board since 2002. I've been trading since the mid 1990's. The life cycle of the avg ET user is about 18 months to 2 years. They come on here. They read a little. They trade a little. They read a little more, start posting and after about the two year mark, they see the writing on the wall and move on. I've seen this with 1000's of posters here now. The names who stick around are usually the "older" guys who play with their IRA or 401k money in retirement. They come here to talk shop and pretend they are traders but really they are dividend collectors lonely and looking to chat. The real discussion that I've "attempted" to have on several occasions is do these guys have any edge? The answer of course is no. But very few people here are making that connection. Instead it's the rules, it's the owners, it's the software, the commissions. It's typical ET. Now one guy was screaming about how little these guys make and how a mcdonalds worker makes more money. Well, that is true of ALL traders. LOL. Look, unless you are getting base plus bonus at a real prop firm, most of the guys here are working an IT job during the day and trading here and there around shifts acting like a BSD pretending like they are career traders. The truth is the amount of capital one needs to pull a decent wage out of the market is pretty substantial. I'm sorry, I don't buy into the 25k account guy making 100k a year trading story. I've been around too long for that. The guy or girl with 25k is NEVER going to be able to compete with a salaried job. You are going to need several hundred thousand. And even then, from a tax standpoint is horribly inefficient. And here of course is the irony of it all. TST, is itself in the same boat. As a small business, their probability of success is as small as most of the combiners. Like most small businesses, their overhead and payroll will ultimately take them down as well. Again, time is their biggest enemy as well.
it's the best post i've seen in ET.i'm passionate to know how Maverick prepared that several hundred thousand initial equity ? TST can be used in order to prepare a modest trading account..? and if TST has any other advantage rather than "learning" stuff?