Transitioning from Retail Trading to Prop Firm?

Spectastic,

There are a lot of models out there. We have several models even within our firm (Kershner Trading). When we started we primarily had short term discretionary traders with no salary. That is still the case today. About half of those traders run quantitative models in addition to their discretionary trading. For entry level traders we sometimes supply a stipend type salary for a year or two.

Over the years we added other types of traders. We have salaried classical hedge fund type traders that are focused more on swing trading and long/short. We have salaried quants as well. We have salaried analysts and do joint trades with them. In general, a firm and trader have to match the salary and payouts with the type of trading, capital needs, and psychology of the trader/quant. The more capital and time needed for trades generally commands a better split for the firm as there is more at risk. The best thing you can do is join a firm where you will get good mentoring, technology, capital, and are around really good traders that are working at getting better every day. I would want to join a firm that has many traders that have grown to be million dollar traders. It is not easy and my experience in training new traders is that about 20% of the candidates that we invite to join us make it long term. Being physically on the floor with other traders will help a learning process. Perhaps there are some good firms in your town. If not, it might be worth finding a local trader to mentor and back you.

Good trading to all,

Andy Kershner
 
Andy Kershner said:
Spectastic,

There are a lot of models out there. We have several models even within our firm (Kershner Trading). When we started we primarily had short term discretionary traders with no salary. That is still the case today. About half of those traders run quantitative models in addition to their discretionary trading. For entry level traders we sometimes supply a stipend type salary for a year or two.

Over the years we added other types of traders. We have salaried classical hedge fund type traders that are focused more on swing trading and long/short. We have salaried quants as well. We have salaried analysts and do joint trades with them. In general, a firm and trader have to match the salary and payouts with the type of trading, capital needs, and psychology of the trader/quant. The more capital and time needed for trades generally commands a better split for the firm as there is more at risk. The best thing you can do is join a firm where you will get good mentoring, technology, capital, and are around really good traders that are working at getting better every day. I would want to join a firm that has many traders that have grown to be million dollar traders. It is not easy and my experience in training new traders is that about 20% of the candidates that we invite to join us make it long term. Being physically on the floor with other traders will help a learning process. Perhaps there are some good firms in your town. If not, it might be worth finding a local trader to mentor and back you.

Good trading to all,

Andy Kershner
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Thanks for the feedback Andy. One of your traders, who went on the same podcast you did, mentioned that the retention rate is 12-13%. I know they're both approximations but still a big difference. Do you mean 20% make it long term at the firm or as traders in general? I've seen people throw around the word "talent" and don't really know what that means. What is talent for a trader? Ability to take/retain large amounts of information, intuition for the market, suppressing emotions, all of the above, or is it something else?

Presumably, the traders who join your firm already have some knowledge and even prior experience with trading. What are the main differences that separate the top 20% from the 80%? Are they typically mistakes/habits that commonly befall retail traders, or are there more specific challenges that prop traders might encounter, like compatibility in trading styles, ability to separate the $ amount from emotion, risk tolerance, or something else?

Also, I've read that age is a thing, and that most prop traders are in their early 20s to maybe early 30s. Is it primarily because those who are younger tend to have higher risk tolerance than someone who has kids and a house, or is it more like prop traders who get good enough eventually just start trading on their own?
 
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the biggest benefit imo is technology and extremely low fees. you usually get dma and rebated fees based on total firm volumes..aggregate! this is huge. its still the same rate of failure because your pool of success and fail is still the same.

You will get good ideas n knowledge but there is a lot of pressure when ur part of a group but it ends up being positive like i want to be top dog and that means you are making the money!!

id go for it whats the worst that can happen
 
speedo said:
Anybody can get reasonable returns in a bull market and 40% is nothing to an active trader unless managing well into the millions. Consider the path to becoming a skilled trader not unlike the time and effort required to become any kind of high level professional plus psychological considerations not as vital in others. If you are looking for a salary, your science credentials may get you into the door of an investment bank or managed fund but don't expect them to let you trade until you have learned the skills and behaviors necessary.
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disagree. this bull mkt stretch had pros calling tops from 2015! then the nasdaq covid bounce!! i mean come on..few nailed the bottom. i nailed the top which was easier to see than the bottom imo. shorting is more difficult but long winded bulls arent easy if they were they would stop going up. all these shorts are getting crushed again.
 
tradeking007yahoo said:
the biggest benefit imo is technology and extremely low fees. you usually get dma and rebated fees based on total firm volumes..aggregate! this is huge. its still the same rate of failure because your pool of success and fail is still the same.

You will get good ideas n knowledge but there is a lot of pressure when ur part of a group but it ends up being positive like i want to be top dog and that means you are making the money!!

id go for it whats the worst that can happen
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Is it really the same though? I have seen some massive stupidity in the retail world that I'd imagine most of them would be filtered out from prop trading before they make it to a desk. but then again retail traders don't really have access to top coaches aside from some YouTube videos and a handful of guys who actually know what they're doing.

Regarding yearly returns, my 40% is over something like 4-5 months on swing positions. The only intraday trades were losing ones. Don't really have that much time to be intraday trading and tbh havent really tried it much. But just to get an idea what kind of % returns are prop traders expected to get on a weekly, monthly annual basis? Guy from smb said this was their best year ever and there have been some really hot sectors so I'm definitely not boasting 40% as I realize this year has been an anomaly. I'm sure the range varies a lot based on skill, market condition and strategy but still good to get a ball park.
 
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tradeking007yahoo said:
disagree. this bull mkt stretch had pros calling tops from 2015! then the nasdaq covid bounce!! i mean come on..few nailed the bottom. i nailed the top which was easier to see than the bottom imo. shorting is more difficult but long winded bulls arent easy if they were they would stop going up. all these shorts are getting crushed again.
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Don't confuse the chatter of talking heads, amateurs and ersatz "gurus" with professional traders. The former "call tops and bottoms", the latter recognize what the market wants to do and go along with it. The pro also recognizes when the markets change their mind and make the appropriate adjustments in position placement.
 
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speedo said:
ET lol
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the truth is i couldnt even understand what you are really trying to say. not because you are above me i am not sure it made sense how you wrote it. maybe help me out if you have the time and restate what you are trying to say ..thanks
 
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