Hello WSO - I'm a long time member/contributor posting under a new account. I'd like to ask the professional traders out there a simple question.
Can a non-professional trader team up with a professional expert to help with execution and thereby learn a profitable strategy (and how to trade professionally)? My definition of an expert is someone who consistently nets over $1 million per year. No rhyme or reason to that definition other than I wouldn't quit my job and shadow/help someone for free unless they possessed that type of skill/operation.
Bit of background to help the discussion: professional private equity investor with a liquid balance sheet in excess of $2 million. I only mention this because it's how much money I can burn through before resorting to ramen noodles and a job search. Always had a passion for trading, but ended up in private markets. Always messed around with macro/event driven trades, but never spent too much time honing in on a strategy (I'm pretty busy on day 2 day). 30 years old. Would not require a salary.
In both the private and public markets, having a balance sheet to partner with is an attractive proposition. However, I don't think that concept is applicable here because I wouldn't want to learn from a trader who has a smaller account. Given that logic, what (if any) reason would a seasoned trader with a profitable strategy bring someone in to work with?
I know this is an absurd question. But curious to see if anyone has some wisdom to share. Has this been done before? Any advice and insight is welcome.
Thanks in advance.
you are essentially asking a trader with a profitable strategy to teach you their strategy...which is worth, as you suggest, in excess of 1mm per year. Assuming 20% no compounding...thats a "value" of 5mm.
you have neglected to mention, what will you offer to this trader with a profitable system?
if i have a profitable strategy, and i'm currently making good money with it...why would i share that for free? as a finance professional, we realize that selling things that have value is the capitalist way. what do you add that directly or indirectly adds value to this trader that already makes good $$?
perhaps you can offer capital introduction? trading 1mm and keeping 100% is cool. Trading 50mm and keeping 20% is cooler.
If a trader is already making 1mm+ per year, they probably don't need "execution help" as they are already executing.
What i think makes more sense is partnering up with an analyst/strategist who has a strategy that would be successful, but they don't have the capital to trade it....they need capital introduction...would you partner with them...they trade your money, and you pay them 20% of the profits, in exchange for learning the system.
this is realy the only way i can imagine this working..otherwise, you are taking advantage of the other party, and most people in this position would see that straight away.
There is another path not yet considered. There are a few trading gurus who might be willing to teach you in exchange for some other type of value. Capital introductions are worthwhile for people who don't currently have the ability to raise money, but I don't think partnering with an emerging manager is really what you're looking for. There is a bit of a mismatch between a 'guru' and someone who can't raise money. And while $2M isn't nothing, it's not a huge sum of money either.
Depending on what exactly you do in the private markets that has generated $2M for yourself before turning 30, you might be better served going to a family office with a major trader as a principal. Someone like Jim Leitner comes to mind. He runs his own money and he's a great trader. But he's not going to just teach you to trade. You have to offer something of value to him. He cares a lot about ESG investments at the moment, so if you had some experience evaluating private deals and could incorporate an ESG angle into your analysis, you might be able to work out an arrangement where you work part-time on those deals and part-time in the markets with him.
You have to understand, though--most people aren't good prop traders. Most people who currently trade for major banks couldn't make money on their own. A lot of market-makers need flow to generate P&L. If they leave that environment, they often lose money. Even seasoned proprietary traders and hedge fund PMs lose money all the time. It's not like HFs have been killing it recently. It's hard to make money in the public markets, and there is no strategy that works forever, so anything you learn from a 'guru' will only be the base of your knowledge which you'll have to constantly refine to stay in the game.
I think it's worth considering a family office environment where they employ traders to actually run their money, and don't just invest in funds. If you can add value to the organization by working in the private markets, you may be able to come to an arrangement where you get to split your time between public and private market investments. And once you've learned what you think you can extract from the traders at the family office, just bounce.
Hope this helped.