Quote from ScalperJoe:
Maverick, gmst, volente:
I appreciate the back and forth dialogue you guys are having (or should I say "banter") regarding their revenue model. Your numbers may or may not be accurate, only the firm and its partners know, however it does make one think critically, and besides, it's mildly entertaining to read, lol!
It reminds me when a bunch of us were trading at VCM and had many discussions trying to estimate what they were making by selling seminars. Here's the model in a nutshell: sell education courses for $5k to $12k a pop which covers training and a funded live equities account with low commissions. Set the bar low, and let traders work their way up.
Starting buying power was 10k for 100 shares max of stock, and a $30 daily draw. Splits began at 60/40 to 90/10. There was no deposit to fund the account, and a trader did not have to pay back any losses out of pocket. However, traders WERE required to make back their losses through trading in order to take a check, get more bp and allow for broader drawdowns.
The model was a hit, since traders paid one lump sum in exchange for training AND funding, with the potential to trade up to a max account size of just over a million, and who wouldn't want to trade the million dollar account with no risk?
The sad part is, hardly any traders were making consistent checks, even though the training itself was solid. The parameters were set too tight, and traders were either stuck at the lowest bp levels or only advancing up a few notches before being demoted back if their draws had exceeded the weekly maximums.
The owners had many internal disputes, and it wasn't until a lawsuit was filed between the owners when the blinders came off, and traders began to discuss the real numbers.
Court documents finally revealed what they had grossed in seminar sales for 2009 alone. I believe the number was around 9 MILLION, not bad for a firm with less than three years in operation. Court records also revealed that once a trader's account went into a draw, it "almost never" came back to positive.
So in theory the model worked if traders were positive or as long as new incoming seminar sales could offset operational expenses and the ongoing losses of the traders. The rest of the story is buried in many of these threads, and is now part of history.
The red flags should pop up when someone says, "I'll provide the tools and give you an account with no risk, first give me ten grand." If TST began selling 10k seminars promising the world, then it's one thing. But $200 combines, many of which are refundable, c'mon?
The easier money is in selling education courses, not in having newbie traders test a simulator for 10 or 20 trading days before giving them a 30k account where you bear all the risk, and only share the rewards IF the trader is profitable, which by the looks of it aren't that many thus far.
Seriously, if they started making millions on combines, the free market system would take note, and there would be a dozen firms lined up at the next Trader's Expo in NY making similar offers.
