I randomly came across the name SMB Capital four times in the past (a story I will tell you about later) before I had the chance to meet you at an open house that you and (Iceman from The PlayBook) had for college students back in April of this year.
I have a BA in economics from Baruch College, I’m a Series 56 holder, and at present I trade remotely (with a trading arcade). I saw a very interesting question on SMB application for equity traders. The question reads “Can you see yourself managing a portfolio of $10-$30mm within five years?” I’m not doubting that it’s possible because I strongly believe that I will be able to manage 10 to 30 million in a few years or less but my question is, can a very ACTIVE intraday trader (as you like to say) put $10-$30 million in the market daily and still be profitable at the end of the day if we take these factors in consideration: the huge volume he or she will create on certain stocks where the potential of illiquidity is present, high transaction costs, and taking too much risk on 5 to 10 trades that will have a total of 10 to 30 million?
In short, yes. This is only for the best of the best intraday traders, with the skill to take very large positions.
You probably have not been exposed to traders at that level yet but hopefully one day you will. It would be rare to see traders at that level at a trading arcade, a shop where you make a risk deposit and they leverage your money and make money on your trading commissions. I was talking with a veteran arcade trader at The Trading Show NYC yesterday, explaining our prop business model, and his reaction was that of surprise at the difference between what a prop firm offers compared to an arcade.
Using off-the-shelf arcade trading technology, it would be very difficult for you to imagine being able to trade such a large book. With in-house proprietary technology you can significantly increase your trading opportunities with custom filters and advanced exit stops. What I love most about our technology offerings, is the ability for a discretionary trader to build automated strategies from his desktop without the necessity of coding skills. This is a game changer turning the discretionary trader into a bionic discretionary quant trader playing much more offense with his favorite setups.
With your draw down of your risk deposit (perhaps 5-20k), it would be difficult for you to imagine being able to trade such a big pad. You would not be able to sustain the losses with that much money. At a prop firm, the firm takes all the downside and has deep pockets, giving you much more freedom to take on considerably more risk.
At an arcade where most are small traders, it is difficult to image sitting next to guys who are not satisfied unless they are booking 50k plus a month.
At an arcade where your commissions are marked-up and after doing considerable volume those fees can be extensive, it is hard to imagine trading so much volume profitably. At our shop we do not mark up commissions like an arcade. We are only interested in splitting P&L. This makes your trading much cheaper.
At a prop firm you are likely able to trade multiple accounts. At our prop firm, the better traders have an intraday account, swing account and options account. With their swing and options accounts firm traders can start to develop longer holding times for their trades. This also helps them to trade larger.
Keep working on your trading game! One day we look forward to giving you a $10 million trading book.
Related blog posts:
Making My Life Easier as a Trader
This is How You Make More Money
You can be better tomorrow than you are today!
No relevant positions
Very informative blog. No need to go through the hassle of opening a hedge fund now.
No. Much better to make 50 percent on those 10m gains than 20 percent as well 🙂 Trade well.