Is a good track record enough for market maker prop firms/hedge funds?

[Late-4]

Hi,

I have a successful live trading track record from the last 7 months. Not a single losing month. I am considering applying to a trading company after I have total of 12 months of successful trading (if I get there).

The reason for wanting to work for a prop firm is to trade with bigger money. I have a couple k's account atm and making around 4-5% a month. I don't have the capital to trade full-time from home and it would take ages for me to get there with my salary.

I have read that prop firms (like futex, optiver) love to do gazillion stages of interviews, speed math, logic tests and my favorite: riddles. Have I really need to go through this crap? I can prove that I can trade successfully, all I need is:

A) an individual investor willing to give me money for trading
B) a trading company.

Are these firms (like futex) taking mainly young sharp guys with no trading experience only, because they see the potential for training them, while the real proven traders go somewhere else?

Thanks, I appreciate every answer very much.

Lauri

 

[OrderFlowDashPro]

I'm sorry but based on my experience, a profitable track record is practically worthless. This is a hard pill too swallow but unless you've made 1 million or more in a year, they don't care. Even at that, you have to realize that many firms are only interested in finding out what you do so they can copy it. And, keep in mind that you have no proof that the firm you are dealing with is even profitable. I know a lot of traders have been sold the, "build a track record" and get funding spiel. But, I'm here to tell you the "realities on the ground".

In general, firms,traders,programmers you name it are only interested in paying for stuff that they can't do. So, a firm is typically going to look for an astronomical risk/adjusted return or they'll want to see you made significant profits and a minimum % gain. So, they might ask to see 750k in profits past year with a minimum 70% gain.

If you look at most prop firms, they are formed based on a certain model. The model that you want and that I want is the "take independent traders" model and give them a degree of freedom to be successful. There are very few of these firms who are known to be legitament. There are a second tier of these firms that clearly make a lot of money from training fees, classes, and education but they probably have at least a few profitable traders, and finally there is a "third tier" of firms which promote the heaviest and are less likely to have any any significantly profitable traders but instead make their money from selling education. But, these aren't the most common models among the big prop firms. The other type of prop firm that exist is one where the owners have already discovered an edge and they are looking for traders to develop that existing edge. These funds are often the funds that print money because they have access to extensive HFT resources. As these funds already have an edge they feel is superior to your own, they don't really care about track records but rather about getting the brightest people in specialized sub domains.

Outside the prop industry, for example moving into managed funds, the expectations for gains and funds go down. They'd typically only consider account sizes that were audited and were funded a minimum 50k level. However, if you factor in the costs to pay for the audits and so forth, it is generally not going to be worth it without a lot more capital, say minimum 150k.

As for hedge funds, you shouldn't trust them either. You may find a popular author who runs a hedge fund and seems an outstanding individual. You might strike up a conversation where he'll offer to run your strategy in a seed account. Once you send the strategy, he may back track and claim he never funds strategies or that your strategy can't qualify because he has one too similar too it. In general, hedge funds don't just consider the return but have to consider how it fits with their other models.

If you can think you can do good at a firm then ditch your expectations about your existing record and just try to get in and then focus on making it in your new environment. I'm almost of the mindset that you may do better by not mentioning a track record.

Barring that, the options for the small trader to leverage that into funding are rather limited. Your best bet may be to sell signals. The entry requirements are generally low. However, you'll often be required to pay premium brokerage fees which can eat into profits if you trade on a higher frequency. At the same time, the smaller traders who will subscribe to your system will have higher demands and expectations.

 

[Late-4]

I'm sorry but based on my experience, a profitable track record is practically worthless. This is a hard pill too swallow but unless you've made 1 million or more in a year, they don't care. Even at that, you have to realize that many firms are only interested in finding out what you do so they can copy it. And, keep in mind that you have no proof that the firm you are dealing with is even profitable. I know a lot of traders have been sold the, "build a track record" and get funding spiel. But, I'm here to tell you the "realities on the ground".

In general, firms,traders,programmers you name it are only interested in paying for stuff that they can't do. So, a firm is typically going to look for an astronomical risk/adjusted return or they'll want to see you made significant profits and a minimum % gain. So, they might ask to see 750k in profits past year with a minimum 70% gain.

If you look at most prop firms, they are formed based on a certain model. The model that you want and that I want is the "take independent traders" model and give them a degree of freedom to be successful. There are very few of these firms who are known to be legitament. There are a second tier of these firms that clearly make a lot of money from training fees, classes, and education but they probably have at least a few profitable traders, and finally there is a "third tier" of firms which promote the heaviest and are less likely to have any any significantly profitable traders but instead make their money from selling education. But, these aren't the most common models among the big prop firms. The other type of prop firm that exist is one where the owners have already discovered an edge and they are looking for traders to develop that existing edge. These funds are often the funds that print money because they have access to extensive HFT resources. As these funds already have an edge they feel is superior to your own, they don't really care about track records but rather about getting the brightest people in specialized sub domains.

Outside the prop industry, for example moving into managed funds, the expectations for gains and funds go down. They'd typically only consider account sizes that were audited and were funded a minimum 50k level. However, if you factor in the costs to pay for the audits and so forth, it is generally not going to be worth it without a lot more capital, say minimum 150k.

As for hedge funds, you shouldn't trust them either. You may find a popular author who runs a hedge fund and seems an outstanding individual. You might strike up a conversation where he'll offer to run your strategy in a seed account. Once you send the strategy, he may back track and claim he never funds strategies or that your strategy can't qualify because he has one too similar too it. In general, hedge funds don't just consider the return but have to consider how it fits with their other models.

If you can think you can do good at a firm then ditch your expectations about your existing record and just try to get in and then focus on making it in your new environment. I'm almost of the mindset that you may do better by not mentioning a track record.

Barring that, the options for the small trader to leverage that into funding are rather limited. Your best bet may be to sell signals. The entry requirements are generally low. However, you'll often be required to pay premium brokerage fees which can eat into profits if you trade on a higher frequency. At the same time, the smaller traders who will subscribe to your system will have higher demands and expectations.

Thanks OrderFlowDashPro,

That was a great post! Although, it crushed my dreams. No, just kidding. You really changed my view on prop firms. What you said makes sense. I would never change my system trying to double my account in a month or so just to get that track record that stands out from the crowd for these firms. I have worked too hard to get where I am now.

I think managed funds seems like the best choice. I am not exactly sure what you mean by that, but my guess is that you mean private investors, small investing firms, business angels etc that are familiar with the industry. Maybe passive stock investors or "holders" aiming for annual 10% profit. These people might be interested in a steady 4-5% profit a month with a proven track record for 12-18 months, right? Makes sense to me.

Selling signals is something I am not too excited, but that could work. Especially in the early stages, where I'm funding my account to a size which a private investor would consider a trading account.

Lauri

 

[Giovan]

I'm sorry but based on my experience, a profitable track record is practically worthless. This is a hard pill too swallow but unless you've made 1 million or more in a year, they don't care. Even at that, you have to realize that many firms are only interested in finding out what you do so they can copy it. And, keep in mind that you have no proof that the firm you are dealing with is even profitable. I know a lot of traders have been sold the, "build a track record" and get funding spiel. But, I'm here to tell you the "realities on the ground".

In general, firms,traders,programmers you name it are only interested in paying for stuff that they can't do. So, a firm is typically going to look for an astronomical risk/adjusted return or they'll want to see you made significant profits and a minimum % gain. So, they might ask to see 750k in profits past year with a minimum 70% gain.

If you look at most prop firms, they are formed based on a certain model. The model that you want and that I want is the "take independent traders" model and give them a degree of freedom to be successful. There are very few of these firms who are known to be legitament. There are a second tier of these firms that clearly make a lot of money from training fees, classes, and education but they probably have at least a few profitable traders, and finally there is a "third tier" of firms which promote the heaviest and are less likely to have any any significantly profitable traders but instead make their money from selling education. But, these aren't the most common models among the big prop firms. The other type of prop firm that exist is one where the owners have already discovered an edge and they are looking for traders to develop that existing edge. These funds are often the funds that print money because they have access to extensive HFT resources. As these funds already have an edge they feel is superior to your own, they don't really care about track records but rather about getting the brightest people in specialized sub domains.

Outside the prop industry, for example moving into managed funds, the expectations for gains and funds go down. They'd typically only consider account sizes that were audited and were funded a minimum 50k level. However, if you factor in the costs to pay for the audits and so forth, it is generally not going to be worth it without a lot more capital, say minimum 150k.

As for hedge funds, you shouldn't trust them either. You may find a popular author who runs a hedge fund and seems an outstanding individual. You might strike up a conversation where he'll offer to run your strategy in a seed account. Once you send the strategy, he may back track and claim he never funds strategies or that your strategy can't qualify because he has one too similar too it. In general, hedge funds don't just consider the return but have to consider how it fits with their other models.

If you can think you can do good at a firm then ditch your expectations about your existing record and just try to get in and then focus on making it in your new environment. I'm almost of the mindset that you may do better by not mentioning a track record.

Barring that, the options for the small trader to leverage that into funding are rather limited. Your best bet may be to sell signals. The entry requirements are generally low. However, you'll often be required to pay premium brokerage fees which can eat into profits if you trade on a higher frequency. At the same time, the smaller traders who will subscribe to your system will have higher demands and expectations.

:whistling cold hard bitter reality. No matter how good a smaller trader considers themselves to be, they must conform to the prop fund's requirements/rules.Sounds like the only track record that's needed is the one you establish while in the firm already..

 

[sonofcablemonster]

I'm sorry but based on my experience, a profitable track record is practically worthless.

As for hedge funds, you shouldn't trust them either.

I call utter boulderdash. A profitable track record with decent pro metrics (not my fx book lol) is very valuable. There are a tonne of hedge fund traders/pros/institutions who will fund you if it is a good fit for both parties. I know of prop traders who have moved to hedge funds successfully. It's up to the individual how they want to play it, trade OPM or self funded (inc self funded prop).

 

[OrderFlowDashPro]

Lauri,
Keep in mind that trading systems/results are like "products", and people shop for products based on certain criteria. In general, it is much easier to get people signed up for a quantitative/programmed system over a discretionary system. It gives people confidence when you can show the system was strong for 10 years and then performed in-line with those historical results in real-time. You want to keep each account compartmentalized for this reason.

A lot of the high riding systems are systems that are designed to take advantage of specific market conditions. A system developer might see, for example, a strong bull market in gold and then they'll develop a system to capitalize on that.

Everyone has their own criteria. The criteria typically takes into account a minimum account size traded, minimum return, products traded, style, and minimum risk adjusted return.

A lot probably has to do with your ability to sale and find the right prospects. Good luck!

 

[Late-4]

:whistling cold hard bitter reality. No matter how good a smaller trader considers themselves to be, they must conform to the prop fund's requirements/rules.Sounds like the only track record that's needed is the one you establish while in the firm already..

Giovan,

The point is not how good I think I am. I am as good as my records says and that is an universal opinion. If you see my record, you see that I am successful. Also I have no problem playing with prop firms rules. After all its their money I would be trading and they have a reason to be concerned. The thing I didnt understand before opening this thread was why prop firms prefer young sharp unexperienced guys over cold hard facts (track records).

But I agree that the reality is cold and bitter and hard.

 

[Late-4]

I call utter boulderdash. A profitable track record with decent pro metrics (not my fx book lol) is very valuable. There are a tonne of hedge fund traders/pros/institutions who will fund you if it is a good fit for both parties. I know of prop traders who have moved to hedge funds successfully. It's up to the individual how they want to play it, trade OPM or self funded (inc self funded prop).

Hi sonofacablemonster,

Thanks for your answer and showing some light in the end of the tunnel. What do mean by OPM or self funded prop?

 

[Late-4]

Lauri,
Keep in mind that trading systems/results are like "products", and people shop for products based on certain criteria. In general, it is much easier to get people signed up for a quantitative/programmed system over a discretionary system. It gives people confidence when you can show the system was strong for 10 years and then performed in-line with those historical results in real-time. You want to keep each account compartmentalized for this reason.

A lot of the high riding systems are systems that are designed to take advantage of specific market conditions. A system developer might see, for example, a strong bull market in gold and then they'll develop a system to capitalize on that.

Everyone has their own criteria. The criteria typically takes into account a minimum account size traded, minimum return, products traded, style, and minimum risk adjusted return.

A lot probably has to do with your ability to sale and find the right prospects. Good luck!

Hi OrderFlowDashPro,

Thanks for the answer. Good point. Though my trading style is very discretionary and it couldn't be easily taught or sold. That is why I think I should sell or advertise my track record/skills to an investor instead of my system.

The criteria you mentioned makes sense. First step of course is to fund an account to a size, that investors take it seriously. After that it is basically salesmanship.

Lauri

 

[Parky]

There has been a huge consolidation in the professional trading companies but those still in operation are doing well but they are differentiated by the deals on offer. If you want direct market access on a professional trading platform (TT, Stellar, RTS, SOL3 etc.) and you have some cash to put down then you can find a home and back yourself either remote or in professional trading rooms both in the city and regional. Most companies work on the basis that if you cover your own risk you keep your profits 100%, some load fixed costs, most load clearing costs but the competitive market means they keep each other honest and competitive. If you require leverage most will offer this based on a percentage of profits from a 50/50 deal to 80/20 in the traders favour. Again different shops offer different packages but it is a risk reward formula, the more risk you want the trading company to take the more of the P&L they will want. My basic advise is this, if you are good enough and have built a track record which will usually equate to some capital to put down then you can find a professional trading company to take you on.

 

[zbojnik]

Any update?

 

[Late-4]

Any update?

No, sorry. My plan from the start was to get trading record for 12-18 months depending how well I do. At the moment I am on the 8th month and still no losing months.

Basically after I get my full record I have 2 choices:

1) Find a trading room and trade my own money with 100% my own risk getting very low spreads and fast executions etc from a broker because of the high overall volume traded in the room.

2) Find a personal investor(s) or business angel(s) to invest me or my trading company. The hard thing would be selling this record to them without looking like a fraud who wants to take their money. I think I have to use some kind of audited accounts or something with that option.

 

[zbojnik]

I'm in the same boat except I only have 1 Month track record. I've been trading for 3 years but I think I finally "figured it out" and will be profitable from now on. So I am planning for the future and researching firms etc. What asset class do you trade? Futures, forex, equities? Did you try contacting every individual prop firm and told them you have a track record? I only know of 1 so far that would partially back me for trading futures. The other ones I will try making contact with after have 6 months track record and see if they bite.;-)

 

[Late-4]

I'm in the same boat except I only have 1 Month track record. I've been trading for 3 years but I think I finally "figured it out" and will be profitable from now on. So I am planning for the future and researching firms etc. What asset class do you trade? Futures, forex, equities? Did you try contacting every individual prop firm and told them you have a track record? I only know of 1 so far that would partially back me for trading futures. The other ones I will try making contact with after have 6 months track record and see if they bite.;-)

Hi zbojnik! Good to hear. I trade over 100 markets including futures, forex and equities. I haven't contacted any prop firms yet. I will start contacting when I get my full record. To bad there arent any here in Finland. Where are you looking for those firms?

Good luck!

 

[zbojnik]

Hi zbojnik! Good to hear. I trade over 100 markets including futures, forex and equities. I haven't contacted any prop firms yet. I will start contacting when I get my full record. To bad there arent any here in Finland. Where are you looking for those firms?

Good luck!

I am in USA but I am looking in USA and UK. I have been emailing but not getting any replies. When I get the track record I will try again but I will be calling this time.

Nice! I trade forex but I'm thinking I can use my strategy on any market too. It would be best because I would have more opportunities I believe. Let me know what happens after you get your 12-18 month record and you start contacting people ok?

 

[ffsear]

It is possible,

I was offered a position on the back of my previous years trading records. This company http://www.blueprint-capital.co.uk/

I didn't go for it as it was too bigger risk for me at the time. But my trading records got me through the door.

 

[DionysusToast]

Hi,

I have a successful live trading track record from the last 7 months. Not a single losing month. I am considering applying to a trading company after I have total of 12 months of successful trading (if I get there).

The reason for wanting to work for a prop firm is to trade with bigger money. I have a couple k's account atm and making around 4-5% a month. I don't have the capital to trade full-time from home and it would take ages for me to get there with my salary.

I have read that prop firms (like futex, optiver) love to do gazillion stages of interviews, speed math, logic tests and my favorite: riddles. Have I really need to go through this crap? I can prove that I can trade successfully, all I need is:

A) an individual investor willing to give me money for trading
B) a trading company.

Are these firms (like futex) taking mainly young sharp guys with no trading experience only, because they see the potential for training them, while the real proven traders go somewhere else?

Thanks, I appreciate every answer very much.

Lauri

Yes - your track record will absolutely help you get a prop position or funding.

Can you tell me what sort of trading you are doing? It does make a difference. How many turns per day, outrights vs spreads, markets, holding times....

I know of 2 prop shops setting up right now and for both I know the people setting them up. As well as the type of trading, what is your physical location?

You should also look into registering as a CTA if you want to solicit individuals for funds.

 

[Late-4]

Nice! I trade forex but I'm thinking I can use my strategy on any market too. It would be best because I would have more opportunities I believe. Let me know what happens after you get your 12-18 month record and you start contacting people ok?

I started with forex too but I quickly expanded to other markets. Basic TA works well throughout all markets.

I will let you know!

 

[Late-4]

It is possible,

I was offered a position on the back of my previous years trading records. This company http://www.blueprint-capital.co.uk/

I didn't go for it as it was too bigger risk for me at the time. But my trading records got me through the door.

Hi ffsear,

What do you mean by the risk?

That firm looks like good place to apply. Simple and good-looking website at least.

 

[Late-4]

Yes - your track record will absolutely help you get a prop position or funding.

Can you tell me what sort of trading you are doing? It does make a difference. How many turns per day, outrights vs spreads, markets, holding times....

I know of 2 prop shops setting up right now and for both I know the people setting them up. As well as the type of trading, what is your physical location?

You should also look into registering as a CTA if you want to solicit individuals for funds.

Hi DionysusToast,

I trade off the daily, 4h and 1h timeframes. I trade 2 strategies both 100% based on TA. Other one is a trend following system and the other is based on price action.

On average I take 2-3 trades / week. Holding time depends on the timeframe the trade is based. From few hours to days.

I trade forex, UK equities and futures. I live in Finland atm.

What is a CTA? Somekind of autited account?

Thanks for the reply