I think you are insane
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Would this work
- Thread starter shortthelows
- Start date
Quote from JoePaterno:
I think you are insane
Any reason in particular?
Seriously what is the worst that can happen? Lets say in two years, I hire 6 traders none of them make money, yes I paid out some money for computers, desk, office space etc. I lose 250k in this so what? I move on. I can still use the computers, sell the desk, I am keeping the office space. I am still trading, still making money. I don't see why I would be insane to do this.
And this is also the reason why I started this thread, to find out why I would be insane for this. I see a limited downside, with unlimited upside. Sounds like a good trade off.
Quote from shortthelows:
Thanks for that Mav. I appreciate the insights especially coming from someone who runs an office.
I can see where you are coming from, but I don't totally agree with you. I have in the low 6 figure range that I am willing to use in this operation from the get go. To pay out 6k in salary plus other expenses a month is not going to kill me.
I have done it and personally seen 5 other traders with the proper guidance develop strategies in under a year that didn't focus on market inefficiencies. I am sure others have done it too.
The year is not a hard fasten rule, its more of a general guide line. You can tell if some gets it from someone who doesn't it.
Capital is not that much of an issue either, its not unlimited but it should be enough to run the type of operation I am trying to do. I am not trying to compete with the HFT firms per say, so the technology doesn't hinder me or others that I might hire from achieving profitability.
Firms such as swift trade for example hire anyone and everyone and they seem to do well, perhaps its due to the fact that they hire a lot of people and one superstar out of 50 duds makes it. That might work for them. But I prefer to take the approach of FNYS, hire a few quality people and work with them.
I won't be allowing the traders to come in, come up with an idea, back test it over a few weeks of data and have the programmer code it up and then take it live. It will be much more intense then that. Proper back testing methods, then forward testing it, then it would go live with the min. amount of shares possible. In no way shape or form would I allow them free reign to do what they please when it comes to live trading.
As for PHDs, I would take a smart, hungry undergrad over a PHD any day, that is just me. Perhaps I am just foolish.
Thanks for your comments though, gives me somethings to think about.
OK, let me add a few words of caution here. When you make reference to Swiftrade or other firms that seem to have pulled it off, please understand the time and money it took for them to develop that model. It didn't happen over night. Sure now they make it look easy, but I assure it wasn't. Most prop firms here in Chicago usually start up when a superstar trader with an edge, leaves firm A to start his own firm B. Firm B has the superstar (the owner) and the edge. He usually is flush with cash having spent 5 years at firm A being a superstar trader. So he then grows his operation from that base and makes it look easy from the outside.
I can't think of one firm off the top of my head that just started with no edge and limited capital and then started burning cash trying to find an edge and tinker. Tinkering works when it comes in the form of an existing and profitable operation.
I don't know if you know who David Kalt is, the guy is worth 500 million or something like that. Runs Reverb Capital here in Chicago. He basically tried to do what you are doing now. He has more money then God, probably some of the best technology around (the guy had started two tech companies and took them public). And runs ads locally looking for traders. Ask around and see how they are doing. I know but don't want to say publicly.
Let me put it this way, you would have better luck starting a movie production company.
Quote from Maverick74:
OK, let me add a few words of caution here. When you make reference to Swiftrade or other firms that seem to have pulled it off, please understand the time and money it took for them to develop that model. It didn't happen over night. Sure now they make it look easy, but I assure it wasn't. Most prop firms here in Chicago usually start up when a superstar trader with an edge, leaves firm A to start his own firm B. Firm B has the superstar (the owner) and the edge. He usually is flush with cash having spent 5 years at firm A being a superstar trader. So he then grows his operation from that base and makes it look easy from the outside.
I can't think of one firm off the top of my head that just started with no edge and limited capital and then started burning cash trying to find an edge and tinker. Tinkering works when it comes in the form of an existing and profitable operation.
I don't know if you know who David Kalt is, the guy is worth 500 million or something like that. Runs Reverb Capital here in Chicago. He basically tried to do what you are doing now. He has more money then God, probably some of the best technology around (the guy had started two tech companies and took them public). And runs ads locally looking for traders. Ask around and see how they are doing. I know but don't want to say publicly.
Let me put it this way, you would have better luck starting a movie production company.
I don't expect it to be easy, in anyway shape or form. That is why I am trying to start off slow. I am not a superstar, but my trading does provide a 7 figure income each year over the past 3 years, so I feel that I have the capital to make something like this work.
As for Reverb they are focused on HFT where it takes a lot of capital and awesome technology to compete and with that segment of the market flooded with participants its a much harder game.
There is so much more to trading intraday and so many opportunities in a given day that others seem to ignore. So by me building off that base with a couple traders, I don't see how it is doom to fail from the start.
Quote from shortthelows:
I don't expect it to be easy, in anyway shape or form. That is why I am trying to start off slow. I am not a superstar, but my trading does provide a 7 figure income each year over the past 3 years, so I feel that I have the capital to make something like this work.
As for Reverb they are focused on HFT where it takes a lot of capital and awesome technology to compete and with that segment of the market flooded with participants its a much harder game.
There is so much more to trading intraday and so many opportunities in a given day that others seem to ignore. So by me building off that base with a couple traders, I don't see how it is doom to fail from the start.
If money is no object, why not do what the Yankees do and buy a team. Go out and lure a superstar away from another firm. Offer him 150k base plus 50% of the profits or equity in your firm. Then recruit guys to work underneath him. Your odds would improve dramatically over bringing in guys off the street and giving them 2k a month to tinker with an automated strategy in the hope that in 12 months they discover gold. Why not go for the sure thing? Am I missing something here?
Quote from Maverick74:
If money is no object, why not do what the Yankees do and buy a team. Go out and lure a superstar away from another firm. Offer him 150k base plus 50% of the profits or equity in your firm. Then recruit guys to work underneath him. Your odds would improve dramatically over bringing in guys off the street and giving them 2k a month to tinker with an automated strategy in the hope that in 12 months they discover gold. Why not go for the sure thing? Am I missing something here?
No Mav. you are not missing anything at all. This is the type of conversation I was hoping for. I never thought about doing that. How would you suggest someone going about to A) Find this superstar and B) Is 150k plus 50% a good deal?
Now when I recruit some guys to work underneath him, should they still be paid, should their job description be exactly what I had in mind?
It is a very interesting idea. Thanks
Quote from shortthelows:
No Mav. you are not missing anything at all. This is the type of conversation I was hoping for. I never thought about doing that. How would you suggest someone going about to A) Find this superstar and B) Is 150k plus 50% a good deal?
Now when I recruit some guys to work underneath him, should they still be paid, should their job description be exactly what I had in mind?
It is a very interesting idea. Thanks
My best advice would be to find a good recruiter in the city you want to do this (Chicago?) and he/she will be able to land you a trader. They will also know ballpark what you should be offering this trader.
When you bring this trader in, now you have revenues (or should) to lean on and you can now afford to pay some small draws to some young guys right out of college. This way the operation sort of funds itself. I'm sure there will still be some cost outlays, and no doubt you will have some risk, but I think this is a much better way to go.
One profitable trader in hand is worth 10 newbies in the bush.
Quote from shortthelows:
I can see where you are coming from, but I don't totally agree with you. I have in the low 6 figure range that I am willing to use in this operation from the get go. To pay out 6k in salary plus other expenses a month is not going to kill me.
I just have to ask. WHY? Why in the world would you wish to waste 6 figures worth of capital on a bad idea like this.
This concept has not worked in years, what makes you think it will work now? The only firm that has managed to pull it off in full scale is FNYS, and they spend a year simply training the candidates from their highly selective process. Plus, they employ more serious high capital strategies.
Listen to Mav, he has his hand on the pulse of the industry, and it is getting weaker by the month. The edges are simply not there to front your own capital and back newbies who would develop trading systems.
Putting aside the trader success/failure statistics, the reality is that there is almost no edge left in equities or index futures for the small to mid-size independent trader.