Trader Management

D

daniel_m

Hitman wrote:

****************************************************
"There are two reasons we let go of people:

1) Guys who take 1 point or more hits in stocks frequently. The guy who was let go lost more than $500 a day trading 200 shares on almost a weekly basis. Even today, he traded 400 shares each way total, lost $440 in a single 200 share position. This is despite of me telling him avoid news stories each day, yet he continues to trade the biggest movers every single day and continued to lose big while trading very small shares. If you don't learn to cut your losses, you will be cut, as simple as that. "

and

"It is inevitable that you need to do some clean up every now and then, especially in this market environment. The guy had serious problems with cutting his losses and the amount of money he lost trading 100 and 200 shares was just insane. It was the right decision. You CAN NOT teach discipline."
****************************************************

These comments by Hitman led me to wonder what measures prop firms take when a pattern of irresponsible trading appears. (In the above case, losing $440 on 200 shares, a $2.20 loss, suggests this person is unaware of or has scant regard for time honored risk/reward prinicples.)

If traders are left to continue on their merry way while trading in such a manner then naturally it should come as no surprise to anyone (except perhaps the traders themselves) that they are cut. Does the firm make some attempt to address such trading patterns or is the onus solely on the trader to improve his performance?

(This question would apply more to firms like Worldco, in cases where the trader is risking the firm's money, but I would be interested to hear other "customer" funded firms' thoughts also.)

Hitman, as far as your comment that discipline cannot be taught goes, can anything REALLY be "taught"? I prefer to think that the other person LEARNT something, rather than I TAUGHT them. I think the best a manager/educator/mentor etc can do is impart their knowledge, offer support, assistance and encouragement, but that ultimately, the "learning" can only take place by the individual himself.

The other point I wanted to make is that holding the belief that discipline cannot be taught (something, based on my comments above, I agree with, although the armed forces may disagree!) may itself hold you back from even attempting to creatively find ways to help a trader whose main problem appears to be a lack of discipline.

PS

As a new poster I might add that I've been following these boards for the past few weeks and find there is a lot of valuable information being shared. I especially enjoy reading Hitman's journals, as he often discusses issues that all of us, as traders, have at one time experienced. Whilst his style attracts scorn (yeah he often comes off as a 'blow hard' - many people display a bolder persona on message boards than they might otherwise exhibit) such candid commentary always deserves kudos.

Daniel
 
Originally posted by daniel_m
Does the firm make some attempt to address such trading patterns or is the onus solely on the trader to improve his performance?

(This question would apply more to firms like Worldco, in cases where the trader is risking the firm's money, but I would be interested to hear other "customer" funded firms' thoughts also.)

Daniel [/B]
More...

Daniel,

I manage the remote traders at Bright. Don't know how many threads you've read here on ET, but just so you know, for the most part, Bright requires traders to put in funds and doesn't take a cut of their profits. (There are a few exceptions, but those are not the norm.) I make sure you realize this to know where I'm coming from.

Whenever I get a new trader, I talk with him about the approach he plans to use and his intended trading style. Then, as much as practical, I watch him to see if he's doing what he said he was going to do. If he doesn't, I'll give him a call and we'll have a chat. I'll ask him why he broke with what he said he was going to do and that often gets him back on track.

I'll also keep an eye out for traders making "classic" mistakes... adding to bad positions, not cutting losses, etc. If I see a trader doing this, I'll call him and ask why. It's usually a good way to "break his state" and get him thinking about what he should be doing instead of what the market is doing to him (which is often what people think is going on).

I'm available to my traders as a "sounding board" so they can bounce ideas off me or discuss strategies. I'm very interested in my trader's success even though I don't profit from their profit. If a trader makes $10,000 a month trading 100,000 shares and decides to migrate to a higher volume style which has him making only $1,000 a month trading 1 million shares, I'll ask him why he changed and suggest he goes back to what made him the biggest bottom line.

I've had traders that have been with me for a while and been successful, and then notice that they aren't doing so well. I'll talk to them and see what they changed. If they're doing the same thing and it's no longer working, I'll suggest some alternatives and techniques that are working for other traders in the current market. I'll point them to some different classes that might help them learn these new techniques. This has often turned people positive again.

You asked to hear from someone else and these are just some things I do. Remember, I manage people that aren't in an office and I often have to do things differently than someone who is sitting right there next to him.

Going forward, we're also getting some new software to alert us when traders are doing some things that they said they wouldn't. I'm looking forward to having that available so I can give my traders a heads up if they're going down a path they said they were going to avoid.
 
One of the reasons for our "modified" prop business model, where traders actually have some financial risk...is to avoid the "overly risky" trader...and focus on those who take this business very serious....and treat it as a profession. All "upside" and no "downside" will attract those who may be a bit more careless with their trading. Don't get me wrong, there are many traders who are working very hard to do well within firms who choose the full prop model, and I respect that....it just makes it so tough to weed out those who may be problematic.


We have had our share of "kamikaze" types (who usually are using OPM to begin with)....but not too many over the years.

If a new trader makes too much money too soon, we are just as likely to monitor them as closely as we would someone who loses too much too soon. Risk is risk...
 
We went over the Bright versus Worldco thing many times, risk management is a joke when your trader has capital in their accounts, and I would love to suggest some high churn strategies too if my guys all started with 25K in their piggy banks.

My goal as a team leader has never been about even try to make everyone on my team profitable, it is NOT possible in this market condition even if I am the greatest trader / instructor on this planet. Instead, I make my own trading completely transparent to others with zero secret kept, and they can learn as much from me as they want to.

My idea of running a team has always been about aggressively recruiting people with heart and basically throw them to the wolves and those that survive, survive. You have to understand that I want to put a lot of effort into my own trading so I can go top tier myself someday, and I am not going to spoon-feed anyone to compromise my own growth as a trader (and no one who is serious about being a trader will disagree with me on that, even ones 50 times better than me).

I have maintained an instruction manual that basically contains every thing I know about trading that actually works for me (no I am not giving it to non-team members), and I give it to every new trader on my team. I give them my login so they can see every single trade I do, real time, real money, and that is it. If they respect me as a trader, it is their job to read my manual (which is very very detailed complete with step by step entry/exit rules on both chart/tape), then watch my trades in real time. If they think they can figure it out by themselve, even better, as my goal is not to produce carbon copies of myself but rather have them see what works for me and develop something that works for them. If the guy is brand new, I will usually give him a lecture on basic fundamentals, then he is off with 100 shares and will lose money every day until he finally gets it. If the guy has any experience, I try to leave him alone, just have him read my manual and watch my trades, and let him develop into his own trader with as much influence from me as he is willing to take.

I don't run lame morning meetings, as I have no idea what the market will do most of the times (I mean who the hell anticipated Thursday's sell-off?). I don't run lame group lectures, as I believe in one-on-one training instead of one-size-fits-all crap. I send out a group e-mail whenever I am experimenting with a new strategy, I send out a nightly e-mail with potential chart based set-ups, and that's about it.

Those that want to learn, that want to put efforts in, will approach me with questions, as I am there after the close for at least 2 hours every day (there is only one person on this planet that can make me leave early, but she rarely calls and every time I get to be with her it feels like a holiday). I am not going to drag guys over to go over their trades everyday, you are the one who should be approaching me when you are on a bad streak, not me.

Those that leave work at 4PM, I am not going to chase after them and drag them back to do research, everyone on my team already know, when they first contact me with an e-mail, that there is at least a 50% chance they will waste up to a year at Worldco for absolutely nothing, that the only way they have any chance of surviving is by giving it their 120% effort.

The best way to teach your guys is to show them exactly everything you do for your own account, and if they want to learn, they will observe, and ask, as everyone is encouraged to talk to me during the dead zone and/or after the close. I am a trader first, team leader second, either you have it or you don't.

The guy who was canned on Thursday came from Generic Trading where they learned this amazing strategy called gap plays. The idea is you watch a filter that look for stocks that gapped down at least half a point in one print, and boom you go long hoping to get some of that retrace (which I admit is a legit strat for stocks that are actually on an uptrend just a hard pullback, you can get some fast quarters that way).

The problem is that by relying on a filter play like this you tend to be lazy and walk in at 9:25 leave at 4:00, and your bread and butter game tends to be underdeveloped, as you spend most of your time bottompicking news stocks as they produce more gaps than anything else.

To be fair, the guy who was canned had discipline, he would get out of positions that go against him for 10-25 cents calm and cool. The problem is that he turns into a deer in head light when the thing hits him for half a point, and he would not take the loss but rather hold for a squeeze when a stock is tanking like crazy. Then when he finally gets out, as soon as the thing upticks he would try to get back in, only to take another gap down. Or he would go short right after he finally gets out, and the stock squeeze the hell out of him. Now keep in mind, he trades the most volatile news stocks, when you churn those, you are going to get hurt really bad, as you can't really control your losses (typical situation, a stock tanks with an offer, gaps down, offer steps down, you get your buy order ready and sends it as soon as he print the offer with size, you get filled and the stock squeezes 10 cents in your favor immediately, you are happy but all of a sudden another offer shows up and next thing you know the stock prints half a point or more against you).

Now, I would never ever force someone to accept a style that they don't like, as I am a very defensive oriented player and a lot of people get turned off seeing my style as it is very boring to get quarters most of the times, rarely home runs. I suggested that he should try to avoid news stocks, he didn't listen. I made him printing out a little contract thing that says if he loses more than 1 point in a stock he should not go back in, and I pasted it on his monitor, he kept on jumping back in anyway. I set a loss target for him, he traded on despite of exceeding that target by a double.

I will NOT watch his P&L during the day like a hawk, and get out of my seat to drag him out of his cube when he exceeds some magic number. If you don't have discipline to cut your losses, you will not last, and it is better to can him right here and now before he starts taking major size and blow up big time in later stage of the game.

Not everyone is cut out to be a day trader, most will not make it, I can not teach anything beyond the mechanical skills, it is the trader who must absorb it and convert it into something that actually works for them.
 
Again, just a different business model. We truly believe in the Partnership arrangement we have with our traders, both in the business sense, and in the more holistic sense...we are both focused on trader success. We don't "throw" anyone "to the wolves"...we focus more on sharing of information (remember, we have some of the world's best traders sharing every day).

We don't aggressively recruit every person to trade with us, we actually try to scare people away from trading during our 5 day trader orientation (I actually make that comment on day one!).

Since our members do put up some capital, they are more inclined to focus more on becoming profitable "nothing ventured, nothing gained" type of thing.

We went through a period of bringing on traders with no capital, and it was disasterous...not only for the firm, but for the traders...they were just not made out for trading (as most aren't).

As the firm grew, we learned from our mistakes, and developed a "hybrid" model of proprietary trading, and we still have to monitor risk very closely (we have traders into our money every day....let me repeat...we have traders deep into our money Every Day!)...and yet we like to catch people before they "blow themselves up" ...and bring them back into the fold.

We have seen it all, traders "freezing", traders saying "well, I lost my money, I guess I may as well go for it" ....and we have worked with so many to bring them back to profitability.

Some of our best traders have gone broke, and into the firm for major money, just to come back into the black with a little support from us.

Hitman works really hard with his people, and he sometimes thinks that I am "bashing" him or his firm, and I am really not... I know worldco better than he thinks, and have friends actually trading there (too much to explain here)....and I realize that there are simply different business models....so don't be too quick to decide A vs. B, because there is much more to it.

Hitman...all the best with your team....keep up the good work!!
 
You must log in or register to reply here.
Back
Top