Setting up my own trading business

[daxdaytrader]

I have developed a profitable trading system which I now use to run a small spread bet account. But I only make pocket money from this as I only have a few k capital.

I'd like to set myself up as a business and borrow capital, maybe 150k, to trade much larger positions so I can make a living and also spend time developing my discretionary trading skills.

Is it feasible to formulate a business plan and ask a bank to finance me much as they will for other ordinary businesses?

Any suggestions?

 

[luckyd1976]

UK I have no Idea. In the US this is easier to do...

 

[ns1000]

A bank is unlikely to lend for a business with no track record. Can you prove that your system is scalable? How long have you been using it. Your best bet - if you want to borrow the money- is to borrow it against some security (most likely a house). Otherwise, you're going to struggle to get anyone to invest in a really risky venutre.

 

[daxdaytrader]

A bank is unlikely to lend for a business with no track record. Can you prove that your system is scalable? How long have you been using it. Your best bet - if you want to borrow the money- is to borrow it against some security (most likely a house). Otherwise, you're going to struggle to get anyone to invest in a really risky venutre.

I have 5 months of live results posted at Collective2. I would develop new, or buy into existing systems rather than scale up my existing one to deliver a more diverse portfolio. I specifically do not want the financial risk upon myself and want that on a limited liability corporate structure.

I don't mind establishing the business in the US if that would help.

 

[ns1000]

If you're talking about buying into new systems, then it's a different business to the one in which you have a 5-month track record.

You say that you don't want the financial risk on yourself, but you're asking a bank to do just that; their return would be only the interest on the loan. To me that would be a really dodgy proposition. There just isn't the return in it.

 

[msrxlbp2]

You need Equity investment as opposed to Debt - the spread betting firm are already providing you with leverage so why would a bank take a huge risk and further increase the leverage?

 

[zupcon]

I specifically do not want the financial risk upon myself and want that on a limited liability corporate structure.

In my experience the bank's will generally want to see business loans secured against personal assetts. From their perspective you're lack of willingness to personally underwrite the loan shows a lack of confidence, and if you have no confidence, why should a lender ?

Perhaps trading OPM under a power of attorney might be a possibility, or maybe operating in the capacity of an IB offering the system for free, or at a reduced cost to clients might generate additional income.

Perhaps try marketing the system to independant financial advisor types who might have access to high net worth individuals who might wish to take a punt.

It might be in violation of the rules here, but if the system is making reasonable returns at least make it easy for people to find the collective 2 listing.. publish first and apologise to the mods later !, you never know someone might see it and take a punt

There's probably loads of opportunities to market your system via sites already selling similar products, if I where selling a system, and somone offered me the potential to add another good product for a profit split, Id take it. There's probably loads of little hedge funds and millions of fly by night operators who have billions in funding, and no clue what to do with it, as long as you keep your name out of the deal, there's a massive market there that are potential licencee's of the system.

 

[deco101]

Hello Dax Trader,

Im in a similar situation myself - I am trading myself at the moment but the aim is to create a financial company that trades as well a other investments.

First priority is document a sound business plan including not only your trading system but how much you will be paying yourself in wages, loans taken etc, capital sought like any other business. The purpose of the business plan is twofold:

1) Document the Aims and viability of the Company

2) A vehicle to Secure Investment

Me personally Im working full time and raising the money myself. ANy bank will want personal assets for security.

One question: What are you plans to access the market ie Do you intend to Spreadbet, use CFDs or trade direct on your chosen market ? I am trying to find what is the most efficient way within a limited company structure.

Cheers and good luck
deco

 

[pboyles]

I have developed a profitable trading system which I now use to run a small spread bet account. But I only make pocket money from this as I only have a few k capital.

I'd like to set myself up as a business and borrow capital, maybe 150k, to trade much larger positions so I can make a living and also spend time developing my discretionary trading skills.

Is it feasible to formulate a business plan and ask a bank to finance me much as they will for other ordinary businesses?

Any suggestions?

Approach a prop trading firm and show them your results, they might give you a deal to trade with their capital. There are a lot of posts about prop firms on T2W and Elitetrader.

 

[pboyles]

I have 5 months of live results posted at Collective2. I would develop new, or buy into existing systems rather than scale up my existing one to deliver a more diverse portfolio. I specifically do not want the financial risk upon myself and want that on a limited liability corporate structure.

I don't mind establishing the business in the US if that would help.

Whats the name of your system on C2?

 

[daxdaytrader]

I am working on a business plan right now, however dealing with banks and investors doesn't sound very attractive. One idea I have is to borrow some of the money I need, and then if I get into difficulties use credit cards to survive drawdowns. This sounds like it could get painful though. However, spreadbet firms offer great leverage so you don't have to borrow so much up front. This is great cos who wants to pay interest on loans when the money is not really required unless you have some losers!

At CMC each 1eu stake on DAX market is about 40eu of margin. The proper DAX future has a margin between 9 and 17k depending on volatility. I usually use a figure of 15k, and that's for a 25eu per point position, which is 600eu margin per 1eu of stake. So spreadbet firms require 15 times less margin! So my starting capital could be 2500eu. I reckon I only need another 15k to start up and survive a bad run by borrowing on a credit card.

Regarding venues I'd have to say spread betting everytime. I trade the DAX and direct access does mean great executions, but it also means a big margin per lot, and there's no tax free opportunity. The problem with this is that you can't scale down your stakes when you have lost some capital. With spreadbet I can just scale down my sizes in proportion to my capital very smoothly, so the risk of ruin drops to near 0. This could be critical to survive a run of losers. As for what is correct for a limited co structure, no ideas.

good luck,
John

Hello Dax Trader,

Im in a similar situation myself - I am trading myself at the moment but the aim is to create a financial company that trades as well a other investments.

First priority is document a sound business plan including not only your trading system but how much you will be paying yourself in wages, loans taken etc, capital sought like any other business. The purpose of the business plan is twofold:

1) Document the Aims and viability of the Company

2) A vehicle to Secure Investment

Me personally Im working full time and raising the money myself. ANy bank will want personal assets for security.

One question: What are you plans to access the market ie Do you intend to Spreadbet, use CFDs or trade direct on your chosen market ? I am trying to find what is the most efficient way within a limited company structure.

Cheers and good luck
deco

 

[north5]

If I read this right you should note that spread betting wouldn't be tax free if it is used within a business such as a limited company.

 

[deco101]

yes north is right...

as i understand there would be no charge on the spreadbet itself but any profits earned would be tax under corporation tax and you would be taxed when you take a salary out

so the question still is then what is best for a ltd company spreadbet / cfd ? or direct forex if you were trading fx that is

im leaning towards cfd's....

 

[daxdaytrader]

It looks like trading through a company is extra tax and extra admin. The idea loses it's appeal unless you are looking for some investors. I wonder how it would work as a self employed person.

If I read this right you should note that spread betting wouldn't be tax free if it is used within a business such as a limited company.

 

[deco101]

hi daxdaytrader

for me im building a company up, a legacy if you were...so a few percent saving tax here and there is not a problem, a company structure can be flexible to invest in property, other companies etc...

if you just want to be a 'trader' as a profession then perhaps other avenues should be investigated

deco

 

[daxdaytrader]

I have a few ideas for diversification down the line. One idea is to teach other people to trade in 1 to 1 sessions, another is to manage some money. I'd certainy consider more seriously a corporate structure to do that.

First I need to build up some capital and cred from trading success though!

hi daxdaytrader

for me im building a company up, a legacy if you were...so a few percent saving tax here and there is not a problem, a company structure can be flexible to invest in property, other companies etc...

if you just want to be a 'trader' as a profession then perhaps other avenues should be investigated

deco

 

[Taylored001]

I have developed a profitable trading system which I now use to run a small spread bet account. But I only make pocket money from this as I only have a few k capital.

I'd like to set myself up as a business and borrow capital, maybe 150k, to trade much larger positions so I can make a living and also spend time developing my discretionary trading skills.

Is it feasible to formulate a business plan and ask a bank to finance me much as they will for other ordinary businesses?

Any suggestions?

Hello.
I am interested in what you're doing, I've made £58,000 out of £500 in the last month and would be interested in being in your buisness trading alongside. I find trading at home i don't wake up till 1 and aren't displined enough. Where are you situated?

 

[timsk]

I've made £58,000 out of £500 in the last month...

Hi Taylored001,
I'm sure that lots of people would be interested to know exactly how you achieved this. Perhaps you'd care to post your trades with entry, exit and position size. It will be most educational for us all.
Tim.

 

[daxdaytrader]

Hello.
I am interested in what you're doing, I've made £58,000 out of £500 in the last month and would be interested in being in your buisness trading alongside. I find trading at home i don't wake up till 1 and aren't displined enough. Where are you situated?

Wow that's impressive for someone without discipline, I don't think you need anyone to help you.

My trades are independantly audited at Collective2 here Trading System: DeutscherTracker.

I made 20% for January. Nothing like in your league.

 

[Taylored001]

Hi Taylored001,
I'm sure that lots of people would be interested to know exactly how you achieved this. Perhaps you'd care to post your trades with entry, exit and position size. It will be most educational for us all.
Tim.

Okay Tim Hold me to that, when i have time i will do. Currently too mentally tired, although i won't post all my trades but i'll explain EXACTLY what i do. I have a step-by-step thing i do daily at around 1 before US markets open and thats it.