1.Professional Investment firms who are looking to hire experienced traders require between 12 to 24 months of Financial statements from a Brokerage or from another trading firm. They require such a long period of time because the industry knows that. A bad trader who doesn’t know what they are doing can get lucky for 1 day, or for 30 days. Even an inherently flawed trading system can produce one month of successful trading results. But a bad system or a bad trader can NOT get lucky for an entire 2 years.
2. A Good trader who knows what they are doing can have a bad trading day, a bad trading week and even a bad trading month. But they will not have a bad trading period that spans over 1 to 2 years. This is why a professional trader is not judged on how they traded over 2 weeks or a month. They are evaluated over a 1 to 2 year period by a firm who is interviewing them. Because they know 1 bad month or 1 good month is not an indication of whether or not a trader’s analysis and execution is reliable or not.
3. This is done to control for "Survivorship Bias" . Anyone who has managed a team of traders or has done systematic back testing of certain trading protocols has seen countless bad systems that were successful for one month but completely failed for the remaining 11 months. A longer period is needed to rule out survivorship bias. Look at the "world wide futures trading competition". It's held over a 1 year period. This is to also control for survivorship bias.
4.In this study lets look at Earn2Trade which is one of these “try out firms”. Which means you pay a fee to take a test and if you pass the test they will give you a “funded” account to trade from. They suggest on their website that they are giving segregated funded accounts only after a 2 week trading evaluation.
5. But if you look at Helios trading partners which is supposed to be the “funding arm” firm that backs the traders who pass the Earn2Trade evaluation. They require 12 months of trading evidence if you want to bypass the earn2trade evaluation test and get hired in directly. Why don’t they allow applicants to show 2 weeks of trading statements ? Or just one month? If Earn2Trade is giving people funded accounts after 2 weeks then shouldn’t the funding firm also allow someone to show proof of trading success after 2 weeks as well? Why 12 months? I submit this as their reasoning. They know 2 weeks is not a large enough sample size of a trader’s performance to consider going through the paper work process of giving them a segregated funded account.
6. Look at other firms like DV trading, Chimera Securities, Marquette Partners,etc, contact them about their direct hire requirements and you'll see that they require 1 to 2 years or more of trading history so they can review your track record. Not 2 weeks. Everyone knows 1 day or even 2 weeks could be pure luck.
7. If you look to hire a mentor or hire someone to teach you how to trade. Do not accept a video of one trade, or their results after 1 day of trading. Require the same level of verification from a trading educator or mentor that a professional firm would require for hiring an "experienced" trader. So you can rule out "survivorship bias" or "randomness" in their trading examples of success. No one in the industry would accept cherry picked data samples of someone's trading success. Even if you were already employed by the firm. If you presented your trading team a singular example of a successful trading idea they would have all assumed that you have 6 to 12 months of back tested data to rule out randomness.