Arcade = Scam ?

[RXC]

hi T2W,

I had the impression that Trading Arcade were scams; by scam I mean people who make retail traders think they can become professional traders after a training period. But in fact the whole process is only done to charge desk-fees or trading-commissions on your back.

Can anyone having been following these training programs give me some advice?

Thanks.

 

[Parky]

RXC,
Very harsh, you have to understand the history to make a proper judgment. Trading "arcades" came into being when the open outcry trading floors closed down and were designed to give the ex floor traders access to the markets whilst maintaining the feel of the trading floor where traders could mix and enjoy the economies of scale that came from having groups of traders together sharing costs.
However on the trading floors a natural progression of new traders came from support staff, known as "runners" or Yellow jackets which were the color of jackets worn on the LIFFE floor by support staff.
In the new arcade world there was no supply of admin staff so the "trainee trader" programs started to come into existence, and for a while they worked well bringing new blood into trading rooms. But theses programs quickly became unsustainable because of the competition between trading arcades. The programs only work if the successful trainees stayed long enough on deals to pay for the failures and fund the next intake. The problem was that successful trainees where soon advised as to the going rates and were poached by other arcades so no one could ever recoup the costs of running the programs and so they dried up.
FSA rules are such that any regulated company cannot do what you are suggesting, namely taking retail traders and take advantage of them, so simple research should be able to help you sort those that are dubious from those that are "professional". The old adage applies a fool and his money are easily parted, go for cheap options and you will pay the price.
Simple questions, is the trading arcade regulated? Are they direct members on the exchanges they offer? How long have they been around ? What is the turn over of traders?

 

[darr3n]

RXC,
The risks to the arcade are pretty high as well, as someone will have to put money up to enable the 'trainees' to trade, and the arcade would be liable for their losses. Before paying up any money, I would find out who is running the courses. Are they accomplished traders, who have been successful and looking to supplemnt their income? or are they failed traders trying this as a last resort. I know of a couple of examples of each type of program that has been tried over last few years by various arcades in London.
As Parky points out as well, is all well regulated, so thats one less thing to worry about.

 

[arabianights]

no, it's not all regulated at all - that's why as parky says first question has to be whether they are FSA regulated, and if not why not...

 

[darr3n]

ok, I will clarify, make sure its properly regulated. Never took in that bit of Parky's reply, I kind of assumed no-one would ever go to an unregulated arcarde.
The only ones I have ever been aware of are operated by well run, regulated arcardes, in and around London. Perhaps I need to get out more. Then again, all UK ones would have to be regulated?? wouldn't they/

 

[Parky]

No they would not; proprietary trading does not require FSA regulation. However it must be prop in the truest sense, that is trading house money, no unregulated entity can take client money which is why some dress this up by asking for fixed costs up front or charge for "training" at which time it ceases to be client money. I would say the majority of prop trading arcades are not FSA regulated but if you are not sure you can use the FSA website to check. However some exchanges will only let you become a member if you are regulated so this twists a few arms. If you are in an unregulated trading room chances are they do not have direct market access and "hop" via their clearer which invariably slows down their access.

 

[stir-trader]

I run an arcade with 15 successful traders. Every one of these traders came to the group with no experience of trading for a living. Each one of these traders now makes a decent living. Some of the traders can bring down a 100k a month, sometimes even 100k in a day. Some only 5k. No matter the amount they are all capable and able to return positive results day in and day out. The smaller traders are improving all the time and that is mostly thanks to the senior traders that share their knowledge, wit and wisdom about all things trading... A clear benefit of being in an arcade.

Having trainees and juniors certainly does NOT make a significant contribution to the monthly round trip totals. After all they only start off with a one or two lot and they are taught not to trade anything other than the value. My established traders can easily hit 100k round trips a month while a trainee will be extremely lucky to trade 1000 round trips a month. The company covers the cost of the traders’ desk fees and front end license costs until the trainee has begun to make decent money trading which can be a bl00dy long time. We also assume all losses (frequently). A benefit to smaller trader and people just starting out is that they can share in having reduced fees thanks to the huge amount of round trips the senior traders make.

The reason that we take trainees on is that some of the trainees progress to junior and then senior level traders. That is when our investment starts to return profits to the company. Most of the time that is not the case at all and we just take the loss. We have spent over 200k in one year training and providing services to trainee traders yet no one came through and it can be years before we see any type of profit if at all.

So people that say that prop shops are all about getting bums on seats and churning lots then you are very mistaken. Maybe some outfits are like that but I am not aware of any and I think I know most of the groups in and around London and Chicago......

My guys pay less than a £1 per round trip and I see retail outfits charging £3 and more per round trip. Tell me who is scamming who?

 

[stephen2003]

I run an arcade with 15 successful traders. Every one of these traders came to the group with no experience of trading for a living. Each one of these traders now makes a decent living. Some of the traders can bring down a 100k a month, sometimes even 100k in a day. Some only 5k. No matter the amount they are all capable and able to return positive results day in and day out. The smaller traders are improving all the time and that is mostly thanks to the senior traders that share their knowledge, wit and wisdom about all things trading... A clear benefit of being in an arcade.

Having trainees and juniors certainly does NOT make a significant contribution to the monthly round trip totals. After all they only start off with a one or two lot and they are taught not to trade anything other than the value. My established traders can easily hit 100k round trips a month while a trainee will be extremely lucky to trade 1000 round trips a month. The company covers the cost of the traders’ desk fees and front end license costs until the trainee has begun to make decent money trading which can be a bl00dy long time. We also assume all losses (frequently). A benefit to smaller trader and people just starting out is that they can share in having reduced fees thanks to the huge amount of round trips the senior traders make.

The reason that we take trainees on is that some of the trainees progress to junior and then senior level traders. That is when our investment starts to return profits to the company. Most of the time that is not the case at all and we just take the loss. We have spent over 200k in one year training and providing services to trainee traders yet no one came through and it can be years before we see any type of profit if at all.

So people that say that prop shops are all about getting bums on seats and churning lots then you are very mistaken. Maybe some outfits are like that but I am not aware of any and I think I know most of the groups in and around London and Chicago......

My guys pay less than a £1 per round trip and I see retail outfits charging £3 and more per round trip. Tell me who is scamming who?

where about are you?.

 

[fantastic]

RXC :
Seems you are confused.
desk-fees, trading commissions, etc:
see it as renting business premises. You can trade for home ( lifestyle business)
or rent business premises ( office , shop or warehouse). Some firms offer to provide the business premises for a fee... just classic business practices. No scams as long as
the premises are theirs and are legally allowed to rent these out to you...

become professional traders after a training period :
depends how you define professional. If it means profitable trader, well ... someone has been economical with the truth : no training can guaranty your becoming a good trader. Your trainers can always try, no guaranty. I am not sure any one can predict if you will be a good one: just try things, do your best and make sure you find out quickly when to cut your losses.

For the training programs : take your time to think things over and make sure you are clear about what you want to get out of it and what you will get.

hi T2W,

I had the impression that Trading Arcade were scams; by scam I mean people who make retail traders think they can become professional traders after a training period. But in fact the whole process is only done to charge desk-fees or trading-commissions on your back.

Can anyone having been following these training programs give me some advice?

Thanks.