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

[Real Money]

can you explain in a little more detail? what do you mean cross hedge for future traders?

If you take long/short exposure in indexes, for example buy YM and short NQ, then you can trade (roughly) three times the size in notional amount using the exchange variance margin (SPAN).

***This is stuff like having $2,500,000 in long DOW contracts and short $2,064,303 in the NASDAQ (you are risk adjusting exposures so that the overall risk of the trade is lessened).

[many times a pro trader has to manage exposure, but a perfect hedge is unavailable, so they use cross hedges]

this could be stuff like hedging out the commodities risk in stock (british petroleum, royal dutch shell, etc) position by selling crude oil futures. This is a cross hedge that is long stock and short commodities to cut the overall risk while still earning the dividend from one of the supermajors.

***Technically, this is a cross hedge. However, you can trade this position like a market maker by initiating the position just before a large move, or inside a range that is being traded in. You can be long and short equities at the same time and just be adjusting the net exposure.

So if you think the market is bullish, you get neutral or net long (while still holding significant positions). If it's ranging, you act like an MM and scalp legs at the ranges. Likewise, when conditions breakdown you adjust to be neutral or net short.

Here is something to think about.

Imagine you're a pro trader that has no exposure at 5:00AM and your boss tells you to get a list of exposures going in the UK and US equities markets in order to hedge a portfolio of (long/short) stock holdings and to not fuck this up. You also have to deal with all kinds of ad hoc shit all day like filling client positions and getting positions on at VWAP or better.

You are going to need to be A LOT BETTER AT TRADING than just picking entry, take profit, and stop loss.

 

[MrMuppet]

'almost all' perhaps an overstatement?

staking is different from a 'prop house'.... players staking each other to smooth out the volatility I guess... and still doesn't make sense for a winning player to look for a pure financial backer.... guy wins why would he want to lose part of the prize.

also prop firms obviously have conflict of interest.... get fresh meat off the street, churn some volume to get commission/order flow... this scenario is not in poker.

My friend, I hope you know a little more about trading than you know about poker.
Have you ever realized how high the variance is in top level play? With trading it's the exact same way.
Also, you benefit from the infrastructure advantage of a prop house as well as the concentration of knowledge and experience.

I still think you don't know the difference between a prop house and a trading arcade. Google it. Hint: Prop houses make money purely from P/L, not from commissions and desk fees

 

[Turveyd]

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?

Errrrrmmmmmm SERIOUSLY!!!!

You haven't got an edge ( but no time ) which you can teach them ??

If can take a trader 10years to develop an edge, so I guess you've got Amatuers and well you'll be funding them for possibly years.

My advice, give up, save your money!!

 

[trend2009]

If you take long/short exposure in indexes, for example buy YM and short NQ, then you can trade (roughly) three times the size in notional amount using the exchange variance margin (SPAN).

***This is stuff like having $2,500,000 in long DOW contracts and short $2,064,303 in the NASDAQ (you are risk adjusting exposures so that the overall risk of the trade is lessened).

[many times a pro trader has to manage exposure, but a perfect hedge is unavailable, so they use cross hedges]

this could be stuff like hedging out the commodities risk in stock (british petroleum, royal dutch shell, etc) position by selling crude oil futures. This is a cross hedge that is long stock and short commodities to cut the overall risk while still earning the dividend from one of the supermajors.

***Technically, this is a cross hedge. However, you can trade this position like a market maker by initiating the position just before a large move, or inside a range that is being traded in. You can be long and short equities at the same time and just be adjusting the net exposure.

So if you think the market is bullish, you get neutral or net long (while still holding significant positions). If it's ranging, you act like an MM and scalp legs at the ranges. Likewise, when conditions breakdown you adjust to be neutral or net short.

Here is something to think about.

Imagine you're a pro trader that has no exposure at 5:00AM and your boss tells you to get a list of exposures going in the UK and US equities markets in order to hedge a portfolio of (long/short) stock holdings and to not fuck this up. You also have to deal with all kinds of ad hoc shit all day like filling client positions and getting positions on at VWAP or better.

You are going to need to be A LOT BETTER AT TRADING than just picking entry, take profit, and stop loss.

Many thanks

 

[NoEmotionTrader]

I would only recruit people from the Ivy League regardless of how good their grades are. I would have a mandatory 95% wash out rate and never give the ability of all the traders I have combined to wipe out the firm.

 

[trend2009]

I would only recruit people from the Ivy League regardless of how good their grades are. I would have a mandatory 95% wash out rate and never give the ability of all the traders I have combined to wipe out the firm.

Ivy League graduate can be a better trader?

 

[schizo]

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?

Sounds like one more boiler-room antic that's collecting dust. So what's happened to those 5? Did you let them go after their first disappointing week?

If I were a prop house, I would make sure of the following:

1) No 20-year olds: immaturity, impatience, impertinence, and other im's.
2) Must have a minimum of 1-year trading experience.
3) Must have a solid understanding price action and money management before going live.

 

[orbit23]

I'd be willing to trade on a demo, but only if the offer is serious. I primarily trade cryptos, but i've been tracking indices,usoil and gold and i'm doing pretty well. Trading with lame brokers because i use crypto as collateral and swap fees are insane.