Competing Objectives...Who Wins?

TraderJimR · May 14, 2003

Quote from trader99:

TraderJimR,

Great Post!! Congrats on your first superduper UPER long posts.

I actually AGREED with you. I trade prop as well b/c of leverage and use of capital blah blah. That point I agree with you totally.

My only issue was the that APPROACH pushed by certain prop frims or perhaps all of them - that high volume trading is the only way to go. I don't mind doing volume. I do decent enough volume to keep them happy. But I do volume, because I see certain opportunities and I want to MAXIMIZE that opportunity through PROPER POSITION SIZING. To maximize the reward for the perceived edge. But I ain't going to do volume for volume sake when I don't see things or setups that fit my criteria.

I see a lot of prop traders just bang away day after day being flat or gross positive but net down huge b/c they feel compelled to do volume. That to me is NOT the way to trade at a prop firm or a retail firm. Trading should be done for good trading reasons. Not so that you can meet some arbitrary volume quota or whatever.

Well, that's all. But really good post TraderJimR.

trader99

I'm cracking up that you quoted the whole thing

We are going to make Baron have to upgrade his servers just to hold all the text.

And I completely agree, no reason to do volume just to do volume. When the edge is not there to be had, trading is a mistake. My volume fluctuates a lot based on how much movement was in the market that day. Trying to trade when the market is not there is a P&L killer.

esc_trader · May 14, 2003

Doing volume for volume's sake isn't good nor evil.

It depends on your style of trading. If your goal is 1 penny a share profit, but you can apply that edge so often as to do 20 million shares/month and your rates are low enough, there's nothing wrong with that.

You may have a 10 cent per share profit goal, but can only apply the edge a few times a day.

Whatever nets you the most at the end of the day is the way to go...

dotslashfuture · May 15, 2003

"but, oops, there's that unspoken alterior motive of high volume is preferable to efficient trading.."

that is of course the problem, which has been stated many different ways over and over again. And if you don't churn like a banshee, then they will either chastise you, make you socially uncomfortable, charge you outrageous fees, reduce your trading size, or get rid of you.

Firms that actually care about your PROFITS are very few, very small, and very selective, and that is why we are complaining on this board instead of working for one of them.

limitdown · May 15, 2003

Quote from dotslashfuture:

"but, oops, there's that unspoken alterior motive of high volume is preferable to efficient trading.."

that is of course the problem, which has been stated many different ways over and over again. And if you don't churn like a banshee, then they will either chastise you, make you socially uncomfortable, charge you outrageous fees, reduce your trading size, or get rid of you.

Firms that actually care about your PROFITS are very few, very small, and very selective, and that is why we are complaining on this board instead of working for one of them.

we all (those brave enough to comment) have expressed our satisfaction and dissatisfaction with the practices that we experience in this sub-industry.

Don did an admirable post. I really didn't think he'd participate, but I"m glad to see that he did, and that he understood that this thread is objective, and not flattering of the vast majority of the firms out there.

Those of us who are making a living from these markets are the few. There was one post from someone who comments infreqeuently, that took up a whole page. I noticed that his solution was:

don't contact him (and that's fare, just that it cancels the credibility of those comments)
good luck finding such a mentor
don't accept advice from a broker sponsored mentor
stay at it until you're profitable
retail trading margins would be huge to duplicate what he does at a prop shop
good luck finding a mentor
you can make it in this business, but its hard

Uh, its as clear to anyone reading this thread that comments like that beget posts like this one. Simply put the contradictions vs.
the sales pitch vs.
the reality vs.
trading volume for volume's sake
are what these very competing objective are all about.

Happy medium or solution, well it really depends on ....... oneself, doesn't it?, whether this sub-industry is worth the risk vs. actual payout vs. the hype.

TraderJimR · May 15, 2003

Quote from limitdown:

we all (those brave enough to comment) have expressed our satisfaction and dissatisfaction with the practices that we experience in this sub-industry.

Don did an admirable post. I really didn't think he'd participate, but I"m glad to see that he did, and that he understood that this thread is objective, and not flattering of the vast majority of the firms out there.

Those of us who are making a living from these markets are the few. There was one post from someone who comments infreqeuently, that took up a whole page. I noticed that his solution was:

don't contact him (and that's fare, just that it cancels the credibility of those comments)

good luck finding such a mentor

don't accept advice from a broker sponsored mentor

stay at it until you're profitable

retail trading margins would be huge to duplicate what he does at a prop shop

good luck finding a mentor

you can make it in this business, but its hard

Uh, its as clear to anyone reading this thread that comments like that beget posts like this one. Simply put the contradictions vs.
the sales pitch vs.
the reality vs.
trading volume for volume's sake
are what these very competing objective are all about.

Happy medium or solution, well it really depends on ....... oneself, doesn't it?, whether this sub-industry is worth the risk vs. actual payout vs. the hype.

Ok limitdown, it's becoming apparent that you may just be pissed at the world right now because all you did was nitpick my thread for any negative thing you could find. I'm going to assume you have not been doing well trading lately and are looking to take it out on someone... But I'll gladly respond.

"don't contact him (and that's fare, just that it cancels the credibility of those comments)"

I actually didn't say don't contact me, I said I won't show you anything related to how I trade, so don't even bother to ask. I'm not here trying to sell a book or magic trading system, so why would I want my trading style plastered all over these boards for someone I don't even know to suck the life out of it? No way.

And to go tit for tat on that one, the way you decided to spell fair ("fare") in that sentence doesn't help your credibility any. Spellcheck doesn't clean up those mistakes, eh?

good luck finding such a mentor

Yes. What is wrong with that? Good luck. I think if you want to learn how to play the game you need to put your butt in a chair next to someone who does. That is my opinion based on my experiences. I don't think success comes from a book or seminar. I would love to hear someone's success story who makes a living all because of some book they picked up off Amazon. Someone indulge me please.

don't accept advice from a broker sponsored mentor

Someone was complaining about how firms like to teach only big volume strategies, so why not learn from someone that you know does not have alterior motives?

stay at it until you're profitable

I don't remember ever saying anything like this in my life! Where did I say this? This goes against everything I believe in. This game is not for everyone, it is for a select group with the discipline and mental fortitude to see through the fog. The sooner a guy can figure out he is not right for this and gets a good job he should.

I always tell guys not to touch a button or even open an account until they know how to trade. Why lose money while you are learning, it's stupid. Here's an excerpt from my post you hate so much:

"do it yourself only after you completely understand it. Don't reinvent the wheel until you are successful and completely understand the game you are playing."

And here's a link to another post by some guy looking to join a prop firm where I tell him not to until he has had the chance to see guys make money:

http://www.elitetrader.com/vb/showthread.php?s=&threadid=17253

Here's an excerpt:

"But before you decide that you want to trade full time, why don't you find a firm that will let you come in and watch them trade for awhile before you make the decision. Try to convince one in your area to let you be sort of an intern in a way. I'm sure if you offer to supply all the guys there with Starbucks every morning, they will greet you with a hug and a smile every day. That will be much cheaper for you in the long run than risking yours, theirs, or anyone's capital to learn.

Don't learn to trade by trading. Trade after you have learned how to trade. And I know you say you have been trading a small retail account for over a year, but that is a whole different animal as you will soon learn."

retail trading margins would be huge to duplicate what he does at a prop shop

Yes, and I'll say it again... If you don't need the leverage that prop shops provide, I think IB is a fine place to be. But I think prop shops take a bad rap from some guys who don't understand how to use leverage, and I am just standing up for Don and saying that I believe more guys succeed at the prop shops than trying to make a living at a retail firm. There's no way I could trade without leverage and make the money I do, it's that simple. And I am not some big 10,000 lot trader taking big swings. I just understand all the aspects of leverage and how to milk it the right way, and in a very risk averse way.

good luck finding a mentor

Don't know why you felt compelled to say this twice, must be a biggie for you. My secret method from years ago is out anyways, you just read all about it three paragraphs ago, so there. Try that and get back to us.

you can make it in this business, but its hard

Is this not true? I have seen a ton of people fail doing this. All of them called themselves traders and none of them knew how to trade.

"someone who comments infreqeuently"

OK, so it's true that even though I have been a registered poster on this site LONGER THAN YOU HAVE, I have less than 1/4 as many posts.... My question is, who do you think looks at the markets and trades more, and who is busy reading about how much everyone else is making and bitching about it more?

"Those of us who are making a living from these markets are the few"

I know two things about that statement: 1 - I am in that group. 2 - I have my doubts as to whether you are.

And I am not saying that to be mean or flippant. It has just been my experience in the now 10 years I have been trading that the unsuccessful guys bitch about the firms, or the software, or the this and that, and I can't remember many successful guys who do that. From what I have seen, a good trader (and my definition of good trader is much more stringent than most) can make money at any firm and with any software. It is what is in his head that makes the money.

Well, there's my second novel. My fingers hurt now, thanks.

limitdown · May 16, 2003

Trader Jim,

this thread isn't about you, me or our success, or how we perceive each other's success, relative success, lack of success or whatever.

What this thread is about are the realities of trading leveraged as its represented from these prop shops and their sales presentations verses the realities of the sheer number of failures by traders, wanna be traders, successful traders who don't succeed using these methods and those who have succeeded and chose to leave the business for other angles like retail basis trading.

What your comment did was, in its length, was to further narrow the field of likely candidates who would succeed. This awakens the minds of those who are going through those "so called" training courses or not seeing the much touted success in their own accounts to the level of "hey something's wrong with this picture".

I've arranged my trading style to participate in these boards, just as others have and others have not. Taking time to participate does not impede my trading, nor my results.

Benefits to proprietary trading are evident in their own right. However, one or two other commentators accurately did comment on these competing objectives and not miss the points made.

When the industry recognizes the extremely high failure rate and properly adjusts for that, if that's possible, then those statements regarding how these firms would rather have 5% of a billion dollars might actually come more true than results to date.

TraderJimR · May 16, 2003

Quote from limitdown:

"this thread isn't about you..."

Yeah, I figured that out. Your post was about me though.

Quote from limitdown:

What this thread is about are the realities of trading leveraged as its represented from these prop shops and their sales presentations verses the realities of the sheer number of failures by traders, wanna be traders, successful traders who don't succeed using these methods and those who have succeeded and chose to leave the business for other angles like retail basis trading.

I am fine with you feeling that way, but don't you think you make a lot of assumptions there? You are saying that these multi-million dollar highly-regulated exchange member, SEC and state-registered firms are openly lying to the general public in their sales presentations? I don't buy it. I think I remember some article by Bright some time ago that actually showed the actual turnover rate there and it wasn't that bad actually, perhaps Don can help me here on whether I am wrong or not. I am just saying, where is your proof found that they are lying other than the fact that you may be unsuccessful? Don't take this the wrong way, but for you to get up here and profess your opinion as fact, and as a fact that contradicts as you say what these highly-regulated exchange member, SEC and state-registered firms are presenting to the public, who was more credibility, them or an anonymous internet message board poster?

Quote from limitdown:

What your comment did was, in its length, was to further narrow the field of likely candidates who would succeed. This awakens the minds of those who are going through those "so called" training courses or not seeing the much touted success in their own accounts to the level of "hey something's wrong with this picture".

Would someone please tell me if my comments narrowed the field of likely candidates who would succeed? What are you on, limitdown? I have always thought of you as a knowledgeable poster, but your posts right now are making so many assumptions that have no factual basis.

Quote from limitdown:

I've arranged my trading style to participate in these boards, just as others have and others have not. Taking time to participate does not impede my trading, nor my results.

This is where you and I differ greatly. With the exception of the last 10 minutes while I am responding to you, my trading comes first above all. This is probably the biggest difference between us and I will never understand how you would rearrange your trading style around posting here. Trading pays the bills, for me this is just a fun outlet for some spare time.

Quote from limitdown:

Benefits to proprietary trading are evident in their own right. However, one or two other commentators accurately did comment on these competing objectives and not miss the points made.

So you are saying that out of 15 pages of posts, all the rest of us missed your point except 1 or 2 guys. But I'll give you that one since you are the one who started the thread, but apparently only you and these 2 guys know the thread's true meaning.

Quote from limitdown:

When the industry recognizes the extremely high failure rate and properly adjusts for that, if that's possible, then those statements regarding how these firms would rather have 5% of a billion dollars might actually come more true than results to date.

Where is your data other than personal observation? What if my observation were that every trader makes millions, should they then publicly recognize that? I'm not saying either is correct, but perhaps again maybe these highly-regulated exchange member, SEC and state-registered firms are presenting the true data and you and I are both wrong by basing our assumptions on our personal observations.

And I am not saying you are wrong, but as a longtime poster here you should know better than to represent opinion as fact.

And if this keeps up then we are just going to have to get out a tub of Jello and strip down and settle this like real men.

dotslashfuture · May 16, 2003

I swing trade and I can post all freaking day if I want, and still make more money than all the churn monkeys out there.

this idea of either you trade or you post is bs rhetoric to avoid the issue.

nitro · May 16, 2003

I don't get it. Who cares what style of trading you or I do? I don't care if you scalp or swing trade or swing from a tree.

If you swing trade and are making money that is great! But why would you want to convert me or call me names because I don't trade that way if I am happy trading the way I do?

THERE ARE SWING TRADERS THAT MAKE MONEY. THERE ARE HIGH VOLUME TRADERS THAT MAKE MONEY.

Assuming the above is true, AND YOU ARE IN THAT CAMP, what is the point of rambling on?

nitro

Don Bright · May 16, 2003

Quote: "perhaps Don can help me here on whether I am wrong or not. I am just saying, where is your proof found that they are lying..."
----------------------------------------------------

I'm always glad to give a response ("whoda thought?)lol.

I actually am able to comment on both sides of this discussion. I was adamantly against the big number of "daytrading shops" that sucked the life out of the "stars in their eyes" type of "trader" who was inticed by the Internet/ Nasdaq bubble. For a short time, we had daytrading references everywhere (Doonesbury for God's sake!), TV, all the media, etc. Then the Senate hearings came and investigations were taking place. We even "debated" with the NASAA people, and they were shocked that my brother totally agreed with what the NASAA was doing (shutting down day trading firms). Bob said that trading is serious business, and should be left to those few "professionals" who fully understand the "game."

Our legal people were involved in the changing of the rules, seperating the retail firms from the serious floor traders and proprietary traders (licensing, etc.).

There were over 150 "daytrading firms" in the late 90's, and only a handful left. This validates the argument that trading is a poor way to expect to make a living for the average person. As in all business ventures, only a few have the skills to not only survive, but thrive. I find it interesting that the same firms who were around 10 years ago are mostly still here (Schonfeld, Generic, Bright), and the multitude of short-sighted non professional fims are all history.

So, I agree that the "odds" are stacked against the "wannabe" trader.

Now to the other side:
Those who are part of what I call the "successful minority" of people in general, traders in particular, have whatever the "x factor" is to make and keep money (whether trading, running a restaurant, practicing Law or Medicine, whatever).

These people have choices presented to them, and will not be "sold" anything, but conversely seek out opportunities. They can choose to trade, or work at a bank, or drive a truck for that matter (then some will buy their own truck, run their own business, start a trucking company, and succeed). Some will remain working for a salary, feeling safe, and say to themselves that this feeling of safety outweighs the risks involved in entrepreneurship.

The Stock Exchanges are "for profit" enterprises, allowing a marketplace for the (very) few who choose to trade stocks. Providing liquidity to the investment community is key to the continuation of the Capitalist system. Providing liquidity involves risk, and therefore must also allow reward.

Traders on the exchanges have always been a very small group, and the success rate is small, and yet the rewards can be great.

Good traders can make money regardless of where they trade. Trading firms come in various "flavors" ..offering a place to trade "off floor" thus avoiding buying expensive exchange memberships. There are many different business models, levels of stability, integrity, and all the other traits found in any business.

A certain degree of "comfort level" is expected by the successful trader and the relationship with their firm. The retail brokerages offer some of the features in Prop trading, and yet all have the offsetting restrictions. A business decision on which road to take is made by the individual trader, nothing more, nothing less.

I, weekly, send "potential traders" back to retail shops because I don't think they would receive any "value added" from trading with us. Retail brokers accept anyone with $$. There is some "competition" within our small industry, and competition is generally a good thing. When traders make their choices within our group of firms, I am proud to share as much information as I can with them. Providing balance sheets, valuable training (we can't teach anyone to be successful, but we have some of the best traders involved in our teaching program, who can share decades of experience in the trading game).

OK, I don't want to turn this into another "Bright commercial" (or be accused of it)....so I will close this "novel" by simply saying that if you don't think trading is good for your financial future, then by all means choose another line of work. If you choose to be a trader, you have business decisions that only you can make.

Best to everyone!

Don