Why would successful traders work for investment banks/prop firms/etc?

[fseitun]

Quote from EMRGLOBAL:

Depends.

Very few "successful' traders I know would work at a "BANK".

Most are trading for Hedge Funds or Smaller Capital Mngmt. Firms.

I work for a Firm that Trades, Raises capital For Private Placements, handles Qualified Investors per Reg D's 506 Rule, for DPPs , Develops Raw land and is now looking at projects overseas in Energy.



Day Trading is great if your making a Half a Million a year or more. But I hardly know any 'Daytraders" bringing home that much. (Please don't tell me about all the guys at so and so firm that bring home millions as I have been in the industry since 99 and have traded with some of the most successful guys, From Rearden Metal, to the "RUSSIAN" and his Option King".)

Rearden Metal Is one of the only ones "Keeping it real" by daytrading and being successful, as a lone day trader. That I currently know of.

The Russian Broke off to do his Hedge Fund, the "OPTION KING" is over in Asia. I have friends that Joined "Terra Nova" and now have started a Fund.

I guess its like, "climbing" a later so to speak. SOROS, BUFFET, VN, SURFER(Had to throw my boy in there), did not make their wealth by "Day trading".

IMHO, those days are long gone, the days of 99-2001.

Penny spreads in equities and options has killed the major edge. Order flow passing through to the 4th market, MMs on their hand-Helds, Feds manipulation, etc.....all put the odds ever more agains the "Day Trader".

I use to argue with VN about "Day Trading" to the point i got "kicked off" the SPEC LIST. Now I understand what VN, MrE and the rest were saying.

And, they were correct. Much like Disco, Day trading became a fad, and has faded.

Of course there are "Futures" (Unregulated pretty much, but not for much longer) There is Forex, totally unregulated. These are the new hot items to trade.

Im sure there is all ways that exception to the rule, as in Rearden Metal. However, that is 1%. I am good but not that good.

I'll take my current situation over "daytrading" any day.

I am not getting the part of the futures being unregulated for not much longer.

I thought the CME was a regulated exchange, isn't it?

Apart from that, why do you talk about spreads?

Are you referring to scalpers? If yes, please specify because I couldn't quite understand the meaning of those statements.

I personally welcome more regulated and liquid markets.

And I see a great future for daytraders, possibly with reduced commissions and more liquidity worlwide, which usually translates into opportunities.

Technology will surely make it a little harder in the long run, with many BOTs fighting each other in the market.

However, let's not forget that in trading all opportunities arise from fear and greed, i.e. emotions.

As long as the BOTs do not eliminate the human component in the market, successful daytraders will be fine.

And i honestly can't see how BOTs can possibly take over humans. I know nowadays you can pretty much program everything, but how is a BOT going to react to economic news? Or to a 4hr Bernanke Congress Q&A? Or to a terrorist attack?

There will always be humans supervising those BOTs.

Plus, humans love to trade because it's addictive.

 

[EricP]

Quote from neke:

Isn't it too early in the year to be damn sure?

Actually, no.

The guys in the (private) chatroom I hang out with are pretty amazing traders, IMO, both in terms of profitability and consistency. Several are up over 1M YTD now and will likely be up multiple millions from daytrading by year end.

Granted, anything is possible, but I'll stick with my original "almost certainly" statement.

There are great traders out there in the current environment. They are just not always easy to locate/identify.

 

[rosy2]

Quote from Specterx:

This is a question that's puzzled me for some time. If one is a consistently profitable trader, than what would be their motivation to work for somebody else, whether at Goldman Sachs or a small prop shop, as opposed to just trading from home with their own capital?

do you really think traders at banks do the same thing as some day trading scalper?

bank traders are almost all flow or agency trading. if you give them money to manage they would be just as good(bad) as everyone else.

 

[volente_00]

It's all a numbers game. If you are trading stocks, you need a lot of money to trade period. Even if you are a good trader and can make above average gains, if you have limited capital, 2 things are going to happen. You will either have to take on to much risk to generate enough money for living. Or you will not make enough to live off of even though you can trade well. Say you can generate 20% returns from trading year after year. If you only have 20k to trade with, How are you going to live off of 4k a year income ? Now apply the same 20% return to a prop firm who gives you 1 mil leverage and now you are making 200k off of the same trading strategy. Maybe you can make more than 20% annual return, but can you do it consistently ? Can you make 40% returns without a huge drawdown ? Many people get into trading and misunderstand the part about it taking money to make money. Another reason I could see one going prop/ ib is because they suffer from traders block when their own money is at risk but when using someone else's they no longer have the emotional attachment to the trade.

 

[drsteph]

With some knowledge behind me, I'll tell you this - trading for a bank will be no walk in the park. You will be at times told how to trade, your risk limited, and worse, you will have to deal with bull-crap office politics where the old and wise feed on the young and naiive.

You will be hired for a job and promised a risk book in time, only to find the desk doing poorly and your subordinates fired, just to end up running the poorly positioned book and the customer desk yourself with no opportunity for more profitable trading. And then when you collectively don't make your P&L for the year because of some academic numbnutz screwed up and lost a crapload of cash (while having a nice and relatively legally iron clad guarantee for a bonus of a few mill which saps any possibility of a decent bonus) and thereby your bonus - better luck next year, if you are not fired and spend the next 3-6 months with a noncompete out of work.

Not to mention the brutal commute from the burbs added to twelve hour days with a wife who never sees you and hates you, spending all your money prior to your divorce where she nails you for some serious alimony. Of course you can go out with your brokers/customers/dealers for some free drinks & a nice dinner. That much of a perk is real. But your wife will be just that much more pissed at you for it, and you'll be sleeping alone with nobody but rosie palmer and her five sisters for comfort.

If you think that kind of life is attractive, go for it. It sounds cliche, but that cliche is accurate.

Yours, sir.

Want to know why you don't just do it on your own? Fear. Fear of screwing up and having nothing, particularly once you have something. The inertia is particularly difficult to overcome. And there is also the realization that until you have that edge (and lots of fresh meat ain't figured that out yet) its a pretty scary thing to quickly lose everything you have worked so hard for - particularly since you really have so little to show for all that deprivation.

As far as being lonely - forget it. Start donating to local charities, get on a few boards, and start meeting people who are of substance. The loneliness is of your own choosing.

 

[Nattdog]

Hilarious.

How much better would the quality of discussion here be if people stopped referring to the ever present, mythical, "trader(s) I know” To provide some semblance of evidence for unsubstantiated claims?

 

[EricP]

Quote from Nattdog:

Hilarious.

How much better would the quality of discussion here be if people stopped referring to the ever present, mythical, "trader(s) I know” To provide some semblance of evidence for unsubstantiated claims?

Exactly. I nominate you for moderator. LOL

From now on, all posts must include audited financials and tax returns. Let's make for some "serious" discussion now, folks!! We'll have excellent traders coming out of the woodwork in no time! :eek:

As an alternative, what would you suggest? Criticizing the posts of some of the better, more experienced traders on ET? You might consider that this is why so few of the top traders bother to post here.

Strange thing, Nattdog, I don't see that you've posted in the Trading blotter thread. Maybe you should start, to better "substantiate" anything further you care to say. Feel free to review the dozens of posts I've made there.

 

[Nattdog]

EricP, your sarcasm raises a few good points. However, I am willing do judge peoples ideas on their own merit, at stated here on a relatively anonamous board, without reference to tax returns, recent p&l figures and similar, which to me are fairly meaningless.

however, the downside of sticking to topic is that we would miss out on all the egomania, pissing contests, etc that make et fun to read.