New Member Here

[kmiklas]

I am a crypto trader (the proverbial retail trader to be exact)

I have been trading for a while and trying to learn as much as I can. I would like to get funding at some point in future (not this year or next year) because I don't have enough money on my own (typical 2 and 20 type of arrangement). I have a few questions:

1) How long of a track record should I have before soliciting funds from serious investors?
2) How should I document the track record before approaching any serious investor? Can they simply verify from the exchange?
3) What typical minimum annual return (reward) and respective drawdown (risk) would generate interest from potential investors?

I have developed a system and I have traded with it for a few months. I have been profitable so far. Maximum DD about 8% and currently up about 44%. I need information from people who have worked with investors before at a prop firm probably.

Alternatively, can I build a track-record and apply for a job at a prop trading firm (which might be a more direct route than seeking investors)? What are the requirements?

TLDR; How do I grow as an undercapitalized retail trader if I have a potentially profitable trading system and a verifiable track record to back it up?

1. 2-20 years
2. The annual return percentage is the key metric. How much did you make on an annualized basis? No BS here... good documented records.
3. Minimally 1% per month, or 12% annualized.

- Be prepared for a litany of risk checks. Don't think they'll tolerate you going down 30%... or even 3%... and holding. 2% down and you'll be frozen.

- You must put you own skin in the game.

- Since you're trading crypto, which has the risk level of a sub-prime mortgage, expect even more oversight. They might even add weird contract clauses to protect them, like the first x% of loss comes out of yours, not theirs. Or maybe ask you to put some money in escrow.

- When you start trading the money of others, it is a BIG DEAL. There's strict laws about it--and like rich white people go to jail for breaking them.

- You cross the chasm from "Non-Professional" to "Professional." There's a lot of regulation around this. Also you'll see increased costs for everything, like MD. More regulatory and reporting, etc. Furthermore, it's hard to go back to NP once you're in the systems as Pro.

- Are you thinking of forming an LLC?

- You might be able to find a prop trading shop that will give you a shot with USD100k. You'll probably have to reveal your strats, which will be the main reason they bring you on board.

- With algo and systematic trading some peeps lease their system without revealing its logic. E.g. I have 1M to employ. I run your system on my funding and pay you a commission.

 

[Blaze]

1. 2-20 years
2. The annual return percentage is the key metric. How much did you make on an annualized basis? No BS here... good documented records.
3. Minimally 1% per month, or 12% annualized.

- Be prepared for a litany of risk checks. Don't think they'll tolerate you going down 30%... or even 3%... and holding. 2% down and you'll be frozen.

- You must put you own skin in the game.

- Since you're trading crypto, which has the risk level of a sub-prime mortgage, expect even more oversight. They might even add weird contract clauses to protect them, like the first x% of loss comes out of yours, not theirs. Or maybe ask you to put some money in escrow.

- When you start trading the money of others, it is a BIG DEAL. There's strict laws about it--and like rich white people go to jail for breaking them.

- You cross the chasm from "Non-Professional" to "Professional." There's a lot of regulation around this. Also you'll see increased costs for everything, like MD. More regulatory and reporting, etc. Furthermore, it's hard to go back to NP once you're in the systems as Pro.

- Are you thinking of forming an LLC?

- You might be able to find a prop trading shop that will give you a shot with USD100k. You'll probably have to reveal your strats, which will be the main reason they bring you on board.

- With algo and systematic trading some peeps lease their system without revealing its logic. E.g. I have 1M to employ. I run your system on my funding and pay you a commission.

Thank you for the reply. I am a strictly discretionary trader. After reading your response, I think that my best approach would be working for a prop trading shop instead of starting a fund. From there I can build an even better track record and perhaps attract the money under management to a sizeable level (millions).

 

[Tradex]

2) How should I document the track record before approaching any serious investor? Can they simply verify from the exchange?

You can use websites like Collective2 to build a track record in real time, assuming you only use very liquid financial instruments.

And please, do not limit yourself to crypto, it does not make any sense at all.

3) What typical minimum annual return (reward) and respective drawdown (risk) would generate interest from potential investors?

Show your clients that you can make twice the return of the S&P 500, or at least 15% a year (with 25% maximum drawdown or so) and you will attract tons of followers in no time, including major major banks, hedge funds and other financial institutions.

Best of luck.