What are firms that hire traders?

They could flipping care less about Sharpe Ratios. Half of the principals at those firms couldn't tell you what a Sharpe Ratio was.

All they care about is: 1. consistent profits with modest drawdowns, 2. How much capital does the strategy require, and 3. how scaleable is the strategy.

Consistency is the name of the game. And if in the back of your mind, a tiny little voice is telling you: "you know, if I traded like a real pussy and took only two trades in a day and was really conservative - then sure, I could become 'consistent', but the reason I don't do that now is because I'd only make a few hundred bucks a day and that is just not me and besides my system shows me twenty trade entries per day ..."

My response would be: the futures prop firm would take the pussified conservative type over the gunslinger every time - and ask him to trade 500 lots instead of one lots.

 

Sorry - who considers a prop firm (in the sense of ET) a legitmate financial institution ?

True prop in the sense of hedge fund props (where you are allocated capital and keeps a (%) of the PnL - and no, no deposits - you get paid a salary instead) ABSOLUTELY cares about Sharpe and Draw-Downs.

I suppose no one cares about Sharpe when the allocation is a few million here and there. But I guarantee you it's not the case when the book is over a yard.

 

I have never heard of any trading firm asking for a sharpe ratio. At the end of the day most real prop firms look for guys who have strategies that work in all markets (not just a one trick pony in a 40 or higher vix). While trading in a volatile mkt will offer a lot more opportunities, you have to be able to trade during different types of mkts, and be successful. Otherwise what are you going to do...trade 4 months a year? Also it seems that the days of hiring cowboy/crazy traders are over. If you can't manage risk then most firms will not want to even talk to you. Back in the 90's until 2002 or so traders who couldn't manage risk got lucky a lot and bailed out during high volatility. These days it seems the real trading firms want guys who are consistent base hitters. You can always scale up and make more and more money if your strategy is scalable.

 

Maverick and myself are referring to futures prop firms - the prototypical Chicago or London kind of futures prop business model.

Do you believe this guy has a shot at any of them given his current body of work ?

 

None.

 

With all due respect, I don't consider those legitimate anymore. It's not that I think they are scams (the traditional ones certainly are not), but there's no room in the modern financial landscape for them - certainly not for people coming in.

 

"
My response would be: the futures prop firm would take the pussified conservative type over the gunslinger every time - and ask him to trade 500 lots instead of one lots."

Bingo...this is so true.

I have worked for some of the bigger prop firms in the past that used to push guys to do 20 entries a day and at the end of the year, most of these guys were scratch traders. The guys who in the end make a great living trading are the patient ones. i think more and more real trading firms are on the same page with "less is more" when it comes to the number of trades.

 

With respect to the futures prop firms in Chicago and London, they are certainly legitimate - ask Jump, or Infinium, or Getco, or Ronin, etc. etc. etc. The business model has changed tremendously the past five years - from arcades of manual traders all backed 100 % by the firms capital, to largely automated traders and strategies. Most of the older 'manual' firms have either died off, or gotten smaller and automated. These firms are still hiring quite a bit, it's just that the landscape has changed.

The ET prop equities business model - especially the ones that combine education and trading, and with the notable exception probably of Bright and their ilk, are not of what I refer to.

 

Draw downs....absolutely.

Sharpe Ratio.....not that I know of. The firms I know of that back guys with anywhere from 5-20 mil never mention sharp ratios.

 

Well... fair - I was specifically speaking of firms where the allocation is measured in hundreds of millions rather than low double digits.