# Would you fund a trader with a proven record?



## CanOz (3 December 2012)

I'm dying to fund or start something where those with some funds available can fund traders that have talent but just need the funding. Sort of like Top Step Trader....but more like an online Prop Shop....how do others feel about funding other traders?


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## doctorj (3 December 2012)

Interesting in theory.  I see a number of challanges - how would you confirm their trading abilities and ensure they were aligned (on both the downside and upside)?


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## CanOz (3 December 2012)

doctorj said:


> Interesting in theory.  I see a number of challanges - how would you confirm their trading abilities and ensure they were aligned (on both the downside and upside)?




Darn, you're so fast i actualy looked over my shoulder Dr.J.

There are read only accounts available now...not all up on it yet but i've seen two or three examples.

There would need to be some hurdles....perhaps a good project for some crowd sourcing?

CanOz


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## So_Cynical (3 December 2012)

I can see the positives and know this sort of thing is getting popular, if its all above board and done with transparency i think it can and will work, from a funder point of view i can see the sense in having one of your many eggs in a basket that a trader controls...not much different to handing over money to a fund manager anyway.


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## tech/a (3 December 2012)

Heard of the turtles.


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## CanOz (3 December 2012)

So_Cynical said:


> I can see the positives and know this sort of thing is getting popular, if its all above board and done with transparency i think it can and will work, from a funder point of view i can see the sense in having one of your many eggs in a basket that a trader controls...not much different to handing over money to a fund manager anyway.




I expected as much from a punter like you SC....now vote please!


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## CanOz (3 December 2012)

tech/a said:


> Heard of the turtles.




They didn't have a track record when Dennis and _whats his face_ put them together though...they were selected. Are you saying that after they got their record they attracted more funding?

Did you vote?

CanOz


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## So_Cynical (3 December 2012)

CanOz said:


> I expected as much from a punter like you SC....now vote please!




I cant find a suitable option to vote for, i don't have the funds to be a funder, and have no interest in trading someone else account....but overall i do like the general idea.


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## CanOz (3 December 2012)

So_Cynical said:


> I cant find a suitable option to vote for, i don't have the funds to be a funder, and have no interest in trading someone else account....but overall i do like the general idea.




Fair enough SC, i guess it'll narrow it down to those with funds available to deploy!

Thanks mate.

CanOz


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## skc (3 December 2012)

No is the short answer.

It costs money to run a prop shop (even if just an online one) with issues around compliance / audits not to mention the technical and human resources needed for the selection and management of traders.

Then you got to hit a critical mass of traders (say at least 10 traders across several markets) to make sure the aggregrate equity curve is smooth enough so your capital requirement is sensible.

Then you got to profit share! At 50/50 split - they need to trade twice as good as me for me just to break even.

If there's really a trader out there who's that much better than me trading my own capital after taking into consideration of the above, I think he/she won't be trading with my $2 online prop shop for long anyway!

If I do have a spare $150m and can't trade it all myself - that's a different story.


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## Julia (3 December 2012)

A couple of months ago, I proposed a similar idea to Joe, not with the idea of having anyone make money on my behalf, but with the principle of funding a trading competition with real money.  Reason was to draw more interest to ASF as a forum and divert members' attention from some of the repetitive discussions that were prevailing at the time.

The details were undecided (eg whether winners would take profits or whether these would go back into the trading capital).
Not a single response was recorded on the thread.


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## Bill M (3 December 2012)

Why would I fund a trader if they can not be held accountable? Having been part of other investments in the past that were "proven" or Guaranteed that went belly up, I don't want anything to do with anything I can't control, so I voted no bloody way.


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## CanOz (3 December 2012)

skc said:


> No is the short answer.
> 
> It costs money to run a prop shop (even if just an online one) with issues around compliance / audits not to mention the technical and human resources needed for the selection and management of traders.
> 
> ...




Interesting answer SKC, i guess i was thinking you'd be all for it for some reason...

I guess I'm thinking of it from a couple of angles....

1.) there must be a dime to be made from good management here....
2.) there must be a pool of talent out there that's yet to be discovered.

Thanks for the view point.

CanOz


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## CanOz (3 December 2012)

Bill M said:


> Why would I fund a trader if they can not be held accountable? Having been part of other investments in the past that were "proven" or Guaranteed that went belly up so I voted no bloody way.




Fair enough too Bill, and funding something like this while in your best days would be kind of silly anyways. Unless you had 150 million or something...

Great points of view here, from all sorts.

CanOz


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## ROE (3 December 2012)

havent people learned already when you hand your money to some else.

you place your complete trust on this person doing the right thing and being human temptation to
do the wrong things are greater than doing the right thing and you know how it will end.

human psychology doesnt change that much when it comes to money doesnt matter what century you living in 

I vote I do it myself or no bloody way


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## Bill M (3 December 2012)

CanOz said:


> Unless you had 150 million or something...



That's so funny, if I had that much why would I risk it with someone who doesn't?


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## CanOz (3 December 2012)

Bill M said:


> That's so funny, if I had that much why would I risk it with someone who doesn't?




a paraphrase on SKCs post Bill...


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## Gringotts Bank (4 December 2012)

Julia said:


> A couple of months ago, I proposed a similar idea to Joe, not with the idea of having anyone make money on my behalf, but with the principle of funding a trading competition with real money.  Reason was to draw more interest to ASF as a forum and divert members' attention from some of the repetitive discussions that were prevailing at the time.
> 
> The details were undecided (eg whether winners would take profits or whether these would go back into the trading capital).
> Not a single response was recorded on the thread.




Got the link?  I like the idea.


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## Gringotts Bank (4 December 2012)

I'd have to first be able to get over some trust issues.  If I could do that, I'd much rather have someone else do the work for me than sit at a screen, so long as the returns were good.

How much you gonna make me Canoz?


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## Trembling Hand (4 December 2012)

Always surprises me at how lacking in entrepreneurial drive this place is. Most cannot get past what they need to control simple business risks let alone think through a process to see the real risk:reward potential (alone the lines of skc reply). Yet they are willing to "invest" in a company they have NO control over that struggle in some dreamers industry with repeated record of ruining investor funds without a whimper of accountability. 



Come on guys & gals. Do any of you have the ability to discuss business ideas or is it all about squiggly lines and old disappointing production reports.


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## Gringotts Bank (4 December 2012)

Trembling Hand said:


> Always surprises me at how lacking in entrepreneurial drive this place is. Most cannot get past what they need to control simple business risks let alone think through a process to see the real risk:reward potential (alone the lines of skc reply). Yet they are willing to "invest" in a company they have NO control over that struggle in some dreamers industry with repeated record of ruining investor funds without a whimper of accountability.
> 
> 
> 
> Come on guys & gals. Do any of you have the ability to discuss business ideas or is it all about squiggly lines and old disappointing production reports.




  what?


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## tech/a (4 December 2012)

> Do any of you have the ability to discuss business ideas




Yeh I think so.




> What?




Then again


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## Gringotts Bank (4 December 2012)

tech/a said:


> Yeh I think so.
> 
> 
> 
> ...




tech/a you're like TH's little sycophant buddy.

You might need to look that word up in the dictionary.


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## McLovin (4 December 2012)

There's a pretty successful fund running in the US (I can't think of it's name though!) that has crowd-sourced the fund manager. I think the way it worked was people traded their own accounts and then the best one was picked to run the fund. It's had some massive gains 50%+ yoy, iirc.


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## skc (4 December 2012)

Trembling Hand said:


> Always surprises me at how lacking in entrepreneurial drive this place is. Most cannot get past what they need to control simple business risks let alone think through a process to see the real risk:reward potential (alone the lines of skc reply). Yet they are willing to "invest" in a company they have NO control over that struggle in some dreamers industry with repeated record of ruining investor funds without a whimper of accountability.




I am not dissing the idea of a prop shop (why would I?)

I am just saying the $2 version isn't something I am interested in.


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## Trembling Hand (4 December 2012)

Gringotts Bank said:


> what?




I rest my case.


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## tech/a (4 December 2012)

Gringotts Bank said:


> tech/a you're like TH's little sycophant buddy.




You think?


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## Trembling Hand (4 December 2012)

skc said:


> I am not dissing the idea of a prop shop (why would I?)
> 
> I am just saying the $2 version isn't something I am interested in.




Oh yes I know. My point was that peoples reply is "I would never give my money to someone else as I lose control" then they go and take the most minuscule share holding in a company they have ZERO control over in a crappy two bit miner. 

When someone puts up a biz idea very little gets discussed. Just no. Seems strange for a business forum.


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## prawn_86 (4 December 2012)

Having done something similar to the opening questions, i would say yes i would do it again.

Previously i have given funds to a trader with a proven track record, and then had a profit share with them. It was only for a short timeframe, but it was one of my most sucessful investments and i would do it again in a flash.

Obviously it depends on the amount needed by the trader to start with, but providing they have a track record, and you have ability to take the funds out when you want (ie master access to an account) then i dont see what is wrong with it


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## Gringotts Bank (4 December 2012)

63% think it's a good idea.

36% aren't so interested.

Most people are supportive and want more info, including me.  Where's the issue?


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## Trembling Hand (4 December 2012)

Gringotts Bank said:


> Most people are supportive and want more info, including me.  Where's the issue?




Xactly. For a collection of wise business and trading experts where is all the smart suggestions? Where is the discussion about real issues beyond the basic? Only one so far who has given any sort of analysis is skc.


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## prawn_86 (4 December 2012)

CanOz said:


> I'm dying to fund or start something where those with some funds available can fund traders that have talent but just need the funding. Sort of like Top Step Trader....but more like an online Prop Shop....how do others feel about funding other traders?




Would the fundee be at the discretion of the funder? Or would all funds raised go across a pool of traders?

What would the traders need to prove their track record?

Would the funders be able to override trader accounts? Or wirthdraw at any stage?

Would risk management be mandated?

If it is online based then you would probably be looking at about 10k minimum to design the website, plus then any account set-up fees for traders, data costs, compliance costs, and ongoing SEO and maintenance.

Would the website/business also make money or be a not-for-profit aimed at exposing unknown traders?


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## tech/a (4 December 2012)

For me it was simply a question.

But to elaborate.
I am one of those who when it comes to investment---if I cant control it I wont do it.
Control maybe blurred but the issue for me is being able to make the decisions and quantify and 
have in place risk control measures which have me avoiding a situation of ruin.

eg 

If have have worked all my life for retirement funds then place them in the hands of someone else who loses the lot.
Has happened to many in the property and the Stock market areana's.

Having said that I do know of one party who has a proven track record and you can trade within your own account. (ASIC licensed)
---of course the broker holding funds can go broke!!

Short answer is no.
But if I could trade in the above scenario and time was an issue with it being a part of my overall structure (one account of a few) Then yes.
The direct answer would Im sure be governed by individual circumstance both in situation and capital at risk.


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## McLovin (4 December 2012)

The biggest issue will be regulatory. You're selling a financial product so you'll need a AFSL or an AR. Then assuming the assets are held in a unit trust type structure you'll obviously need a trustee + a custodian. Unless the intention is just to trade on someone's own personal account (NB the more money someone has, the less likely they will want to do this). The back office can be outsourced to companies like State Street they can also be the custodian. In that sense, it's probably a lot cheaper to not have a system of matching person A with money with person B who wants to trade but having a large pool of investors + traders.

You're essentially creating a hedge fund. You need to find someone with plenty of cash who can be your cornerstone investor (that's how you get credibility, plus a guy with money usually has lots of other friends with money). I guess you also need to make sure whatever it is you are doing is scaleable. If you're making a killing trading $0.20 explorers, you'll really struggle if you suddenly have $20m in FUM.


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## CanOz (4 December 2012)

Thanks for the effort people....and to TH for catalyzing things a bit...

I guess the thing that intrigues me about the prop shop concept is that its a way of "trading" the traders...By managing the risk you attempt to make the most of the successful traders while keeping losses small and controlled. Sort of "cut your losses short and let your winners run". The key is the risk management i reckon, but I'm sure TH and SKC can add some color to that.

For me there is also an element of 'desire to help aspiring traders', people with a passion for the markets but lack funding because of age, or whatever. 

If you had a pool of funds from a few investors, my first thought is that its better spread across the group of traders that are in turn spread across as many non correlated markets as possible. I'm really only guessing that this is how you would run a physical Prop Firm, as i have no insight. That fact that its online would have some challenges but none that i would think be insurmountable in this day and age.

I don't think it would be _difficult_ to setup with a good IT contractor and i can definitely raise the capital for start up and funding. The reason I'm prodding this a bit is that i would like to include it in a later phase of a current project. So nothing in the near term, just fleshing out some thoughts from a forum of like minded people with a passion for the markets.

Thanks again.

CanOz


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## Joules MM1 (4 December 2012)

skc said:


> No is the short answer.
> 
> It costs money to run a prop shop (even if just an online one) with issues around compliance / audits not to mention the technical and human resources needed for the selection and management of traders.
> 
> ...




yes, for mine...

outstanding post tho, skc

my thinking is the same for this as it is for people who sell their systems/software/timing sheets/subscriptions......all smart businesses that i've evert dealt with all find ways to either diversify the risk and income or look for like-mindeds to earn for  them when they can't be active much like royalties....

if your attitude is typical as this one is "if your system is so good why sell it?" then youve missed the point of business......


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## Trembling Hand (4 December 2012)

Joules MM1 said:


> if your attitude is typical as this one is "if your system is so good why sell it?" then youve missed the point of business......




Errr I'm pretty sure skc has figured out the benefits of a prop shop.


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## skc (4 December 2012)

Joules MM1 said:


> if your attitude is typical as this one is "if your system is so good why sell it?" then youve missed the point of business......




That's not what I said. I said if the trader is so good (>2x better than me), why would they trade in a $2 prop shop? Even if it was just to get started, he/she certainly would move on to bigger, better capitalised outfits.


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## skc (4 December 2012)

Trembling Hand said:


> Errr I'm pretty sure skc has figured out the benefits of a prop shop.




Yup. Worst $ loss day of the year and I am only wearing half of it


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## CanOz (4 December 2012)

skc said:


> That's not what I said. I said if the trader is so good (>2x better than me), why would they trade in a *$2 prop shop?* Even if it was just to get started, he/she certainly would move on to bigger, better capitalized outfits.




Who said anything about being a $2 prop shop??

If a bunch of guys can get together and form Propex, why can't another bunch of investors do this?

Why do you think it must be a $2 shop? Whatever that is

CanOz


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## Joules MM1 (4 December 2012)

skc said:


> That's not what I said. I said if the trader is so good (>2x better than me), why would they trade in a $2 prop shop? Even if it was just to get started, he/she certainly would move on to bigger, better capitalised outfits.




except for the line that said your post was good all else was not at or about you......but, nice bite tho


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## Joules MM1 (4 December 2012)

say, did a lot of people wake up on the wrong side of their coffee machines today or wot !


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## skc (4 December 2012)

CanOz said:


> Who said anything about being a $2 prop shop??




This...from everything I've read these guys are funding no bigger than what most full time retail traders would trade. 



CanOz said:


> Sort of like *Top Step Trader*....but more like an online Prop Shop....








CanOz said:


> If a bunch of guys can get together and form Propex, why can't another bunch of investors do this?




Sure if it's something like Propex. Like I said, if one can get around the hurdles of initial fixed costs, get critical mass of traders and have enough capital so the good traders don't out-grow you, then it's a very valid business model.


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## McLovin (4 December 2012)

What's sort of capital is the average trader at a prop shop given?


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## skc (4 December 2012)

Joules MM1 said:


> except for the line that said your post was good all else was not at or about you......but, nice bite tho




Well it's hard to know where "your" doesn't apply to "me" after you've quoted me.

That's why I use "one" (when I remember).

E.g. "One" must be careful how one quotes vs "You" must be careful how you quote"


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## boofis (4 December 2012)

Would do it if I had the capital.

Just for discussion: Why couldn't the business have incentives for traders who develop and want to move more size? Rather than just assuming they'll go for a bigger firm? 

Would the idea be to refine individuals already trading or...? 

Definitely think you would need some top traders to play the mentoring roles and what not. 

What's the regulations on this stuff like when it comes to getting multiple traders to trade thinner markets and have one hitting size for the break then one fading when the momentum pulls back? etc.
:dunno:


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## prawn_86 (4 December 2012)

boofis said:


> What's the regulations on this stuff like when it comes to getting multiple traders to trade thinner markets and have one hitting size for the break then one fading when the momentum pulls back? etc.
> :dunno:




Not 100% sure but i would assume as long as there are 'chinese walls' in place and each trader was trading their own account and not atually colluding it should be ok. Obviously there is probably additional regulations i am not aware of


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## Trembling Hand (4 December 2012)

McLovin said:


> What's sort of capital is the average trader at a prop shop given?




Not unusual to start newbies (just out of training) with $150,000 to MAX size positions @ $500,000. 

Thats newbies. Good profitable traders depending on the market many multiples of that.


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## McLovin (4 December 2012)

Trembling Hand said:


> Not unusual to start newbies (just out of training) with $150,000 to MAX size positions @ $500,000.
> 
> Thats newbies. Good profitable traders depending on the market many multiples of that.




Thanks TH. That's much less than I thought.


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## boofis (4 December 2012)

McLovin said:


> Thanks TH. That's much less than I thought.




Fo' real? :\ Let me have your account if that's small size!


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## CanOz (4 December 2012)

McLovin said:


> Thanks TH. That's much less than I thought.




McLovin, these guys are mostly day traders. Flat at the end of the day. You're not thinking they're like a fund manager are you?

CanOz


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## McLovin (4 December 2012)

boffis]Fo' real? :\ Let me have your account if that's small size![/QUOTE]

I'm not a trader. My account is said:


> McLovin, these guys are mostly day traders. Flat at the end of the day. You're not thinking they're like a fund manager are you?
> 
> CanOz




No, I know that.

I just thought they'd be working with a bit more cash. What sort of returns would they be generating?


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## Trembling Hand (4 December 2012)

McLovin said:


> Thanks TH. That's much less than I thought.




Oh and on your other question about upping size. You wouldn't be wasting your time in the penny dreadfuls. Mostly you would aim at the futures market where you can hit the market and get many mil in a second. Clearly ASX stocks are not where you look.


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## McLovin (4 December 2012)

Trembling Hand said:


> Oh and on your other question about upping size. You wouldn't be wasting your time in the penny dreadfuls. Mostly you would aim at the futures market where you can hit the market and get many mil in a second. Clearly ASX stocks are not where you look.




Thanks, that makes sense.


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## boofis (4 December 2012)

McLovin said:


> I'm not a trader. My account is, however, quite a bit larger than $150k
> 
> 
> 
> ...




I thought it was max 500k position size? Not account size.

Anyway, back on topic lol.


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## Trembling Hand (4 December 2012)

McLovin said:


> I just thought they'd be working with a bit more cash. What sort of returns would they be generating?




How longs is your string compared to mine? You really don't go on "returns" as strange as that sounds. I've never been asked about % return in my talking with prop shops. Not sure any traders I know have either. But i really only know one prop trader well.  

I'll get back to you later on this one before the risk manager sees all my posts and pulls my account.


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## McLovin (4 December 2012)

Trembling Hand said:


> How longs is your string compared to mine? You really don't go on "returns" as strange as that sounds. I've never been asked about % return in my talking with prop shops. Not sure any traders I know have either. But i really only know one prop trader well.




Is risk the answer to what they look for? How it's managed etc, especially as they give you more and more of their money?


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## ThingyMajiggy (4 December 2012)

Would do it in a heartbeat and have thought about it later down the track also, just dream building but love the idea, also thought about a HFT firm as an idea. 

But I'm more of the trader looking to be funded at this point in my life


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## CanOz (4 December 2012)

75% or so now would....

Good stuff.

CanOz


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## waza1960 (4 December 2012)

Sounds like a good idea but have a look at the latest FX developments which are gaining rapidly in popularity..
  Trade signals  check out these links: http://www.zulutrade.com/performance       
https://www.fxcopy.com/
http://www.mql5.com/en/signals    and there are many others.

   So basically you can trade the signals of these traders and pay a slight increase in spread.Obviously trading in the
  retail FX space is not ideal. However why not set up something similar for futures if the relevant platforms support throughput of signals/copying signals.Then just pay a premium to the particular trader for signals used.Quite an elegant approach I would have thought.


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## Gringotts Bank (4 December 2012)

waza1960 said:


> Sounds like a good idea but have a look at the latest FX developments which are gaining rapidly in popularity..
> Trade signals  check out these links: http://www.zulutrade.com/performance
> https://www.fxcopy.com/
> http://www.mql5.com/en/signals    and there are many others.
> ...




One of Joe's major sponsors offers this same thing - eToro (social trading is the name for this style of piggy back trading).  Most of the equity curves are rubbish unfortunately.  You'd never subscribe.  Are there any good traders on these sites?

Then there's managed futures funds.


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## waza1960 (4 December 2012)

> Most of the equity curves are rubbish unfortunately. You'd never subscribe. Are there any good traders on these sites?




 Zulutrade seems to be the most popular I think there are a few reasonable traders there but agree re equity curves.
  Most equity curves go to pieces after 6-12 months also stops/drawdowns are extreme in a lot of cases.
  My thoughts on them were that you could trade signals from traders with proven track records while systems were new and continue cycling into new ones or use a combination of traders for a balanced approach but Off Topic here....
 However I brought up the idea of using the concept to achieve what CanOz is proposing which means that regulatory and compliance issues are minimal and transparency and risk is controlled to an extent.
  However setting up the interface maybe the best investment lol:


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## ftw129 (4 December 2012)

CanOz said:


> 75% or so now would....
> 
> CanOz




Hi CanOz,

Not sure what you mean by this but I just wanted to make myself very clear.

I was initially hesitant in selecting any of the options in your poll as none of the answers really fit for me.

In reality, my answer is more a combination of the 2nd, 3rd and 4th answers however I'm always open to looking into new ideas so I selected response number 2 "Yes, i would be interested in seeing a business plan on this."

This however does not mean I would be signing up for it. It ONLY means that I'd be interested in looking into it out of sheer curiosity.

The chances of me actually participating in something like this from it's onset without any history, are pretty close to ZERO.


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## CanOz (4 December 2012)

ftw129 said:


> Hi CanOz,
> 
> Not sure what you mean by this but I just wanted to make myself very clear.
> 
> ...




That's ok, its only a poll. There is no obligation. If i actually needed capital right now i wouldn't really be looking on here....I live in China...there's a ton of funding just in my wife's classmates lol!

CanOz


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## Trembling Hand (4 December 2012)

waza1960 said:


> Zulutrade seems to be the most popular I think there are a few reasonable traders there but agree re equity curves. Most equity curves go to pieces after 6-12 months also stops/drawdowns are extreme in a lot of cases.
> 
> However I brought up the idea of using the concept to achieve what CanOz is proposing which means that regulatory and compliance issues are minimal and transparency and risk is controlled to an extent.




Waza I'd imagine the idea is to create a business rather than just a system. Something that grows and helps traders rather than churn and burn.


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## ftw129 (4 December 2012)

CanOz said:


> That's ok, its only a poll. There is no obligation.
> CanOz




That's not really what I meant.

I just wanted to illustrate to you, that it's a mistake to assume that the voters answering "Yes, i would be interested in seeing a business plan on this" mean that they would actually be willing to "fund a trader with a proven record" so you shouldn't count them as you did "75% or so now would.... CanOz".

The answer "Yes, i would be interested in seeing a business plan on this" means exactly that and only that.

Therefore the way you are counting your result thus far, is inaccurate.

Get my drift?


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## waza1960 (4 December 2012)

> Waza I'd imagine the idea is to create a business rather than just a system. Something that grows and helps traders rather than churn and burn.




   My thoughts are that the business uses this type of approach .
    That is the business creates the interface, manages the traders /clients etc becomes the " middle man" doesn't have to be churn and burn IMO.This could involve a relatively exclusive client base as well.


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## Trembling Hand (4 December 2012)

McLovin said:


> Is risk the answer to what they look for? How it's managed etc, especially as they give you more and more of their money?




Yeah its really of little concern about percentage return to some degree. I can turn over my allotted size 20 - 40 times a day. You can imagine the actually $ value of that each day! I'd probably be horrified to actual know the return on funds traded come to think of it. 

But as with all trading it comes down to comparing, in a daytraders case, avg winning days to avg losing days. And then there is a huge difference between traders. Some have 80% wining days and the odd shocker some are 50/50 but with every 10 or so days huge winners. Its really about how you can build decent positions when its going your way and then mostly not lose your head when its not going your way (all of last month for me!). 

You have a daily stop thats a rough end of the day "your not seeing it right come back tomorrow" kinda thing. (sometimes if you have been a good boy you still get to play if you blow it). The idea is you will do no more damage to your account than what you can fix tomorrow. Then you have a risk manager monitoring everything in real time to make sure no one has gone off tilt and blowing up agreed daily/weekly/total loses.

So if you can put on the size they give you, cover cost and grind your account higher you and they (the prop firm) will make money and everyone is happy. (though its no easy way to riches..... surprise!)


The big problem in this setup with having investors is the profit split. Are your investors going to be happy giving 50% to the trader, 20% to the firm and taking the remaining 30% while also taking risk? Clearly the investors will have to be the firm. CanOz?


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## CanOz (4 December 2012)

ftw129 said:


> That's not really what I meant.
> 
> I just wanted to illustrate to you, that it's a mistake to assume that the voters answering "Yes, i would be interested in seeing a business plan on this" mean that they would actually be willing to "fund a trader with a proven record" so you shouldn't count them as you did "75% or so now would.... CanOz".
> 
> ...




Yup, i see your point....

thanks!

CanOz


----------



## CanOz (4 December 2012)

Trembling Hand said:


> The big problem in this setup with having investors is the profit split. Are your investors going to be happy giving 50% to the trader, 20% to the firm and taking the remaining 30% while also taking risk? Clearly the investors will have to be the firm. CanOz?




Yup. I would think you'd need an active investor base. Perhaps a few could be silent to start with, then you could pay them back as the core group gets their feet.

I guess i keep thinking of guys like SMB capital, where they're actively involved in mentoring and trading alongside their teams but all have a stake in the business.... 'managing partners' in the firm. Its the ultimate in _ownership_ really. You have a true interest in seeing traders do well.

CanOz


----------



## CanOz (4 December 2012)

The part that bugs me about taking online traders is that you might miss that random element of taking people off the street. 

By sourcing traders online your going to get mainly traders that want to be traders....whilst looking at graduates, job ads, etc., you might find the odd diamond in the rough so to speak. A prodigy...totally untainted by past losses...

CanOz


----------



## McLovin (4 December 2012)

Trembling Hand said:


> Yeah its really of little concern about percentage return to some degree. I can turn over my allotted size 20 - 40 times a day. You can imagine the actually $ value of that each day! I'd probably be horrified to actual know the return on funds traded come to think of it.
> 
> But as with all trading it comes down to comparing, in a daytraders case, avg winning days to avg losing days. And then there is a huge difference between traders. Some have 80% wining days and the odd shocker some are 50/50 but with every 10 or so days huge winners. Its really about how you can build decent positions when its going your way and then mostly not lose your head when its not going your way (all of last month for me!).
> 
> ...




Thanks for the explanation, mate. Very helpful. As someone who is firmly in the FA camp, it's still interesting to see how you guys work.


----------



## matty77 (5 December 2012)

1. What does "proven record" mean?
2. If they were that good, well why would they need my money?


----------



## CanOz (5 December 2012)

matty77 said:


> 1. What does "proven record" mean?
> 2. If they were that good, well why would they need my money?




1.) a positive expectancy
2.) to increase position size

CanOz


----------



## 5oclock (5 December 2012)

Good thread CANOZ , with some good posts by all concerned, not sure where i would stand though,initially it was no way, but i think i would be interested in seeing the business plan. Very interesting to hear everyones take on this though,good points by TH, and SKC (and others too).


----------



## pixel (5 December 2012)

CanOz said:


> 1.) a positive expectancy
> 2.) to increase position size
> 
> CanOz




How often have we seen a strategy tested, backtested, and proven beyond doubt *for position sizes of $xxx*, but when we tried to up-scale five-, ten-, or 100-fold, it has influenced the Market to the point of becoming counter-productive.
Hence my continuing to say "no way!"


----------



## CanOz (5 December 2012)

pixel said:


> How often have we seen a strategy tested, backtested, and proven beyond doubt *for position sizes of $xxx*, but when we tried to up-scale five-, ten-, or 100-fold, it has influenced the Market to the point of becoming counter-productive.
> Hence my continuing to say "no way!"




If there is one e-arena where size is an advantage pixel, it's futures. Google 'Paul Rotter'...

I understand where you're coming from, but this is one case of bigger equals better. You need more liquidity to trade size though. 

CanOz


----------



## Trembling Hand (5 December 2012)

matty77 said:


> If they were that good, well why would they need my money?



Funny that all the good traders I know are trading prop or hedge funds all the strugglers are trading retail.

If you have traded for a living there is absolutely nothing that comes close to trading prop. Have covered it many a time before but very much worth repeating here,

https://www.aussiestockforums.com/f...t=11988&page=2&p=401340&viewfull=1#post401340


Trembling Hand said:


> A quick post on the why trade for a prop. To counter the "if ya a good trader why would you need to question".
> 
> *First* and most obvious SIZE. With props willing to let you go nuts with size you would need a huge personal account to match that. HUGE. Almost impossible to get there if you don't start there .
> 
> ...




I made that post 3 years ago but should also have added this one. 

*TEN* As a trader I can make more and risk nothing!! 

My question to all you guys is.......... Why are you so silly risking your own money! I mean really??  



pixel said:


> How often have we seen a strategy tested, backtested, and proven beyond doubt *for position sizes of $xxx*, but when we tried to up-scale five-, ten-, or 100-fold, it has influenced the Market to the point of becoming counter-productive.
> Hence my continuing to say "no way!"




We are talking futures market here (well I am) and most probably discretionary traders. Its just not a concern.


----------



## tech/a (5 December 2012)

> Why are you so silly risking your own money! I mean really??




Thats a great point if your trading for a living.

Some of us dont and dont want to trade for a living.
We have different lifestyles and commitments.
Different goals and capital bases.

All I and a few others here I know of want is to generate a low risk
passive income and at times it is very generous.--Its all I/we need.

My peanuts trade on the FTSE last night took 23 mins and secured 12 ticks x 3 contracts.
Around $500 from the time I got home to tea.I only trade the first hr or 2


----------



## CanOz (5 December 2012)

tech/a said:


> Thats a great point if your trading for a living.
> 
> Some of us dont and dont want to trade for a living.
> We have different lifestyles and commitments.
> ...




Fair enough Tech, actually I'm not sure i would want to be a full-time prop trader either, but i would love to have experience. 

Many young people would be well served by a stint in a prop firm for education.

Actually, I'm just really passionate for the markets. I just want to be involved as much as possible and be able to share that passion and anything I've learned along the way with others.

Maybe one day i can do that with an online prop firm...

CanOz


----------



## craft (5 December 2012)

Trembling Hand said:


> My question to all you guys is.......... Why are you so silly risking your own money! I mean really??




Inverting this provides the Prop shop business proposition and the right way to think about CanOz’ question.

All propositions start from an equal footing – but there is nothing here to evaluate – so my vote has to be - depends on the business plan. 

Looking at the prop shop proposition - The traders are basically commission only employees – probably very easily dispatched if they don’t perform - So variable costs . The risk management is not delegated to the trader so that stays in the control of the capital provider. Trading limits would obviously only be increased for traders earning in excess of required return. Margin offsetting probably keeps capital requirements low for given exposure.  All-up - Potential, but the Fiduciary risks and the mismatch of downside risk between capital and labour (when labour can create losses quickly) means the capital provider really needs to be active in the business. Probably not something I would passively invest in – (Are there any publically listed prop shops anywhere in the world? – it would be interesting to look inside the books)


----------



## CanOz (5 December 2012)

craft said:


> Inverting this provides the Prop shop business proposition and the right way to think about CanOz’ question.
> 
> All propositions start from an equal footing – but there is nothing here to evaluate – so my vote has to be - depends on the business plan.
> 
> Looking at the prop shop proposition - The traders are basically commission only employees – probably very easily dispatched if they don’t perform - So variable costs . The risk management is not delegated to the trader so that stays in the control of the capital provider. Trading limits would obviously only be increased for traders earning in excess of required return. Margin offsetting probably keeps capital requirements low for given exposure.  All-up - Potential, but the Fiduciary risks and the mismatch of downside risk between capital and labour (when labour can create losses quickly) means the capital provider really needs to be active in the business. Probably not something I would passively invest in – (Are there any publically listed prop shops anywhere in the world? – it would be interesting to look inside the books)




Thanks Craft, nice to see the business from the Fundamental side...

On a lighter note, i stole this from John Grady's site....lol..

Size matters...

CanOz


----------



## Trembling Hand (5 December 2012)

craft said:


> Inverting this provides the Prop shop business proposition and the right way to think about CanOz’ question.




I wasn't replying to CanOz q's rather the prompt from Matty about why a trader who could trade trade with a prop shop.



craft said:


> Looking at the prop shop proposition - The traders are basically commission only employees – probably very easily dispatched if they don’t perform - So variable costs . The risk management is not delegated to the trader so that stays in the control of the capital provider. Trading limits would obviously only be increased for traders earning in excess of required return. Margin offsetting probably keeps capital requirements low for given exposure.  All-up - Potential, but the Fiduciary risks and the mismatch of downside risk between capital and labour (when labour can create losses quickly) means the capital provider really needs to be active in the business. Probably not something I would passively invest in




yep agreed,



craft said:


> (Are there any publically listed prop shops anywhere in the world? – it would be interesting to look inside the books)




No they only float the crap business to the punters


----------



## craft (5 December 2012)

Trembling Hand said:


> I wasn't replying to CanOz q's rather the prompt from Matty about why a trader who could trade trade with a prop shop.





Yep Sorry I understand that, quoted you but wasn’t really addressing your point. 

On your point – I can’t understand either why traders wouldn’t look into it. Although I don’t understand why if you can make a return for somebody else’s capital why you wouldn’t also run your own capital alongside. Diversification maybe?


----------



## Trembling Hand (5 December 2012)

craft said:


> I don’t understand why if you can make a return for somebody else’s capital why you wouldn’t also run your own capital alongside. Diversification maybe?




You cannot trade the same market as the ones you're trading for the prop shop for obvious reasons. I thought I would be able to develop a longer term system to run as well but frankly I cannot be bothered. I like doing my 5 hours of work a day  and logging off and not giving a toss about what happens till open tomorrow.


----------



## craft (5 December 2012)

Trembling Hand said:


> You cannot trade the same market as the ones you're trading for the prop shop for obvious reasons. I thought I would be able to develop a longer term system to run as well but frankly I cannot be bothered. I like doing my 5 hours of work a day  and logging off and not giving a toss about what happens till open tomorrow.




Ahhh laziness - be careful that can leed to passive investing


----------



## odds-on (5 December 2012)

Hi CanOz,

It would be good to see a business plan. I would be willing to allocate a small amount of capital to this type of venture subject to the paperwork being straight. Some rough ideas below-

Performance management:   Trader gets 70% of profits above a 5% return on capital (after expenses and measured quarterly)
Capital:  There must be option to receive the profits each quarter as a dividend or to reinvest.
Loss of principal: There must be a clause that as soon 40% of my contributed capital has been lost then the remaining contributed capital gets returned.
Reporting:  Quarterly reporting would be sufficient - no more than 1 side of A4!

Cheers

Oddson


----------



## DJG (15 January 2013)

Just found the thread now but the poll is closed.

How'd you end up going with this Can Oz? Anything develop of it or at least get you thinking?
I'd be interested after some reading.

Look forward to further comments on the thread.


----------



## CanOz (15 January 2013)

DJG said:


> Just found the thread now but the poll is closed.
> 
> How'd you end up going with this Can Oz? Anything develop of it or at least get you thinking?
> I'd be interested after some reading.
> ...




I think the result was better than I thought from this crowd. 

It's good to see...many wouldn't realize that there are traders trading thier supers and they haven't seen thier track record!

Cheers,


CanOz


----------



## DJG (15 January 2013)

CanOz said:


> I think the result was better than I thought from this crowd.
> 
> It's good to see...many wouldn't realize that there are traders trading thier supers and they haven't seen thier track record!
> 
> ...



Very good point!


----------



## Gringotts Bank (15 January 2013)

I can afford to post this now, since Mr Fund manager will be at Portsea or Palm Beach till the end of January.  What he doesn't read won't offend him.
au.finance.yahoo.com/
---------------------------------------------------------------------------------------------------
Professional wealth managers have long been criticized for charging more than their services are actually worth. [what?  you mean charging a high fee for no result? ]

But getting routed by an animal that spends 20 hours a day either asleep or scratching itself is a new low. 

In a recent stock-picking challenge, the UK Observer pitted a trio of investment managers against two groups of amateurs: a handful of high school students, and a house cat named Orlando. 

The cat won. 

Each team started the year with  £5,000 in capital to invest in five companies from the FTSE All-Share index. After each quarter, they could swap out whatever stocks they chose, if any.

While the two-legged participants picked stocks the old-fashioned way, Orlando chose by tossing a toy mouse onto a grid of numbers that designated different companies. 

Things were looking up for the pros by September, when they showed a profit of £497 compared to the cat's £292.

But Orlando really turned up the heat in the last quarter of 2012, increasing his profit to an impressive £5,542.60 and beating the professionals by £366. The students fell in third place. 

Here was the cat's winning strategy, per the Observer: 

"All but one of Orlando's stocks (Morrisons) rose during the last three months of the year, including specialist plastics and foam company Filtrona, which Orlando had hastily swapped for under-performing Scottish American Investment Trust in September.

By contrast, the professionals refused to swap any stocks at the end of the third quarter and paid the price. British Gas fell by 19% and Imagination Technologies dropped by 16.8%, dragging their portfolio down by an average 7.1%."

This isn't the first time professionals have been beaten by "lesser than" competitors. In a study by UC Berkeley's  Terry Odean, he found stocks that professional fund managers sold off actually performed 3.2 percent better annually than the ones they purchased for their clients. Taking into consideration the average 3 percent fund managers charge clients in fees, it's a pretty significant finding.

The cat's victory ought to make Economist Burton Malkiel smile, too. It was in his controversial book "A Random Walk Down Wall Street," that he claimed a "blindfolded monkey" could put together an investment portfolio better than a paid professional.

How They Ended Up - Final Total
Orlando                        £5,542
Professionals                £5,176
Kids                             £4,840


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## CanOz (15 January 2013)

Well done Orlando!!


CanOz


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## Trembling Hand (15 January 2013)

GB what point are you trying to make in relation to this thread. We should fund a cat rather than a trader?


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## McLovin (15 January 2013)

CanOz said:


> Well done Orlando!!
> 
> 
> CanOz




He'll be a fat cat before you know it.


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## boofis (15 January 2013)

Gringotts Bank said:


> It was in his controversial book "A Random Walk Down Wall Street," that he claimed a "blindfolded monkey" could put together an investment portfolio better than a paid professional.




Controversial for containing preposterous 'experiments' such as the aforementioned


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## Gringotts Bank (15 January 2013)

Trembling Hand said:


> GB what point are you trying to make in relation to this thread. We should fund a cat rather than a trader?
> 
> View attachment 50437




If he can continue his form long enough, sure.  I don't much mind if "best" is an astrologer or a garbage collector or cat, but there needs to be a strong history of performance first.

Fat paw errors might be an issue, but we can get around that.


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## todasec (22 January 2013)

I am looking for capital to trade and just came across this forum. I am advertising but is on topic so I thought I'll give it a go, if this is against the rules please remove the post.

You will be opening your own brokerage account under own name, just allowing me limited power of attorney to trade on your behalf. Please read Interactive Broker's "Friends and Family accounts" for further details. You can liquidate trades anytime if you are uncomfortable, although doing so I won't work with you anymore. Withdrawing funds can only go to your name. You also need to agree to pay fees on profits, which is facilitated through the broker. You will be charged brokerage by IB, and I receive no compensation on the commissions generated. 

Past record as below:

i46.tinypic.com/jqi9us.jpg

Note: Have traded for a couple of years, but only account where there are also client live trades will be shown. This is my personal account which I opened when I started managing others, client's accounts have achieved the same replicated result, BEFORE performance fees. If interested, 3 years historical live account statements can be shown, but they are for informational purposes only as I will only promote track record where there are also client's money being traded. 

21 week return: 23.33%
Max Peak to Valley Drawdown: 3.87%
Valley to Peak recovery Period: 12 days

---
Annual Profit Target: 20-35%
Management Fee: 0%
Performance Fee: 30% New High Watermark(The highest net asset value that an account has reached and for which a performance fee was paid.) Paid Quarterly.
Eg.
Starting capital: $20,000
1st Quarter: $20,600 = (watermark 20,600-20,000=600) 30% of $600 paid to advisor manager.
2nd Quarter: $21, 600 = (watermark 21,600-20600=1000) 30% of $1000 paid to advisor manager.
3rd Quarter: $21, 000 = (no new high watermark)
4th Quarter: $21, 599=(no new high watermark)
5th Quarter:$21,601=(watermark 20,601-21600=1) 30% of $1 paid to advisor manager
No NEW profits/growth from previous high watermark value means no performance fee payable. 

Max Risk Limit: 10% TRAILED equity.  If the account ever exceeds a 10% draw down peak to valley, NOT initial deposit, all trades will be closed, and the client will be contacted for further instruction.
---
Yes 21 weeks of record is not much but I only promote record where clients funds are managed (3 years trading history available on request, but I am more aggressive with higher DD and growth when not managing others money so it is not the perfect indication of performance). We have experienced (as per SP500, which is what I trade) sideways, down and up market since September and my strategy works in all market conditions. I do short term gamma scalps with monthly and weekly SPY options only. Just SPY options, liquidity is very high so slippage is minimal. Due to the nature of my strategy I am only aiming for consistent slow and steady growth, so do not expect 70%+ annual returns. 

I am not licensed so I am not being regulated or audited and as such our relationship will be "friends and family", you will be responsible for your own account and taxes, performance fees will not be tax deductible as far as I know. As far as auditing goes, well I have no auditors of past performance but you are welcome to arrange to meet me in Melbourne CBD and I will log in the master account above and my own personal account you can go through all past trades. Other than that transparency, I can't do much more to prove anything.  

If anyone is interested and needs to know more, please PM me.


----------



## skyQuake (22 January 2013)

Interesting to see you're gamma scalping. Would have thought this to be the purvey of insto rather than retail.

To be frank I doubt you'll win anyone over with the 5 months records (although impressive). 3year broker statements will be far more important.

How long have you been trading options for? I'd assume you're trading US oppies from here in Aus?



> You also need to agree to pay fees on profits, which is facilitated through the broker.




Did not know this was possible through IB


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## todasec (22 January 2013)

skyQuake, thanks for being frank, I also do think 5 months is too short to arouse much interest. Although my trades are very short term, in and out in mostly during the week but I also hold some positions over the weekend, very small net long positions(<4% long of total capital in long minus short options). I also want to show trades through a intermediate or prolonged bear market to show the validity of the method. I plan on managing funds for the long term anyway so if I can come back and show the results of managed accounts after a full year, maybe more people will be interested.

Been trading stocks for 6 years, options for 5 years and this strategy for 3 years. 3 year brokerage statements is available, but is very messy as I run other systems as well in the same account (I would've seperated systems into different accounts, but portfolio margin advantages is just too hard to pass up). I have tried my best to seperate the system by itself although it is not a fair indication of the way I will trade client's accounts. Profits and drawdowns are magnified on my personal risk parameters and will give unrealistic expectations on performance as compared to when I am risking less in the managed accounts. 

I do not trade that way for others as when your drawdown is more than 5%, people get worried and when it is above 10%, most people bail out before recovery begins. Which is why I tailored the risk parameters to around where I expect 5%+ drawdown to be very rare and 10% will be the stopping point where I will have to explain to clients why I have lost a tenth of their money and why they should not withdraw their money. I do not expect to get there but anything is possible.

I am in Melbourne trading just US options. By the way above where I mentioned solely SPY options is not entirely true, I also have VIX and VXX spreads on in some volatility environments.

IB has a few advisor fee schemes: flat fee, % of net liq, % of P/L etc. Taken from client accounts straight to master account on timeframe which you can choose like monthly, quarterly, yearly.


----------



## Trembling Hand (22 January 2013)

todasec said:


> I am in Melbourne




Then almost certainly you are breaking the law buy soliciting retail funds without a AFS Lic.


----------



## todasec (22 January 2013)

Trembling Hand said:


> Then almost certainly you are breaking the law buy soliciting retail funds without a AFS Lic.




It is not a retail fund, no money are pooled together. I will do more research but I have checked with an accountant who specialises in investments who says I do not need to be registered at this size while all money remain under clients.


----------



## Trembling Hand (22 January 2013)

todasec said:


> It is not a retail fund, no money are pooled together. I will do more research but I have checked with an accountant who specialises in investments who says I do not need to be registered at this size while all money remain under clients.




Mate! You are advertising in a public forum offering a financial services in margined derivatives to retail clients. If your account said thats fine for an unlicensed person then you REALLY need a new accountant.


----------



## Gringotts Bank (22 January 2013)

todasec said:


> It is not a retail fund, no money are pooled together. I will do more research but I have checked with an accountant who specialises in investments who says I do not need to be registered at this size while all money remain under clients.




Why not hook up with Canoz, the OP.  Most people in here would trust him.  That could be your entree.  No one here knows you, so they have no way of judging your character.


----------



## todasec (22 January 2013)

Trembling Hand: My accountant is not from a one man shop, it is a medium sized firm. PM me if you want his name and which company he is from, happy for you to chat with him but he might charge you consultation fee I don't know. I have email records so if I really am breaking the law he is responsible for providing ill advice. Nevertheless, I thank you for the warning please contact the admin if this is breaking the law and he will remove me from here. 

Gringotts Bank: Happy to have contact with him if he is willing, maybe he can monitor my performance for a few months and report to everyone here. Thank you for the tip.


----------



## tech/a (22 January 2013)

Trembling Hand said:


> Then almost certainly you are breaking the law buy soliciting retail funds without a AFS Lic.




ASIC are unfortunately pretty bad at weeding these sort of characters out.
Makes it difficult for the guys that have all the right licencing.
It also casts a bad rep on those who are licenced as those who arent 
fail---take the money and run--with no consequence.
Someone who is legit gets the run off from the bad rep these
guys leave behind after failure.

Unfortunately you cant protect people from the lure of wealth.

But I love this!!



> Performance Fee: *30%* New High Watermark(*The highest net asset value that an account has reached and for which a performance fee was paid*.) Paid Quarterly.




So whos looking after who??
30% is only twice the industry average.
But the *bold* just has me on the floor!


----------



## skc (22 January 2013)

todasec said:


> It is not a retail fund, no money are pooled together. I will do more research but I have checked with an accountant who specialises in investments who says I do not need to be registered at this size while all money remain under clients.




As far as I know, you can do this kind of arrangement as essentially private agreements between you and "your friends". ASIC has a limit on the amount and number of people etc on this sort of arrangement.

But advertising on a public forum is a completely different matter. Your intended audience are clearly not your friends so it is hard to argue that you are selling a financial service without the proper licence.

Your accountant may have said the structure of the IB account is legal. But did he also say advertising for potential client on a forum to be legal as well? Even if he did I'd check properly. And just because said it's OK doesn't mean you haven't broken the law.

I like your commission structure in relation to the high watermark. I also like the 10% drawdown-and-pause idea. It's clear that you've given this some thought. With respect to advisor fee not being tax deductible... are you sure? Say you make 40% return on my $100k account, I pay you $12k in commission but I also need to pay $19.4k in tax (on highest tax bracket), leaving me with a mere 8.6% return after tax... or ~18% before tax. This is a lot less than the headline figure... if you intend to pay tax on your advisor fee income I see no reason why it isn't tax deductible to the investor.


----------



## notting (22 January 2013)

skc said:


> As far as I know, you can do this kind of arrangement as essentially private agreements between you and "your friends".




Looks like the Facebook friend is about to take on a whole new meaning!
"Look, he is one of my friends." It's official!


----------



## Trembling Hand (22 January 2013)

skc said:


> With respect to advisor fee not being tax deductible... are you sure?




Yeah he is wrong about that as well. I have the exact same deal with "friends" with a written contract etc etc cept I charge much higher % split . I was Audited a few years ago by the ATO and all above board, Advisor fees are an expense to the "client" and income to the Advisor.


----------



## tech/a (22 January 2013)

SKC

What is it you like about the commission structure?
Have you really thought about it?

Find out what his maximum and average 
*Peak to valley* drawdown is / mth


----------



## Trembling Hand (22 January 2013)

tech/a said:


> What is it you like about the commission structure?
> Have you really thought about it?




I like it too.
Its like a hedge fund structure for the poor man.


----------



## tech/a (22 January 2013)

If I was running it I'd like it as well.

Say I'm up 15% in a month but finish down 
10 % my client loses 30% fee off his highest
Profit in the month and finishes with a loss.

To make money he only has to trade in profit at 
" sometime " in the month.

You could overall lose on your account and pay a heap
In fees with a nett loss.

Love it!


----------



## Trembling Hand (22 January 2013)

tech/a said:


> If I was running it I'd like it as well.
> 
> Say I'm up 15% in a month but finish down
> 10 % my client loses 30% fee off his highest
> ...




Nah thats not how he is saying it works.


----------



## todasec (22 January 2013)

tech/a: you would rather be charged 1% of NAV per annum regardless of performance win or loss rather than pay 30% of profits only ? Drawdown periods are shown in the graph provided. 

skc: you will have to check with someone who's done this before like Trembling Hand on tax of advisor fees. I have never been an investor in one before and my current investors have only been 5 months so far have not been tax time yet. I'm assuming if IB's statements has the fees listed on them you can claim tax off it, I will not be issuing anything of any kind officially to you personally. 

I have only been compounding for 21 weeks and currently on target to achieving 50%+ which would mean 35% after fee, before tax. Obviously the risk is if my performance drops, you will be stuck with something closer to 18% before tax. I will be dissapointed but hopefully at least you have a good chance of beating the index fund.


----------



## Trembling Hand (22 January 2013)

Todasec how many times have you developed profitable short term strategies? From my experiences just as you start to leverage them up, like you are doing, the market niche disappears and you give back a years work in two months.


----------



## todasec (22 January 2013)

tech/a said:


> If I was running it I'd like it as well.
> 
> Say I'm up 15% in a month but finish down
> 10 % my client loses 30% fee off his highest
> ...




Don't know where you got that from, but that's not what happens. Maybe I didn't word it correctly.  Google high watermark on hedge funds.


----------



## tech/a (22 January 2013)

Trembling Hand said:


> Nah thats not how he is saying it works.




Sorry it's quarterly 
So you could be up in any or all quarters to finish down
In any or all quarters.

Same but quarterly!


----------



## todasec (22 January 2013)

Trembling Hand said:


> Todasec how many times have you developed profitable short term strategies? From my experiences just as you start to leverage them up, like you are doing, the market niche disappears and you give back a years work in two months.




Only 2 times on short term strategies. Just this strategy and a premium writing one which only works well when VIX is 25+. This strategy has been traded live from August 2008 although I've tweaked it to have more bullish bias since the end of 2010. Always could change back the rules when we get a bear market. I am still using the same position sizing % ever since I started and there has been no liquidity problems when leveraging up the capital. Everything fills instantly (including clients accounts) when I buy at the ask. With SPY's volume I do not think I will have to worry about leverage of capital there is also SPX as well. 

I don't know so yes it could stop working but I will hit the 10% stop before I give back a few month's profit. My net long options at anytime is less than 10% of total capital so it is theoratically impossible to go above 10% loss unless I go kamikaze and don't follow the rules(which is still a possibility). Which is why I sometimes tell clients if you ever see I have taken onmore than 10% risk in your account, immediately disconnect your account and fire me.


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## Trembling Hand (22 January 2013)

tech/a said:


> Sorry it's quarterly
> So you could be up in any or all quarters to finish down
> In any or all quarters.
> 
> Same but quarterly!






If the account is up from initial amount you get commission. Once commission is paid thats the "high water mark" for any further profit calculation. No further profit is paid untill an equity high is surpassed - the  "high water mark" .


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## tech/a (22 January 2013)

Trembling Hand said:


> If the account is up from initial amount you get commission. Once commission is paid thats the "high water mark" for any further profit calculation. No further profit is paid untill an equity high is surpassed - the  "high water mark" .




Yeh if it ranges it can happen.
If it trends then un likely


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## skyQuake (22 January 2013)

Trembling Hand said:


> Todasec how many times have you developed profitable short term strategies? From my experiences just as you start to leverage them up, like you are doing, *the market niche disappears* and you give back a years work in two months.




^this sooo much


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## tech/a (22 January 2013)

Trembling Hand said:


> If the account is up from initial amount you get commission. Once commission is paid thats the "high water mark" for any further profit calculation. No further profit is paid untill an equity high is surpassed - the  "high water mark" .




Your right.
Apologies.


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## skc (22 January 2013)

todasec said:


> skc: you will have to check with someone who's done this before like Trembling Hand on tax of advisor fees. I have never been an investor in one before and my current investors have only been 5 months so far have not been tax time yet. I'm assuming if IB's statements has the fees listed on them you can claim tax off it, I will not be issuing anything of any kind officially to you personally.




You don't need to issue any official invoice for it to be tax deductible expense. As far as I am concerned, I invested $100k and I ended up with $120k in my IB account, I pay tax on $20k net profit. It doesn't matter that my gross profit was $30k but you've taken $10k as fee/commission. As long as my IB account is a "closed system" the tax treatment should be simple and the fee should definitely be deducted for tax purpose. 

Obviously get your own tax advisor blah blah blah, but I'd fire my tax accountant if he tells me the fee isn't deductible.



todasec said:


> I have only been compounding for 21 weeks and currently on target to achieving 50%+ which would mean 35% after fee, before tax.




How much money are you trading with now vs how much money do you plan to trade for others? It's very easy to compound on a small account but once the numbers get 20x larger, you may find that the "internal compounding over the year" approach becomes less viable. 

If your method is truely scalable and you have a track record, have you consider joining a prop shop (or whoever that will endorse such strategy)? It's way simpler and more rewarding set up than what you are trying to achieve with "friends and families" accounts, plus it's probably more legal! I don't know if Propex does future options but someone might know the answer.


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## todasec (23 January 2013)

skc: Makes sense, if IB steals your profits you should be able to claim it. I am trading 271k in my master account and client's amounts I do not wish to disclose but is bigger than my own account but well under 8 figures. My personal account which has a different risk profile is 578k but it is crossmargined with 2 other strategies so only a portion of it is actually under this strategy. Varies depending on my discretion.

My frequent trades are near the money SPY strikes with usually 20k+ daily volume and 50k+ op int. I don't know how scalable it is have not traded tens of millions but even with a 10 million capital I still will not make up more than 1% of the volume on any given strike I am trading. Have not experienced 1c slippage on fills yet, full order always gets filled instantly when I go to the ask. I don't really day trade just adjust my positions which means I may not do any movements for few days or sometimes 2 or 3 times in a day.

That is my theory that until I start receiving 1c slippages (eg. buy fills 300 contracts at 14c, and 120 contracts at 15c), I do not have to worry about scalability and diminishing returns. Bigger volume actually reduces my brokerage. 

I have gave a quick thought to trading firms but they seem pretty demanding in their criteria which clashes with my own demands. ie. I will trade my own hours, I am not going to move to another city, I do not wish to report to an office. Plus I am too small to be taken seriously, maybe after I've traded larger amounts of money. 

Cheers for the input, gets me thinking more. Back on the topic of scability if I notice my return is suffering because of more capital, I will close out this fund or start charging less fees until I work out a point where the fees I am charging is highest for me while not impacting clients returns.


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## skc (23 January 2013)

todasec said:


> I have gave a quick thought to trading firms but they seem pretty demanding in their criteria which clashes with my own demands. ie. I will trade my own hours, I am not going to move to another city, I do not wish to report to an office. Plus I am too small to be taken seriously, maybe after I've traded larger amounts of money.




I think none of these concerns are valid. You trade your own hours, you can trade remotely (many do from their own home), there's limited reporting (certainly way less effort than managing 20 friends and families), and the account size you mentioned is more than meaningful from a prop shop's perspective. i.e. you will be taken seriously if you can backup your claims.

The only real control you get from a prop shop is your trading size, and that will grow as they see your strategy working and get more comfortable with you. It also saves you pimping yourself on a public forum for more funds.

I don't know if any prop shop have option desk / traders but you should certainly investigate more as the concerns you have seem unfounded.


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## todasec (23 January 2013)

There's actually no reporting for me at the moment. Everything is in their own account they can see the statements IB generates. Only had to go through how to read a P/L statement with one guy who was a non-trader. On my side I just get a summarisation of all accounts and fees paid to me. 

If I can find any prop shop who will give me a large funded account allowing me to trade freely with my rules with same or higher profit fees without bothering me then yes I am definitely up for it. I will narrow down some firms tommorrow and send some emails. Thanks I will keep you informed of any luck.


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## Trembling Hand (23 January 2013)

todasec said:


> I have gave a quick thought to trading firms but they seem pretty demanding in their criteria which clashes with my own demands. ie. I will trade my own hours, I am not going to move to another city, I do not wish to report to an office. Plus I am too small to be taken seriously, maybe after I've traded larger amounts of money.




Hahahaha

WRONG!

todasec from your limited posting its hard to take you seriously as we get people blowing in every few months wanting to be the next Soros. Best advertising you will ever get is to start your own thread and run some trades live. Everyone talks the talk few every take a step - let alone get into a trot.


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## CanOz (23 January 2013)

Trembling Hand said:


> Hahahaha
> 
> WRONG!
> 
> todasec from your limited posting its hard to take you seriously as we get people blowing in every few months wanting to be the next Soros. Best advertising you will ever get is to start your own thread and run some trades live. Everyone talks the talk few every take a step - let alone get into a trot.




First of all Todasec, welcome to ASF. I think TH has a great idea, why not start a thread with some stats on your system, some live trades even...People that have done this before tend to develop credibility quickly, TH is a great example. Tech/A has also displayed a system publicly in the past.

It could become a very popular thread and attract some attention for you. If you contribute here, then I'm sure everyone would be more than willing to tolerate the fact that you are sort of "advertising"...

Actually i met another chap, through his thread, that is doing something similar to you but with Iron Condors(is this the same). He is funded, but looking for more clients.

Cheers,


CanOz


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## todasec (23 January 2013)

Trembling Hand: that is fine I will be here from time to time posting results. If I ever stop without saying anything it means my system is broken. I will post when I do not need any more funding so if I dissappear for a long time without updates you can take it as my performance sucked and I am too embarrassed to post it and write me off as another Soros wanabe.

I have got one guy from another forum who is interested and is in the process of funding just a $10k account to see how it goes for a few months. Worst case he will lose $1k and shut me off. If it does performs as expected he will be adding more funds. 

CanOz: Thank you for the welcome, attached is the updated stats although it has only been a couple of days since I last posted my stats. I am not sure about starting a new thread as advertising so I will stick to here for now. Live trades will be good although you will have to stick it out for a few months for the returns to be meaningful. I will look for something that is a trustworthy third party monitor of live trades, something like myfxbook but for the options market.

EDIT: Not sure what happened to the SPX chart at the end where it falls right off..seems like IB has some data problems.


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## Trembling Hand (23 January 2013)

todasec said:


> Trembling Hand: that is fine I will be here from time to time posting results.




Problem is if they are not live they are not worth a pinch of........

You should run it on Collective2.com If your equity curve looks like that after 6 months you will do very well.


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## todasec (23 January 2013)

I do not have time to post here everyday right as I trade, which is why I offer anyone who is interested but suspicious wants to verify the results can meet me and poke around in my account with their own eyes.

I was going to open a demo account on IB and trade it while giving a few people who is voted to be trusted the password to the account so they can monitor it real time, but that may not be necessary with the site you posted. Thank you for the link, you may have found a solution for me as it is automated.


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## Gringotts Bank (23 January 2013)

Trembling Hand said:


> Problem is if they are not live they are not worth a pinch of........
> 
> You should run it on Collective2.com If your equity curve looks like that after 6 months you will do very well.




Are you on Collective2?


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## CanOz (23 January 2013)

Gringotts Bank said:


> Are you on Collective2?




lol...


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## Gringotts Bank (23 January 2013)

todasec said:


> I do not have time to post here everyday right as I trade, which is why I offer anyone who is interested but suspicious wants to verify the results can meet me and poke around in my account with their own eyes.
> 
> I was going to open a demo account on IB and trade it while giving a few people who is voted to be trusted the password to the account so they can monitor it real time, but that may not be necessary with the site you posted. Thank you for the link, you may have found a solution for me as it is automated.




There's a few ways to gain trust through 3rd party verification websites.  This is the best known.
http://www.timertrac.com/Public/Default.asp


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## Gringotts Bank (23 January 2013)

CanOz said:


> lol...




what's wrong?


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## CanOz (23 January 2013)

Gringotts Bank said:


> what's wrong?




Sorry mate, he could very well be on C2...but it just struck me funny why a Prop trader would be on C2...

CanOz


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## Trembling Hand (23 January 2013)

Gringotts Bank said:


> Are you on Collective2?




You are not serious are you?


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## boofis (14 May 2013)

Curious to know whether anyone has changed their views on this/tried pursuing ideas like this/is now funded/is now funding etc. 

Any discussion would be valuable just for my own use


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## andrehughes (11 June 2013)

I would definetely fund someone with a poven track record that also works with a reliable broker and keeps risk under control.


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## minwa (2 July 2013)

Anyone else kept in contact with this guy ? Just saw his latest performance and he has outrageously low draw downs with a equity curve that seems to be fabricated. Anybody shed some light on gamma scalping ?

Would be interested in seeing someone offering something similar but through a company/business with proper licenses. Would like to diversify a bit of my own portfolio.


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## tech/a (3 July 2013)

todasec said:


> Trembling Hand: that is fine I will be here from time to time posting results. If I ever stop without saying anything it means my system is broken. I will post when I do not need any more funding so if I dissappear for a long time without updates you can take it as my performance sucked and I am too embarrassed to post it and write me off as another Soros wanabe.
> 
> 
> CanOz: Thank you for the welcome, attached is the updated stats although it has only been a couple of days since I last posted my stats. I am not sure about starting a new thread as advertising so I will stick to here for now. Live trades will be good although you will have to stick it out for a few months for the returns to be meaningful. I will look for something that is a trustworthy third party monitor of live trades, something like myfxbook but for the options market.
> ...




Guess that didnt end that well?


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