Competing Objectives...Who Wins?

Since I have had a nice morning and am trying to avoid trading until later I thought I might add a simple thought. As I have been on both sides of the table. I was an owner of a firm that trained people and took a cut. After I had learned from another guy who I gave a cut to. Unfortunatly that method got way overexposed and is still being touted by some.

I no longer possess a scalping edge so it was my decision to close my marginally profitable office to concentrate on my trading. I was not going to tell people I could show them how to make a living so there was no safety in me taking on a new lease and continued expenses.

I am now trading through another prop firm because I have very good rates, never worry about buying power and have excellent executions. I also look at my volume and wonder if the guys are able to make much off my seat because I would like to see them make some money off me for providing me with the package of services I receive. Hopefully it will work out for everyone.

Now if someone were to show me some techniques where I could make a good living again without taking huge risk I would happily pay them what I use to charge my traders and maybe more. As I built up my account I would then trade bigger just like I did in the past and again everyone would be better off.

I never saw a problem with the old model and If someone shows you and real edge they deserved to be paid and paid well.
 
Quote from Mr.Bling-Bling:

The prop commission model has officially died. Try using the P/L model. Quality ..... not Quantity. Train, educate, developed solid methodology, decision making skills, and proper risk/reward ratio. Provide a good environment and keep the emotional guys out. A simple, yet tough model to execute.

Sound like your style.......contact me. Professional Traders ONLY.

Lets throw in a systems group to complete the model. Managed Futures will be BIG. They are picking up steam.
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Hey ETers,

I don't understand why prop trading firms don't allow longer horizon time of trading rather pure scalping. I think it has to do with just wanting to generate commissions. So, each trader generating 1M+ shares/month at half a penny to 7/10th penny and it adds up to a steady stream of income.

But suppose, they just stepped back and not push the high volume model so hard. And actually try to get big chunks out of a move. 30-75 cents. To multiple dolllars , overnite, a few days swing. Wouldn't that add up to MORE profit for the prop owners? So, they reduce the payout to 50/50 or 60/40 or whatever the traders would still be happy because they ended up with a few grand per trade rather than a few hundred dollars per trade. And over a month, a good technique can yield 20-40K easily NET. Not gross up, but net down or flat.

oh well..

just wondering out loud..
 
prop traders are the stock market equivalent of high rollers in vegas. The ones who manage to scrape up a pile of money and quit are the only real winners, and they are rare.
 
scalping has been effectively killed off by penny and sub-penny increments, and by too many people doing it.

when we get a new bull market, long only momentum trading will return however. we have even seen a bit of that happening in this latest bull move over the past few months.
 
Quote from trader99:



Hey ETers,

I don't understand why prop trading firms don't allow longer horizon time of trading rather pure scalping. I think it has to do with just wanting to generate commissions. So, each trader generating 1M+ shares/month at half a penny to 7/10th penny and it adds up to a steady stream of income.

But suppose, they just stepped back and not push the high volume model so hard. And actually try to get big chunks out of a move. 30-75 cents. To multiple dolllars , overnite, a few days swing. Wouldn't that add up to MORE profit for the prop owners? So, they reduce the payout to 50/50 or 60/40 or whatever the traders would still be happy because they ended up with a few grand per trade rather than a few hundred dollars per trade. And over a month, a good technique can yield 20-40K easily NET. Not gross up, but net down or flat.

oh well..

just wondering out loud..
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when the model shifts towards making the traders money, then profitablility will return to the house...

until then, its "you can keep this seat as long as your capital is above our minimum closeout"....

tough reality

and then, you have those outright cheat chop shops that make sure that their supervisory traders see the next longs/short/positions and trades against them... come edge, huh?
 
Quote from dotslashfuture:

prop traders are the stock market equivalent of high rollers in vegas. The ones who manage to scrape up a pile of money and quit are the only real winners, and they are rare.
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when they put that "common language condition" in the contracts, so that the average guy understands that the model being presented has far less than a 1% chance of success,

then, this game will be more fair, but then again, that's just what its about,,,

inaccurate disclosure,
inaccurate expectations, unchallenged,
inaccurate results glossed over

can't wait for the next .....er to come along..
 
As the dotcom bull market declined, and shook out many of the more seedy operations, the firms left standing are the ones that are willing to work with traders and give them the support they need so they can make it over the long haul. Of course, these firms have done it all along.

I'm not sure one prop firm's trading strategy is better than another's, as long as you chose which one compliments your market view and which firm/execs/traders you feel comfortable and strike a rapport with.

If anyone's interested, we'll be having Vito Sisto of ECHOtrade on this afternoon, just after the close in the Elite Trader Chat Room. He'll be discussing the enhancements his firm has made to its ECHO Trading Methodology, which focuses on the scalping of large listed equities, in order to maintain consistent profitability in this market environment.

André
 
Quote from limitdown:



this is very true, however, without framing the situation, which happens to be so realistic, that most people that have contacted me, have identified with it, yeah, too much theorizing, but highly accurate.....

yes, in one formum or another these matters have been discussed, however, putting them together in this thread seeks to bring singular attention to this in a manner that addresses the frustration that so many traders who can't seem to get through these abusive contractual situations share...

I knew some traders who basically got their software platform and chair/desk free because one benefit to bringing in huge share volume was the free desk charges, as an incentive. those same traders came into our offices one day and realized that they weren't making any money for the last 4 months consecutive to keep their wives mouths shut. That's when we started taking notes for a thread like this...

Those that are succeeding dont care about threads like these, but then, there are all those who aren't, nor will that this continues to apply to....

to them, perhaps they're paying attention...
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Or perhaps they are bored trustfund kids, but most likely they are all looking to share thoughts and ideas in hopes of developing a true "edge"
 
Quote from trader99:



Hey ETers,

I don't understand why prop trading firms don't allow longer horizon time of trading rather pure scalping.

oh well..

just wondering out loud..
More...

The answer to that is very simple. It is all about turnover and commissions.

For the hell of it, I recently called a firm that is widely quoted and advertises here on ET. I was interested in what they had to offer. The second I told the rep that I was a position trader, and a profitable, experienced one, his smart-ass response was, "Oh, you must be trading one of those OLD systems. We have people here making 100s of trades a day." I kid you not. The conversation ended there.

They are in business to collect commissions from the largest possible number of traders they can run in and out of their doors, doing the largest number of trades. By and large these are inexperienced traders who will wash out quickly, but not before they have pulled the lever enough times to make it worthwhile in commissions. If these firms supported a longer time frame, the new traders would wash out quickly with just a few trades.

IMHO, it is absolutely no different than a casino that's more than happy to take your money through a thousand cuts at the slot machines. The psychological underpinnings of the "action" are precisely the same.
 
The prop commission model has officially died. Try using the P/L model. Quality ..... not Quantity. Train, educate, developed solid methodology, decision making skills, and proper risk/reward ratio.
More...
The P/L model has its bad points (from the point of view of the prop firm). The more exposure to the market, the higher the risk for the prop firm.

With the commission model, the company was never exposed to market risk. The trader would methodically grind his/her account into commission revenue. There would be a transfer from trading capital to commission revenue. No real risk for the prop firm!

With the P/L model the prop company is exposed to market risk and commission revenue risk. If the trader holds a position for hours, days or even weeks ... the firm looses out on all of that commission revenue that could have been collected in the same time frame as well as risking capital.
 
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