Any reason in particular? Seriously what is the worst that can happen? Lets say in two years, I hire 6 traders none of them make money, yes I paid out some money for computers, desk, office space etc. I lose 250k in this so what? I move on. I can still use the computers, sell the desk, I am keeping the office space. I am still trading, still making money. I don't see why I would be insane to do this. And this is also the reason why I started this thread, to find out why I would be insane for this. I see a limited downside, with unlimited upside. Sounds like a good trade off.
As soon as you pay somebody, you're automatically flooded with 'dandidates'. You'll spend your time reviewing applications.
OK, let me add a few words of caution here. When you make reference to Swiftrade or other firms that seem to have pulled it off, please understand the time and money it took for them to develop that model. It didn't happen over night. Sure now they make it look easy, but I assure it wasn't. Most prop firms here in Chicago usually start up when a superstar trader with an edge, leaves firm A to start his own firm B. Firm B has the superstar (the owner) and the edge. He usually is flush with cash having spent 5 years at firm A being a superstar trader. So he then grows his operation from that base and makes it look easy from the outside. I can't think of one firm off the top of my head that just started with no edge and limited capital and then started burning cash trying to find an edge and tinker. Tinkering works when it comes in the form of an existing and profitable operation. I don't know if you know who David Kalt is, the guy is worth 500 million or something like that. Runs Reverb Capital here in Chicago. He basically tried to do what you are doing now. He has more money then God, probably some of the best technology around (the guy had started two tech companies and took them public). And runs ads locally looking for traders. Ask around and see how they are doing. I know but don't want to say publicly. Let me put it this way, you would have better luck starting a movie production company.
I don't expect it to be easy, in anyway shape or form. That is why I am trying to start off slow. I am not a superstar, but my trading does provide a 7 figure income each year over the past 3 years, so I feel that I have the capital to make something like this work. As for Reverb they are focused on HFT where it takes a lot of capital and awesome technology to compete and with that segment of the market flooded with participants its a much harder game. There is so much more to trading intraday and so many opportunities in a given day that others seem to ignore. So by me building off that base with a couple traders, I don't see how it is doom to fail from the start.
If money is no object, why not do what the Yankees do and buy a team. Go out and lure a superstar away from another firm. Offer him 150k base plus 50% of the profits or equity in your firm. Then recruit guys to work underneath him. Your odds would improve dramatically over bringing in guys off the street and giving them 2k a month to tinker with an automated strategy in the hope that in 12 months they discover gold. Why not go for the sure thing? Am I missing something here?
No Mav. you are not missing anything at all. This is the type of conversation I was hoping for. I never thought about doing that. How would you suggest someone going about to A) Find this superstar and B) Is 150k plus 50% a good deal? Now when I recruit some guys to work underneath him, should they still be paid, should their job description be exactly what I had in mind? It is a very interesting idea. Thanks
My best advice would be to find a good recruiter in the city you want to do this (Chicago?) and he/she will be able to land you a trader. They will also know ballpark what you should be offering this trader. When you bring this trader in, now you have revenues (or should) to lean on and you can now afford to pay some small draws to some young guys right out of college. This way the operation sort of funds itself. I'm sure there will still be some cost outlays, and no doubt you will have some risk, but I think this is a much better way to go. One profitable trader in hand is worth 10 newbies in the bush.
I just have to ask. WHY? Why in the world would you wish to waste 6 figures worth of capital on a bad idea like this. This concept has not worked in years, what makes you think it will work now? The only firm that has managed to pull it off in full scale is FNYS, and they spend a year simply training the candidates from their highly selective process. Plus, they employ more serious high capital strategies. Listen to Mav, he has his hand on the pulse of the industry, and it is getting weaker by the month. The edges are simply not there to front your own capital and back newbies who would develop trading systems. Putting aside the trader success/failure statistics, the reality is that there is almost no edge left in equities or index futures for the small to mid-size independent trader.