Again, you didnt address my answer. What happens on the flip side when a traders deposit takes hits or does that not happen at Bright.
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Why would successful traders join/stay in a prop firm?
- Thread starter HotTip
- Start date
Again, you didnt address my answer. What happens on the flip side when a traders deposit takes hits or does that not happen at Bright.
Quote from Don Bright:
I've heard the same thing but since the retail firms make most their money by not paying interest on short stock, and by the interest differentials, they are unlikely to embrace the change. FWIW,
Don
Retail firms should embrace the change as it would free up more capital so their clients can trade more.
Quote from mskl:
Retail firms should embrace the change as it would free up more capital so their clients can trade more.
The firms go to great lengths to advise against even trading on margin...it's going to take quite a PR turnaround to convince their regulators that they "changed their minds" LOL....
Don
Quote from hairdresser:
Again, you didnt address my answer. What happens on the flip side when a traders deposit takes hits or does that not happen at Bright.
Trading is just like any other business, if you run out of money, it's pretty hard to run any business...if that's what you're asking. Traders (and other business ventures) can either make it or not, depending on many factors. I personally think that if you're going to trade, you may as well give yourself the best chance of success (capital use, training, and a group of successful traders to work with). Unlimited upside potential, very limited downside, and no "franchise fee" or "backers" to deal with.
And, I wish our traders never took hits, but unfortunately that's not the case, LOL.
(Just making conversation, as always, to each his own)
Don
ok. honesty is the best policy.
Quote from HotTip:
This is meant as an innocent question, because I've never been in a prop shop nor do I know anyone who has. But, if a trader was consistently successful, making $200K+/yr, and his account was large enough to finance his trading with the margin offered by regular retail brokers, is there any financial reason for him to join or stay in a prop shop? Especially now with retail commissions coming down it's hard for me to understand why that trader would want to have to shower and drive to an office to trade. I'm sure there's camaraderie and idea sharing, etc., but I'm wondering if there are also financial considerations.
It seems to me based on my minimal knowledge of prop firms that the people who join them are predominantly newbies who need training, equipment, and BP -- things that aren't necessary once a trader has reached a certain level of success. Do prop traders who eventually become successful eventually leave the firms to trade on their own?
I have been trading 30Y Bond futures electronically now for six years and have been consistently profitable for a long long time now exceeding your requirements in some years by an excess of 10 times.
The number one reason to trade at a prop firm is OPM (other peopleââ¬â¢s money). Yes, you do give up some upside and most prop firms are not very ethical when it comes to taking care of their traders. My first few years in the business I worked for a group that was raping me over the coals where I made them enough money in commissions and from what they kept from me to purchase a $5 mm home with cash!
The kind of size a lot of the good traders trade with, it takes a lot more then a few hundred thousand to have sufficient funds (at least to trade fixed income).
The stress is another factor, when your 25 years old and you can have a day where you lose 80 - 90K in a day, it's a lot to take home with you. When I am trading my best I am not thinking about anything...just trading. Stresses way on people more then you would think.
Quote from cstu:
Maverick
Thanks for working with me here.... I come from a different end of the business but I must say I would not take any risk with 99% of the people that post here. First, are there any prop firms that are actually at risk of losing any of ther money? I mean if they are throwing money at everyone that opens an account with haircuts it would seem I would be damn sure the numbers work out to a "no-risk" scenario.
No, I can assure you, this is not the case. Most JBO's are very careful who they bring and traders are watched much more carefully then at daytrading shops.
Certainly, I have never worked where I was at my own risk, yes I could get fired for being stupid or lose my bonus in December but having to go to the wallet is different. Now based on my wanting to go to the wallet. If I put up $100,000 what can I go totally long at the end of the day and what is the "risk-based" haircut? Now what about if I have an even long/short portfolio?? I just want a typical example.
If if you are trading stock outright, you are putting up 15% of the notional value of the stock. So 100k in cash would allow you to be long or short about 650k worth of stock. It doesn't matter if you are long and short. That is not a hedge in a risk based haircut account (thank God). Each position is looked at separately. So if you are long 10k shares of LOW and short 10k shares of HD, these are naked positions that are unhedged. You will need to put up 15% for each of them.
I also don;t see how this can be truly "risk-based" if no determination is made to how the portfolio will react when there are stresses to the system.
I am beginning to think you are still not understanding what haircut is. With a haircut, we graph out your positions and go up and down 15% and see where the biggest loss is, that is your haircut for equities. indices are slightly less. So in effect, they are stress tested. In other words, you are putting up "risk capital".
I do know my VAR was $140,000. Point being just reaching that would need an extraordinary event. For instance 10/87 would have been a $230,000 loser. Now my point is if this is my VAR, why am I not paying a % on this figure? and margin on the balance? It seems this "haircut" in the equity markets is just another way to insure NO RISK at all and is getting awful close to the corner schylock.
I'm not sure I understand what you are talking about. When you put up a haircut, you are not paying anything on that haircut unless you go over it. Then you are paying a capital charge. You will pay a debit rate for any debit balances you carry. This is usually 50 basis points over broker call rate.
I guess what it comes down to is are there places that treat professional backgrounds and records differently than the guy who puts up $25000 with no skills or knowledge and thinks he is going to make a career.
Not to come off as a dick or anything, but I treat everyone suspect when it comes to trading. I don't care what your track record is or where you went to school or what returns you had in the past. Risk must be adhered to as if the person you are dealing with could blow you out at any time because the truth is, they can. The funny thing is, the new inexperienced and small traders are never the concern. It's always the guys with the big egos, big account and all the experience we have to worry about. Because they will push their limits to the max and will usually be trading the most size when they are wrong. I'm not worried about some piker with a 10 lot that lost 4k because he didn't manage his risk well. I'm worried about the guy with a 5 million dollar account that is running a huge haircut taking down huge size and is smart enough to get around the system.
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Quote from mskl:
Look for risk based haircuts/portfolio margin to be available to retail accounts within the next five years - long, long overdue. It's about time they laid Reg-T to rest.........
CBOE/NYSE are currently talking about such a system.
Mark my words. Will never ever ever happen. There is a currently a pilot program on the CBOE that is allowing one firm to do this. My guess is there will be select firms out there that could allow this but there will be a very very stringent requirement process. If you let Joe six pack have access to haircuts in a retail environment, you are going to have a financial meltdown. I don't think most people on this board understand exactly what hair cuts are and how dangerous they are. If I really wanted to, I could blow out my firm tomorrow in 30 minutes and risk management would never see it coming. It's just way too risky. And to make this available to the masses would be suicide.
Can anyone say market meltdown..... I don't see any chance that reg t will be changed. In fact, it was mentioned often that perhaps the Fed would adjust this in 1999 as part of dealing with irrational exuberance. I certainly don't want reg t to be some sort of fed tool and that is what would happen at some point.
Now, I am still thouroghly confused with the haircut concept but...
Maverick I say this respectfully. You have no reason to think your statement about traders is improper. I would echo that to a large extent. That is why I made the comment I did about not trusting xxx% of the people on this site. I don't trust most people with my money at any time.
Now, I am still thouroghly confused with the haircut concept but...
Maverick I say this respectfully. You have no reason to think your statement about traders is improper. I would echo that to a large extent. That is why I made the comment I did about not trusting xxx% of the people on this site. I don't trust most people with my money at any time.
Quote from Maverick74:
If I really wanted to, I could blow out my firm tomorrow in 30 minutes and risk management would never see it coming. It's just way too risky. And to make this available to the masses would be suicide.
Well then... it sounds like there are quite a few guys with access to the nuclear football at Vtrader. I don't know if this statement bodes well for any option-specific JBO.