The truth about trading arcades

[LION63]

Tieler,

As you seem to have an insight into the way they work, could you kindly tell us if the trader is allowed to trade using his/her own strategies or are strict guidelines laid down? Do traders have to trade designated markets or can they make a choice?

 

[fastnet]

So let me get this straight:
i) You risk 100% of your stake before CTC lose a penny?
ii) You pay inflated prices for round turns?
iii) You must trade their system & stick to their general idea of trading frequency and stake size (risk)?
iv) You get no basic salary so must try and make enough to live on from your initial stake and any margin enhancement from CTC. Assuming very min you can get away with in London is 20K per year plus 6K for your seat. So, if profits are split 70/30 in yr favour you must make 37K gross (185%!!) on a 20K margin just to stand still? Much more to make a real living.
v) But there is free pool.

I am being deliberately controversial. . . . I would like an employee (member) of one of these firms, or indeed Arjunr, to defend them and set the record straight. . . .

TWalker - any comments??

Cheers - FN

 

[TWI]

That sounds like a much tougher deal than I would offer.
Seems that different businesses offer very different deals. It is important that you must not get into the mindset that since you have an offer you should sign up to any old deal. Everything is negotiable.
You need to be pretty sure you can survive. If you get a bad deal you will just leave broke and bitter. Most people on grad schemes will drop 25-50% of their account before they start making if they are paying usual funded transaction costs and desk fees. Consider it an "entry fee" to learning to trade. Be very aware of that if you are putting your own money in.

 

[anley]

Yep, as Walker says be very aware.

The lure of wanting to 'be a trader' makes many people fall prey to the predatory business tactics of the arcade owners who in many ways are just trading their personal for profit.

Fo 90% of people there are many easier, better and more rewarding avenues to make your money than flipping euribor spreads for a living.

 

[wisestguy]

tieler ,

my sentiments exactly , must be one of these " daytrading " centres set up by the brokers , where you walk , pay some fees , they give you all the trading infra , and then you trade your own accounts .

in fact , I don't find them serious at all , full of gamblers and uncotrolled people like the guy in Florida who lost $ xxxxxx and then came back to shot the place up .

 

[fastnet]

Twalker - re my earlier post could you set the record straight? What is a typical deal that you company would offer?

I am especially concerned about the limitations that seem to be imposed on your trading style and the tiny stakes these guys are trading with in order to earn a living AND pay the monthly fixed costs.

I would like to hear the other side that's all.

Anyone else currently trading in an ''arcade''? How's it going? What's the training like? What's the profit share deal like? What's the attrition rate - roughly?

Come on guys - there are no real names used here. . .

BTW - do they focus on the recruitment of raw graddies or are they willing to take on those that have popped their trading cherry?? Is there an age limit?

Cheers

 

[tieler]

I work for a trading firm that focuses on the recruitment of raw grads. We give them good training and set them up with an account trading Index futures. The split is 60% in their favour and desk fees vary from £1500 to £2300 p/m. this is the only type of trading i've done so no comparisons but I cant complain with the way its going.

 

[fastnet]

Okay - thanks Tieler. Can I take it from the use of (we) above that you are a shareholder or have some sort of stake in the firm over and above that of the regular trader?

Desk fees of up to £2300pm - that sounds steep without comparing to anyone else. If you were also trying to make a very modest income of 20K p/a your fixed costs would be over 26K before you started. With a 60/40 split you would have to make 46K pure profit. What would your initial stake have to be to give you a chance of managing this? How much would you and the company contribute?

Again - just curious - thanks

 

[TWI]

Wisestguy,
Think you have the wrong impression. I am no more a gambler than any other trader. There are good and bad but a well run prop trading business will be full of very disciplined traders who know exactly what they're doing and believe me, when it's your living on the line, it is far more serious than many of the fund managers and IB traders who earn a monthly salary and only have the balls to play with other peoples money. I have been on both sides of this game so I know how each works.
fastnet
Desk fee varies from place to place but expect around £1200-1500pcm. This is really not so much and the business does not make much on that. More important is the cost of your lots. This will be anywhere from £1.20 downward. This is the most important figure. Withing a few months you will likely be doing 10-20,000 lots/month so in this respect every 1p makes a big difference to your return.

As for the imposed trading style. If I am supplying you with capital I want you to trade the methodology that I show you, not some other way that I have no idea about. If you prove yourself then you can bring in your own ideas. Thing is, the method taught is proven and you will see in each business people who make a good living from using it. It is likely to be more effective than what you may have come up with yourself and it can only improve your overall market knowledge.

 

[gullible]

Arjun,

Where are you? I need some more information as I would like to do business with you. I am 52 yrs old, willu take me on?

 

[fastnet]

Wisestguy,
Think you have the wrong impression. I am no more a gambler than any other trader. There are good and bad but a well run prop trading business will be full of very disciplined traders who know exactly what they're doing and believe me, when it's your living on the line, it is far more serious than many of the fund managers and IB traders who earn a monthly salary and only have the balls to play with other peoples money. I have been on both sides of this game so I know how each works.
fastnet
Desk fee varies from place to place but expect around £1200-1500pcm. This is really not so much and the business does not make much on that. More important is the cost of your lots. This will be anywhere from £1.20 downward. This is the most important figure. Withing a few months you will likely be doing 10-20,000 lots/month so in this respect every 1p makes a big difference to your return.

As for the imposed trading style. If I am supplying you with capital I want you to trade the methodology that I show you, not some other way that I have no idea about. If you prove yourself then you can bring in your own ideas. Thing is, the method taught is proven and you will see in each business people who make a good living from using it. It is likely to be more effective than what you may have come up with yourself and it can only improve your overall market knowledge.

Thanks TWalker,

This is the crux of the issue really. How much is mine, how much is yours? How much is my risk - how much is yrs? Tieler said that CTC will match a 10K initial stake. However, he also said that I'd have to lose almost all mine before my poor performance started hurting CTC. In the mtm their collecting desk fees/marked-up commissions. I am also having to pay living expenses with no money coming in.

So, at yr firm. I arrive with 20K. How much will your firm, hypothetically, stake me? If you only match it AND I have to pay 1500pm I would have to make a fantastic % return to just b/e never mind cover desk fees and take home a decent living. Let's face 30K per year, no hassles, unconditional payment type jobs are not hard to find for graddies/experienced people. . .

None of it makes sense. Look at it like a trade: what's the risk? what's the possible up-side? What are the odds of achieving this up-side?

From what we've heard so far:

Risk: 2 yr contract to pay 1500p/m = 36K + say 10K stake (min) = 46K + London living min for 2 yrs say 40K = 86K.
Possible up-side? No idea? Profit of 100K per year? 200K per year???
Odds of achieving this: very low., maybe 10%.
Odds of losing yr stake and having to pay out yr contract AND funding yourself for a year 95%

Once again PLEASE inform me otherwise if I am way off beam. I would really like this not to be the case. All these schemes from franchises to MLM to commission only sales ALL justify themselves by shouting how well the top 3-5% are doing and ignoring the huge losses of the vast majority. They are NOT successful because of the winning few. They are successful because of the losing many.

Please set the record straight if this is a gross mis-representation of the truth.

Thanks

Fraser


FN

 

[TWI]

With 20k, you would go self funded completely. Usually people turn up with no money and get funded in full. If self funded, that would mean more aggressive rates although desk cost about same. You have fairly good chance of making reasonable/living cost money after 1-year. Even if you only made 30k net you would have a much better life than working for somebody else. It is very different from being a slave. It is a life changing choice and of course therefore a risk. Going self employed involves financial risk whatever it is you do.
I used to make very good money trading for others but I would not go back to that now unless there really was a very large incentive.
Upside is impossible to say as it is so individual. If you are good 100k+ is possible after 2 years for some it is considerably more whereas others settle for making there consistent living costs whether that be 30k or whatever they feel they need to live on.
While funded you will not make a lot but you will learn the skill to allow you to make once you are out of your contract. Knowing you can make a living standing on your own feet is a great confidence booster to all aspects of your life Even if it is not for you at the end of the day you will learn a lot for relatively little life investment.
Important thing is to get into the right company. That will always be tough and publicly it is unlikely people are going to say one way or another who are the good and who are the bad due legal reasons. Personally I believe in creating sustainable business and not to burn out and destroy people while squeezing every cent out of them but I think this is not the case with some companies who have decided there is a limited lifespan to their methodology. Rather than looking to change they are just out to maximise returns before it stops working.

 

[anley]

Personally I believe in creating sustainable business and not to burn out and destroy people while squeezing every cent out of them but I think this is not the case with some companies who have decided there is a limited lifespan to their methodology. Rather than looking to change they are just out to maximise returns before it stops working.

There you go, the first sentence pretty much sums up what the majority of the business models of the arcades are, to spin and grind their personal for maximum profit.

Do your homework on all the companies before you sign up because without this knowledge chances are you'll become financial cannon fodder for the arcade owners.

Remember he who clears the most (transacts the biggest volume) in this business is normally he who ends up with the most money.

Ya gotta hand it to the arcade owners who with subtle smoke & mirrors have disguised the true nature of their businesses. Well they haven't fooled me

 

[fastnet]

Anley, I appreciate yr feelings towards them - I don't know whether you have had a brush with a similar organisation. I haven't and am trying to remain objective and to let them have their say.

I have been trading my own account on a part time basis for a number of years. My problem is trading capital. I have a decent pot but not enough to earn a living from by any means. What I was looking for was a co that would supplement my stake for a share of the return.

This is why I keep coming back to the figures and crucially the effect on split of yr contribution?? If they will just match my initial stake but then want 60% of the profits + charge me a monthly desk fee and restrict my use of brokers then I might as well save my pennies and look forward to the day when I do have a big enough pot to trade with.

It all depends on the deals and breaks available and the restrictions that come with these deals.

If I had to trade their system then so be it.

Anley - yr right about the hook for novices being the draw of ''being a trader''. If they deliberately play on this and use it as a lure knowing most will fail then it's a shame. But - that's private enterprise I suppose. However, what I was looking for was a reputable outfit that will take a fair share of any profits after supplementing my stake and not tie me into years worth of desk fees.

 

[LION63]

Fastnet,

Based on the contents of most of the posts in this thread, Trading Arcades are unlikely to be the answer. You will probably be better off grinding out returns over a longer time period in order to achieve your goals. I have remained objective throughout (and still am) but the numbers just do not add up on our side of the fence.

In all probability you will make more money than the majority of their traders without the extra burden of working for someone else and by their rules.

Good luck and happy hunting.

 

[rog1111]

twalker

I realise that you are self funded, but out of interest, were the methods that you currently use learnt while trading with an employer's money ? Or did the arcade owners have any major contribution (re methods) to assist you on your way ? Presumably you must have had a much larger pot of money to trade with when working for Cargills etc, so assuming this, does this greatly affect your choice of strategy ? Or just the size ? I am trying to form an insight into how the large Commercials really earn their money, I can speculate, but maybe you have some comments ?

rgds

rog1111

 

[wisestguy]

twalker ,

so can you define for a simpleton like me what is a " prop trading business " , are you hiring other people or are you trading for yourself.

yes , I too have been on both sides . actually this is a genuine question , I am not sure what your set up is .

and you are right about fund managers . but what is a " IB trader " .

 

[fastnet]

I was thinking about this thread.. . . . . exactly where is the risk for the prop house/arcade?? There don't have to shell out for a basis salary, they do recieve fat monthly fees (12/24 month min. contracts) and marked-up commissions. IF the trader makes a profit you share it with the house in their favour. If you make a loss they make sure you lose your stake first before eating into theirs - how is this ''share the risk share the reward?''

Come on - is no one going to stick up for these guys?? This can't be the reality surely. . .

Who would accept this deal and why? Was Anley right all along?

 

[LION63]

This is simply a case of heads you win, tails I lose. Otherwise known as a licence to print money with no downside whatsoever.

 

[wisestguy]

It's beggining to look that way , is it not .

I don't understand how I lose my capital first and then only does the house's come under liability ?

where's the incentive for the trader , surely after losing his capital , he would feel more reckless than before - what has he to lose, but the house's money !