Worldco LLC

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It seems that a lot of homers are coming out of the woods to bash prop firms.

I have said it before, and I will say it again, as a newbie day trader:

Your chance of making it starting out from home is about 10%. I will give you 15% if you have sufficient capital, and that's at least 50K, and you want it really really badly.

Let's be realistic here, the times a newbie can take a 10K account into 100K is long gone, you need serious capital to make a living nowadays.

Your chance of making it starting out in a prop firm is about 30%.

I don't sugar coat stats, I don't come up with 85% of our traders make it after first year (read: if you graduate from Harvard chances are you will get a 50K a year job) type of garbage, I am giving you the stats as I see it.

Now, people keep on telling me gee if I already make <insert the number to multiply 100K a year by> why do I need to do anything. Well guess what, if you are bringing home that kind of money, don't fix anything, you are doing fine, how many people are actually in that boat?
 
Originally posted by dottom


One of the dangers with a high churning, spray type strategy is that when you are just gross even or slightly profitable for the day, that low profit-to-commission ratio hurts. Using the above example, you make $2k gross but pay $5k commissions for net $3k loss. What if you had $5k loss gross, now add $5k commissions and you're sitting at net $10k loss.
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Well, in the business, if this happened to a trader consistently, he would simply be... a bad trader. Your "What if" statement is flawed and doesn't really apply to what i'm refering to, because it assumes that all traders are bad.. Simply, *good* traders don't churn or "spray paint", it's rare. But they do trade size volume.

Granted, that they do have down days, but there is a reason why these guys net in the 7 and 8 digits every year.

I'm not saying there is anything wrong with retail trading few trades a day, averaging 200-500 bux a day. That can be done and made to be a living for many. I am saying that the big traders on the street go about doing things differently, and know commissions are part of the game, not something to try to avoid like the plague.

stone roses
 
Originally posted by StoneRoses


Well, in the business, if this happened to a trader consistently, he would simply be... a bad trader. Your "What if" statement is flawed and doesn't really apply to what i'm refering to, because it assumes that all traders are bad.. Simply, *good* traders don't churn or "spray paint", it's rare. But they do trade size volume.

Granted, that they do have down days, but there is a reason why these guys net in the 7 and 8 digits every year.
stone roses
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Stone, I think your "what if" statement is flawed b/c you are assuming that any good prop trader can make $20k any day. Of course no one would care about paying $5k commissions if they had the ability to make $20k per day. Avoiding commissions just to avoid commissions is like saying you don't want to make more money b/c your tax bill would be higher - we agree here.

Also, if this hypothetical trader you mention is averaging $20k per day and averaging $5k commissions, that's a 4:1 ratio which is a healthy day trading ratio.

I was addressing the majority of day traders at prop firms, many of whom are running close to a 1:1 ratio. These traders must maintain a higher winning % because a break-even or slightly profitable gross day is actually a net loss due to effect of commissions. This is not about prop vs. home, even though we are discussing prop traders, the same applies to both. This is also not about what the "elite traders" do because for every prop trader making 7 or 8 with a low ratio there are just as many if not more non-prop, off-floor traders making 7 or 8 with a high ratio. If you're good enough to generate 7 or 8 year after year then you have an awesome technique that works. But the elite traders are the exception for sure.

Also, the difference between 7 or 8 is a lot. To reach 8 figures you have to average $40k net per day. I do not personally know any prop traders making 7 or 8, but I would guess the net profit-to-commission ratio has to be at least 5:1. Perhaps some prop traders could elaborate.
 
First of all, I think for a PURE intraday trader 2-3 million a year is about the max as you will inevitably run into liquidity issues. Last year I don't think anyone at my firm made more than 1.5 million from their intraday trading. I am not aware of the performance of their longer term accounts so I can not comment on that.

A lot of people simply don't realize that you can have a lot of multiple K day's and even a few five digit day's and you will still have trouble AVERAGE just $500 a day for a year.

We are talking about 250 games a year, 65 of which is summer time where you will be hard pressed to AVERAGE whatever you averaged in say January - April. Regardless of how good you are, you will have down days, and they will greatly impact your average.

I can tell you that 70% of the prop traders do not average $500 a day, and out of 700 traders in Worldco I think we had 10, if that, who made seven digits last year after commissions. It is industry habit for the interviewer to say "you will be working with someone who made 750K last year", now take that number and reduce it by a third, you get the guy's real number BEFORE COMMISSIONS, cut it in half you probably get the real numbers AFTER COMMISSIONS.

Unless someone shows you their account statement don't ever believe the stuff they put up. I have seen a guy at my firm giving out a lecture and said he brought in 2.5 million last year when in reality he took home 1.4 million after commissions, I scratched my head as that second number is nothing short of awe inspiring by itself and why blow it up.

The bottomline is there are very few people with integrity in this business and those that do still have to overcome their egos. Very few people will tell you their real numbers, and most of the times the numbers you see on their screen, assuming he is willing to show it to you, is probably his best day in a while.

The reality is, someone who makes six figures a year day trading is a very solid trader, whether he is a homer or prop. Someone who AVERAGES $300-$500 a day is on the hit list of every single recruiter.
 
Thanks for the info, Hitman. I always appreciate hearing the real numbers, especially to provide context to the frequent hypothetical (and sometimes useful) discussions going on.
 
Originally posted by dottom


Stone, I think your "what if" statement is flawed b/c you are assuming that any good prop trader can make $20k any day. Of course no one would care about paying $5k commissions if they had the ability to make $20k per day. Avoiding commissions just to avoid commissions is like saying you don't want to make more money b/c your tax bill would be higher - we agree here.

Also, if this hypothetical trader you mention is averaging $20k per day and averaging $5k commissions, that's a 4:1 ratio which is a healthy day trading ratio.

I was addressing the majority of day traders at prop firms, many of whom are running close to a 1:1 ratio. These traders must maintain a higher winning % because a break-even or slightly profitable gross day is actually a net loss due to effect of commissions. This is not about prop vs. home, even though we are discussing prop traders, the same applies to both. This is also not about what the "elite traders" do because for every prop trader making 7 or 8 with a low ratio there are just as many if not more non-prop, off-floor traders making 7 or 8 with a high ratio. If you're good enough to generate 7 or 8 year after year then you have an awesome technique that works. But the elite traders are the exception for sure.

Also, the difference between 7 or 8 is a lot. To reach 8 figures you have to average $40k net per day. I do not personally know any prop traders making 7 or 8, but I would guess the net profit-to-commission ratio has to be at least 5:1. Perhaps some prop traders could elaborate.
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i agree with you on most of what you wrote, but i didn't say that all "good" traders average 20,000. The discussion was born on trading frequency/commissions and someone's disbelief that anyone could trade that much and still make any money.

Thanks fo the post tho, makes sense.

stone roses
 
Originally posted by Shorteee
"I believe you must meet three requirements before you can trade or be recruited there and they as follows:

1: you have to have some money to put down
2: You have to be breathing
3: You have to have a few fingers to be able press the buy or sell keys.
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Actually, Requirement # 3 can be taken care of with speech-to-text software.
 
Originally posted by candletrader



For what its worth, like Tony, I am home-based... I rarely do more than 5 trades a day... as a home-based trader, I am in the business of enriching myself and am under no compulsion to do any minimum volume whatsoever, in order to "keep my seat"... this allows me to cherry-pick, and maximise my profit:commissions ratio. As a result of having a 'permanent seat' (actually 2 seats; one in my study and one in my kitchen), regardless of monthly trading volume, commissions become a very minor consideration in my trading plan... the commissions I save at a professional firm on my average 5 daily trades (we are talking around a $50 saving, I guess) will be given back in seat fees and lifestyle issues, such as an aversion to commuting and a desire to be home-based ... and that's assuming a professional firm is actually even happy to have me (an 'undertrader') taking one of their seats instead of a massive commission generator (one of Don's 100 trades a day people).

The only time I would consider trading at a pro-firm is if I could do it remotely from home and benefit from a great commission schedule, irrespective of minimum trading volume contraints... otherwise, I am happy to remain retail and do my 5 trades a day at slightly higher commission costs.
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Candletrader, I don't see why a prop firm would have a problem with your volume of trading. Don't know what your commission schedule is, so I can't address that. You don't need to be a 100 trade per day person, you just need to trade what style suits you best and if it's 5 trades a day, then do that. I'll always advocate trading the style that best suits the individual. BTW, I too enjoy my 10 second commute (15 if I stop to pet the dog)!
 
If you are into Gross trading numbers go to Schonfeld. They will pay you a percentage of the gross. Seems to me the incentive is all screwed up that way, but so be it. You get a lot of traders trading for pennies. Makes no sense but I think they pay 20% of gross or 60% of net whichever is higher.
 
I second that, every prop firm will kill to have someone of Candle's caliber. When you can get a proven performer, even if he may not take 100 trades a day, you love to have him in your space so he can influence and motivate others.

Besides, you are a no risk guy, and basically a walking ATM machine for any firm, why would they say no to free money. Some commissions is better than none, having a proven winner is always better than taking chance on new guys.
 
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