If you had a prop firm, how would you develop traders?

N

newwer

I just started funding 5 futures traders and the first week all five have lost money. I know that 95% of traders lose money but damn.

How do help these guys out?

One big problem seems to be impulsive entries chasing the market. So I've emphasized trading with less frequency and waiting for ideal entries by placing bracket orders well ahead of time and being detached from what the market is doing now.

Another problem seems to be scaling in and out which obviously leads to biggest positions on losses and smallest positions on winners. To solve the scaling problem I'm thinking of emphasizing an all in/out approach.

Risk management isn't really a problem since I can set limits so that is not my concern.

My biggest concern is helping them develop an edge.

Since 80% of market volume is market making is that the only viable approach to intraday trading?
 
errmmm...you can forget about the mid 00s prop shop model, scalping and market making in STIRS or fixed income spreads. With those strategies at work you could train a talented beginner within 6months to break even.

Todays markets are much more efficient and the discretionary strategies have become more complex. Today you should be thinking 1 year to break even, 3 years to constant profitability and 5 years to serious dough.

Now imagine how many people would go through the torment of not making a dime and working their asses off for that long and working nightshifts at McD to pay their rent...
 
MrMuppet said:
discretionary strategies have become more complex
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This I agree with but

MrMuppet said:
scalping and market making in STIRS or fixed income spreads
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has to be considered complex strategies. I am working on some strategy where you take a equity index spread and spread that against a short rates spread. This is complicated, but that other stuff is too.

Have them trade micros, index spreads, bond spreads, or something else that reduces the risk. Teach them how to cross hedge indexes.

I think it would be impossible to teach somebody how to trade. Even if they were smart, there is just too much you have to know, so it would take forever.
 
dozu888 said:
this sounds made up.... 'started funding 5 guys' for what? 5 guys off the street?

'prop firms' are a universal scam... you don't see any 'prop poker houses' out there do you.
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Almost all pro poker players are backed or staked by 3rd party investors...who is the equivalent of a "prop poker house"

Not all prop shops are a scam. There still are a couple of serious P/L firms out there.
I think you got confused over terminology...you meant arcades. Desk fee + first loss deposit...scam
 
Real Money said:
This I agree with but



have to be considered complex strategies. I am working on some strategy where you take a equity index spread and spread that against a short rates spread. This is complicated, but that other stuff is too.

Have them trade micros, index spreads, bond spreads, or something else that reduces the risk. Teach them how to cross hedge indexes.

I think it would be impossible to teach somebody how to trade. Even if they were smart, there is just too much you have to know, so it would take forever.
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In my days you either had to chose from Bund/Bobl/Schatz, Treasuries or Eurodollars. Money was made by posting bid/offer in some weird product with little liquidity (packs, bundles, far out expirations), leg into an inventory position (fly) and either exit by trading the exchange traded spread or by reversing your trade on the other side.

It's not quite shaved chimp difficulty since you had to be fast but today there are off the shelf algo's that can do this in 100 markes simultaniously.

Today you are either a quant or lucky enough to find a mentor who teaches you. There is too much crossflow between assets to figure out which way the money is going.
 
newwer said:
I just started funding 5 futures traders and the first week all five have lost money. I know that 95% of traders lose money but damn.
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Perhaps you could share a bit about your business decision to fund 5 traders.
 
newwer said:
I just started funding 5 futures traders and the first week all five have lost money. I know that 95% of traders lose money but damn.

How do help these guys out?...
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5 futures traders?

In my estimate you'd need a minimum of 20 million dollars in the account to fund them.

You limit them to max 10 contracts each, and allow them to swing. No "daily drawdown" crap" no trailing-loss BS. Allow them to roll. Allow them to spread their wings. And you do this only if you have hundreds of millions in your bank account to allow folks to constantly fail so you can re-fund their accounts.
 
I fund them 100%, no deposit.
Also not charging any monthly data fees or any commissions.

Initially I gave a lot of discretion for them to trade whatever they want however they want so long as they don’t hit risk limits.

I don’t think risk management is anywhere near enough in this business. You also need a solid edge and a strong focused mindset.
 
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