I am a bit hesitant to post what will follow, but I am hoping to receive some positive feedback from our community (this trading forum) about some future plans that I am considering. Please be gentle. To share briefly about myself, I have a few months of previous day trading experience, and I am currently working towards pursuing this type of trading again during 2012. I had a positive experience the last time, becoming profitable within weeks of commencing, as well as maintaining a very good control on risk (i.e. low dollar amount losses). I chose to depart from the trading firm for personal reasons, specifically that I was not quite well enough prepared to essentially be an entrepreneur, and needed to return to a more stable form of income. My single greatest weakness at this point in time is that I do not have a longer term established track record, which is offset somewhat by the fact that I have previous exposure to the industry, and that I know from previous experience that I have the aptitude and ability to learn how to trade. I also have a personal and professional background that would satisfy a reasonable level of due diligence, and I have devoted significant time to learning about trading since graduating university. The alternatives are generally as follows: - Trade with oneâs own capital - Join a proprietary trading firm, with or without a capital contribution (dependent on the specific firm), and either receive a salary, be paid a salary plus performance compensation, or be paid purely based on performance. - Start a hedge fund, managing a large pool of other peopleâs money. I am open to the first two arrangements, but generally do not foresee myself pursuing the third arrangement. Why not? Because I am somewhat familiar with the securities industry in Canada, and I would also prefer to remain relatively private/anonymous, as opposed to being a public figure. The above said, does anyone have any thoughts about a fourth type of relationship, specifically partnering with a single individual to trade their capital. This idea is in part inspired by a recent episode of Dragonâs Den (Canadian show), where two investors were so impressed by a very young trader that they were willing to back him with a relatively small amount of capital, and then increase the scale from there based on success. The relationship could be scaled in a manner that would make the appropriate partner comfortable, by starting with a relatively small amount of capital (e.g. $30,000, with perhaps a lesser amount to actually be traded), with specific rules, daily monitoring and no overnight positions, and then increasing the size of the capital as comfort grows. Compensation could be structured in a manner that is somewhat similar to prop trading, e.g. 70% to trader, 30% to company owner, combined with a capital level rule (i.e. profit payout does not take place unless capital is currently greater than $x dollars, so that trader is not paid when the company loses money). I think that a natural response to my post will be that there is already an established industry that caters to individuals in my position, i.e. those that desire to trade, but do not yet have the level of capital required to do so effectively, which is a very fair response. I would still be interested to see if anyone has thoughts regarding the type of venture that I am contemplating. Thank you!
Hi, Anything less than a couple years of solid returns is not enough of a track record to handle OPM (other peoples' money) in my opinion. The market has a way of lulling traders into finding something that works, only to have it all taken away when a big tail comes along. It's easy to design a trading system that works now, but not so easy to create one that works all the time. -professional engineer, not a fund manager
I have spoken to a FOF manager here in Canada and the consensus is that institutionally, you will need a CFA to even be considered. On the retail side, you can use seed capital to start building a track record to market in the future. You sound like you want to make a living doing this now, and I'm afraid short of getting a HNWI or going on Dragon's Den itself, you will need to wait a few years for that track record (personal or managed acct) to kick in. The setup you mention is essentially being a Financial advisor, gathering clients and when ready a few years later, you can launch your fund. I know several fund managers in Canada who got their start this way.
Every month that you trade your own money makes all other options more possible. Assuming you are as you say profitable that makes the advantages of trading your money NOW two fold. 1) At the end of the month you have more $$ than at the start; 2) You have a track record that has added another month. Trade!
I completely agree with your comment regarding institutional money, the CFA designation would absolutely be a key aspect of being qualified to manage pools of money (e.g. IFM and PM categories). I also agree about the HNWI approach, that is actually more along the lines of what I was thinking, i.e. one individual, small corporate structure (done properly), rather than a number of investors...my current goals would not (and possibly never) include managing a few million dollars of OPM for what I am contemplating. Thank you for the feedback.
I definitely agree, and I am planning to resume daytrading in the near future, hopefully this year. Just need to line up a few items first to ensure a greater probability of success (e.g. adequate personal savings, etc.). The positive thing is that I have a very realistic idea of what I am getting into, having been exposed to the industry previously. Thank you!