Open an account at let us say Velocity Futures, with an opening deposit of only $15,000. Then start trading only 20 lots with a trade plan you formulated and perfected over the course of 6 to 9 months trading 2 and 3 lots that is successful. Have an extremely low daily profit goal of only +1.5 pts per day per 20 contracts after commissions, and then trade only 220 days of the year. What you now have at the end of the year in this scenario is mind boggling IMO - $330,000. You are now in the top 1/2 percent of all income earners in the U.S. with a very favorable tax situation (Futures 60/40 capital gains rule). Now go out and trade 30 contracts, and then go and trade 40, and then go and trade 50, etc, etc, etc. This is truly an amazing time for a trader that can see where the opportunities are at right now...there is ALWAYS amazing opportunities! Good Fortunes! Chris
Just to clear the record on expectations and payouts . . . Sure, the Quantum Fund did not have expectations of 50% gains like SAC, but you must remember that even Soros had the kind of prestige factor that allowed him to charge 3-4% for his management fee, which was totally unheard of back in the 80's!
It is the change in technology and the internet that enables the new brokerage model to exist... The model that lends itself more towards the customer being profitable is the model that will retain longevity...The musical chairs game is a matter of advertising to newcomers... A major reason that traders fail are high front end costs...which are hidden in the software..commission...training..hardware..and other costs...In the case of daytraders this is usually in the range of 50 to 150% of the initial capital... Another major reason that traders fail is that firms that sell training services are not valid..they cannot even produce daily blotters for a single client... When you implement a business model based on profitability of the customer...this model favors longevity... The daytrading business is fraught with front end approaches...and almost no back end or profit approaches...
Don't necessarily agree with the above. I think a lot depends on how long traders have been at it. I started full time early in 1996 so I've seen the bull market of the late 90's as well as the 3 year meltdown from 3/00 to 3/03. I think a lot of people who started trading more recently are giddy since we've had a strong uptrending market the last 8-9 months. In the end I think it comes down to whether a trader can trade a market that's moving sideways or heading south. Seems like a lot of (wanna be) traders are not comfortable playing the short side. My point is that those who have survived bear markets will likely keep on trading assuming the desire is there. Those who can only seem to make money in a bull market will wash out IMO. BTW, I trade my own $$$ so the payouts at prop firms don't impact me.
I completely disagree with your reasoning as to why most traders fail (ie. high costs, commissions, lack of training, etc.). In my opinion, the vast majority of traders fail BECAUSE THEY HAVE NO EDGE! Without a bull market (ie. creating new paper wealth), trading itself is a zero sum-game or worse in a Bear market (ie. destroying wealth), a negative sum game. With that said, The masses (of traders) are giving money to the few (the 'smart money' or those that trade with an 'edge'-order flow, statistical edge, inside info, etc.). Add up all the revenue that all these investment banks make per year combined, it's multiple billions per year. Where do you think this money comes from? Thin air? It comes out of the market and by and large the investing public (including the 'semi-pro' with a dollar and a dream). Making money in markets is one of the toughest things to master. Some newbie with a BA, MBA, whatever, a low commission structure and some training program is not going to beat the house. Thanks for your response, however...
When you say most traders are not comfortable trading from the short-side and say traders that can only trade the bull markets will wash you, you prove my point. That is 9 out of 10 people. Even if they are comfortable 'switch hitting' it's a lot harder to make money from the short side and most people can't do it successfully. Thanks for your response..
Have you heard of mutual funds who lose money. have you heard of hedge funds which incur losses and disappear. The billions of dollars come from them. Traders are a small part of the entire food chain. At any given time there will be a pool of traders who will be successful. As the market has expanded the pool has increased. You seem to have some deep unresolved issues regarding traders who are not part of hedge fund or are not macro traders.
Exactly...in some of our work...we believe but cannot prove that mutual fund managers are mostly responsible for particular support/resistance points...however their game is always to win in the long run...and because of their size are always averaging the prices of companies they want to own...they may lose by near term friction...but possibly win longer term... Lose when?...Win when?...