EquitiesVs Derivatives-Comparative Analysis

The deal with that specific prop. firm was start small trading real money, 100 shares or 1 lot after a 2 day "theory of trading" training session by the manager who has no clue how to trade.


Show you can make a profit of $100 per day either by credits or scalping. That is a lot of trading for the course of 1 trading session. What was hand tying was their risk management policy, limit trading loss per trade to 0.02, the ideal loss was 0.01 per share.

Once you proved you were a profitable hyper scalper, you were given more capital to trade more size. Your account would always start with what you are given as trading capital. If you hit your loss target, your account would lock up. They had a central system that showed everyone P&L for the day.


Now here's the interesting part. At the time I was there, they had this one trader who was either +/-$1000 on any given day and he'd either hit either target within the first 30 minutes of trading. Either way he would stop trading for the day and hang around the office, he pretty much kept to himself. his style of trading...he would find a thinly traded stock and manipulate the price, it would either work or it would not. You need to be very proficient in your hot key order entry since there are many ECN's for you to place your order. Some guys would trade 1 block (10,000 shares) of a highly liquid stock and scalp it for 0.01

Some were credit traders, placing a bid or offer to get filled of a sideways moving stock under $5.00, they would be shaving to get in front of the level 2.


Either way it was a room full of traders just like us, but some of them looked like they were trading without the slightest clue about market direction, shorting a strong up trending day and getting steamrolled. It was a video game to them, short 10,000 of ORCL just like that and they would do it over and over again because the cost of trading was fractions of a penny.


That is where all the volume comes from those NASDAQ stocks, trading firms like that.

There I was trying to practice patience and the way they traded was the complete opposite. I did not respect the manager because here this guy was, teaching others how to trade when he could barely do it himself. I was watching him one day trade. Sitting there, left hand, right hand on the keyboard, placing trade after trade after trade, like a robot without emotion. He'd be losing and he'd still continue.


The plus side was I did meet this one trader who said to me "Change your way of thinking." I had no idea what he meant at the time, but now I do.


In case you are wondering which prop. firm this is...it's Swift Trade.
Don't get me wrong some of their traders make nice money, but you need capital to trade 20,000 shares of anything, even on margin. They do how ever retain their traders because of that.

One firm I know does futures, ES, NQ and they lose traders after they realize they can trade with as little as $5000 and keep all the net profits.


The way they compensate was in tiers.

70/30
60/40
50/50

The more you make, the more you get to keep. If you were making $1000 every two weeks, you'd get like 30% of net profits. It was not much in the lower bracket so your goal was to be trading size to reap the benefits of the 50/50 spilt.





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