Also, you may trade longer time frames than intraday but your capital is limited. In a fund structure the access to overnight capital would be less stringent since it is strictly firm capital and not based on your deposit size or a variation thereof.
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Any firms out there that are created for position traders
- Thread starter sltrader
- Start date
Quote from Midas:
Many of us trade longer term timeframes as well as day trade at prop. firms. No firms that I know of restrict your from trading longer term. It is up to you. You are given more capital (leverage) with shorter time frames or heged positions due to the decreased risk.
Your suggestion in theory sounds like a good one, however, once you begin to make money trading why would you want to share your profits with the firm? Keep in mind hedge funds and firms like First NY still pay commissions.... Why give up a % of your profits on top of that?
It doesn't seem that the top prop traders at banks and hedge funds are running over to these daytrading arcades where they can keep 100% of profits so cleary these traders see some value in splitting profits with the bank/hedge fund
Quote from sltrader:
It doesn't seem that the top prop traders at banks and hedge funds are running over to these daytrading arcades where they can keep 100% of profits so cleary these traders see some value in splitting profits with the bank/hedge fund
Very good point.... so the questions stands - why don't some of these prop groups start a hedge fund? Owners of prop shops are encouraged to respond.
Is it because commissions are a sure thing while profitable traders wouldn't be?
to UDontKnowMe:
QUOTE: What if the trader loses money, who covers the loss? Are you gonna pay for a salary and for losses? Do you think your profits can overcome both of those and be a profitable business?
MY RESPONSE
Uh.... yes! That's what hedge funds and bank prop desks do. Lo and behold, they don't just cover losses but also commissions.... WOAH! That really works as a business model? Yep, and much more effectively than the individual prop firm. Goldman, Morgan, Renaissance, etc all follow this model of covering losses and commissions while employing their traders. By doing this you will get the best traders as they have proven time and again.
While I do see the opinion that 'if I'm great at trading why waste my time elsewhere' as a somewhat valid one, it doesn't hold up in reality. Also, at a bank prop or hedge fund you can perform somewhat average for a month or two and still know you've got a tiny amount of security which helps you get back to profitability (psychologically huge). Typical prop firm you don't get paid.
QUOTE: What if the trader loses money, who covers the loss? Are you gonna pay for a salary and for losses? Do you think your profits can overcome both of those and be a profitable business?
MY RESPONSE
Uh.... yes! That's what hedge funds and bank prop desks do. Lo and behold, they don't just cover losses but also commissions.... WOAH! That really works as a business model? Yep, and much more effectively than the individual prop firm. Goldman, Morgan, Renaissance, etc all follow this model of covering losses and commissions while employing their traders. By doing this you will get the best traders as they have proven time and again.
While I do see the opinion that 'if I'm great at trading why waste my time elsewhere' as a somewhat valid one, it doesn't hold up in reality. Also, at a bank prop or hedge fund you can perform somewhat average for a month or two and still know you've got a tiny amount of security which helps you get back to profitability (psychologically huge). Typical prop firm you don't get paid.
Quote from SchraderTrader:
to UDontKnowMe:
QUOTE: What if the trader loses money, who covers the loss? Are you gonna pay for a salary and for losses? Do you think your profits can overcome both of those and be a profitable business?
MY RESPONSE
Uh.... yes! That's what hedge funds and bank prop desks do. Lo and behold, they don't just cover losses but also commissions.... WOAH! That really works as a business model? Yep, and much more effectively than the individual prop firm. Goldman, Morgan, Renaissance, etc all follow this model of covering losses and commissions while employing their traders. By doing this you will get the best traders as they have proven time and again.
While I do see the opinion that 'if I'm great at trading why waste my time elsewhere' as a somewhat valid one, it doesn't hold up in reality. Also, at a bank prop or hedge fund you can perform somewhat average for a month or two and still know you've got a tiny amount of security which helps you get back to profitability (psychologically huge). Typical prop firm you don't get paid.
Do you think a Hedgefund can afford to pay a salary, cover the trader's losses, cover commission costs and other trading expenses and give a 50/50 split and still be a profitable business?
What you are talking about is an ideal situation for a trader to make money. Now try looking at it from the Hedgefunds perspective, and a situation that makes the Hedgefund money. Otherwise why should the Hedgefund bother doing business?
Quote from UDon'tKnowMe:
Do you think a Hedgefund can afford to pay a salary, cover the trader's losses, cover commission costs and other trading expenses and give a 50/50 split and still be a profitable business?
What you are talking about is an ideal situation for a trader to make money. Now try looking at it from the Hedgefunds prospective, and a situation that makes the Hedgefund money. Otherwise why should the Hedgefund bother doing business?
If you read my posts, I clearly say I was using 50/50 as a random figure to be adjusted as desired.
I am looking at it from the hedge fund perspective..... they cover commissions, salaries, benefits, etc AND share the profit through bonuses. That is the way a hedge fund is structured and works. You're obviously either confused or your ego has been damaged and are trying to recover with an argument which is a fruitless one. This is a big reason why I only visit this site occasionally..... people spouting off on things they have minimal knowledge about because they a-feel threatened, b-feel embarrassed, or c-want to hear themselves talk (type).
If there are any people with actual knowledge who will answer my question honestly....
Is the main reason to be prop over hedge because of the guaranteed commissions?
Quote from sltrader:
It seems like most prop shops are focused on intraday trading does anyone know of any firms that consist primarily of traders that hold positions for several days, or weeks?
Don has already chimed in but I spoke to one of his managers a few years back and that guy basically told me that Bright would accomodate any style of trading once they had established a sense of the trader's abilities. I'm sure you would pay commissions but if a very established trader with a proven record and sufficient volume approached them, he may be able to strike a deal that he liked. There must be other firms out there that would go down to almost zero commissions if the trader was the right guy.
I would guess that the reason many prop firms stick to the commission model is that it's easier. Why don't many prop firms focus on a model based on the arrangement you're suggesting? Just a guess, but could it be because it isn't that easy to find traders who are going to long-term, low vol profitable, and the ones that are can find the best of both worlds (salary, benefits, at least some job security, vacation) trading at an institution?