The truth about trading arcades

[fastnet]

Got to say I agree with Steve on this point. This subject has been very well debated on other threads . . . .

I believe that a 20-30% return on capital is achievable but should by no means be taken for granted. A higher return will require you to assume a higher risk thereby increasing the chances of a drawdown from which you will not recover.

A flick through Market Wizards (a book profiling the very TOP traders) will show that these guys are extremely proud of returns per annum of less than 40-50%.

You hear of many on these board that claim to make 100% pa. Maybe they do - for a time. Do you think that they let us know with the same enthusiasm when they suffer huge drawdowns??

There will ALWAYS be exceptions to any rule and (as stated in an earlier post) winners in any game in which the odds are stacked against the participants. This ''few'' are always touted as the norm by those promoting the scheme.

twalker has answered one point I had. My problem is the fact that I am under capitalised. I have been trading for over three years and am able to return 20-30% pa. However on my trading pot this amounts to a handy sum but would be a poverty line income (below 10K). Plus, if I had no other income, this would be taxable albeit at a minimum rate.

I was hoping that these 'arcades' would be willing to supplement a traders own funds to make a trading account large enough to provide an income for me and some return commensurate with the risk for them. This doesn't seem to be the case - their main income (twalkers co perhaps is an exception) seems to be from the desk fees, commissions and high turn over of lemming like graddies looking for a start as a ''City trader''.

Hi hate being so cynical but no one has been able to provide any evidence so far that allows me to view these companies any differently.

 

[TWI]

There are a number of arcade businesses that are not out to rip off. You just hear about the bad ones.
20-30% is a great return if you are able to use the method to slowly scale up to trading many millions. For a local that kind of return will not make a living unless it is every month. Difference is that the kind of method that makes you that return each month cannot be scaled up to trade a billion dollar hedge fund.

 

[anley]

Good post Fast, and yep you've got to be cynical these days because that's the kind of world we live in.

 

[jmreeve]

Hello TW,

20-30% is a great return if you are able to use the method to slowly scale up to trading many millions. For a local that kind of return will not make a living unless it is every month. Difference is that the kind of method that makes you that return each month cannot be scaled up to trade a billion dollar hedge fund.

Are all the traders in arcades acting as e-locals/liquidity providers or are some traders using a longer term managed money approach?

 

[Roberto]

Difference is that the kind of method that makes you that return each month cannot be scaled up to trade a billion dollar hedge fund.

Exactly: that's the whole point underlying the fallacy of imagining that you need huge starting capital to make a living, isn't it? In purely percentage terms, even I make more than most of the guys in the Schwager books, and I need to in order to make a living, and I'd have given up years ago if I couldn't, but I have no illusions whatsoever about being able to do that if I had a lot of capital!

 

[harryc]

Not to digress too much but I been day-trading futures for years now and never really allow my balance to be anything much over £10K , so have to dissagree with your comment to a degree Steve .

It does indeed depend on your trading styles and what time-frames you trade in , but very True that trading with Scared money can get you busted quick

SORRY STEVE - noticed you were talking of £10K as an amount to get 'started with' . My BAD

 

[TWI]

Are all the traders in arcades acting as e-locals/liquidity providers or are some traders using a longer term managed money approach?

Some people get involved in that, including myself, but it is always prop money as most of these businesses do not carry the regulation for trading client capital. 99% is just liquidity provision and minimal overnight positions.

 

[jmreeve]

Some people get involved in that, including myself, but it is always prop money as most of these businesses do not carry the regulation for trading client capital. 99% is just liquidity provision and minimal overnight positions.

I think this is a very important statement in deciding if you are likely to be happy/profitable in an arcade. There are a lot of people that might make good swing or position traders but would not be suited to liquidity provision. I suspect this would be true of myself.

 

[TWI]

It is the kind of thing that you get totally addicted to. Even those who think they may want a different way find they get the bug and then there is no way back. I was a long term player before I started in this game now I miss it when I am away. Only thing that decides it for people is if they end up winning or end up losing.

 

[Strategic Trader]

most professionals, unless hedged, are in cash overnight

 

[wisestguy]

actually Roberto,

a lot of people have this falsely glamourous image of being a prop trader . having been one , I can tell you that it is a BS job , mainly because most shops that do this sort of thing ,including banks , have unrealistic expectations for the restrictions they impose ( and no , I'm not even talking strong risk control , it's the other BS that kills the trading opportunities ) .

so they never do well for the risk they have to take , that's why bank run hedgies for example , are nearly always ranked in the nether regions of any league table.

the other type of PT " firms " are run by goons of whom some have never clicked a buy button in their lives, and so have zero risk control . my ex boss was one such , and said " hey we are in the high risk , high reward business " . I nearly threw up all over his face - in fact I should have . what an incredibley irresponsible statement .

so your response as a mickey take is misplaced , on what you wrongly perceive as a show off statement.


walker ,

I wasn't hinting that I wanted to apply to you , I would never give you that pleasure , and your set up is not my cup of tea.

matter of fact I am NOT looking to join any fund , hedge or not . just stating what is a fact .

I have a statement from my SB stating that I am in the top 20% of traders .

 

[wisestguy]

" scared money never wins "

well , to an extent yes , but the flip side to me is better to be scared than complacent, because the reverse can work against you too , if your pot is large then you may be too comfortable to make good returns, the incentive is less !

 

[Roberto]

actually Roberto ... your response as a mickey take is misplaced , on what you wrongly perceive as a show off statement.

I didn't really; it's just that sometimes I fail to resist the urge to be facetious. Apologies sincerely ... and no offence at all intended. I take your points. And others: actually a number of very good and interesting points have been made in this thread.

 

[wisestguy]

OK , Roberto ,

perhaps I misunderstood , internetitis . cheers.

 

[TWI]

I wasn't hinting that I wanted to apply to you , I would never give you that pleasure , and your set up is not my cup of tea.

I never thought that you did want to apply to me wisestguy but what makes you assume it would be a pleasure?
I just wanted to let you know about a couple of hedge funds who will provide capital if you can show a good track record.
and
You know nothing about my set up.

 

[wisestguy]

isn't it a part of the game that " fund " CEO's get a kick from playing god to eager beaver wannabe traders ?


I mean I don't know , I'm just going by experience .

 

[mikeyk]

Hey,

Just wondering if anyone knew, how likely it is CTC will offer you a fully backed contract if your any good after you finish the training programme

Also if they did, would you be able to take the desk fee's from your trading account or would they have to come from your pocket?

Cheers in advance

 

[TWI]

LOL, I do not consider myself in that category. I am very hands off. Others are concerned with training and most of the supervision. I will just get a little stressed if the figures aren't right.
As I am sure you have seen from this forum I only offer the reality of it. This is probably because I was once the "eager beaver wannabe" trader and I had to deal with a few right c*nts along the way.

 

[wisestguy]

good . I gather your set up is something along the lines of shared risk in the sense that the trader uses up his pot first and only then does yours come into play .

is this right ?

 

[TWI]

wisestguy, you must be trying to wind me up.