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Trading Someone Else's Money

  • #1
  • First Post: Mar 19, 2012 12:02am Mar 19, 2012 12:02am
Hi guys,

I've reached the point in my trading career where I've become consistently profitable after a lot of hard work!

I was wondering if anyone had any advice or could point me in the direction of some which related to trading investors money. The situation is that my parents and brother realise that by investing in my trading there are some decent returns to be made. The problem is I don't really know where to start in terms of how much I should charge, how to actually practically do it and what legal issues there are.

I thank you guys in advance for your help.
  • #2
  • Mar 19, 2012 1:25am Mar 19, 2012 1:25am
Most of the hedge funds charge a performance fee between 20 - 30 %, while the management fee is around 2 %.

Take a look at Oanda's solution for Managed Accounts, perhaps they can also help you with your further questions:

http://fxtrade.oanda.com/trade-forex/managed-accounts/
  • #3
  • Mar 19, 2012 9:09am Mar 19, 2012 9:09am
Well done! I reached the same point about 2 years ago and opened advisor accounts with Oanda, Dukascopy and Interactive Brokers....all enable you to trade friends and family money.....IB worked best for me for many reasons but that's another discussion.....depending on $ size you want to trade one of these should suit to get you started but choose carefully as it's a pain if you need to move all your clients to a new platform
J
  • #4
  • Mar 19, 2012 9:29am Mar 19, 2012 9:29am
Quoting makybe05

I've reached the point in my trading career where I've become consistently profitable after a lot of hard work!
Well done! How long did it take you to achieve?


Quoting makybe05

I was wondering if anyone had any advice or could point me in the direction of some which related to trading investors money. The situation is that my parents and brother realise that by investing in my trading there are some decent returns to be made.
Friends and relatives are a big no-no, they expect and you feel obliged, often leading to unnecessary pressure.

Average performance related commissions are something around ~15% so is it really worth all the hassle unless you've got >1m under management?

If you decide to go ahead then make sure you have a very clear agreement drawn up, saves a lot of arguments later! And also check the regulations not only in your country but also the client's country, you can get yourself into a whole pile of do-do with regulatory authorities!
  • #5
  • Mar 19, 2012 10:07am Mar 19, 2012 10:07am
Thanks for the replies guys, I really appreciate it.

To answer some of the questions - I've been trading for around 18 months now in fx and before that I dabbled in stocks. In the last 6 months say I have come along in leaps and bounds, mostly due to focusing primarily on price action.

What my family plan to invest is only a really small amount. They realise the risks and dare I say it, can afford to lose it but I know that won't be happening. If it all goes to plan they will be increasing their funding as return targets are met.

JamesBranson thanks for the advice on the brokers. I'd love to hear from anyone else who has some thoughts on a particular broker.

Also, whilst on this topic I was wondering how people attracted investment from potential clients? I guess back in the day it was word of mouth but surely with the net there are easier ways to attract potential clients.

For me this might not be attainable straight away but eventually down the track I want to be trading others people money.
  • #6
  • Mar 19, 2012 11:59am Mar 19, 2012 11:59am
Quoting makybe05
Hi guys,

I've reached the point in my trading career where I've become consistently profitable after a lot of hard work!

I was wondering if anyone had any advice or could point me in the direction of some which related to trading investors money. The situation is that my parents and brother realise that by investing in my trading there are some decent returns to be made. The problem is I don't really know where to start in terms of how much I should charge, how to actually practically do it and what legal issues there are.

I thank you guys in...
Go to one of the big 4 and explain them your situation. They are professionals and know how to set up such a thing in your country. Of course their service is not cheap.
  • #7
  • Mar 19, 2012 12:02pm Mar 19, 2012 12:02pm
Quoting makybe05
Thanks for the replies guys, I really appreciate it.

To answer some of the questions - I've been trading for around 18 months now in fx and before that I dabbled in stocks. In the last 6 months say I have come along in leaps and bounds, mostly due to focusing primarily on price action.
I don't think this is enough to attract any investor.


Quoting makybe05
Also, whilst on this topic I was wondering how people attracted investment from potential clients? I guess back in the day it was word of mouth but surely with the net there are easier ways to attract potential clients.

For me this might not be attainable straight away but eventually down the track I want to be trading others people money.
I would get your trading statements audited (again by one of the big 4, cause investors trust in those auditors). Then investors know that you are legit.
  • #8
  • Mar 19, 2012 12:06pm Mar 19, 2012 12:06pm
Quoting makybe05

In the last 6 months say I have come along in leaps and bounds

They realise the risks and dare I say it, can afford to lose it but I know that won't be happening.

as return targets are met.
Sorry to be a party pooper but do you really think you're ready after 6 months?

As recently as a month ago you were playing around with different strategies, asking people about (trailing) stops, and canvassing other forum participants opinion about your positions! Add to that your comment about 'return targets' and to be honest I think you're a bit premature thinking you can suddenly become a fund manager.

Get at least a couple of years under your belt, get a track record (it's not all about returns, for investors it's about the risk you took to achieve those returns), then just maybe someone will consider investing.
  • #9
  • Mar 20, 2012 10:27am Mar 20, 2012 10:27am
Completely understand where you're coming from. I think some solid returns over the next 12 months to go with what I have made in the last 6 months can help me attract investors. I'm more curious than anything and would like to trade people's money to generate some higher returns for myself in the future. I'm not saying this is straight away. This is something that I want to strive towards in the medium term as I think I've reached a point in my career where I can minimize risk and make steady returns.
  • #10
  • Mar 20, 2012 1:39pm Mar 20, 2012 1:39pm
Quoting makybe05

I think I've reached a point in my career where I can minimize risk and make steady returns.
This is what investors will want to hear, they're not looking to be dazzled by claims of ridiculous unsustainable high risk returns. Show them ~15% a year with low risk and you'll be inundated, but tell them 20% a month and they'll run a mile screaming scam!

South Africa is a great source for clients, they have more money than they can find investments for. For people like that it's not the money which is important, it's being able to brag to their friends and business associates about how they discovered an unknown talent!

I can't remember his name now but there was a fund of funds manager working out of Wacker Drive, Chicago who used to invest with traders who had a decent track record, he'd start them small ~20k and see how they got on. Someone like that is a better choice as you'd be dealing with someone who understands trading whereas private investors can be a royal pain in the butt and handling them is a profession in it's own right! The beauty is that you can leave him to handle investors while you focus on trading. Who knows where it may lead, sooner than you think you can be trading a decent sized fund......which brings it's own set of problems, lol

Anyway enough rambling from me, good luck with whichever path you take!
  • #11
  • Mar 20, 2012 9:15pm Mar 20, 2012 9:15pm
That sounds good but if you are serious about this, I would suggest that you review a few managed accounts, figure out how it is set up and do the same.
And as others have pointed out, there's no easy 1-2-3 steps to going from a broker to managing fx funds for others.
Keep us updated!
  • #12
  • Mar 23, 2012 9:27pm Mar 23, 2012 9:27pm
Thanks for the replies guys. Does anyone else have any ideas how I can attract investors? Or where I could act as a signal provider in return for payment?

Pipmutt the company out of Wacker Drive in Chicago seems really interesting. Do you have any more information on this or know of anything similar?
  • #13
  • Mar 23, 2012 10:07pm Mar 23, 2012 10:07pm
Quoting makybe05
Hi guys,

I've reached the point in my trading career where I've become consistently profitable after a lot of hard work!

I was wondering if anyone had any advice or could point me in the direction of some which related to trading investors money. The situation is that my parents and brother realise that by investing in my trading there are some decent returns to be made. The problem is I don't really know where to start in terms of how much I should charge, how to actually practically do it and what legal issues there are.

I thank you guys in...
If you are so good at it then why not become rich by yourself with your account!
Unless you are trading pennies....
Something about your post just screams "pretender"
In trading, you have to be defensive and aggressive at the same time
  • #14
  • Mar 24, 2012 2:55am Mar 24, 2012 2:55am
Quoting Davit

If you are so good at it then why not become rich by yourself with your account!
Unless you are trading pennies....
Something about your post just screams "pretender"
Stupid comment, think about it!
  • #15
  • Mar 24, 2012 3:00am Mar 24, 2012 3:00am
Quoting makybe05

Pipmutt the company out of Wacker Drive in Chicago seems really interesting. Do you have any more information on this or know of anything similar?
The guy's name is Tom Trimmer trimmercapmgt.com

It was a few years ago so I don't know if he's still around but it's worth a try, if not him then there will be plenty of others like him.
  • #16
  • Mar 25, 2012 12:09am Mar 25, 2012 12:09am
Thanks Pipmutt really appreciate the help. Nice know there are people out there willing to lend a hand.
  • #17
  • Mar 25, 2012 12:31am Mar 25, 2012 12:31am
Quoting makybe05

Thanks Pipmutt really appreciate the help. Nice know there are people out there willing to lend a hand.
You're welcome, good luck with it.
  • #18
  • Mar 25, 2012 6:04am Mar 25, 2012 6:04am
One of the most important things to consider when you start managing other people's money is how are you going to deal with potential losses. Most guys who've been profitable jump into this business but when the first big loss comes in then they have problems coping with it. What are you going to tell your investors? How would they react to losses? Would they flee? How would this affect you financially?

Every guy has different psychology. In my career as money manager, I've tried to select such clients who are pshychologically stable and predictable. I had once a client who liked to call me up every time he saw an article in Financial Times about markets going down. He asked me how is his portfolio doing, am I sure nothing will happen to his money? In 3 months I decided to return his money and never dealt with this guy anymore.

The point I want to make is that be very cautious when accepting money from people you don't know - especially from private persons who have little understanding about how the markets work.
  • #19
  • Mar 27, 2012 2:27pm Mar 27, 2012 2:27pm
Managing other peoples money can be tough opposed to just trading.

Signal guys will usually use trade copier for MT4. Which, if you can trade well and have a system that works, it makes it all the better.

But, as soon as you have a losing day you need to have a systematic process of how you are going to deal with the clients so the stress does not overcome your trading.

Make 1 person money they tell 3 ppl your the man. Lose 1 persons money they tell 10 ppl your .

Just make sure you got a solid system (w/ plan B) and mentally prepared (alot easier said than done though) .
  • #20
  • Mar 31, 2012 10:42pm Mar 31, 2012 10:42pm
Quoting Cheese_Mouse
One of the most important things to consider when you start managing other people's money is how are you going to deal with potential losses. Most guys who've been profitable jump into this business but when the first big loss comes in then they have problems coping with it. What are you going to tell your investors? How would they react to losses? Would they flee? How would this affect you financially?
Oh yes, you need to incorporate some form of risk management in order to "limit" that exposure. And yes, trading with other people's money is not going to be easy and when that first loss rolls in, you would have to roll with it.
Sorry, no deliberate pun intended..
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