Why successful day traders seek investment? | Forex Factory

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Why successful day traders seek investment?

  • #1
  • First Post: May 11, 2016 7:07am May 11, 2016 7:07am
Why successful day traders seek investment?

Hi All,
Excuse me for the maybe ignorant questions.

1) Why is it the usual path of a successful day trader to want to show his track record for the express purpose of finding investment?
2) Surely a good day trader can continue to use the massive leverage available in FOREX to continue to take larger positions? So why do you need clients’ money when you have access to so much leverage?
3) If you did use clients’ money then you’d need to share your profits at least 50 : 50 with the client so you end up with less money than using leverage?
4) Surely it’s more hassle too? I mean you’d have to be registered as a money manager and there would be more paper work?
5) Could someone explain to me, maybe with a simple example how it’s beneficial to go after managing other people’s money in FOREX when you have access to so much leverage?

Thanks in advance for any replies.

I would appreciate articulate and detailed replies as opposed to one liners that won’t explain all of the above.

Thanks Again
  • #2
  • Edited 4:01pm May 11, 2016 3:20pm | Edited 4:01pm
You are referring to the hedge fund model, using an argument of the proprietary fund model. They are two different businesses. If you want to trade other people's money, you are a hedge fund. If you want to trade your own money, you are a proprietary fund.
You cannot be extraordinary by being normal
  • #3
  • May 11, 2016 5:08pm May 11, 2016 5:08pm
Yeah, it's more hassle but you don't need to be registered or licensed, there are just restrictions on the number of people you can solicit per year. Plus, most brokers have a function to link accounts (Managed Account Trading) so any positions you enter into your account are automatically entered at the same time in all of your client's accounts (you can adjust position sizes automatically based on client account sizes).

You don't split 50-50, you pay (or re-invest) your client's money based on the percentage gain and the size of their investment. If you're trading with $10,000 and they give you $2,000 and you do 50% that year, you keep $5,000 and they receive (or re-invest) $1,000 minus commission.

The best reason I can think of to trade OPM (Other People's Money) is if you lack capital and you need to make a living sooner than later. If you over-leverage your own account you're setting yourself up for a huge loss (eventually), but using OPM you risk the same percent and you make a commission. If you can make 50% for clients they'll be happy to give you a 20% (on profit) commission. Or follow the 2 and 20 Hedge Fund model.

Rob M.
  • #4
  • May 11, 2016 9:28pm May 11, 2016 9:28pm
because.....

if they win, they will get 10%-50% of client's profit.

if they lose, that's not his money.

No one wants to be defeated~
  • #5
  • May 12, 2016 12:56am May 12, 2016 12:56am
Thanks for the replies!
  • #6
  • May 13, 2016 6:29am May 13, 2016 6:29am
You take investors money so that you can become richer much quicker.
Why would you try to become a billionaire from $100 dollars if you can take millions of investor money and become a billionaire much quicker?
Never Ever Give Up!
  • #7
  • May 16, 2016 11:07am May 16, 2016 11:07am
Quoting jonirrenicus
because..... if they win, they will get 10%-50% of client's profit. if they lose, that's not his money.

Well said. Unfortunately that is the real truth.

Over the past years all the self-appointed "fund managers" and "signal providers" I have seen on FF have failed. At the end they have all walked away with clients' fees and risked nothing... Except for their reputations, but next day they usually set up a new "bucket shop" under a different username.
  • #8
  • May 16, 2016 11:17am May 16, 2016 11:17am
no money no honey lol
  • #9
  • May 16, 2016 6:22pm May 16, 2016 6:22pm
a successful daytrader - contradiction in terms.
  • #10
  • May 16, 2016 7:20pm May 16, 2016 7:20pm
Quoting edb500
Why successful day traders seek investment?
Simply speaking...It's a stepping stone.

1. Showing your market prowess helps to develop confidence. As a lowly day trader, paying the bills is good, but you lack the recognition of others patting you on the back that lends itself to the societal pitfalls of individual identity.

2. Leverage with a broker that will continue to pay, isn't the same leverage as most of the average Joe's have access to. Typical 500-1000:1 tapers dramatically when you hit the $10,000 mark. This is the illusion to keep suckers investing in their dime accounts.

3. If you can't afford to trade higher than dimes, having a larger account size feels a lot like padding. But when you start to understand that leverage for a "Real Account", isn't what it is for the micro FF traders, it's a much different ball game.

4. It's not a hassle. It's a total fucking Nightmare!!!!
When others see your stats, they start to see the moon when you haven't even taken a jump from the ground. When their money is on the line, they want a fucking update every 15 seconds as to why they aren't rich yet. And then...there is working for an actual brokerage trading with managed accounts...you feel the wrath of all of the clients with an account manager who wants an update after every time you press the buy/sell button!

Don't even get me started on trading cash for friends and family...make them 15% and it's not enough. Lose 2% and you have effectively stolen their life savings and they now have to rent out their basement to feed the kids.


5. Trading other peoples money has advantages if you are mathematically challenged. Your own nuts aren't necessarily on the line so absorbing a large loss isn't quite as painful. The down side to this is that nobody will consistently pay you more than 10-15% on account unless you are 100% private. And even in this event, refer to points 3 and 4.

After the "Better than Average Trader" has gone this route, they will appreciate their absolute market silence and the fact that they can actually trader smaller accounts with higher leverage to make more than they could with larger accounts with lower leverage only taking a small percentage of the gains.

Sure...

There are exceptional incidences where trading OPM makes sense for a while...but longevity isn't one of them.

Like all jobs.

You do what you have to do, until you can do what you want to do.

In the case of any trading, it really boils down to what you can afford to do.

When I started managing funds, I still had to work a full-time job to make ends meet.
When I upped my percentage and went prop, I couldn't deal with the headaches and conversations.

When I learned that trading my own dough had a lot less pressure and made me a lot more money...
I continued this path.

Let all others find out where they land in the same scale.


All in all...

I don't regret a single step.

Without having an understanding of down, you can never appreciate up.
Money Can't Buy Happiness. Poverty Can't Buy SHIT! You Choose!
  • #11
  • May 16, 2016 10:18pm May 16, 2016 10:18pm
Quoting Magix
{quote} Simply speaking...It's a stepping stone. 1. Showing your market prowess helps to develop confidence. As a lowly day trader, paying the bills is good, but you lack the recognition of others patting you on the back that lends itself to the societal pitfalls of individual identity. 2. Leverage with a broker that will continue to pay, isn't the same leverage as most of the average Joe's have access to. Typical 500-1000:1 tapers dramatically when you hit the $10,000 mark. This is the illusion to keep suckers investing in their dime accounts....
Good post magix.
Hey if you don't mind I'm gunna pinch your last line for my signature..
Without having an understanding of down, you can never appreciate up.
  • #12
  • May 17, 2016 12:46am May 17, 2016 12:46am
Thank you all for the continued great replies
  • #13
  • Edited 7:58am May 17, 2016 12:49am | Edited 7:58am
Quoting Magix
{quote} Simply speaking...It's a stepping stone. 1. Showing your market prowess helps to develop confidence. As a lowly day trader, paying the bills is good, but you lack the recognition of others patting you on the back that lends itself to the societal pitfalls of individual identity. 2. Leverage with a broker that will continue to pay, isn't the same leverage as most of the average Joe's have access to. Typical 500-1000:1 tapers dramatically when you hit the $10,000 mark. This is the illusion to keep suckers investing in their dime accounts....
Excellent insight, Magix! And so true...!

Especially No.4: "It's not a hassle. It's a total fucking Nightmare!!!!... Don't even get me started on trading cash for friends and family... make them 15% and it's not enough. Lose 2% and you have effectively stolen their life savings and they now have to rent out their basement to feed the kids."
  • #14
  • May 17, 2016 7:17am May 17, 2016 7:17am
Quoting Magix
{quote}4. It's not a hassle. It's a total fucking Nightmare!!!! When others see your stats, they start to see the moon when you haven't even taken a jump from the ground. When their money is on the line, they want a fucking update every 15 seconds as to why they aren't rich yet. And then...there is working for an actual brokerage trading with managed accounts...you feel the wrath of all of the clients with an account manager who wants an update after every time you press the buy/sell button! Don't even get me started on trading cash for friends...
Outstanding... I have gone, thinking the matter...

Best
D.P.
Hunting High and Low
  • #15
  • May 17, 2016 9:15am May 17, 2016 9:15am
Quoting anonymousey
{quote} Good post magix. Hey if you don't mind I'm gunna pinch your last line for my signature..

Quoting MasterGuru
{quote} Excellent insight, Magix! And so true...! Especially No.4: "It's not a hassle. It's a total fucking Nightmare!!!!... Don't even get me started on trading cash for friends and family... make them 15% and it's not enough. Lose 2% and you have effectively stolen their life savings and they now have to rent out their basement to feed the kids."
Quoting Dr.Phoenix
{quote} Outstanding... I have gone, thinking the matter... Best D.P.
Money Can't Buy Happiness. Poverty Can't Buy SHIT! You Choose!
  • #16
  • May 17, 2016 9:38am May 17, 2016 9:38am
There is only one and only one business model that will make you money with forex

1) find a gimmick (example "We found a long lost trading manual written by W D Gann"
2) Show some positive trading track record (demo is ok and values can be doctored as needed)
3) Grow a membership base. You must invest and put all your effort in marketing
4) For the edification of your enthralled followers, make sure to do a "live trading session once a week" - real money, as a marketing expense ..
5) and to cap it all, always sell sell sell; (books, videos, training, software ; etc ...)

That is how money is made in forex if having your own FX brokerage is not an option ..
  • #17
  • May 17, 2016 5:41pm May 17, 2016 5:41pm
Real successful day traders don't seek investment.

They're their own boss.
  • #18
  • May 18, 2016 11:32pm May 18, 2016 11:32pm
Quoting Magix
{quote} Simply speaking...It's a stepping stone. 1. Showing your market prowess helps to develop confidence. As a lowly day trader, paying the bills is good, but you lack the recognition of others patting you on the back that lends itself to the societal pitfalls of individual identity. 2. Leverage with a broker that will continue to pay, isn't the same leverage as most of the average Joe's have access to. Typical 500-1000:1 tapers dramatically when you hit the $10,000 mark. This is the illusion to keep suckers investing in their dime accounts....

I learned something with that post. It reaffirms my view of staying private, selling nothing, and not taking any money from friends or family.
If you are good at something, never do it for free--Joker
  • #19
  • May 19, 2016 1:44am May 19, 2016 1:44am
Quoting edb500
Why successful day traders seek investment? Hi All, Excuse me for the maybe ignorant questions. 1) Why is it the usual path of a successful day trader to want to show his track record for the express purpose of finding investment? 2) Surely a good day trader can continue to use the massive leverage available in FOREX to continue to take larger positions? So why do you need clients money when you have access to so much leverage? 3) If you did use clients money then youd need to share your profits at least 50 : 50 with the client so you end up with...
The answer is simple.

They are successful because of some reasons. One of them and very important one is because they do not over leverage their accounts. Otherwise they wouldn't be successful.
  • #20
  • Jun 2, 2016 7:13pm Jun 2, 2016 7:13pm
Quoting antonis1681
{quote} The answer is simple. They are successful because of some reasons. One of them and very important one is because they do not over leverage their accounts. Otherwise they wouldn't be successful.
and to be a successful trader then we need to continue to improve trading skills are good, with increased skills will allow us to increase the trading results, then why try to take advantage of the demo account or demo contest to become a successful trader
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