I work for Caliber financial.
What's the logic of the capital requirement at a prop firm?
- Thread starter Druckenmiller
- Start date
I work for Caliber financial.
How the heck did you deduce this theory? I think it's safe to say that reputable firms with higher capital requirements are more stable and offer lower risk to ALL of their members.
Firms that let you trade on a shoestring are not the kind of places that I would entrust my money with.
Furthermore, there is no definitive relationship between the quality of training you get and the amount of capital you contribute.
That's kind of a silly statement. The manager of an office has to do the hiring, deal with the traders problems, and anything else that comes up. It would be impossible to trade if you're constantly being called away. But, the trainer, should always be trading, so he can stay in tune with the market.
I agree with you. But the more capital you bring in, the less risk you are to the firm. My belief is that both the trader and firm should bear some risk. The trader should have something to risk, and the firm should bear the risk of losing money if they don't work with the trader to make him profitable.
I was attacked here. I know it. But let us put in a logic way:
if a company is risking their own money, they will definitely train you more since they don't want their money loss. Am I right. If you put down your capital, that means company doesnot have too much risk, at least the risk is much much decreasing. And at the same time, whether the traders are making money or not, companies can still make money, right? So at that moment, do you think that the training is so essential to the company? You do the training, you can make money; you don't do the training, you still can make money. Looks like that the training is more like volunteer. Anyway, I don't want to say some bad words to those companies. I just want to tell the truth. As a new trader, if they can find a firm who doesnot need capital, he should definitely choose that one, no question.
In my company, when new trader made any trade, he should explain to the mentor why he did this. How about the other firm?
if a company is risking their own money, they will definitely train you more since they don't want their money loss. Am I right. If you put down your capital, that means company doesnot have too much risk, at least the risk is much much decreasing. And at the same time, whether the traders are making money or not, companies can still make money, right? So at that moment, do you think that the training is so essential to the company? You do the training, you can make money; you don't do the training, you still can make money. Looks like that the training is more like volunteer. Anyway, I don't want to say some bad words to those companies. I just want to tell the truth. As a new trader, if they can find a firm who doesnot need capital, he should definitely choose that one, no question.
In my company, when new trader made any trade, he should explain to the mentor why he did this. How about the other firm?
Any firm that the new trader joins, the mentor/trainer should insist the trader explain why he's doing a trade. That's the only way for the trainer to get a grip on the traders abilities and what he is doing right or worng so he canfix them.
As far as firms making money, it's not true that firms make money whether or not the trader makes money. If the trader comes in with no capital and loses to the market, then the firm is losing money. You have to remember, the firm pay per share for every share you trade. So you have to take out of the market at least what the firm is paying their clearing firm, and then they break even.
training is important, cause if the trader loses money, he won't stick around for that long.
A. You're an employee type trader, no cash, lower payout, higher costs (in most cases). Zero risk (except the "days of their lives") for the trader, and the Firm has most of the Reward....very little to the trader.
B. You put up some money, the trader has some cash at risk, higher payout (100%), lower costs (in most cases), and the trader has low risk, high reward...firm, lower risk, lower reward.
The world can have A's and B's...and A's who do well, usually can afford to become B's. The A's that don't do well, hey, you gave it a shot on some else's money.
We prefer the B model, and so far it has proven to be the most successful for the traders and the firm.
This doesn't make no cash traders bad people, or no cash firms bad either....just different business models.
After a few successful years, most good traders want to be self suffcient and on their own (as in any business), but a few like to stay on and split their profits....it's not a big deal, just different personalities.
Don
B. You put up some money, the trader has some cash at risk, higher payout (100%), lower costs (in most cases), and the trader has low risk, high reward...firm, lower risk, lower reward.
The world can have A's and B's...and A's who do well, usually can afford to become B's. The A's that don't do well, hey, you gave it a shot on some else's money.
We prefer the B model, and so far it has proven to be the most successful for the traders and the firm.
This doesn't make no cash traders bad people, or no cash firms bad either....just different business models.
After a few successful years, most good traders want to be self suffcient and on their own (as in any business), but a few like to stay on and split their profits....it's not a big deal, just different personalities.
Don