The Perfect Prop Firm

Quote from illiquid:

Maybe it's me, and I just don't understand the point of "prop for hire" in the first place.

If you know how to trade, why do you need to get hired?

If you know how to trade, why do you need backing?

If you know how to trade, why quit trading, in order to run a prop firm?

If you DON'T know how to trade, why do you need to apply to a firm that doesn't know how to trade in today's market? How will that help you learn?

I'm not trying to be a dick either, but I still don't understand the concept of "hiring" and "backing" traders at the individual prop level. When it comes to discretionary traders, why does anyone who knows what they are doing need to get outside funding in the first place? Why would anyone who DOESN'T know what they are doing deserve to get hired in the first place? It seems to me that there is only one sweet spot where the trader and prop firm co-exist for mutual benefit, and that's a matter of leverage as a developing trader first begins to scale up his edge. But beyond that, where does the relationship go?

You are right in that this game is all about sacrifices. The real sacrifice of a trader is TIME -- doing it on your own, taking years and spending thousands and thousands of hours in front of the screen. When you truly make this sacrifice, you don't need some firm of ex-traders telling you if you can or cannot trade. You just go out and do it. If you want to sacrifice a piece of your future for the sake of accelerating growth, go for it by all means. But this seems to me to be the only true reason for prop to exist -- the "wish list" being all but moot.
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See my post above. Because they are not hiring you to scalp minis or AAPL stock. LOL. You have no idea what trades these firms are engaged in and there is no way you could execute them in your IB account. I'm sorry, those are just the facts. You are 100% right, if your definition of trading is scalping e-minis all day long, then there is absolutely no reason to go prop.

And btw, I don't run a prop firm nor will I ever run a prop firm. I just get the feeling you are not even clear on what a prop firm is.
 
Quote from illiquid:

Maybe it's me, and I just don't understand the point of "prop for hire" in the first place.

If you know how to trade, why do you need to get hired?

If you know how to trade, why do you need backing?

If you know how to trade, why quit trading, in order to run a prop firm?

If you DON'T know how to trade, why do you need to apply to a firm that doesn't know how to trade in today's market? How will that help you learn?

I'm not trying to be a dick either, but I still don't understand the concept of "hiring" and "backing" traders at the individual prop level. When it comes to discretionary traders, why does anyone who knows what they are doing need to get outside funding in the first place? Why would anyone who DOESN'T know what they are doing deserve to get hired in the first place? It seems to me that there is only one sweet spot where the trader and prop firm co-exist for mutual benefit, and that's a matter of leverage as a developing trader first begins to scale up his edge. But beyond that, where does the relationship go?

You are right in that this game is all about sacrifices. The real sacrifice of a trader is TIME -- doing it on your own, taking years and spending thousands and thousands of hours in front of the screen. When you truly make this sacrifice, you don't need some firm of ex-traders telling you if you can or cannot trade. You just go out and do it. If you want to sacrifice a piece of your future for the sake of accelerating growth, go for it by all means. But this seems to me to be the only true reason for prop to exist -- the "wish list" being all but moot.
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LOL that's exactly my point!! 100% agree
 
Quote from Maverick74:

See my post above. Because they are not hiring you to scalp minis or AAPL stock. LOL. You have no idea what trades these firms are engaged in and there is no way you could execute them in your IB account. I'm sorry, those are just the facts. You are 100% right, if your definition of trading is scalping e-minis all day long, then there is absolutely no reason to go prop.

And btw, I don't run a prop firm nor will I ever run a prop firm. I just get the feeling you are not even clear on what a prop firm is.
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Ok what is a prop firm then?
 
Quote from Maverick74:

This business is definitely not for you.
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So then one has to be able to get the game winning base hit with a 0 and 2 count down by two runs with bases loaded in the final game of the World Series against Marino Rivera at Yankee Stadium with thousands of fans on their feet screaming and yelling. How many MLB players can do that?

I thought this thread was about a perfect prop firm and not about a perfect trader.

Nevertheless, this thread was amusing.
 
Quote from SteveNYC:

So then one has to be able to get the game winning base hit with a 0 and 2 count down by two runs with bases loaded in the final game of the World Series against Marino Rivera at Yankee Stadium with thousands of fans on their feet screaming and yelling. How many MLB players can do that?

I thought this thread was about a perfect prop firm and not about a perfect trader.

Nevertheless, this thread was amusing.
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Well the thread got a little de-railed. So unusual for ET. LOL.

Look, there are 1000 threads every year on the prop section of this site all complaining about this and that and I thought it would be a good idea to consolidate it all in one thread instead of starting 1000 threads. And the idea of asking what the perfect prop firm would be was just to see how far traders expectations are from reality. The answer......light years!!!!! :)
 
Quote from Maverick74:

See my post above. Because they are not hiring you to scalp minis or AAPL stock. LOL. You have no idea what trades these firms are engaged in and there is no way you could execute them in your IB account. I'm sorry, those are just the facts. You are 100% right, if your definition of trading is scalping e-minis all day long, then there is absolutely no reason to go prop.

And btw, I don't run a prop firm nor will I ever run a prop firm. I just get the feeling you are not even clear on what a prop firm is.
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Your thread asked a bunch of anonymous individual traders in a public forum what their "idea of a perfect prop firm" was. I get the feeling you posted your question in the wrong site lol. Now you try to swing the attitude that a prop firm = market maker/market neutral/yet not a hedge fund ivory tower? Sorry, I'm guess I'm just "retail" prop who scalps AAPL stock. LOL? What's with the attitude?

Tell me these prop firms are paying 6-7 figure salaries, then you can really say I have no idea what a prop firm is. Then tell me why I need to go to your version of a prop firm rather than making the same amount trading right where I am. Thanks.
 
Great post Mav. You have outlined who prop works for, the conditions it works under and why it works. You have also laid out the part of the equation that most small/directional traders simply cannot seem to comprehend:

"Leverage and direction are like oil and water, they don't mix."

I can throw up small $$$ say $5000 (small enough that if the firm goes the MF route I'm annoyed but not destroyed) and trade six or eight ES or three or four 6E. I am in a $500,000 notional position betting on my ability to pick direction at 100 to 1 gearing. Do I really want more leverage? Do I even want that much?

If I want to increase size I can open an account at another low margin house -- let's not overlook counter party risk -- and on 10K be in intraday for a million. No prop firm wants to be online behind that leverage and in fact there are very few traders who can use even that much directionally.

Now that we all know you have no interest in opening a prop firm, Mav, I bet most of us are curious as to why the thread!




Quote from Maverick74:

Here is my advice. If you want to be a directional trader, you need to use notional capital, not leverage. This means you need to become a CTA or start a fund or become an RIA. Leverage and direction are like oil and water, they don't mix.

These firms trade give guys 50 million in exposure are trading the basis trade. The basis being the spread between cash and futures in any given market, usually debt. And 50 million is actually on the low side. That's only a 50 lot on the EuroDollar. Most the trades there go off in 1000 lots, not 50's. But I digress.

The bottom line is, if you want to trade a size book in the prop wold, you are going to want to have an absolute return strategy. In other words, market neutral, market making, HFT, stat correlation, arbitrage, dispersion, etc.

Let me ask you this. Say I have a firm, Maverick Capital. And I hire 50 guys to come in and directionally trade futures. Now, they can trade anything for the most part, but usually they are all going to trade what's moving and what's liquid so that really narrows it down. We can basically create a tri-nomial tree right? There are 3 possibly trades they can have on if they are trading direction, let's say the Euro as you mentioned. They could be long, short or flat. Let's say the Euro is really breaking out. And I give each guy a 10 contract limit. Let's say two guys are flat because they want to be short and it's strong now. But the other 8 guys are all long. So 8 guys long 10 Euros each. So as an entire firm, we are basically in one position, we are long 80 lots of the Euro. Why can't I just buy 80 lots of the Euro myself? I'm a good trader. I see it breaking out. Why do I need 8 to 10 guys all doing the exact same thing. And simply using a plain vanilla strategy of punting on the direction of the Euro? And what if the Euro goes down? Say a rumor comes out of the ECB and it suddenly drops 100 pips. I've got the entire firm all loaded up in one direction. That's not going to work and no one is going to pay you to do that. Like I said, I'll just buy some Euro as the partner and not hire these 10 other traders. The math just doesn't work.
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Quote from Swan Noir:

Great post Mav. You have outlined who prop works for, the conditions it works under and why it works. You have also laid out the part of the equation that most small/directional traders simply cannot seem to comprehend:

"Leverage and direction are like oil and water, they don't mix."

I can throw up small $$$ say $5000 (small enough that if the firm goes the MF route I'm annoyed but not destroyed) and trade six or eight ES or three or four 6E. I am in a $500,000 notional position betting on my ability to pick direction at 100 to 1 gearing. Do I really want more leverage? Do I even want that much?

If I want to increase size I can open an account at another low margin house -- let's not overlook counter party risk -- and on 10K be in intraday for a million. No prop firm wants to be online behind that leverage and in fact there are very few traders who can use even that much directionally.

Now that we all know you have no interest in opening a prop firm, Mav, I bet most of us are curious as to why the thread!
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I thought it would be interesting to see where the market is for reality on this forum. I'm getting tired of debating politics down in the basement. LOL. Sometimes you have to branch out and explore other areas of the site.

The commonality between the basement of ET and here is the over sensitive ego's. LOL. I'm not here to sell anything or convince illiquid he is not a real trader. It's simply a discussion. Not trying to hurt anybody's feelings. I guess the guys down in P&R have thicker skin. :)
 
The market for reality is very thin. I like to think I add liquidity but I bet everyone else thinks they do as well ... lol.

Quote from Maverick74:

I thought it would be interesting to see where the market is for reality on this forum. I'm getting tired of debating politics down in the basement. LOL. Sometimes you have to branch out and explore other areas of the site.

The commonality between the basement of ET and here is the over sensitive ego's. LOL. I'm not here to sell anything or convince illiquid he is not a real trader. It's simply a discussion. Not trying to hurt anybody's feelings. I guess the guys down in P&R have thicker skin. :)
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