PM: = Paul Mullen (Interviewer)
MP: = Michael Patak (Trading Scout)
PM: What is a trading scout and what do you do ?
MP: As a trading scout I evaluate and monitor recruits who are in our Combine program (similar to the NFL Combine). At the completion of the Combine, I review trade reports and analyze each recruit’s trading methodology to ensure they have adhered to our scouting evaluation form. This review allows me to determine if a trader is prepared to begin trading a live account, which is fully funded by our equity partners.
I also work as a managing trader, in this role I monitor the daily progress traders we have recruited from the Combine who are now trading a live account. In addition to daily monitoring I also work with them to establish goals and objectives for live trading account.
The premise of my business is to reduce the barriers of becoming a futures trader by opening the opportunity to anyone in the world, regardless of experience, background, or education. By opening all these doors we are able to “mine” for consistent, disciplined, and profitable trading talent that is often over looked by other trading firms, by evaluating their trading performance in today’s market through the Combine.
PM: How did you get started in the industry?
MP: I began trading while still in college, starting when I was 20. Upon graduation and determined to become a successful futures trader, I moved to Chicago. I was hired as a trader by a clearing firm, which required me to trade under very strict risk-parameters, which helped me hone my skills as a profitable, disciplined, and consistent trader.
Through those principles, eight months later, I was successful enough to financially back myself; I bought a seat on trading floor and become a member of the CBOT (Chicago Board of Trade), and began trading in the Dow Jones Futures pit.
PM: How long have you worked as a broker and local at the CBOT?
MP: I have been a trader in the Dow Jones Futures pit since 2002 as a broker and local (a local is a person who trades independently for themselves). Since establishing TopstepTrader at the beginning of 2010, my trading has taken a back seat to my scouting and company responsibilities.
PM:. What qualifications are required to be a BROKER/LOCAL in the DOW pit?
MP: To be a broker/local in the DOW pit, you must be registered with the NFA (National Futures Association) and also pass membership with the CBOT. Once that is accomplished, a trader must develop a partnership with a clearing firm, which will clear your trades. Clearing firms require floor traders to have at least $50k in their trading accounts, so that is a large obstacle of becoming a floor trader.
PM: How is a broker/local paid. bonus?
MP: Traders are paid based performance. As a broker, I have my customers that I fill orders for and I get paid a commission for doing that. As a local I get paid based solely on my trading performance. Most brokers and locals are independent, so we live by the motto “we eat what we kill.”
PM: What are the hours like?
MP: As a trader the hours are really what you make of. Although the ability to trade is available nearly 23/24 hours a day because of Globex’s hours, there are some traders who trade in the mornings, afternoons, evenings, or overnight. That being said, even when a successful trader is not trading, they are still always constantly studying and learning to work to advance their trading aptitude.
As a floor trader and director of scouting I am on the floor by 7am and by 3:15pm I am usually clocked out, flat in the market and checked up with my trades. That being said, I continue to work on my business responsibilities and developing my trading knowledge and market awareness often late into the evening.
PM: Do you have people working under you and who are you responsible to?
MP: Yes, there are clerks that work with me and help manage recruits. I also work with other trading scouts who help me evaluate our recruits/potential live traders; the scouts also work as coaches for the live traders.
PM: Can you talk through a typical day?
MP: I am typically on the trading floor by 7am. From 7 – 8:15am (when our daily TsT Squawk Radio broadcast begins) I spend time analyzing the markets and reviewing pre-morning market reports. Once I have a good understanding of what has/is happening in the markets, I am in constant communications with our recruits and live traders. I provide trading advice, insight, and clarification to both groups throughout the day.
Daily from 11:15-12:00pm I have a “Drill a Scout” session via the squawk radio broadcast/interactive trader chat room, which is when respond to any questions our recruits ask regarding trading, the program, the market, etc.
PM: How has the credit crunch affected your sector of the industry?
MP: The market has clearly dried up as a result of less players being in the market. Orders from customers coming into the pits has also slowed down.
Although, my business has gained momentum as a result of this, because floor traders are rapidly leaving the floor to trade the screen due because there is such low volume in the pit. With exception, because of the recent increase in market volatility there have been some floor traders that have returned to the floor to trade but I have not seen ANY new floor traders come into the pit in my recent memory. Most, if not all new traders, are trading strictly on the screen.
*Trading the screen means trading electronically from anywhere in the world someone can access a computer and Internet connection.
PM: Are you affected by the various rescue packages and new legislation regarding the activities of financial institutions?
MP: We are not affected by this at all. We are futures traders so we keep only short term positions, we trade the news and anticipate the market movement for the minute, hour, or day. This type of news affects only investors with long term positions in the market.
PM: Does your role attract much media attention and, if so, is it warranted?
MP: My role as the founder and president has garnered some media attention, all of which has been very positive. We welcome the ability to spread the opportunity with anyone who is interested in a career in futures trading.
Specifically we were featured in the Wall Street Journal’s online finance section and Technical Analysis of Stocks and Commodities Magazine. Also, our TsT Squawk Radio broadcaster’s picture was used in an article featured in a number of publications, including Forbes online and the India Times. The Wall Street Letter is also working on publishing an article about the growth my business has experienced over the last year and about the opportunities we offer.
PM: What advice would you give to someone who wants to become a broker/local?
MP: I would focus on becoming a consistent, profitable, and most importantly a disciplined, electronic trader. Although trading has existed for hundreds of years, electronic trading has been around for a short time in comparison to open outcry.
There is a new wave of traders evolving electronically. As a “human” trader, people should focus on learning to coexist with algorithmic trading systems, bots, and black boxes. There is a lot of potential for a new electronic trader to find an edge in the market
PM: Is there anything you want to add ?
MP: Yes, trading is hard damn work. Focus on understanding what style of trading works with your personality, and stick with it. Do not jump from product to product or indicator to indicator. Have ONE focus and work your ass off to hone your skills and become a consistent, profitable, disciplined trader, that can handle any market condition that may arise. This comes with time and experience, you need to immerse yourself in a market simulator until you are fully confident in your ability to trade a live account.
Michael Patak can be contacted at TopStepTrader