Who called that one Don? Come on, give me credit.
SEC needs to CRACK DOWN on "Prop" firms
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Who called that one Don? Come on, give me credit.
Quote from Maverick74:
Who called that one Don? Come on, give me credit.
Yeah, I know...it was either last year or the year before that we offered that (lower entry) program to a few "special" people, but it was wrong on a couple of levels. (This is where I get in trouble, speaking honestly) ...One, if the person has not been able to accumulate a bit more money in their life, then perhaps their dedication and discipline are not up to trading standards. Two, everyone has fluctuations, no matter what. Three, the risk monitoring was burdensome, trying to watch every 500 share trade. And four, they tend to Take Shots more often than not.
Thanks Mav....
Don
PairCo actually assumes the risk and participates in the profits of many of their traders. If a trader provides "some" capital, then they receive "mo-money".
Good point however.
Don
Quote from Don Bright:
Yeah, I know...it was either last year or the year before that we offered that (lower entry) program to a few "special" people, but it was wrong on a couple of levels. (This is where I get in trouble, speaking honestly) ...One, if the person has not been able to accumulate a bit more money in their life, then perhaps their dedication and discipline are not up to trading standards. Two, everyone has fluctuations, no matter what. Three, the risk monitoring was burdensome, trying to watch every 500 share trade. And four, they tend to Take Shots more often than not.
Thanks Mav....
Don
I think those are very insightful points that should be better known by people in this biz.
It seems to me that the real sweet spot in prop is in either having hardcore software and analytics with cheap commissions for high-vol groups that have been around the block already, or finding well-capitalized retail types -- the successful engineers or small business owners who really are tired of their jobs -- who understand the psychology that goes into being successful in anything and who have the capital to weather the learning curve. Knowing your potential client and having savvy marketing sense to woo them seems to be overlooked by the people I have met who run prop firms.
Heh.
I should introduce you to the management at the last place I was at after I foolishly got caught up with an introducing broker type. A former trader and his highschool friend who was smart but generally socially incompetent and manipulative. There's a reason why these types of firms end up appealing to the lowest common denominator: they can only see numbers and not really understand how to run a business with people. Difference between someone like that and people like Maverick74 (I imagine) or Don Bright. Trading firms are really not much different than other businesses.
I might be talking out of my ass here, but that's never stopped me before. These Prop firms bear a striking resembalance to, for profit, technical schools, with which I have had some experience during my colorful career.
For profit tech schools were, and some still are, notorious for their low standards. If a prospective student had the entrance fee and could qualify for studend loans they were in. Put bodies in the chairs was the goal. All was good, for awhile. You see, there is a catch to all that government money. It's called the default rate. How many of those students are actually paying the loans off? A schools default rate goes above 20% then get put on a 2 year watch list. Goes above 25%, good-bye government money.
The lower the entrance standards are, the higher the drop out rate, the higher the default rate. The answer, lower the standards to graduate, of course. Works for awhile, then you're graduating idiots that can't hold a job. Default rate goes higher. Several schools in the Chicago area, some of them very well known, have experienced these problems.
Moral of the story...shit in, shit out. If the front money is all a school, prop firm, whatever, is looking for, they are destined for hard times.
For profit tech schools were, and some still are, notorious for their low standards. If a prospective student had the entrance fee and could qualify for studend loans they were in. Put bodies in the chairs was the goal. All was good, for awhile. You see, there is a catch to all that government money. It's called the default rate. How many of those students are actually paying the loans off? A schools default rate goes above 20% then get put on a 2 year watch list. Goes above 25%, good-bye government money.
The lower the entrance standards are, the higher the drop out rate, the higher the default rate. The answer, lower the standards to graduate, of course. Works for awhile, then you're graduating idiots that can't hold a job. Default rate goes higher. Several schools in the Chicago area, some of them very well known, have experienced these problems.
Moral of the story...shit in, shit out. If the front money is all a school, prop firm, whatever, is looking for, they are destined for hard times.
Quote from Dogballoon:
Absolutely. He's good at what he does and he seems like a genuinely nice guy who knows business AND trading, not a sociopath
Thanks, now back to the"wooing" mention before.
Providing education, and having a history in the industry, is the primary "marketing sense" that we have always used. That, and just "being out there" in the game that we love so much. Pretty hard to "woo" someone into taking classes, studying for the Series 7, and putting up capital to start a business. For the most part, the new traders are successful in other things, and generally have common business sense. But, you can't please everyone, no matter how hard you try. I feel pretty good about how we run our business, and my brother has always led by example.
The âbuy when green, sell when redâ guys do most of the âwooingâ in this business, (IMO), with their $zillion advertising blitzes. Itâs funny, you never hear about those gawdawful groups here on E.T.
Gee. Dow at all time closing high..."how is that gonna make us all some money"? LOL.
edit: I agree with the Captain above. Our program is setting up independent people as well as we can, not "jobs" training, which has been notorious forever at those tech schools. On the other hand, our IT guy graduated from one of those, and we pay him pretty well...he's probably still paying off the student loans however, LOL
All the best,
Don
For profit tech school -- that's a great analogy. I gotta remember that one
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