Mav's Combine Proposition
- Thread starter Maverick74
- Start date
I think my plan makes much more sense.. anytime there is an open plan to accept anybody then I don't think it will work. A real problem with any serious plan is that it does take about 6 months to evaluate someone but most good/developing traders wont trade on the sim for 6 months
Also come from someone who knows.. trading on sim too long can introduce performance problems when going live. There is a risk to too long sim trading... There is also another problem if that one is succesful on sim then sometimes there isn't as much drive to go and make money.
I would want 6 months to evaluate a trader.. but its simply too long to get best talent.
Another option is to have both live and sim trading simultaneously.. I find that works better. Not a back and forth... but the recruit might have 1 live acccount and 2-3 sim accounts... experiment on sim and take best trades on live. This way they could start live trading within 2 weeks or so.
Another option is to have an ambigious account that can be swithced to live state without the trader knowing when.. but he knows it can be.. this could be used during training phase. As you could come back and show when he made money..
1. The time required would be longer but more flexible. 1 month is just too random. It'd be at least 2-6 months in length. Minimum of 50 days and 90 trades. Meet the objectives at any point and go live.
2. Objectives would be reduced and objectives would be formulated in a risk adjusted measure. I suggested that 5x multiple of max peak to value DD and 6x return on daily risk limit would be a challenging but reasonable measure and manage not to have a peak to valley DD greater then 6x daily loss limit (or whatever the conditions would be live).
3. Scout opportunity could be free for traders who showed promise on live acccounts because the objective is to find best traders -- not to sell crap. If a charge was needed, scout opportunity would cost something tangible, like a $750 deposit but you'd get it back if you just showed up. Trade on 60% of days and get a full refund.
4. There would only be one tier because as someone who funds traders then there is no reason for me to risk more then required. Likewise, it is understood I will scale up traders to enough capital to trade for a living if they do well. So, it'd be probably start at about $900 risk cap per trader and scale up quickly to 3k-5k per day if they did well.
5. It would be at my discretion. There would no guarantee that everyone would be funded. However, I would show those that were funded over another and show why and the reasons would need to be logical.. better risk adjusted return, higher net profit, etc. I would also set a firm # of traders who were guaranteed funding at the start of a new scouting round.
6. When going live, you would get at least 4x your daily loss limit and possibly up to 6x limit.
7. You would never be forced back to simulator but would be scaled down in both loss limit and contracts if you did poorly.
8. Hitting the daily loss limit 1x would not be end of world. The platform would automatically shut you down/out if you were within 90% of the loss limit and had no open positions. If you have an open position, you could go 15% over the loss limit without penalty. If you shut down between 15% and 20% over the limit then you'd be be penalized - no trading for 3 days. At 20% over the limit, the software would shut you down. If the software closes you or you exceed the 20% overrage then you'd be shut down for 1 week from live trading with possible further penalties on subsequent violations including fines. Of course, I'd just work backwards so that the software close level was the true loss level. This graduated response will encourage my traders to utilize all of their risk while still being disciplined.
All numbers may need to be tweaked.. just general concept here
Also come from someone who knows.. trading on sim too long can introduce performance problems when going live. There is a risk to too long sim trading... There is also another problem if that one is succesful on sim then sometimes there isn't as much drive to go and make money.
I would want 6 months to evaluate a trader.. but its simply too long to get best talent.
Another option is to have both live and sim trading simultaneously.. I find that works better. Not a back and forth... but the recruit might have 1 live acccount and 2-3 sim accounts... experiment on sim and take best trades on live. This way they could start live trading within 2 weeks or so.
Another option is to have an ambigious account that can be swithced to live state without the trader knowing when.. but he knows it can be.. this could be used during training phase. As you could come back and show when he made money..
1. The time required would be longer but more flexible. 1 month is just too random. It'd be at least 2-6 months in length. Minimum of 50 days and 90 trades. Meet the objectives at any point and go live.
2. Objectives would be reduced and objectives would be formulated in a risk adjusted measure. I suggested that 5x multiple of max peak to value DD and 6x return on daily risk limit would be a challenging but reasonable measure and manage not to have a peak to valley DD greater then 6x daily loss limit (or whatever the conditions would be live).
3. Scout opportunity could be free for traders who showed promise on live acccounts because the objective is to find best traders -- not to sell crap. If a charge was needed, scout opportunity would cost something tangible, like a $750 deposit but you'd get it back if you just showed up. Trade on 60% of days and get a full refund.
4. There would only be one tier because as someone who funds traders then there is no reason for me to risk more then required. Likewise, it is understood I will scale up traders to enough capital to trade for a living if they do well. So, it'd be probably start at about $900 risk cap per trader and scale up quickly to 3k-5k per day if they did well.
5. It would be at my discretion. There would no guarantee that everyone would be funded. However, I would show those that were funded over another and show why and the reasons would need to be logical.. better risk adjusted return, higher net profit, etc. I would also set a firm # of traders who were guaranteed funding at the start of a new scouting round.
6. When going live, you would get at least 4x your daily loss limit and possibly up to 6x limit.
7. You would never be forced back to simulator but would be scaled down in both loss limit and contracts if you did poorly.
8. Hitting the daily loss limit 1x would not be end of world. The platform would automatically shut you down/out if you were within 90% of the loss limit and had no open positions. If you have an open position, you could go 15% over the loss limit without penalty. If you shut down between 15% and 20% over the limit then you'd be be penalized - no trading for 3 days. At 20% over the limit, the software would shut you down. If the software closes you or you exceed the 20% overrage then you'd be shut down for 1 week from live trading with possible further penalties on subsequent violations including fines. Of course, I'd just work backwards so that the software close level was the true loss level. This graduated response will encourage my traders to utilize all of their risk while still being disciplined.
All numbers may need to be tweaked.. just general concept here
Lucias, that model will not work. And how many people are you going to hire and "pay" to do all this. LOL. Good luck. Your model might be OK for a trader, but the owner of that model will go broke. That is a 100% fact.
Mav... there could be a small fee for that. I really think this model is more likely to find best traders... the scout phase is just designed to break even or lose money.
I know it is actually more likely to produce good traders by looking at longer term record because I monitor many systems/traders who do well over a short perod... doesn't hold up. But those who do well over longer tend to continue to do well.
Even as designed, I'm sure that some will not trade the required days and will lose the scout fees.
Why would owner go broke? He has complete control over who gets to trade live.. unlike your model. Also, the risk is much higher then tat TST/PTK.. I am way more likely to get serious traders. $750 is a lot of money for most people... I'd only get super serious people... $150.. that's a joke. But its also more fair.... so you really get refunded.
I know it is actually more likely to produce good traders by looking at longer term record because I monitor many systems/traders who do well over a short perod... doesn't hold up. But those who do well over longer tend to continue to do well.
Even as designed, I'm sure that some will not trade the required days and will lose the scout fees.
Why would owner go broke? He has complete control over who gets to trade live.. unlike your model. Also, the risk is much higher then tat TST/PTK.. I am way more likely to get serious traders. $750 is a lot of money for most people... I'd only get super serious people... $150.. that's a joke. But its also more fair.... so you really get refunded.
In all honesty, I'm having a very difficult time seeing how you would come out of this with your own head intact.
This is an immensely fair deal to the apprentice.
As with almost any venture or "backing" it is pretty difficult to be profitable when the success rate of traders is 5-10%...in any business when you fund something with that success rate...the payofff when your right has to be extreme.
So unless your finding a supreme trader every once in while it will be difficult to make money...then you have the added part that even if you do find someone who develops into a great trader they can easily just leave and trade themselves or find a better set up for themselves somewhere else.
there isnt much loyalty in trading LOL
ahh just had good idea...but makes this much more restrictive...find say 10 guys have them trading the same product...half of them must only go short and half only long...so your total exposure might be close to zero give or take...
Have you ever backed anyone Mav?
So unless your finding a supreme trader every once in while it will be difficult to make money...then you have the added part that even if you do find someone who develops into a great trader they can easily just leave and trade themselves or find a better set up for themselves somewhere else.
there isnt much loyalty in trading LOL
ahh just had good idea...but makes this much more restrictive...find say 10 guys have them trading the same product...half of them must only go short and half only long...so your total exposure might be close to zero give or take...
Have you ever backed anyone Mav?
LOL. Lucias, go back to business school. Your model is dead. Hell I would go broke with my model. Lucias, I'm not trying to sound like the evil business guy, but first worry about you before you worry about the trader. You can pick and choose all day long. Most prop firms in Chicago that hire guys pick from the cream of the crop and they still go under. You have to find a place to generate revenue other then trader p&l or your finished. Take that to the bank.
The good VCs can do this, but it means having a few home runs where you're getting 20x the return on a single investment to make up for all the complete 100% losses. I think the downfall for the owner with a plan like above is that it's going to be tough to get a good trader to stick around long enough to generate that 20x for you.
Which would explain why so many operations like this end up making their actual coin from internalizing, aggregating and then selling the order flow, and etc.
*Something* has to pay the electricity bill...
Quote from Random.Capital:
In all honesty, I'm having a very difficult time seeing how you would come out of this with your own head intact.
This is an immensely fair deal to the apprentice.
I know. Scratch that whole plan.