Trading for friends

Hi FF

I've been running a trading bot that I wrote for a few months now, and it's not doing anything spectacular, but I'm excited enough that I told one friend at work about it.

Well, I guess he spread the word because three of my coworkers came into my office a couple days ago and basically said "we want in". I had planned on trading for friends and family sooner or later, but definitely not this "sooner" lol.

My question is, if we're just trading an office pool of a few thousand dollars, what do I need to do to trade that for them? I'm sure I could fly under the radar, and one of them offered the idea of them "gifting" me the money and I would "gift" them the returns, but I'd rather be above board with the whole thing.

Basically, to do this 100% legit, what do I need to do to trade other people's money?

As I said, I had planned on trading OPM on a larger scale in a year or so, once I had a track record, so any longer term advise would be appreciated as well

I guess it's important to mention, I'm not a broker, and have no certifications. I do have a close friend who has his series 7 though.

Where do I start? Or, is this even a good idea?


Thanks!


Seavo


Edit:
Please note: I don't have the "holy grail", I'm not making "10 pips a day", and I'm not going to offer "signals" or sell it. You can find EAs that make waaaay more $$ all over the web, but I wrote this one, and I'm partial to it

Honestly, I don't think it's worth the trouble for "just a few thousands".Don't allow yourself to be pressured into accepting by your colleagues.

The moment you do, I'll bet you'll be constantly nagged about your current trading performance, how much many have you made since the previous day, how much you lost, how much you plan to make and so on and so forth, they'll never run out of questions because people like to be reassured as often as possible that their money is safe.

I know it sounds cool, to trade for other people, but don't ever do it without establishing a legal base for it first, if you really do want to trade for them as well, regardless of how much money is involved.But given that there are only a few thousands involved, it doesn't seem to me like it's worth it.

Have you considered the alternative? That you might actually lose all the money at some point? Are you going to pay them back from your own pocket or not? Ar you sure you'll still be able to face them every day at work if you lose their money?

If I were you, I'd simply refuse and tell them I'm not doing it because I'm greedy and want to keep it only for myself, but because I'm simply not comfortable with the extra risk.

Also, in the event that the few thousands turn into a few tens of thousands for instance, you won't be able to "gift" the money back to them easily without raising suspicions.Depending on what country you live in, there are certain limits for money gifts beyond which they stop being considered money gifts and pass into the money laundering field.

I'd recommend you to be very considerate about what you plan to do and pick what's best for you only.

And don't forget about the biggest pain in the ass.......TAXES for which YOU will be responsible if they give you the money to trade....

Excellent points. I had made it clear that they could lose everything, and that I would not recoup their losses, but I do have the sense that their vision is clouded by winning, and aren't really appreciating what a loss would do to them mentally. I remember when I used to get upset when I lost $$ in a demo, let alone real $$

Ultimately, this is why I got into trading though. Not just to make a million bucks, but to help my family and friends as well. Maybe I should just pick which friends a little more carefully

Thanks again for the input tenantro. You sound like you speak from experience. Have you/do you trade for others currently?


Seavo

If you want to trade for a small group of friends you might consider setting up a trading club, it should be an LLC. that way you have some protection and the bookkeeping is simpler,

lol. I can't believe I overlooked taxes, johndoe. I'd rather not pay my own, let alone theirs!

Not to mention what a nightmare it would be to ask for "gifts" from them every year for taxes.

I suppose an investment club would be a suitable alternative to alleviate this problem, but from what I understand I wouldn't be able to be compensated for my time then.

Thanks again johndoe! Thoughts like this are exactly why I turned to the FF community for help


Seavo

Edit:

I just saw your next post, thanks again! With a trading club, a lot of the bylaws I've seen require that participants aren't compensated other than for operating expenses, and it requires voting on trades, which is simply not applicable for a trading bot. Have you set up a club before? How much can the bylaws and partner agreements be tailored for particular needs?

Thanks again! :-)

Seavo

No clubs for me........ I have a group of friends that set one up ... they seem to be doing OK.
as to the vote regarding trades, it could be a club vote to allow the bot to make the trades.
I had some links re setting up a trading club, if I find it I will send it to you, in the meantime you might google it.

Here is an outline of forming a club... http://www.ehow.com/how_3505_start-investment-club.html

Thanks again johndoe. I was heading to the library later to find some books on investment clubs, but that article will keep me googling for a couple hours

This looks like the right route so far. Minimal setup fees, and a great way to continue proving my track record for bigger things while also helping my buddies.

Thanks again for your help, it's most appreciated!


Seavo

Yes, they might seem ok with it now, but I'm pretty sure if you really were to lose the money, they'd still bitch about it. That's why it's best to have things on paper, and only if it's truly worth the trouble.If you decide to go ahead and legalize it, make sure to specify exactly what the payout scheme will be(how much is your cut, how much will they get based on the returns) and what happens if you lose the money(will you be accountable for the loss or not and so on).

And like someone else mentioned and I tried to suggest in my initial post, be careful with taxes.Money gifts will only work for small sums, for larger sums you'll have to pay taxes otherwise you might turn into a suspected money laundering target for the authorities.

thanks again tenantro! I agree, the loss of funds is the only thing that's keeping me from going forward. I can talk about losses until I'm blue in the face, but until they experience one (or, more realistically several of them) they aren't ready.

I still have to mull it over from this angle. Even worse would be if the boss caught wind of it, invested, and I lost money for him too lol.

Thanks again for making sure my head isn't in the clouds. It's very much appreciated :-)


Seavo

Hi Seavo,

I totally agree with the comments made by tenantro ,

The lagalities of trading for friends would be the least of my worries. You want to trade well for them, you want to make profits for them. That would just create so much pressure, and it would effect your trading.

Particularly, if you lost the money. I do not think it would matter a hoot even if you wrote it down on paper. Once you made that loss, you would feel it personally - to the point of wanting to pay them back - A simple thing like two of your investors going for an innocent cup of tea after a loss. You would think , "are they talking about me? are they disappointed with me? do they think I traded against them?" and so on.

My advice:don't do it.

Any bot will work some of the time,and in other times it won't.
When it doesn't,all the fingers will be pointing at you.Here's what you'll get:
-"I used my rent/mortgage/car payment money"
-"but we made 80% last month"
-"why did we lose 10% this month?I had that money spent"
-etc. etc.

I made the mistake of trying to help friends/family,and never again.

Seeing as I was the only trader,all the pressure was on me to perform for others-which I don't do.

I'm the one trading 16+ hours a day,so when I got burnt out and went on holidays for a month, there was a guilt trip about that.

I get tired and take a few days off,and markets soar-it's my fault we didn't catch it.

Why the hell should I bust my brains out so others can benefit and whine about it???

After 2 months I told them no more.

Guess what,now I'm the jerk/a-hole because I don't want to be at their beckon call.