Teaming Up w Expert Prop Traders

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.

Comments (33)

Sep 3, 2019

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.

just google it...you're welcome

    • 2
Sep 3, 2019

Nice

Sep 3, 2019

Appreciate the response. I read a few of your other posts, and it seems like you know what you're talking about re: trading.

I guess "profitable strategy" was the wrong wording. More so looking to learn profitable and professional techniques and learning how to apply them to given set of securities to test out hypothesis. Not looking for a free lunch - rather looking to learn how to bob n weave with the markets across variety of securities and in turn make some good money with the mentor. Capital intros are certainly a possibility as I'm dialed into the family office/HNW space. I'll caveat this by saying the goal is not to raise a fund or sheet to trade because it's a fuggin grind (large part of what I currently do). The allure is to have a principal capital base that I can compound at reasonable rates and not have to answer to people on a quarterly basis. I want to sit at home in my boxers.

Hear you loud and clear re: trader already making that money doesn't really need help - which was the basis to the second part of my post. I'm on board with partnering - but is my $2 million in capital really enough to get someone going. Seems like pennies for someone who can properly (risk adjusted) trade it.

When I was first starting out in the business I networked almost every night of the week to meet capital and build proprietary deal flow. How the eff do I meet successful principal capital traders lol? Need to meet some guys who have a sick proven strategy (multi year) but have no capital relationships.

Anyways I'm kind of rambling in circles here..

Sep 3, 2019

i understand perfectly what you want...and i understand perfectly who you want to work with. the issue is..once a trader is making 1mm+ for himself per year...he doesn't "need" much at all except large slugs of capital to leverage his strategy.

personally, it took me many tears to find a "system" that works for me (and i use that term very loosely). i had to give up lots of fancy stuff frommy ibank days,that only has value when you are trading a 1 bln+ book, delta hedging and making significant profits on the portfolio.

since a successful trader, making 1mm+ per year can goto one of the multi manager platform hedge funds (millenium, etc..) there is most likely nothing you can offer them in the direct this for that exchange given your size.

However, if you can find a trader who is just emergin, has a profitable strategy (probaly used to be a junior trader, or maybe a strategist) and is making 100-200k...for that guy, 40% of trading profits from your 2mm would 4x his take home....that is a significantly better story. You both win. That's what a good negotiation looks like..both sides come out ahead.

there are a lot of people looking for these "diamonds in the rough"....emerging managers who don't yet have significant capital to manage/trade, but given their success...really should. Finding these emerging managers is not easy, as you are finding.

If you want to partner with the trader making 1mm+ per year, you probably need to walk in with 10-20mm to get him interested...because your plan is to learn what you can and then leave...and take your capital with you, so that you can keep all your trading profits to yourself. Its not a bad thing...its just the obvious thing.

just google it...you're welcome

Sep 3, 2019

Sounds like you want to be a junior trader or trade analyst at a prop trading firm. There's plenty of these positions but they're very competitive. Possible firms include Flow Trades, Optiver, SIG, etc.

Try for these, if it's not what you're looking for please explain the difference.

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Sep 4, 2019

he wants to trade from home, on his own schedule, in his boxer shorts.

i understand why...thats EXACTLY what i'm doing myself now..and its awesome. You work when you want...and only when you want.

The hard part is, there are lots of "trading education" shillers out there, guaranteeing to make you a better trader....they say they will teach you their secret sauce...but newsflash....they don't have a secret sauce....they make all their money teaching...and all their students are left with worthless info, and out the "tuition".

Trading is one of the only industries where, once you find something that works...you never tell anybody how you did it, for fear that it stops working if too many people learn it.

This happened with HFT...remember Gecko and Knight? They were making a billion...now they make a small fraction of that.

just google it...you're welcome

Sep 4, 2019

Hi Jim - thanks for sharing. I think the big difference is I'm looking to learn vs. find a junior trade analyst job. I guess they could be one in the same.

As faceslappingcompilation (ridiculous handle) mentioned, more so looking to "team up" with a solo jedi and learn how to harness the force. My hunch tells me that there are thousands of sophisticated traders around the world that don't work for anyone other than their own bank account.

I get that public market strategies get thinned out when more people catch on to them, but is there really no benefit to having a "partner" to trade with? Spotting different patterns, giving contrasted viewpoints, industry expertise, different ideas, etc.

    • 1
Sep 4, 2019

Soul4trade, there are plenty of these "solo jedi" guys. But this is probably not the right forum since this forum is filled with "career guys". I recommend reddit (there will also be a lot of idiots) and maybe nuclearphynance (mostly very intelligent guys).

Have you considered simply renting a seat at a prop shop? You can trade your own money, you'll have the good equipment, and you'll be surrounded by real traders.

Most Helpful
Sep 4, 2019

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.

    • 4
Sep 4, 2019

After all these posts, I am still not seeing exactly what you have to offer? You are essentially asking someone to teach you their secret sauce of making $1m+/year, which is basically intellectual property worth $10m+ (assuming 10x annual profits multiplier). Are you offering something worth $10m+ in exchange?

Sep 4, 2019

many great traders love to talk about markets with other traders, and its human nature to enjoy showing off and teaching things that you are passionate about...so its not completely unreasonable that a trader might take you under their wing...but its still a big ask...you need to craft a story about "why you".

just google it...you're welcome

Sep 4, 2019

Does being a mod on Wall Street Bets count?

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Sep 5, 2019

    • 1
Sep 4, 2019

Topic hits home for me @Soul4Trade

About a year and a half ago, I was very deep in the cryptocurrency scene and had made a sizable chunk of change placing bets on technical fundamentals that I scraped from reading whitepapers. I made a bit more money on top of that by placing bets using ichimoku cloud with some volume profiles slapped on top and I thought I was doing well for myself. But everyone I was doing this type of stuff with, rudimentary TA, were all playing with <100K.

It wasn't until I stumbled upon a TeamSpeak server, WhalePool, where I found some of the bigger stacks playing the game of price action. In this server, I just joined anonymously and listened to dudes from all around the world playing with some very crazy leverage (BitMex at the time was offering 80 - 1) who would basically verbalize everything they saw, why they thought what they were thinking and share insights / theories as to what was going on at the highest levels of a very immature market at the time.

I had a friend from a Discord Server that we modded togethe who went in with about $100,000, lost about 20 - 30K at the start (which is what he chalked up to a trading education + ramp up) but is now doing quite well for himself. I never went for it like he did because not only is it significant ramp-up to learn price action and implement the risk management aspects of a trading system, but you have to always be trading. I feel like the goal would be to devise the strategy and as quickly as possible, implement it algorithmically and un-glue yourself from the computer and focus on stability of the algorithmic strategy execution.

But to answer your question, I'm sure places like WhalePool exist for other asset classes where you've just got a bunch of brilliant, usually autistic people in their houses executing their strategies day-in-day-out who wouldn't mind you being the annoying fly on the wall that slowly works his way into being one of the guys.

EDIT: NVM, don't think any of these guys were raking near $1MM / year

    • 2
Sep 4, 2019

Until you see an audited track record of AT LEAST several years, don't believe anyone who is telling you they are profitable trading from a basement in their pajamas, it's usually bs/luck.

You killed the Greece spread goes up, spread goes down, from Wall Street they all play like a freak, Goldman Sachs 'o beat.

    • 1
Sep 5, 2019

Couldn't agree more. Most people don't make money trading from home. It's like I said above--it's much, much harder than outsiders think.

Sep 5, 2019

.

You killed the Greece spread goes up, spread goes down, from Wall Street they all play like a freak, Goldman Sachs 'o beat.

Sep 5, 2019

to echo others here, if you have a profitable strategy in the public markets, you are not going to divulge anything about it. Any trader offering to tell you their secrets for a fee(like cap intro) does not have a strategy worth keeping.

If you want to learn the ins and outs of trading, the best route IMO is to work your way up on trading desk or the like. Or hire a quant fresh out of school, buy some data sets, and see if they can put together a strategy. And make sure you have an ironclad noncompete and NDA.

Array

Sep 5, 2019

not necessarily true...many hedge funds started out as a guy who was a good trader, but didn't have a ton of money and needed outside capital to leverage their strategy

just google it...you're welcome

Sep 5, 2019

Use your network to get a clerking job at a prop shop. Late 20's bankers can make that switch with a little luck and humility. This route is really the only way someone netting $1mm/year is going to show you step by step how to trade.

Sep 5, 2019

You could buy the Dark Pool Secrets from Stephanie Cameraman on CNBC. She made tons of money and is willing to share her secrets with you for the small price of $30.

Sep 6, 2019

Serious question - for these "traders" clearing 1mm+, what's the average volatility to these earnings? What is the average return? Also, we are 10 years into a bull market, how does these strategies work in a down market? I'm just curious if its less an investing game and more a "trading" game, and if so what does that even mean.

My guess would be there is a lot of volatility to earnings, up years, down years, ok years, etc. but I really have no idea. Without understanding, seems unrealistic to consistently generate something in the abstract like 1mm a year without swings.

*edit /addition - does clearing 1mm+ just mean they have a lot of personal assets, like 10mm+ that's generating 10% returns or is that not how to think about it.

    • 1
Sep 6, 2019

a guy i used to work with would see swings up up to 50k (not in one day....but a string of losses 5-10k losses)...most days making on avg 3-8k...the occasional +15k day...and end the year up around 800k-1.2mm. These are real "traders"...going home flat every day...waiting for the market to create some volatility...taking a position, extracing money from the market...and go home flat (most days).

he's been doing this for the past 6 years pretty consistently...not trading stocks...trading interest rates..mostly playing intraday volatility of the 5/30 curve...sometimes outright...and other stuff...but thats the majority of it.

this guy in particular keeps about 1mm in his trading account...so he makes about 100% annual return, but he takes his profits out every few months...so no compounding. why doesn't he compound or goto a large fund? he thinks his small size and instant liquidityis an advantage...and after spending and putting away money for retirement...he doesn't have a lot left. Since he is taking a lot of levered risk, he prefers to pocket the cash rather than reinvest

just google it...you're welcome

Sep 6, 2019

So these must be non-scalable strategies then? Basically taking directional bets day-to-day that are achievable on a small dollar amounts? Seems pretty wild to put up 100% "returns" consistently. I don't doubt this but at the same time something doesn't pass the smell test - this can't really last forever and I'd guess there could be a day of reckoning, especially using leverage.

Again, I'm not overly educated on that subject, I'd just imagine these guys eventually get blown out / mean revert. Maybe not.

    • 1
Sep 12, 2019
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Sep 12, 2019
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just google it...you're welcome