Raising Capital as a Discretionary Trader
- Thread starter prestonhouse
- Start date
Very difficult raising money, the reason he probably wants you to go systematic is you are almost there. Discretion implies a subjective choice in decision-making. If you are using hard and fast rules that can be written into a spreadsheet formula and simply choosing when to trade that is not dicretionary. [IMO]
The advantage as a system is:
1. it's statistically provable
2. you can build a scaleable business on it, a discretionary trader who is off sick or vacation is not a business
3. you have more clearly quantified your approach, so 2 years is ok to start with, but as a discretionary trader it will take maybe up to 5 years of 'proof' to see how you perform over various bull/bear market cycles
An institution will not give you anything without a pedigree, at least several million under management using your track record and some infrastructure (appropriate staffing, audited statements, administrator, etc.) For many they need you to prove that you can run a stable business with a strategy that can scale up to $500 million. [IMO]
The advantage as a system is:
1. it's statistically provable
2. you can build a scaleable business on it, a discretionary trader who is off sick or vacation is not a business
3. you have more clearly quantified your approach, so 2 years is ok to start with, but as a discretionary trader it will take maybe up to 5 years of 'proof' to see how you perform over various bull/bear market cycles
An institution will not give you anything without a pedigree, at least several million under management using your track record and some infrastructure (appropriate staffing, audited statements, administrator, etc.) For many they need you to prove that you can run a stable business with a strategy that can scale up to $500 million. [IMO]
As it has been correctly pointed out above "quantitative" traders get advantage because their systems can be backtested. One may need a good number of years to generate a trustworthy track record but many "quants" bypass it by showing a backtest instead.
Also a few layman's myths add to it:
1) If you can't code, backtest and automate your approach, you either don't have a consistent approach or are lazy;
2) If you have a really good profitable trading idea, you can manually trade it on just a few instruments but you cant "auto-trade" it on dozens;
3) You can improve profitability of any trading startegy by optimizing paramters (that's a real myth);
4) Quantitative trades work because traders don't use discretion... Seriously? Aren't desiosions regarding when to "improve" a trading strategy or change parmeters discretionary?
Also a few layman's myths add to it:
1) If you can't code, backtest and automate your approach, you either don't have a consistent approach or are lazy;
2) If you have a really good profitable trading idea, you can manually trade it on just a few instruments but you cant "auto-trade" it on dozens;
3) You can improve profitability of any trading startegy by optimizing paramters (that's a real myth);
4) Quantitative trades work because traders don't use discretion... Seriously? Aren't desiosions regarding when to "improve" a trading strategy or change parmeters discretionary?
Tradar Zones and Trader Zones...Thanks for your reply to the thread. I agree with both of you that 95%+ of traders will bleed slowly and blow up their accounts. I am with you on that. But it seems that when a person posts a thread in the manner I have, it may be beneficial to offer a little more constructive input than saying it's impossible, etc. I started 2 years ago with basically no formal financial education. I was a high school English teacher. The one advantage I had was that I've been an athlete my entire life and have played at very competitive levels, so I know the art of discipline.
Because of reading some great literature on trading psychology, I adapted a very disciplined risk management approach to trading from day 1. The most I've ever lost on a trade in 2 years is probably 3% and that happened only once that I can ever remember. I now rarely risk even 1% due to having a bit more capital. The largest DD I ever had from peak to valley in my 1st year was about 20%. Not bad for my first year. I think that the 90%+ fail because of a multitude of reasons, but I think most of the reasons can be traced back to not approaching trading as a business.
Think Richard Dennis--I am of the camp that most anyone can be taught to trade if they are given very strict risk management teaching and a solid edge in the market. if you have those 2 elements, failure is only up to you. that is my opinion. of course, those 2 things are not easily mastered at all!
I actually have never been active on any forums because I found out early on that they were filled with mostly struggling traders. I read through a few threads in the Career Trader part of ET and thought this forum may be different because I ran across a few guys who said they were CTA's, hence my post. I only came to ET in the first place because I was searching for info on the CFA designation which i found very few posts on in this section of the forum. I really wanted true answers (opinions) to the questions I raised. I hope you guys can release a bit more encouragement to folks who are really taking forward steps in this business.
Obviously if some guy is posting a stupid thread about how he's going to become a millionaire in a year with any size of account that's less than $2 million
, then sure grill the guy and take some jabs at him. However, it seems that if someone is really moving forward, as I am, it seems that a bit more compassion could be a good thing. Just my 2 cents. Not meant to ruffle any feathers. Now, in all fairness, I know I don't have hardly any posts to my name, so for all you guys knew, I was some dreamer just chasing the gold pot...so with that in mind, I do understand where you're coming from. Just thought I'd try to shed a little light.
I know that TraderZone is an established fella on this thread, so thanks for all your contributions. Hope you hear what i'm saying.