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Funded Traders - Pros n Cons

  • #81
  • May 17, 2016 2:49am May 17, 2016 2:49am
Quoting trader1988
yes fair enough forexia but I do think for me to set up a hedge fund I should have more experience. This is the reason why prop firms call out to me at the minute. Could anybody leave their honest opinions about topsteptrader please. It looks and sounds very legit but I just want to get people views on it before accepting the trial. Thanks for your reply forexia. I am guessing you are a personal trader investing your own money then? I'd love to hear any more success stories with either prop firms, institutions or hedge fund set ups. That would be...
Yes hedge funds investors do look for a track record of several years which is fair considering that you are supposed to demo trade for at least *6* months profitably in a consistent manner before you trade live and this is just trading for yourself. If you are trading other people's money, of course they would want to see a more long-term performance track record to ensure that you do have a niche in making money in the capital market and not just a fluke. This is why I find a little suspicious that those prop trading firms would trust to fund a trader after a trial/evaluation period of so short of just 20 days or even 5 days. How can they be so comfortable in parting their money with strangers they barely know just based on such short track record IF there is no other hidden agenda involved? As I have said before, it is just too good to be true.

Anyway I don't object to people trying those prop trading firms out but I just want people to be very cautious in the process and to be aware of many of the potential pitfalls. We traders are in the retail forex industry to MAKE money so far all we have been doing is just being ATM machines to so many businesses; we don't need to be an ATM machine to one more.
Make your losses in demo. Earn your profits live.
  • #82
  • May 17, 2016 2:50am May 17, 2016 2:50am
Quoting trader1988
yes fair enough forexia but I do think for me to set up a hedge fund I should have more experience. This is the reason why prop firms call out to me at the minute. Could anybody leave their honest opinions about topsteptrader please. It looks and sounds very legit but I just want to get people views on it before accepting the trial. Thanks for your reply forexia. I am guessing you are a personal trader investing your own money then? I'd love to hear any more success stories with either prop firms, institutions or hedge fund set ups. That...
Good firm with the largest number of funded traders, but they are also the most expensive at present.
Combat crazy markets with crazy trading
  • #83
  • May 17, 2016 3:32am May 17, 2016 3:32am
Quoting Forexia
{quote} I just believe that in terms of raising capital, between starting a hedge fund and going to a funded prop trading firm, it makes more sense for a trader to start a hedge fund instead of going into a prop trading firm in terms of capital efficiency and profitability. What's the point of getting more funds when at the end the increased profit from the increased capital is going to be just clawed back?

With all due respect, I see no viable comparison between looking to be hired by a prop firm, and starting a hedge fund.

Governance issues, legal compliance and a whole myriad of hurdles come at you in just the first attempts at forming one legally...and that's to say absolutely nothing of the personal expense.
In this one quick link search:
http://www.investopedia.com/articles...hedge-fund.asp

"Don't be mistaken by those who say you only need a small amount of money to get everything in place and start a hedge fund, as many funds spend over $1 million in their early stages. "


"As a reference point, most hedge fund managers start their businesses with $15,000-50,000. Of course, there are plenty of exceptions who spend up to $350,000 in startup costs."

Just from a financial perspective, it is a huge ask, and all these costs are excluding start up investment capital.
Realistically, starting a legitimate hedge fund would only be possible if you had pre secured investors with sufficient capital to meet your expenses, a formal agreement with a seed-capital provider...or a few HNW friends.
If you yourself had the benefit of being able to start it up financially independently, great..but I'd still question why? If you're a profitable trader with a hundred K or so, why would you bother starting a hedge fund when that cash is enough to survive from?

If the goal is to simply trade OPM, then there are less taxing ways.

Of course, I'm not saying hedge funds are pointless to establish, of course not... but I think the chances of starting and sustaining a hedge fund as an individual with less than a Hundred k or so personal disposable capital are not optimal.

So, the idea of being hired by a prop firm to me, is far more realistic as a trader who doesn't have sufficient balance to meet income requirements.

I have to admit, I share huge skepticism with those companies.
I am yet to find one that doesn't impose ridiculous conditions (conditions BTW that are far removed from those at any legitimate hedge fund), or demand out of pocket expenses which are also ridiculous. Clearly some of these are only churn and burn operations looking for suckers.

I do however disagree that just asking for outlay means the company is a scam. If you are starting any new venture then there are always expenses, so there's no reason this should be any different.
Obviously the key will be in the details.

I find it odd that there are all these prop companies out there, yet aside from corny testimonials there aren't droves of funded traders coming forward with their verification.
I also note that the conditions will likely cause most traders a headache...anyone who's traded will know this. There are precious few of these companies that allow realistic DD figures, and overnight holds.
Doesn't it seem odd that companies specializing in Fx trading would impose such conditions, knowing the realities of trading?
The reality is to do with the deal they have with the broker, and their risk management. It has nothing to do with promoting profitable trading. That fact in itself should tell you which companies to avoid.

@trader1988 I had a quick look at topstep and I just see the same crap.
Convoluted rules and requirements, their own wonderful test program.. usual sales pitch. The front page has testimonials from 3 guys saying how much they learned there...nothing about being funded.
The idea of no risk to your own capital is also an alert. Other companies will ask you to open an account of your own money, from which the trading is done, and replicated for the funded balance. This at least shows they want traders who trade their own money.
What i find most revealing is this:

http://info.topsteptrader.com/careers

Read their mission, vision and values.
Do they seem trader focused?
Any lingering hope should be quashed at the bottom.
So, the prop trading firm is hiring no one?
And the internships.... they are looking for fintech marketing specialists. Marketing!

If you do the free trial, just make sure it is free.
Wealth comes from what you keep, not what you earn
  • #84
  • May 17, 2016 4:02am May 17, 2016 4:02am
Quoting trader34
{quote} With all due respect, I see no viable comparison between looking to be hired by a prop firm, and starting a hedge fund. Governance issues, legal compliance and a whole myriad of hurdles come at you in just the first attempts at forming one legally...and that's to say absolutely nothing of the personal expense. In this one quick link search: http://www.investopedia.com/articles...hedge-fund.asp "Don't be mistaken by those who say you only need a small amount of money to get everything in...
If you have read my posts from the beginning, you will see that's EXACTLY my point. If you are making money, why do you need to get other people's money? You can just make your own. I believe the best way to for trader to build up capital is just to trade their own money ESPECIALLY if they ARE making consistent profit. And in my post #55 I even illustrated mathematically how much capital a trader can accumulate in 12 months using Trader1988's published profit record.

BUT since Trader1988 insisted that he wants to raise capital fast so I thought rather than giving your money away to prop trading firms that currently exists right now that are not really in the business of helping traders succeed and build up capital, it would be better to start a hedge fund. Starting hedge fund is not easy I am aware of the hurdles and difficulties involved but at least it's 1) legitimate and 2) it's keeping the money with the trader instead of being squandered away to dubious prop trading schemes
Make your losses in demo. Earn your profits live.
  • #85
  • May 17, 2016 4:48am May 17, 2016 4:48am
The main obstacle about starting a hedge fund is what you've both mentioned and that's start up costs. If I went to say 3 prop firms I could trial etc for less than £1000. Hedge fund cost as stated by trader34 are £15000-£50000 so looking at these figures there is ultimately only one affordable choice at the moment. If in time money builds with the prop firm then it will possibly better to look at a hedge fund start up. Until then there is limited choice for those with minor capital.
  • #86
  • May 17, 2016 5:17am May 17, 2016 5:17am
Quoting trader1988
Until then there is limited choice for those with minor capital.
Well, that is unless you take Forexia's advice and just keep trading your own money.

Look, i understand the appeal of the prop firms, but the truth is there are no free rides anywhere. Sadly we exist in an industry built around making a fast buck form anyone who's giving them away.
The overwhelming majority of these firms actually have very little desire to get traders to make as much money as possible, their concern is with the next prospect.
When you look at TST all you see is a marketing pitch. It doesn't even closely resemble a professional fund's website, which if we are to believe their intentions are to fund profitable traders, just seems a little odd.

I have one friend who was funded by 2 companies, in the end he decided it wasn't worth the time and effort...slow funding, slow progression through the levels etc etc.
He is convinced these companies are worthless.

In contrast another friend is about to go in with a prop firm. These guys actually seem legit, in terms of their desire to get traders in, and have them make money with limited restrictions.
Personally I'm still unconvinced, but am following his progress.

I will ask, and if he's willing I will see if he wishes to share his experiences here.
Wealth comes from what you keep, not what you earn
  • #87
  • May 17, 2016 5:37am May 17, 2016 5:37am
Quoting trader1988
The main obstacle about starting a hedge fund is what you've both mentioned and that's start up costs. If I went to say 3 prop firms I could trial etc for less than 1000. Hedge fund cost as stated by trader34 are 15000-50000 so looking at these figures there is ultimately only one affordable choice at the moment. If in time money builds with the prop firm then it will possibly better to look at a hedge fund start up. Until then there is limited choice for those with minor capital.
But the problem is you are NOT going to get that money from funded prop trading. This is EXACTLY what those funded prop trading firms preys on to lure the traders in. They KNOW that it's hard to start a hedge fund so they dangle this "funded trading with no risk" in front of prospective traders to lure traders in making them think this is a fast track to large wealth when in fact it's not. They are NOT going to just drop $15K into your lap without knowing you at all and significant track record of at least 1 year. But by one year, if you look at my post $55, if you are able to keep making the consistent 41% profit, you would've accumulated $61K (from a $1K initial deposit), WELL above the $15K start-up cost that you need to start a hedge fund. So WHY would you need to go to funded prop trading firm? That's why I say it doesn't make sense.

Fine, you say I need the money in short-term, in less than a year. I just want to earn this $15K from the prop trading firm by them funding me. Let me ask you this: If you have $15K to give away, would you give it to a Joe Blow that's across the globe somewhere that you have never met and only showed you his performance record for like 5 - 20 days (which is the typical evaluation period at those prop trading firms)? If not, then WHY would you think those prop trading firms would? Money does not grow on trees for those firms either.

They would only under one circumstance: You need to put up something of yourself first, either take their education course or your own capital in some way so they won't be stuck with all the risk cuz they know you are a noob. But if you are going to put up own capital, you are already doing that when trading on your own, WHY give your capital to another firm only to have them take % of your profit away?

Either way, funded prop trading firm doesn't work for traders. You don't need them if you are already making money and you won't be making money trading with them if you can't make money trading on your own. The way that they are set up, they are just another type of company that are trying to take some money out of us traders.
Make your losses in demo. Earn your profits live.
  • #88
  • May 17, 2016 7:17am May 17, 2016 7:17am
fair enough forexia can't complain with any of you points. Good argument against prop firms.
  • #89
  • May 17, 2016 3:35pm May 17, 2016 3:35pm
​I think one of the main arguments for prop firms are that they are so accessible to trader. The problem with funds etc is that its not always how good you are or what you've accomplished its who you know. Opportunities don't just come out of no where as we've all established, it's the people we know and the people they know.
  • #90
  • Edited May 18, 2016 4:42am May 17, 2016 8:07pm | Edited May 18, 2016 4:42am
Quoting trader1988
​I think one of the main arguments for prop firms are that they are so accessible to trader. The problem with funds etc is that its not always how good you are or what you've accomplished its who you know. Opportunities don't just come out of no where as we've all established, it's the people we know and the people they know.
When a prop trading firm is REALLY set up to be *genuinely* invested in the trader AND is REALLY set up to help the trader to succeed then yes, it could be a venue for traders to be more accessible to larger trading capital BUT this will expose the prop trading firm to higher risk. It's NOT even an issue of who you know or what you know. It's a matter of how much risk the prop trading firm is willing to take on. It's really a catch-22 situation for the prop trading firm. The way it's set up, they will only be attracting the kind of traders they DON'T want and yet the kind of trader that they DO want will not want to go to them.

Just as I have explained many times before, if the trader is already very successful and is already able to accumulate capital rapidly through trading profits, he/she would have NO incentive to go to a funded prop trading firm. If you are making 41% profit on your own consistently, WHY would you want to go to a prop trading firm to earn just (41 - 21)% profit and also be subject to their other various restrictions?

So the ones who go to the prop trading firm are the ones who REALLY needs money, i.e. the ones who are really not making money which is EXACTLY the kind of traders that the prop trading firm should avoid. If you are not making money that means if the prop trading firm funds the trader money, the firm will be losing money too and even larger amount IF they don't require you to invest in your own capital because you will be playing with larger capital. So the firm is basically exposing themselves to higher risk if they don't ask you to shoulder some risk as well. But if you are shouldering some of the risk because you are trading with larger capital due to the increased funding, you will be losing money even quicker. So at the end you won't succeed. And the firm just fires you and move on to their next target.

That's why I say funded prop trading firm does not really work in the traders' favour and it has nothing to do with connections.
Make your losses in demo. Earn your profits live.
  • #91
  • Edited 10:46pm May 17, 2016 8:51pm | Edited 10:46pm
Quoting trader34
{quote} Governance issues, legal compliance and a whole myriad of hurdles come at you in just the first attempts at forming one legally...and that's to say absolutely nothing of the personal expense.
Excellent post and lot's of food for thought.

Here in Australia the process of setting up a fund particularly dealing with the retail investor is an extensive, highly regulated and time consuming process........but an exceptionally profitable process provided you can overcome the hurdles.

Step 1 - You need to meet RG146 certification which requires a track record of experience or the need for formal education qualifications with accredited providers.
Step 2 - As an Investment Manager in Australia that deals and advises in financial products you need to hold an Australian Financial Services Licence (AFSL) that is specific for the purposes of the Fund you wish to operate. The process of obtaining this licence is a time consuming and fairly resource intensive process particularly if you engage a 3rd party to apply on your behalf. Without the AFSL you are dead in the water. As an alternative you could seek to operate as an Authorised Rep under the AFSL of another existing licence holder, but you will be exploited by the AFSL holder in paying a fee for the privilege.
Step 3 - You then need to source a Responsible Entity with an appropriate AFSL and at least $2.5M in NTA who you as IM will operate under. ...oh and pray to god that they also can operate as a Custodian otherwise you will need to include a Custodian service for trade settlement. The compliance costs of meeting the RE's obligations are quite considerable and time consuming. Of course the RE will be engaging you in a significant capacity to assist in the preparation of an Information Memorandum, Fund Constitution and Compliance Plan and as IM it is likely that the RE (for the privilege of operating under them) will require you to fund the pre-setup phases and legal costs of setup.
Step 4 - You may then need to find a Fund administrator to manage the fund and investor accounts and administer the extensive reporting requirements to investors and regulators (ASIC, ATO, AUSTRAC etc.) unless you have the skills and systems to do this yourself and once again a fee for the privilege of appointing a Fund Administrator will be required.
Step 5 - Obtaining ASIC approval to register the Fund. This is where you lodge the IM, CP, Constitution and pay ASIC for fund registration.
Step 6 - .....and this is where the hard work commences when the fund goes live as it is critical that you can attract the investment public to build sufficient critical mass to satisfy the parasitic intermediaries that are foisted on you by ASIC via the Corporations Act into the equation. Without an investment performance track record or some highly experienced traders in the IM company that have the track record....you will live a very short life.

Once all these barriers are overcome.....then you may be able to observe a very distant tunnel of light which represents your breakeven point.

However despite the gloom of this post.......that's what is required to attract the 2:20 returns for Investment Management in a regulated fund....and believe me when I say it that for the investor, it actually is worth every penny to pay these fees. Investor protections offered by this regulation are extensive and the associated fee impost on an investor is a small price to pay.

The difference between operating as a prop trader for a firm and running a fully regulated fund is chalk and cheese. This is why the fee structure is so different, and rightfully so. Unless you have the experience and skills of a team at your disposal, forget the latter and concentrate on the former.

PS

As a general guide in Australia..a budding Investment Manager wishing to set up their own fund is going to part with between $100K and $250K for setup (dependent on how much they wish to do inhouse) and that is before a single dollar is spent on marketing to attract the Investment public. So let's round this up to $500K for startup.

Then once the fund goes live you are going to need the critical AUM to meet minimum thresholds of your service providers such as the RE/Custodian and Admin Manager and the ongoing operating costs of the fund such as audit fees etc. which means you are going to need a min AUM of at least $10M-$50M to have sufficient funds under management to generate an income from the standard IM mgt fee of 2% to pay the wages and operating costs of the (very limited IM team). All this is extracted fromthe Funds gross investment returns that therefore assumes apriori that you are sufficiently profitable from the get go without having to dip into personal equity. Even $50M of FUM virtually guarantees that you will have your back up against the wall in meeting your commitments (let alone having the spare time to focus on your trading activities)...and at the same time dealing with aggressive investors demanding regular returns.......it's a really really tough and demanding game. But the lure of those performance fees is an attractive pursuit that hopefully makes it all worth it.
  • #92
  • May 17, 2016 9:04pm May 17, 2016 9:04pm
I agree with Forexia, trade and grow your own account.

If your goals are larger, then start a hedge fund.

Prop trading firm is a no go for the reasons already stated. It's only use is for the uninitiated to learn the ropes at minimal to no cost if that exist at all.
  • #93
  • May 17, 2016 10:28pm May 17, 2016 10:28pm
Quoting Copernicus
{quote}.... As an Investment Manager in Australia that deals and advises in financial products you need to hold an Australian Financial Services Licence (AFSL) that is specific for the purposes of the Fund you wish to operate....
Excellent post Copernicus.

I am wondering if you have come across HLK group and have any views about their MANAGED DISCRETIONARY ACCOUNTS service?

Atleast for Forex, their structure seems to be reasonable and very cost effective. There are no custodian issues either as broker choosen to provide MAM will provide it.
@trader_umr
  • #94
  • May 17, 2016 10:39pm May 17, 2016 10:39pm
Quoting breaststroke
{quote} Excellent post Copernicus. I am wondering if you have come across HLK group and have any views about their MANAGED DISCRETIONARY ACCOUNTS service? Atleast for Forex, their structure seems to be reasonable and very cost effective. There are no custodian issues either as broker choosen to provide MAM will provide it.
Hi B. Sorry mate. I haven't come across them. The MDA structure is quite a minefield despite the perceived flexible offerings to investors but to be honest, my skills lie in 'vanilla fund setups'. The MDA offering delves into further complexity and associated investment risks that have more or less made me stay away from them.
  • #95
  • May 18, 2016 1:15am May 18, 2016 1:15am
Quoting Copernicus
{quote} Excellent post and lot's of food for thought. Here in Australia the process of setting up a fund particularly dealing with the retail investor is an extensive, highly regulated and time consuming process........but an exceptionally profitable process provided you can overcome the hurdles. Step 1 - You need to meet RG146 certification which requires a track record of experience or the need for formal education qualifications with accredited providers. Step 2 - As an Investment Manager in Australia that deals and advises in financial products...
Thanks..
  • #96
  • May 18, 2016 3:52am May 18, 2016 3:52am
the more I read and contemplate the next move the more I think prop firms aren't the way to go. I asked a well known and experienced trader to look into all of the mentioned firms and thankfully he did. There is only one that looks worthy to pursue from looking into their company profiles. He basically says what has been said before reiterating the fact that you should not have to pay to be trial with anybody. If they are interested in your background that should speak for itself then they should have faith in that and the trial is to merely confirm this.
  • #97
  • May 18, 2016 4:30am May 18, 2016 4:30am
Quoting Copernicus
{quote} Excellent post and lot's of food for thought.
Thanks Copernicus.
Actually it's interesting with *unnamed Australian broker* I recently inquired about a MAM account, and they expected RG146 compliance from me!

Kind of frustrating, but in a way a breath of fresh air in a grossly unregulated and abused industry!
Wealth comes from what you keep, not what you earn
  • #98
  • May 18, 2016 4:41am May 18, 2016 4:41am
Quoting Copernicus
{quote} Excellent post and lot's of food for thought. Here in Australia the process of setting up a fund particularly dealing with the retail investor is an extensive, highly regulated and time consuming process........but an exceptionally profitable process provided you can overcome the hurdles. Step 1 - You need to meet RG146 certification which requires a track record of experience or the need for formal education qualifications with accredited providers. Step 2 - As an Investment Manager in Australia that deals and advises in financial products...
This is fair. After all you are dealing with other people's hard-earned money. Given all those stringent requirements albeit from Australia, you still had crooks like Bernie Madoff who was able to make away with $70 BILLION. Imagine these requirements are not in place.
Make your losses in demo. Earn your profits live.
  • #99
  • Edited 5:14am May 18, 2016 4:58am | Edited 5:14am
Quoting trader1988
The main obstacle about starting a hedge fund is what you've both mentioned and that's start up costs. If I went to say 3 prop firms I could trial etc for less than 1000. Hedge fund cost as stated by trader34 are 15000-50000 so looking at these figures there is ultimately only one affordable choice at the moment. If in time money builds with the prop firm then it will possibly better to look at a hedge fund start up. Until then there is limited choice for those with minor capital.
I didn't see this post until now. They make you PAY 1000 POUNDS JUST to try out with them? Seriously??!!! So is that 1K pound going to be injected into the funds that they gave you to trade or just payment to them and that's it? If not, with your published monthly 41% profit ratio, that 1K pounds would've doubled in just 2 months!! And yet you would have to give that 1K pounds away for nothing and still have them claw back 50% of the profit each month? Even if it's not a scam, do you think it would be an efficient usage of that 1K pounds capital? You are putting it into something but getting less return back?

I think we traders REALLY need to always assess the return of our capital carefully. Trading is a business and we are in it to MAKE MONEY not to hand out money. Before we have to hand out any money, we always have to ask ourselves the questions "How much am I getting back? How much return am I going to earn from this taking into account of all the losses (negative returns) and etc.? Is it worth it for me to put in this investment?" I think once we asked ourselves these questions, it would help us to avoid being ATM machines to many schemes. I am glad you got your friend to check those firms out for you and gave you his honest assessment.
Make your losses in demo. Earn your profits live.
  • #100
  • May 18, 2016 5:58am May 18, 2016 5:58am
Been sitting back reading the garbage being posted on this thread by a couple who appear to be trying to convince people they actually know what they are talking about, when in fact all I see is a whole lot of misinformation & totally wrong assumptions.

I'll just touch on a couple.
NO you do not pay 1000 pounds for a trial to see if you are talented enough to be funded. The average for a $50,000 funded account is $365.
We are not here to discuss Prop' firms who "Hire" traders, MAMM accounts & investment funds etc. We are discussing firms that fund talented traders.

The rules & criteria have improved immensely over the past 6 months. Mainly due to competition pressure.
There is now one firm leading the way with an entry fee of $365 to trade a $50,000 funded account. This firm also provides trialist's with a further 5 FREE attempts to pass. A FREE $2000 Futures trading platform & Free data. Anyone who fails all 6 attempts obviously should not have started in the first place.
Funded trader profit split 80:20
Another has NO entry fee. All you have to do is prove your trading ability. You get 2 chances. Funded trader profit split 50:50
Another has a $300 entry fee & a further 2 chances at NO cost. No platform fees, no data fees. Funded trader profit split 70:30
These firms are putting their own money up for you to trade. Are they risking $50,000... NO. They are risking $2000 per funded trader. Blow that & your out.
People should check the FACTS before posting on this thread. Criticize at much as you want but make sure you can back your posts with FACTS.

This thread is about FUNDED traders. Nothing else.
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