Is having your own hedge fund good idea vs. staying as prop.

[nyxtrader]

Here is my opinion and not that it matters.

If you have talent, why let somone else reep the benefits? Unless the payout is with the time. I have tossed around the idea of a fund myself and still do time to time. I actually had an investor call me last night and ask if I would start a fund using his money, with a 20/80 split.. I laughed and those of you who manage funds should too.

Let me tell you, they need you as much as you need them. I kindly explained that I wouldn't even consider the deal unless it was a 50:50 split as both, money and the talenr are worth the same price, in my eyes.

As fund managers, you should take approach that your hard work is worth more than 20 or even 30%.

With my lengthy track record I wouldn't consider anything less than 50%.

So to answer your question, I would stick with prop.

 

[marketsurfer]

Quote from jjk2:

read "Hedgehogging" by Biggs

the new book "hedge hunters" is also a must read for those interested in such things.


surf

 

[anarcho]

Never having to answer to anyone is priceless. If you are established many prop firms will give you loads of BP and leave you alone. In my books, that is gameover. Who even cares about the money scenarios.

 

[marketsurfer]

well said NYX. Many here have no clue true costs involved--- just for an example, an audit, by a reputable firm ( and anything less is a waste) costs 35-50k for a small fund....plus plus plus---costs are outrageous. everyone wants a piece of you and charges accordingly---prop is the way to go for 98% of traders imho.

surf

 

[olias]

Quote from on the money:

Absolutely right shmuck.
"grammer" should be "grammar".

Actually, "Absolutely right shmuck" ...is not a sentence. That's incorrect punctuation my friend. ...which brings us back to Eric's point...

 

[Don Bright]

Quote from Tracy McGreedy:

Does Bright allow for $10MM net long or short portfolio and an 8% drawdown = 800k with no money up.

Of course not, who in their right mind would? Would you? Will you give me money to play roulette with and if I lose, "too bad" ? I doubt it, LOL.


Don

 

[Don Bright]

Quote from TradStSOX:

Now, this IS the MOST important factor here. IMO maybe 1 in 10,000 traders could get 10mm to manage! The other benefit is the hand holding of the prop. Not easy to manage an HF and trade at the same time.
Now on the other hand, what is exactly the benefit of using a prop anyways? I am totally against utilizing max risk.

OK, let's address issue again. More than half my traders have been with us more than 7 years...obviously making money or they wouldn't/couldn't continue to trade. New business ventures of any kind fail 90% of the time in the first year. Over half our "newbies" are here the second year (not all, but not 5% either).

Now let's address risk and use of capital. You might find this of value first.
http://www.stocktrading.com/riskreward2.html
(I'll leave the entire article up a few days only since it is copyrighted). You'll need to scroll down.

In my opinion, when my brother and I started and could use the clearing firm's money to trade with, we were able to engage in good, working, market neutral strategies. We wouldn't be able to do that with $25K-$50K, we would have to pick some direction or another or simply try to day-trade.

With enough capital to "use" not "abuse" you can engage in lower risk, higher reward strategies than the PDT trader/investor. You're basically able to do what "real" hedge funds do make money, and what exchange members have been able to do but not the public.

My premise is that since you might be risking $20K or so, that by using more capital, you can engage in good, working techniques that you may not otherwise be able to.

(once again, good discussion)

Don

 

[TradStSOX]

Don,
I quite agree. It is a viable approach to use max. leverage for arbing purposes which in fact I've just quite successfully got into since recently utilizing ES & ER2 since their disparity eventually catches on and hence...
Also what you say about sharing the exchange membership benefits with the traders makes sense too.
However I continue to vote against using max leverage for daytrading purposes only without been hedged!
BTW, do you also handle futures? Since that is my specialty, specially ES and all my studies and indicators are based off of that. Although those same signal I guess could be used for trading equity instruments too like QQQQ etc. Your comments on this issue of mixing ES with equities appreciated.

 

[Don Bright]

Quote from TradStSOX:

Don,
I quite agree. It is a viable approach to use max. leverage for arbing purposes which in fact I've just quite successfully got into since recently utilizing ES & ER2 since their disparity eventually catches on and hence...
Also what you say about sharing the exchange membership benefits with the traders makes sense too.
However I continue to vote against using max leverage for daytrading purposes only without been hedged!
BTW, do you also handle futures? Since that is my specialty, specially ES and all my studies and indicators are based off of that. Although those same signal I guess could be used for trading equity instruments too like QQQQ etc. Your comments on this issue of mixing ES with equities appreciated.

We don't really bother much with trading the e's, but of course we use them as leading indicators. We prefer the "easier" approaches to making money. But, yes, we have a few who trade the E's. We allow them to do so until they lose a specified amount of money, and then we shut them off...we have shut off all but 4 out of 40 or so in the last couple of years. Hard to compete with the CME trading firms who pay under 80 cents round term, LOL.

Once again, whatever works for you. We do our best to focus on the traders bottom line, and if you're already making really good money, then absolutely no reason to change what you're doing.

We don't consider "max leverage" BTW. If you're consistent with 2,000 shares, you might want to trade 5,000 shares, not a big deal for daytraders.

All the best,

Don

 

[TradStSOX]

Can you tel us your rt cost on E's? or PM me if you prefer. I could by all means compete with the majors, they have the cost edge over us and we have the maneuverability edge over them where we can see their cards but we don't have any for them to benefit from lol.