# I want to start trading, how to proceed?



## BeNice (6 January 2010)

Hi everyone.

Maybe I should have clicked search or something before posting this but I figured that I could be more active in my own thread. It may not even be the right forum for this! Maybe I'm just selfish. hahaha

Anyway, this isn't a short post and I'm not sure you need to read the whole thing to give useful advice, so here's some pre-emptive cliffs...(scroll to complete bottom of this bloated post for the actual questions I want to ask)

Summary

-Math/Stat (honours)
-Didn't like risk mgmt
-Winning online poker player (my mindset fits trading well)
-Enjoy pursuits primarily concerned with imperfect information/logic/analysis to find edges
-Want to know more about the trading world.
-Came to forum full of experts, hoping you will all pity me

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The long version:

Anyway, I'm Math/Stat trained and I tried to take that to financial risk etc but I just didn't enjoy what I was doing (or the path that lay ahead) for a variety of reasons. I found it dull (even when based on what my superiors were doing) and lacked the level of engagement I require. I have a pretty large hole in my resume that was filled with online poker and the occasional sports/racing arbitrage/betting (although I was pretty risk averse with sports, I doubt I was good enough to beat it with the amount of knowledge I had so I only took the best spots). 

I'm a large long term winner at poker and also seemed to enjoy finding some arbs in the sports betting world. Basically, I have mid 6-figs in savings from poker now but I'm looking at moving away from full time poker and I like the idea of moving towards the markets. Poker is becoming a worry with regard to its long term viability. The poker economy seems to be winding down a bit and I see trading as an area that will "always" be fruitful/liquid for those that can beat it.

Part of me knows that with some work, I have enough capital and natural ability to get off to a start which will see me making a "decent amount" based on some fixed ROI in the "I'm not sure how distant" future but I know that it will take work/study and some time as a loser to get there. I'm being realistic. 

I have some idea about trading and have done an honours level thesis on the topic of options pricing. I am highly competent w.r.t analytics and I feel like this is an area that I want to forge a career in.

And on to the questions...

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Q's

1. Should I look at the big trading houses (I know of Tibra and Optiver) for career stability/potential to swap over to analytics?
2. Should I consider Prop houses (recommmendations?) as a way to leverage some % of my existing bankroll and potentially get training?
3. Should I get into it with 100% my own money and learn from the ground up (would probably feel comfortable using ~100k for this purpose)?
4. Are the bigger firms offering salary+bonus as opposed to drawings etc (which basically amounts to a staking deal and seems to be heavily in the firm's favour)?

I feel like a hopeless case at the moment, I don't have any particular background in this area and I'm asking questions which I think may attract some criticism. That said, I'm am analytically/numerically/logically very skilled and I come from a background of working in an extremely volatile environment and thriving on it. I feel like this (trading) is where I need to be and I would appreciate any advice that you are kind enough to throw my way. 

Sorry about this long-winded, gas-baggy post, I hope I don't come across as a douche, I just want the best advice possible before I throw myself into a new life path.

Thanks in advance...and please be gentle.


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## Trembling Hand (6 January 2010)

Lots of junior trading jobs going, thou lots of competition for them. I would say for a smaller firm your poker experience would be a plus. A bank would probably not look at it so favourably 

http://seek.com.au/JobSearch/index.ascx?catindustry=1203&DateRange=999&Keywords=trader

As far as Prop Shops you could look at Propex Or Aliom.


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## BeNice (6 January 2010)

TY for the response, I assumed that a bank wouldn't be so accommodating lol

Thanks for the link too, I have looked there but my question is more a matter of who is good to work for, thanks for the recommendations, I'll be looking into them.

Should I be looking to leverage my existing bankroll or invest none of my own capital? Will this be dependent on the "type" of firm at all?

Part of me would love to simply take a "salary" and continue to use my existing bankroll for poker since there is still money to be made there.


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## Trembling Hand (6 January 2010)

BeNice said:


> Should I be looking to leverage my existing bankroll or invest none of my own capital? Will this be dependent on the "type" of firm at all?
> 
> Part of me would love to simply take a "salary" and continue to use my existing bankroll for poker since there is still money to be made there.




Very few start on their own and end up being Old traders. There's two good reason for that. Firstly most blow their own capital before they know whats going on and never get back to what they see as a bad set back financially. And probably rightly too.

The second and IMHO the more important one is that a trader sitting at home isolated trying to get a good & broad understanding of the markets has little hope. What ends up happening is they get, to some degree, physiologically damaged and confused. They end up learning bad habits and shell shock. You see it throughout most forums with all the conspiracy theories of Algo trading & confusion of market moves, denial & anger.

Get a job and learn the markets first. Then you can start to learn how to trade.

By the way with a prop shop you trade their capital not yours. (if you have some great live off it while they teach you ow to trade with their money its a great way to go )


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## bilo83 (6 January 2010)

Congrats on the poker success to date, I was hoping to one day tap the poker economy myself!

Any of the ETO market makers such as Tibra, Optiver, Timber Hill, Susqehanna would be the beez knees for you given the options thesis. If you have any programming skills and/or very quick on your feet you might have a shot. Without much trading experience, I’d take anything in trading/broking I could get if I were you. Learn with other people's money - thats the way to go.


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## Sir Osisofliver (6 January 2010)

BeNice said:


> Hi everyone.
> 
> *snip*
> 
> ...




Speaking as an ex full service broker who worked at several large firms... The analysis boffins tend to try and stake out a particular segment of the market to become "expert" in it. They need to get cosy with the management of the companies within that segment - simply so those management will answer their calls ahead of other analysts and brokers when stuff happens. There is a fair bit of schmoosing as an analyst and long boring hours of running numbers through models. Most analysts are restricted from owning or trading in the shares that they cover. I haven't yet met a analyst from one of the big firms who I would classify as a "trader", primarily because most analysts are all about the fundamental analysis and ignore the technicals. (Which if you have been reading these forums you will understand is a big no-no for a trader). On the plus side you'll likely get an expense account and get to go places for site visits.







> 2. Should I consider Prop houses (recommmendations?) as a way to leverage some % of my existing bankroll and potentially get training?



IMO - no. Most research notes, tip sheets and the like that are forward looking is basically just someone's opinion, only the aggregate opinion will matter and the way to get a handle on what will happen there is through price action.


> 3. Should I get into it with 100% my own money and learn from the ground up (would probably feel comfortable using ~100k for this purpose)?



How do you feel about losing that $100,000.00? There are a couple of good threads on here - becoming an expert at anything springs to mind, about the kind of time it will take to get consistent profits from trading. First thing is you need is a plan, without a plan you are planning to fail, and determine what your edge is - where you are better skilled than the majority of your competition. Is it speed, accuracy, sourcing leads, designing systems etc. Currently you are ignorant of all the ways that the market can hurt you.


> 4. Are the bigger firms offering salary+bonus as opposed to drawings etc (which basically amounts to a staking deal and seems to be heavily in the firm's favour)?



 Yes larger firms offer a variety of differing pay structures, most of which are bent in the firms favour. Until you've been an analyst for a while and have attracted a reputation for success in your chosen area, you will be a price taker of whatever they think you are worth.







> I feel like a hopeless case at the moment, *snip* I hope I don't come across as a douche, I just want the best advice possible before I throw myself into a new life path.
> 
> Thanks in advance...and please be gentle.




We all started somewhere BeNice, I hope I was gentle... P.S. Go read my newbie thread.

Cheers

Sir O


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## Trembling Hand (6 January 2010)

Sir O







Sir Osisofliver said:


> Speaking as an ex full service broker who worked at several large firms... The analysis boffins tend to try and stake out a particular segment of the market to become "expert" in it.



 I didn't think the OP was talking about being an Analysis. Thats not trading!



Sir Osisofliver said:


> IMO - no. Most research notes, tip sheets and the like that are forward looking is basically just someone's opinion, only the aggregate opinion will matter and the way to get a handle on what will happen there is through price action.



Sir O I don't see how your above comment has anything to do with trading with a prop house like propex. I couldn't think of ANY better way to start a trading career. Could you elaborate on what your point is?


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## mazzatelli (6 January 2010)

With your strong maths/stats and understand of option pricing - maybe you could consider a pricing analyst role at the large banks. 

It is not trading, but when you are competent, you can move towards trading exotics [barriers, lookbacks etc] which is highly rewarding monetary wise.

Or you can choose the MM option, which I feel is inferior to the above option, but is still a starting point...

Also have you thought about algorithmic trading and arbs [risk, stat, dispersion, Delta 1 trading desks]?


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## BeNice (6 January 2010)

Trembling Hand said:


> Very few start on their own and end up being Old traders. There's two good reason for that. Firstly most blow their own capital before they know whats going on and never get back to what they see as a bad set back financially. And probably rightly too.
> 
> The second and IMHO the more important one is that a trader sitting at home isolated trying to get a good & broad understanding of the markets has little hope. What ends up happening is they get, to some degree, physiologically damaged and confused. They end up learning bad habits and shell shock. You see it throughout most forums with all the conspiracy theories of Algo trading & confusion of market moves, denial & anger.
> 
> ...




Thanks a lot, this was a very helpful post, you addressed much of what I am looking to find out, I'll probably start looking at a few prop houses, thanks again!


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## Sir Osisofliver (6 January 2010)

Trembling Hand said:


> Sir O I didn't think the OP was talking about being an Analysis. Thats not trading!




He used the word career - which to me implies a job working for someone as an analyst...If I'm wrong please disregard







> Sir O I don't see how your above comment has anything to do with trading with a prop house like propex. I couldn't think of ANY better way to start a trading career. Could you elaborate on what your point is?




No need I didn't recognise the term - Hey I learnt something! I was under the impression that he'd made a typo and seized on the word recommendations thinking it was tip sheets and the like. Now I'm curious about Proprietary trading houses 

Cheers

Sir O


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## BeNice (6 January 2010)

bilo83 said:


> Congrats on the poker success to date, I was hoping to one day tap the poker economy myself!
> 
> Any of the ETO market makers such as Tibra, Optiver, Timber Hill, Susqehanna would be the beez knees for you given the options thesis. If you have any programming skills and/or very quick on your feet you might have a shot. Without much trading experience, I’d take anything in trading/broking I could get if I were you. Learn with other people's money - thats the way to go.




I hate to say it, but you've likely missed the gravy train. Still doable but not "printing money" these days. I missed 2005/2006 myself so I didn't get the best of it either, very tough these days. The learning curve has steepened exponentially over the last two years and I only see it getting worse. If you want to play, learn Pot Limit Omaha instead of holdem.

I hadn't heard of a couple of those places, cheers! I'll be looking into it.


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## BeNice (6 January 2010)

@mazzatelli:

Thanks, I will look into some pricing analyst roles as well. I'll look into some of the market maker roles too, I might as well cast the nets as wide as possible at the moment. 

W.R.T arbs and algorithmic trading, I was sort of under the impression that it could not possibly be lucrative enough for a skilled trader (I imagine diminishing returns and I'm always confident that I can attain a very high level of competency at an endeavour that requires my skill set). Am I wrong?

@Sir Osisofliver:

I was sort of quick to dismiss your first post due to it's seemingly condescending and passive-aggressive nature but now I see that we just had our wires crossed. Your input is greatly appreciated. I don't think that I'm completely ignorant either, somewhat ignorant but not completely. You can more than likely put some actual content to me without me being overwhelmed.

Also, I was referring to "analyst" in the sense of providing statistical/mathematical information to traders, not trading itself but also not a "business analyst" like you seem to describe. I have a friend who does this for Tibra, it would just be a nice contingency plan in case my psychological profile changes over the years and I no longer want to be a trader.

Thanks again everyone! Keep the opinions coming!


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## Mr J (6 January 2010)

> -Came to forum full of experts, hoping you will all pity me




Some are, most are not. Financial markets follow the same food chain structure as poker. Most have no idea, some have a clue, and few are very good.

I'll be the devil in the ear suggesting you to trade for yourself, but then I am completely biased, so it may not be wise to consider it as advice .

Your gambling experience is probably far more beneficial than you realise, or at least more than you state here.


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## mazzatelli (6 January 2010)

Merger arb can be lucrative [from observation of a hf trader] - especially with combined use of vanilla ops for bets on vol &/or gamma. Though I'm not sure whether it is an active area for the ASX universe. 

I mentioned algo & arbs, mainly to use it as a stepping stone to enter the hedge fund industry, if you desire/interested. 
I agree with what TH says about working for others initially, because you have the opportunity to meet traders who far surpass your skills of which you can learn from, rather than trade on your own with your own money.

btw all the best and good luck!!!


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## Trembling Hand (6 January 2010)

Sir Osisofliver said:


> Now I'm curious about Proprietary trading houses
> 
> Cheers
> 
> Sir O




Just to clarify a Prop Shop (Proprietary trading firm) is a company that "contracts" traders to trade the companies funds for a profit split, normally starting around the 50/50 mark. They usually don't pay a wage its eat what you kill (or half of it anyway  And there are no funds put up by the trader.

They are mostly setup to trade Futures and on a short term basis. Some take experienced traders with a profitable record others will take novices and train them like Propex.

It should be _the_ way to learn how to trade. But unfortunately in Asia & Aus there is not that many.


PS There may be another Asian one being set-up this year. Just quietly


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## Trembling Hand (6 January 2010)

Actually there is two more that I know of. Silk Road Capital and Transmarket.

Also a thread on Oz prop shops here,

https://www.aussiestockforums.com/forums/showthread.php?t=11988


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## MRC & Co (6 January 2010)

Trembling Hand said:


> PS There may be another Asian one being set-up this year. Just quietly




ha ha, wouldn't be in HK would it?


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## Trembling Hand (6 January 2010)

MRC & Co said:


> ha ha, wouldn't be in HK would it?




As the saying goes ....................... Stay Tuned for further updates


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## BeNice (6 January 2010)

Trembling Hand, you have been incredibly useful thus far, thank you for basically everything you have written!

One thing I would like clarified:

With the Prop Shops, I have heard about the profit splitting arrangement, it is almost perfectly analogous to a poker staking deal. I have staked plenty of players in my time and I understand it pretty well, I also understand how much I expect as the backer given I shoulder 100% of the risk for 50% of the profit. Am I correct in assuming the following:

- If I start trading; lose $20k and draw $5k from my account ("salary" I suppose) I am in the red for $25k
- If I then make $55k trading, I repay the $25k negative balance and then get $15k for myself ((55-25)/2)?

I hope that this is correct, it was explained to me that many prop houses offer drawings up to $x p/w as a wage from your personal account. Is this true? If so, is the above scenario a decent picture of how your account balance is maintained? Also, what sort of range is x going to take? That is, what sort of drawings/wage is "standard" in these houses?

Thank you for your patience. I just want a complete picture of how the industry works.


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## Trembling Hand (6 January 2010)

No profit = no money.

I haven't hear of a prop shop allowing you to take money that you haven't earned. Especially not a new trader.

Oh and you will also have to pay monthly desk costs (just like office rent) and other costs depending on what software & data you use.


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## BeNice (6 January 2010)

Mr J said:


> Some are, most are not. Financial markets follow the same food chain structure as poker. Most have no idea, some have a clue, and few are very good.
> 
> I'll be the devil in the ear suggesting you to trade for yourself, but then I am completely biased, so it may not be wise to consider it as advice .
> 
> Your gambling experience is probably far more beneficial than you realise, or at least more than you state here.




Nothing wrong with playing devil's advocate 

I can definitely see how my background might help me and I certainly agree with you that the economies are structured similarly. It just seems that there are more relative "fish" in the financial markets than there are in online poker in 2009/2010. I also imagine that the market will stay like this for a very, very long time where poker has started to see most of the bottom fall out, thus less easy money trickles upwards...I just don't want to be there at the end when everyone good is fighting for the last few dollars before it all implodes.

One day, I would love to trade for myself but I feel (maybe wrongly?) that I am best off getting my start with limited liability and maximum available resources, which is sort of what I figure a prop shop gives me.


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## alwaysLearning (7 January 2010)

BeNice said:


> Nothing wrong with playing devil's advocate
> 
> I can definitely see how my background might help me and I certainly agree with you that the economies are structured similarly. It just seems that there are more relative "fish" in the financial markets than there are in online poker in 2009/2010. I also imagine that the market will stay like this for a very, very long time where poker has started to see most of the bottom fall out, thus less easy money trickles upwards...I just don't want to be there at the end when everyone good is fighting for the last few dollars before it all implodes.
> 
> One day, I would love to trade for myself but I feel (maybe wrongly?) that I am best off getting my start with limited liability and maximum available resources, which is sort of what I figure a prop shop gives me.




Go get a start on technical analysis and register a DEMO account with Oanda (forex trading). Start practicing and learning how markets move.

Risk no more than one to two percent per trade. Double your demo account first (while only risking one to two percent per trade). If you can do that then you are ready for trading with a SMALL live account. Double your small account and then start to trade with larger position sizes.

Your gambling experience will come in handy from a psychological point of view for sure.

Do this tutorial while you are at it.
http://www.babypips.com/school/

https://fxtrade.oanda.com/your_account/fxtrade/register/game/signup

Good Luck


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## Mr J (7 January 2010)

BeNice said:


> Nothing wrong with playing devil's advocate
> 
> I can definitely see how my background might help me and I certainly agree with you that the economies are structured similarly. It just seems that there are more relative "fish" in the financial markets than there are in online poker in 2009/2010. I also imagine that the market will stay like this for a very, very long time where poker has started to see most of the bottom fall out, thus less easy money trickles upwards...I just don't want to be there at the end when everyone good is fighting for the last few dollars before it all implodes.
> 
> One day, I would love to trade for myself but I feel (maybe wrongly?) that I am best off getting my start with limited liability and maximum available resources, which is sort of what I figure a prop shop gives me.




I think you're right to make the jump. Financial markets are saturated and mature, offer many more opportunities, far better scaling of growth, better longterm security etc. I don't think trading is any harder than poker, and I can only compare it to when I played - '05.

I can see why you would feel a little hesitant, but it's probably no different than when you decided to study poker. I've used forums as my primary resource in my initial phase, and while a mentor would have helped, it wasn't really necessary. I imagine a good online poker player would be used to going through forums and discovering the hidden "gems". I'm sure it would be very handy to have other traders to talk to in person, and especially a mentor, but I don't think it's _necessary_ to be _profitable_. I suppose it might depend on how you learn, as some people teach themselves, while others need or just prefer a teacher.

The only advantage that really interests me with prop trading is Other People's Money. Anything else would just be a bonus.


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## Aussiest (7 January 2010)

BeNice said:


> I hate to say it, but you've likely missed the gravy train. Still doable but not "printing money" these days. I missed 2005/2006 myself so I didn't get the best of it either, very tough these days. The learning curve has steepened exponentially over the last two years and I only see it getting worse. If you want to play, learn Pot Limit Omaha instead of holdem.




BeNice, what's happened to the Poker world? 

Isn't there still a huge US and international market?


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## MRC & Co (7 January 2010)

Trembling Hand said:


> Especially not a new trader.




Yes, you can draw on a flat/negative account if they trust you.  But as said here, not as a new trader. 

Good luck with your search/outcome/trading.


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## adobee (7 January 2010)

Trembling Hand said:


> Lots of junior trading jobs going, thou lots of competition for them. I would say for a smaller firm your poker experience would be a plus. A bank would probably not look at it so favourably
> 
> http://seek.com.au/JobSearch/index.ascx?catindustry=1203&DateRange=999&Keywords=trader
> 
> As far as Prop Shops you could look at Propex Or Aliom.




Where would you look at these jobs ? Are they advertised or better of speaking with a recruiter. ..


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## SmellyTerror (7 January 2010)

adobee said:


> Where would you look at these jobs ? Are they advertised or better of speaking with a recruiter. ..




Dude, did you click on the link? That's where you look.

And as for speaking to them, I'm guessing it can't hurt - just look at the companies offering the jobs in the link provided, go to their home page, and look for something like "Contact Us". Welcome to the internet! 

I have to say, the whole prop shop thing comes as a bit of a revelation to me. It should have been obvious, really - it makes too much sense not to exist - but it never occurred to me.

Ah well, it looks unlikely I could get anything for Canberra / remote without (at the very least) experience. Having done the first couple of the 100 or so hard yards necessary, and with some scalping skills slowly developing, I think I'll have to sigh enviously and plow on alone (apart from for you very fine intertube people, of course  ). But it's a very interesting thing to consider, if I can get my **** together.


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## BeNice (7 January 2010)

Thanks guys, I think when I was told that you could draw on a negative account it was with reference to traders who had build up trust in the company. It makes sense, thanks for clearing that up. Was given some bad/incomplete info!

@Aussiest:

Online poker is still profitable but there are a lot of bad signs for its future, I'm just trying to be cautious. First, 6max No Limit holdem started to get very tough, even the smallest stakes were tightening up and getting aggressive. The midstakes games (2-4 thru 5-10) that I was playing were getting tougher so I figured I'd try to outrun the trends and took up heads-up NLHE and Pot Limit Omaha. They were good for a while but everyone caught on very fast which wasn't helped by training sites and "Pokertableratings.com" (which should really be banned in my eyes).

I just keep seeing games get tougher, I'm still beating the stakes I am playing for a good clip but I know I need to start thinking of the future, which looks bleak for a number of reasons. Trading seemed like an obvious step.


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## BeNice (7 January 2010)

Anyway, thanks a lot for the good suggestions. I will be looking into all the prop houses mentioned. Trembling Hand, once again you have been exceptionally helpful. Thank you very much.

So, if drawing against a negative account is not generally allowed for new traders, logically I would imagine that you are not obliged to repay the amount that your account is stuck. Further, this leads me to believe that the prop shops would HAVE to have very stringent requirements with respect to how negative your account can be before you get the boot. I'd imagine that this amount has to very excruciatingly low. Am I far off base here? I mean, you could take the best trader in the world and he could lose a decent amount over a smallish sample and get ****canned.

Do they have some sort of probabilistic way of determining whether or not you should be let go for being a "true" loser? I'd imagine that they could use some sort of confidence interval based on trading volume and market volatility etc etc to stop themselves from firing an actual winner based on a bad sample...at least only fire a true winner <5% of the time or w/e


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## Trembling Hand (7 January 2010)

BeNice your making it way to complicated.

Before you get to go live you have to show in real time in sim hat you can trade & control risk.

Then when you do go live you have daily loss limits and Max position sizes.


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## nomore4s (7 January 2010)

Trembling Hand said:


> No profit = no money.
> 
> I haven't hear of a prop shop allowing you to take money that you haven't earned. Especially not a new trader.
> 
> Oh and you will also have to pay monthly desk costs (just like office rent) and other costs depending on what software & data you use.




Just for interests sake, a ball park figure for these costs?


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## condog (7 January 2010)

Im negative $60000 today in my ANZ account by accident and not so much as a phone call to let me know


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## Trembling Hand (7 January 2010)

nomore4s said:


> Just for interests sake, a ball park figure for these costs?




Not so sure. Maybe Mr C can answer. Its in the hundreds per month but remember you are getting Super fast access straight to the exchange plus a on site IT support & of course you are going to save on cheaper brokerage than a retail trader.

If your moving a biggish line its going to be unnoticeable. But I'm sure fore someone starting on 1-2 contracts its a drag.


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## nomore4s (7 January 2010)

condog said:


> Im negative $60000 today in my ANZ account by accident and not so much as a phone call to let me know




And what's that got to do with this thread?


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## auri (8 January 2010)

Which broker do you use for trading?


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## Aussiest (9 January 2010)

BeNice said:


> @Aussiest:
> 
> Online poker is still profitable but there are a lot of bad signs for its future, I'm just trying to be cautious. First, 6max No Limit holdem started to get very tough, even the smallest stakes were tightening up and getting aggressive. The midstakes games (2-4 thru 5-10) that I was playing were getting tougher so I figured I'd try to outrun the trends and took up heads-up NLHE and Pot Limit Omaha. They were good for a while but everyone caught on very fast which wasn't helped by training sites and "Pokertableratings.com" (which should really be banned in my eyes).
> 
> I just keep seeing games get tougher, I'm still beating the stakes I am playing for a good clip but I know I need to start thinking of the future, which looks bleak for a number of reasons. Trading seemed like an obvious step.




Sorry, off topic, but from what i gather, it seems that the skill level is increasing, thereby making competition and profitability a lot harder. Makes sense really as Poker was quite in vogue a couple of years ago.


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## condog (9 January 2010)

nomore4s said:


> And what's that got to do with this thread?




In response to 



> Yes, you can draw on a flat/negative account if they trust you. But as said here, not as a new trader.
> 
> Good luck with your search/outcome/trading.




If they trust you, lots of the big institutions seem to turn a blind eye to flat / negative account balances....eg: comsec and ANZ neither batted an eye lid, yet i nearly had heart failure...


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## nomore4s (9 January 2010)

condog said:


> In response to
> 
> If they trust you, lots of the big institutions seem to turn a blind eye to flat / negative account balances....eg: comsec and ANZ neither batted an eye lid, yet i nearly had heart failure...




lmao, that reference is to prop shops and how you earn your money with them and what you can draw from your account. It has nothing to do with big institutions or brokers at all, and it certainly has nothing to do with ANZ or Commsec letting you go into negative with your accounts



Trembling Hand said:


> No profit = no money.
> 
> I haven't hear of a prop shop allowing you to take money that you haven't earned. Especially not a new trader.
> 
> Oh and you will also have to pay monthly desk costs (just like office rent) and other costs depending on what software & data you use.






MRC & Co said:


> Yes, you can draw on a flat/negative account if they trust you.  But as said here, not as a new trader.
> 
> Good luck with your search/outcome/trading.


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## ducati916 (10 January 2010)

et al,

When considering Prop. Shops, it behooves you to examine how they earn their money.

Most do not look to earn the bulk of their money via profitable trades, although some do, but rather from taking a *risk free commission on order flow.*

The leverage that they provide has a definite cost. The cost of capital will be the cost to the firm + X%. This also mandates high turnover, as you will find it hard to exceed this cost of capital on swing trades, unless you are in volatile stocks.

This has definite implications for trading strategies that they allow you to use. For example carrying an overnight position is a big no-no with many. The ones that do, will require that you hedge it, this incurs a cost, although, if short you are credited interest on the short capital, which generally is a wash.

The number of shares they expect you to swing in the US is high. I know traders that will trade 3M+ shares a day, that's $30K in commission/day. Finding that liquidity, with enough movement to provide profit can be stressful to say the least.

With this leverage comes the inability to tolerate any drawdown on a position. This means that you need to be highly skilled, as your stops are going to be VERY TIGHT.

Tight stops, vitually guarantee that novices will be fleeced initially at least, and with leveraged losses, 100K in risk capital doesn't last long.

All that being said, some, provide training. Some charge you for this, others provide it and look at it as an investment, particularly those firms that rely more on profitability, than commission for driving revenue.

Of course, you just have to hope that the strategies taught, sit comfortably with your individual psychology, many strategies, unsurprisingly, are hyperactive, with lots of leverage, go figure.

I would recommend learning to trade first, then, approach a Prop. firm, at least you'll have an idea of some of the pitfalls before being launched into the pit.

jog on
duc


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## Trembling Hand (10 January 2010)

Duc as usual in relation to prop shops in Oz you couldn't be more wrong. 

Virtually every point is wrong.


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## MRC & Co (11 January 2010)

Actually I would say a few of those points are right.  You need very tight stops because with splits/desk fees, you have to leverage up far beyond the average trader, so in this respect, your strategy MUST include tight stops.

They also do make a portion of your brokerage fee, though it is still cheaper than retail.

It is a good opportunity to get cheap brokerage, fast execution and learn a lot around a heap of traders, but at the same point, it is by no means a gift, there are many drawbacks.


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## MRC & Co (11 January 2010)

MRC & Co said:


> desk fees




BTW nomore400s, desk fees, average, prob around 3kish per month I would say.


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## chern (18 February 2010)

BeNice said:


> - If I start trading; lose $20k and draw $5k from my account ("salary" I suppose) I am in the red for $25k
> - If I then make $55k trading, I repay the $25k negative balance and then get $15k for myself ((55-25)/2)?




That can't be right... if that is the case I would draw 100k, have negative balance, make 100k and have zero profit while being up 100k. =)



Trembling Hand said:


> Not so sure. Maybe Mr C can answer. Its in the hundreds per month but remember you are getting Super fast access straight to the exchange plus a on site IT support & of course you are going to save on cheaper brokerage than a retail trader.
> 
> If your moving a biggish line its going to be unnoticeable. But I'm sure fore someone starting on 1-2 contracts its a drag.




Realistically how much return can be made from 1-2 contracts?



MRC & Co said:


> BTW nomore400s, desk fees, average, prob around 3kish per month I would say.







MRC & Co said:


> They also do make a portion of your brokerage fee, though it is still cheaper than retail.
> 
> It is a good opportunity to get cheap brokerage, fast execution and learn a lot around a heap of traders, but at the same point, it is by no means a gift, there are many drawbacks.




Would the drawbacks at such a prop shop outweigh the advantages Mr C?

It sounds like a challenge to start at a prop shop and become profitable bringing home a decent wage. Sounds like to make an average 4k a month, you'll need to make 11-12k a month from 1-2 contracts. Can someone shine a light on this ?

Sorry if I seem to be hijacking this thread, but I have wanted to do trading for a while but I think that I really need to find the time to be able to focus on it. Live and breath the market..  Propex sounds like a great place to start, good environment, good support. Only question, is how soon before I can bring home some wage?

This forum is fantastic..


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## Trembling Hand (18 February 2010)

chern said:


> Realistically how much return can be made from 1-2 contracts?



 Anywhere from lossing your whole account to $8,000 per day.


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## chern (18 February 2010)

Thanks for the response TH. So I guess, 1k to 2k consistent should not be too much to ask? Time to work really hard.. hahaha...


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## Trembling Hand (18 February 2010)

chern said:


> So I guess, 1k to 2k consistent should not be too much to ask?




Very few every get close


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## white_goodman (18 February 2010)

chern said:


> Thanks for the response TH. So I guess, 1k to 2k consistent should not be too much to ask? Time to work really hard.. hahaha...




not trading 1 or 2 lots, very possible to do just not every day


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## MRC & Co (21 February 2010)

chern said:


> Would the drawbacks at such a prop shop outweigh the advantages Mr C?
> 
> It sounds like a challenge to start at a prop shop and become profitable bringing home a decent wage. Sounds like to make an average 4k a month, you'll need to make 11-12k a month from 1-2 contracts. Can someone shine a light on this ?




That's a good question.........one I can not answer.  There are a lot of positives, mostly the learning of just being around other traders, but your numbers there are about right, so you cannot be doing 1-2 lots if you want to cover costs and earn a decent wage unless you are extremelly good and consistent.  

Which moves to the next point, and the largest of them all:  You will have to do size.  But, this will cause you to be whipsawed out a lot more on trades you are correct because you don't have a large enough risk tolerance trading large volume.  

Basically, it comes down to this: 

Markets are good: volatile and readable, Prop pizzes on anything you could do as a retail trader.  

Markets are sh*t:  You are better being catious and doing small size, so makes Prop very hard as you aren't afforded that luxury if trying to cover costs/splits etc.  

The job is feast or famine, simple as that.  Bringing home an average 'wage', is very rare.  You can have killer months, but you will also have ones where you won't bring home a wage at all.  That's the life of a trader.


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## chern (22 February 2010)

MRC & Co said:


> The job is feast or famine, simple as that.  Bringing home an average 'wage', is very rare.  You can have killer months, but you will also have ones where you won't bring home a wage at all.  That's the life of a trader.




Sounds like it's gonna be one heck of a rollercoaster ride if I end up in prop.

Being able to learn at a prop almost definitely would be the BEST advantage in speeding up the learning process and going from zero to hopefully hero. Haha...


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## BeNice (22 June 2010)

Hey guys, just thought I'd check in since this creating this thread was instrumental in my pursuit of a job in trading circles.

I was picked up by a market making firm and currently reside on a highly regarded Nikkei desk. My learning has accelerated perpetually and I began to feel quite confident in my progress in financial markets.

In mid April, I started to work on my own short-term algo trading models (not HFT tick by tick stuff, but still an intraday, futures based approach) built on technical indicators, statistical measures and option pricing which have proven quite profitable through my backtesting, even with terrible fee structures. I feel that the strength of my models come from my understanding of how options markets affect futures markets. I will not expand on this point since I am quite sure I have some form of competitive advantage here and frankly, if one knows how options work inside out, it is quite easy to find these relationships.

I have also, along with a few friends, built several winning models for betting sports and also trading price dynamics/order flow on betfair. I have additionally taught my parents how to allocate shares to their existing portfolio optimally and how to choose new longer-term investments based on my own statistical methods.

My progress in trading has definitely been shaped at least partially by creating this thread and I thank everyone who gave me advice. I have a lot of options (pardon the pun) going forward and I feel very good about my progress in this industry/game. I am going to participate in this forum more and more going forward. I am still green in a lot of ways but I see good things on the horizon.

Maybe prop trading for me next, maybe a hedge fund...who knows? Everyone who posted in this thread helped make it possible to simply know where to start and I sincerely thank you.


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## Wysiwyg (23 June 2010)

> I'm a large long term winner at poker and also seemed to enjoy finding some arbs in the sports betting world. Basically, I have mid 6-figs in savings from poker now but I'm looking at moving away from full time poker and I like the idea of moving towards the markets. Poker is becoming a worry with regard to its long term viability. The poker economy seems to be winding down a bit and I see trading as an area that will "always" be fruitful/liquid for those that can beat it.



I seems our paths have many similarities. I too have done exceptionally well at poker. Starting with a meager 10 dollars I surmounted well over 100 dollars. It was easy for me because most of the time I can visualise the next card in the pack so have an edge over my competitors. I too have grave concerns for the long term viability of poker. As they say, you just never know these days. 


> I feel like a hopeless case at the moment, I don't have any particular background in this area and I'm asking questions which I think may attract some criticism. That said, I'm am analytically/numerically/logically very skilled and I come from a background of working in an extremely volatile environment and thriving on it. I feel like this (trading) is where I need to be and I would appreciate any advice that you are kind enough to throw my way.



Within six months you should be pulling in the big ones. Your skill set and experience in a volatile environment will see to that. In your most recent post you have proven this. As follows.


> In mid April, I started to work on my own short-term algo trading models (not HFT tick by tick stuff, but still an intraday, futures based approach) built on technical indicators, statistical measures and option pricing which have proven quite profitable through my backtesting, even with terrible fee structures. I feel that the strength of my models come from my understanding of how options markets affect futures markets. I will not expand on this point since I am quite sure I have some form of competitive advantage here and frankly, if one knows how options work inside out, it is quite easy to find these relationships.



As you have discovered since January, trading market instruments is an easy progression while constructing algorithmic trading models is, as I found from being naturally gifted myself, an exciting phase of growth.


> My progress in trading has definitely been shaped at least partially by creating this thread and I thank everyone who gave me advice. I have a lot of options (pardon the pun) going forward and I feel very good about my progress in this industry/game. I am going to participate in this forum more and more going forward. I am still green in a lot of ways but I see good things on the horizon.



 Yes the depth of experience here stands many people in good stead as they take the step from newbie (for want of a better word) to trader. Your participation will be greatly appreciated and as for being green in many ways well you know what they say in this business don't you? 
"That I hold here, in my mortal hand, a nugget of purest Green."

Wyg.


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## frugal.rock (11 March 2022)

alwaysLearning said:


> Do this tutorial while you are at it.
> http://www.babypips.com/school/
> 
> https://fxtrade.oanda.com/your_account/fxtrade/register/game/signup



A couple of links from an old thread that still work... amazeballs.


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