Competing Objectives...Who Wins?

I would only join a prop firm if they gave me an absolutely obscene amount of money to trade with and cut me a deal to keep a minimum of 80%....

Also, I would stipulate that there should be NO commission minimums and no additional fees of any kind... if they want me, they must be happy to take 20%.... period... oh, and there should be no lock-in's or lock-outs in the contract...

The name of the game with prop firms is joining on your terms, not on theirs...

 
Quote from limitdown:


Is it possible to:
  • find the happy compromise of individual trader's success along withthe trading firm's success?
  • consistency in meeting ones fixed costs during/after training while meeting the trading firm's minimum revenue goals?
  • trading in a manner that is profitable for the trader instead of just writing tickets while meeting the trading firm's minimum revenue goals?
  • continuing business as practiced and hoping for more new traders coming through the door?
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These were the proposed thread questions that were asked. I would like to add;

1) Pricing is a marketing function - Do you get what you pay for and are the services worth the money.

I'm not a prop trader, so I can't specifically answer all the questions, but my comments are.

Does the company help me or cooperate with developing a business plan for getting started. Training + overhead thru profitability. If trainging is offered, is it's success verifiable or certifiable? I sure the companies are hoping for a win/win outcome, but how do we tell if they have the "stuff" if there is no discloser and we are forced to judge the company statements from a limited knowlege position.

I don't think I care what their interal expectations are, I have to focus on:

Is the software and data services reliable, timely and offer the features that present trading opportunities.

If training is offered, does it represent or address current market realities and provide trading systems and solutions that are "Resonably" reliable to produce profit. (never seen a magic bullet yet that lasted long enough to teach to someone else and be useful over time).

But the absolute #1 thing I rarely hear traders talk about is how they fit into this equation. "Will I be durable and dedicated enough to consistantly execute the strategies and be nimble and versatile enough to alter strategies." Nothing seems to work forever.

Does the firm have a system or culture to help you keep your head on or help you find the door before complete disaster? Due they have the personalities that breed success. Some people are just not ment to be traders and that's not a bad thing. The sad thing is how really experienced managers just let the wrong people flame out when they could certainly see it up front. If their business plan depends on the revenue of inept wana-be traders, then I think that's tragic.

I wish some managers of offices or firms would comment here. It would be great to see some integrity step forward. I think this industry could really prosper with considerate integrity rather than Darwin's theory of business. I know there are good people out there working very hard every day!!!
 
Does the firm have a system or culture to help you keep your head on or help you find the door before complete disaster? Due they have the personalities that breed success. Some people are just not ment to be traders and that's not a bad thing. The sad thing is how really experienced managers just let the wrong people flame out when they could certainly see it up front. If their business plan depends on the revenue of inept wana-be traders, then I think that's tragic.

I wish some managers of offices or firms would comment here. It would be great to see some integrity step forward. I think this industry could really prosper with considerate integrity rather than Darwin's theory of business. I know there are good people out there working very hard every day!!!
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Very well said, almost sounds like we know each other....

Showing the door;
breeding success;
letting the wrong people go;
inept wanna-be crybaby traders;
integrity and stepping forward;
Darwin's theory...


yeah, we must know each other,

glad to have your contributions to this discussion

something needs to change in the positive for the traders...
 
Who cares what the prop firm cut is, beyond just wanting them to stay in business so my capital is OK. Their profit is their own business.

Only one number matters, your net P&L at the end of the month. Your costs are very important, but your % of gross paid in costs is irrelevant. (Rather make 10% on a mil, than 50% on 100k?)

Training, systems and all that other stuff - mostly irrelevant. All the prop firms on here are doing the same strategies.

You just need a simple system that works consistently, low costs, and work every day - don't make it too complicated.
 
Quote from esc_trader:

Who cares what the prop firm cut is, beyond just wanting them to stay in business so my capital is OK. Their profit is their own business.

Only one number matters, your net P&L at the end of the month. Your costs are very important, but your % of gross paid in costs is irrelevant. (Rather make 10% on a mil, than 50% on 100k?)

Training, systems and all that other stuff - mostly irrelevant. All the prop firms on here are doing the same strategies.

You just need a simple system that works consistently, low costs, and work every day - don't make it too complicated.
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spoke to a guy, whom I knew

when the DJI was up some +135 points, he only made $200 on just over 23,000 shares and that was one of his better days, and this is after being on the desk over 7 months....

watching one's P&L is an accurate statement, however the methodology and structure of these chop shops is such that one in a few actually has anything worth withdrawing monthly for just normal expenses, let alone treating ones' significant other to dinner, dance and movie

it takes reality to look a gift horse in the mouth and say, hey, you need dentures...translation... what presents itself as an opportunity par excellence may not be based on the results...and you have to measure the reality of those results for what they really are

most guys are failing in this business....
 
Prop shops used to have the natural advantage of the DA software over retail traders, who had, at best, simplistic Visual Basic designed order entry screens through larger retail shops, like Fidelity, who invested in some form of modem based trading.

Given some of the natural sophistication of, say SLK's Redi+ over say filling in 18 boxes on a pop-up pseudo order entry sub-screen, while trying to get real time charting; well the case always went to the direct access traders...

By 1999 some of the more expensive huge houses who invested in legions of programmers had customized order entry platforms which began the process of improving retail access.

By 2000 - 2001 the lead that EDreyfus, Fidelity, Merrill Lynch, Vanguard and a few other large retail shops had filtered down to almost every retail chop shop. Getting software trading platforms came with every discount broker, some vastly superior to others. But all this time, the DA software continued the proprietary traders' advantage over anything available retail.

In that environment, the advantage went to the prop shops. Those were the days up until 2000 that created a number of millionaire traders. Since then the ability to have an advantage continued to slip in ever increasing speed.

Margins being squeezed, yes. New methods and procedures to maintain the previous opportunity, well perhaps these will present themselves in the future....

something about this game needs to change in the positive or more will wake up and realize that sitting at a desk for 2months, 4months or longer before making anything significantly is not wise....
 
Every business goes through cycles. Often, the fat margins available in the early stages of an industry are squeezed as either more players come in, technology creates efficiencies, or the customer can't afford to pay your price. Trading is a little of all three but more on the latter.

There is a shakeout in this industry. Not everyone who wants to be a trader will prosper ansd survive. It is a cold business fact that many of the posters here on Elite will have to go get a real job and give up trading because the margins are too thin, their skills not superior and/or their ability to take risk or to ride out a downturn in the cycle is too limited.

This is true of many firms too. For the firms, margins are thin and volumes are down. They are facing the same dilema that K-Mart faced, the Wal-Martization of trading firms. A few will get so big they will be able to operate on thin margins while those not doing enough volume or where the trader is not making money will close.
 
Quote from limitdown:

when you see posts from guys that boast that they trade 2 million shares a month and enjoy being a ticket writing machine you have to wonder whether those statements are true or meant to suggest that we should all want to aspire to that level.

As if aspiring to that level of frantic high volume trading is admirable.

Let's take that premise apart:
  • 22 trading / business days on average each month
  • avoid the 3x witch expiry thursday/friday/monday leaving you with 18 days
  • averaging 100,000 shares per day requires some effort
  • creates $1,000 minimum comm revenue per average day

Let's stop right there. That's exactly what those statements produce commission revenue .

No where in those discussions, especially when you press them for details do they boast about their profitability or achievement in a similar manner.

That's the flaw in that reasoning, whose objective is being served by that trader?
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There is too much theorizing...The answer has been told here many times.

It is not clear to me if traders gravitate to firms that promote active trading styles [self selection,] or whether traders are turned into active traders by firms who do well by traders that generate lots of comissions. The truth probably lies somewhere in between.

While I do not doubt for a micro-second that a firm would rather have a scalper than a "swing trader," I honestly believe that unless you have access to TONS of buying power, the less active style of trading simply does not bode well UNLESS THE MARKET CONDITIONS WARRANT IT, which in my experience is about 10 - 15 percent of the time the markets are open.

I can tell you one thing though and this has been discussed before at ET ad-naseum : From principals at firms that I have talked to that have access to MOUNDS of data of hundreds of traders over many years, the statistic is that the decent traders make about .013 to .017 cents per share per. 01 penny spent (assuming .01 per share pricing - those that get their comissions down make that much more.) The really terrific traders make .02 per share + and are talking advantage of the commission charge limit at these firms that cap the comission at $20 - $25 (about 2K shares at .01 per share) In other workds, they are doing SIZE and not "paying" for it. Granted, this is not a scientific and statistically valid statement (I am getting the numbers from the very people that promote active trading styles,) but the only traders that I have seen that do well with a slower style are the ones that have access to their OWN bying power and can afford to put on size IN THE RIGHT WAY (in every single case, they were pit traders that spread front month contracts against back month contracts with HUGE size and then waited and occasssionally managed the position)

While generating tons of commissions is not necessarily the _only_ way to make money, 99.999% of the _EQUITY_ traders making 200K+ year are doing _AT_LEAST_ 75K shares a day, or approximately 1.5M+ shares a month. This has been my experience.

nitro
 
Brother nitro... I gotta agree with ya about doin' large size... but although I do large size I don't trade frequently... most days I trade fewer than 5 round trips (which is precisely why a prop shop would tell me to fuck off if I went to one sayin' that I wanted 90% payout and told 'em they were welcome to the 10% residual plus my monthly commissions)... for me, the selective use of large size is the best way to go... kinda like a handful of cruise missiles compared to many cluster bombs...

Brother nitro... congrats on the 3000... I made you a present to commemorate it on the Chit Chat thread...
 
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