Would you fund a trader with a proven record?

[Gringotts Bank]

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?

 

[tech/a]

Do any of you have the ability to discuss business ideas

Yeh I think so.

What?

Then again

 

[Gringotts Bank]

Yeh I think so.




Then again

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

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

 

[McLovin]

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.

 

[skc]

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.

 

[Trembling Hand]

what?

I rest my case.

 

[tech/a]

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

You think?

 

[Trembling Hand]

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.

 

[prawn_86]

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

 

[Gringotts Bank]

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?

 

[Trembling Hand]

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.

 

[prawn_86]

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?

 

[tech/a]

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.

 

[McLovin]

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.

 

[CanOz]

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

 

[Joules MM1]

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.

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......

 

[Trembling Hand]

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.

 

[skc]

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.

 

[skc]

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

 

[CanOz]

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