Competing Objectives...Who Wins?

Quote from limitdown:

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Conclusion: in this real world example, the ability to catch movers and hold them all day into a profit instead of being concerned with maintaining a 100,000 share per day trading average highlights the essence of this thread, namely that these goals of profiting from the market vs. trading these markets (as taught by these firms) are the competing objectives that pretty much leave most traders losing their $10,000 - $25,000 initial investments.
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I am not sure what you are saying, but if you are saying that one should not be concerned about having to generate 100,000 shares a day to make a living in the markets [or worse, lose your stake] I would agree with that.

However, there is a conotation in your "tone" [as far as I can decipher it on a message board] that firms are out to churn you and that you should stay away from all such strategies because you will lose your money. If this is what you are saying, this is downright false.

Setting aside whether an active or passive style is the "correct" one, consider that you can trade remotely at most of these firms for a "desk fee" of $200/M, and do any amount of "holding" you want without "churning" your account. If the $200/M desk fee scares you [$10/day on the average month,] then I have no idea what kind of money you are taking from these markets. Would I rather not pay a desk fee? Sure, but if that was my situation, I wouldn't even think about it. I think I make about $200/M in Keyboard errors alone.

nitro
 
Quote from nitro:


I am not sure what you are saying, but if you are saying that one should not be concerned about having to generate 100,000 shares a day to make a living in the markets [or worse, lose your stake] I would agree with that.
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close enough, however, one is never really free to hear themselves think over the outright and subtle pressure tactics of ticket writing vs. efficient trading from the profit motive perspective

However, there is a conotation in your "tone" [as far as I can decipher it on a message board] that firms are out to churn you and that you should stay away from all such strategies because you will lose your money. If this is what you are saying, this is downright false.[/B]
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even I agree with you on this, and no, not suggesting that, however the experiences are vastly different from the success that a number of new and semi-experienced traders are experiencing

Setting aside whether an active or passive style is the "correct" one, consider that you can trade remotely at most of these firms for a "desk fee" of $200/M, and do any amount of "holding" you want without "churning" your account. If the $200/M desk fee scares you [$10/day on the average month,] then I have no idea what kind of money you are taking from these markets. Would I rather not pay a desk fee? Sure, but if that was my situation, I wouldn't even think about it. I think I make about $200/M in Keyboard errors alone.

nitro [/B]
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there are definetly benefits to leveraged trading, but at the same time the explosion of the direct access software platforms for retail and sophisticated retail accounts that can easily surpass the PDT requirements has lessened the advantage that leveraged trading offers...

trading remotely is not for everyone, let alone those who have to either be around others, or get out of the house just to maintain a regular regimen

I never said churning, however, its not without cause that one might liken the experiences of others with the emphasis on ticket writing to churning. What makes this impossible to ever be wrong, is the fact that being licensed is required, and the account is one's own, and there numberous notations in the contracts to stipulate that the trading decisions are being made by that trader without influence from others.

Let's face it, this form of trading is not investing, however, the level of disclaimers required to be active in one's account mitigate ones protections, as if there were ever any anyways.
 
Don,

I thought that this thread would really benefit from your comments on how traders, and others really perceive this industry, whether they're successful, marginal or not..
 
Quote from limitdown:

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Revenue per trader's deskchair is how the leveraged business attempts to project profitability through commission and services earnings. Hence, in order for each traders' seat to yield, say $10,000 monthly, one would have to charge $.01 per share and have that trader average above 1,000,000 shares per month. Other services would be software or desk fees of $200, $350, $400 or more per month; bullet costs for married puts; futures/options ticket charges and other service offerings.
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That's gross not net in above example.

since no firm has zero cost to do transactions
 
Quote from rtharp:



That's gross not net in above example.

since no firm has zero cost to do transactions
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IN this example, suppose that through good trading skills the trader made over $10,500 in profits. Naturally, there's a cost associated with trading, commissions and cost of doing business. There are also incentives and soft dollar commission rebates from the ECN's, prop shops with their monthly fee rebates and so forth.

What does that trader then have access to, of his $10,000 profit?
a) the full $10,000
b) less than the $10,000
c) broke even on fees, for the month and expenses?

In a rhetorical fashion the question is posed without the answer, however the wrong answer is a

Comparitively also ask whether being at the Prop Shop, and making the $10,000 profit is something you're capable of doing without a prop shop environment, where the same questions apply.
 
If I was to exclusively focus on, say futures, I would do around 10 roundtrips a day (currently I do around 5, cos I trade stocks as well)...

My size is anything from 10-20 contracts... let's say 15 on average...

So, if I was trading at a prop firm for $3 roundtrip per contract ($1.50 each way), my monthly commissions payment to the firm would be:
$3 commission x 15 contracts x 10 trades/day x 22days/month, which is about $10,000, which is at least a 40%-50% reduction on retail rates... so far, I have saved a few $000 per month...

However, the firm would prolly wanna take 15-20% of my profits, so the commission saving goes out of the window and now I am worse off (assuming I am trading my usual size) by trading for a firm... and then you gotta add on stuff like desk costs, so I am another few thousand worse off relative to retail...

The ONLY way working for a firm could work for me is to allow me to trade more contracts than I would feel comfortable about trading with my own money... another thing: I hate working for other people, so it'd better be a totally obcene number of contracts relative to what I am used to, to make up for the psychological distress of not being in total control of things...

In a nutshell, I wouldnt have any sense of "competing objectives" working for a prop firm if they gave me at least an 80% payout and allowed me to trade 75-100 ES contracts worth of their capital on a given trade... now me and the firm would be operating on the same wavelength... they win if I win, but I aint too sure if such a deal (80%+ payout, capital allowing 75-100 cons trades) exists... if I were a prop firm, I sure wouldnt wanna be risking that kind of deal... so, in the absence of ideal deals, its gonna be the trader-employee who has got the shit end of any deal... competing objectives are prolly alive and well...
 
The firm takes a cut of your funds on every trade (commissions).

This is, in effect, the "house edge" so in a sense you are competing with your brokerage firm. It is, in my opinion, critical to your success to reduce that edge to as little as possible, while maintaining the standards (software reliability, support, etc..) you need to trade your style.
 
Quote from esc_trader:

The firm takes a cut of your funds on every trade (commissions).

This is, in effect, the "house edge" so in a sense you are competing with your brokerage firm. It is, in my opinion, critical to your success to reduce that edge to as little as possible, while maintaining the standards (software reliability, support, etc..) you need to trade your style.
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the Firm, takes more than just their cut/commission....

they impose through many means, their profit objectives, which is purely self interest, which does not benefit most traders, especially new ones...

by imposing high ticket/volume preferences...
by severely frowning upon the ability to carry positions (swing trade) over the preference to high ticket/volume trading...
by severely preventing/frowning upon risk mgmt hedging techniques (see this thread ...http://www.elitetrader.com/vb/showthread.php?threadid=7373)...

by a number of means, they take their "house edge" way down deep into the field of the individual traders court that they simply can't make enough to make it worth it....
 
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.
 
Quote from esc_trader:

The firm takes a cut of your funds on every trade (commissions).

This is, in effect, the "house edge" so in a sense you are competing with your brokerage firm. It is, in my opinion, critical to your success to reduce that edge to as little as possible, while maintaining the standards (software reliability, support, etc..) you need to trade your style.
More...

agreed....

that edge has been narrowed to the point where you're able to successfully do all the same trading things individually....

Direct access trading software
Bullets, conversions, less than a penny share commissions
4:1 margin c/o PDT ruling

and other significant concessions have severly reduced the competitive edge that these Prop Shops have over the alternatives.

one upside is not having the "mind think" where you have to learn destructive habits of trading, as if your account depended upon it. (this topic is a thread in itself)...

being able to maintain positions, swing trading and SIPC and NASD account protections are some of the benefits you pick up,

what you might not have access to are the almost unlimited Market Open Only order margins, or some other esoteric trading methods...

for the vast majority of new traders and mid range traders the true crossover point favors retail vs. proprietary
 
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