The truth about trading arcades

[SHOPFRONT]

yes , very quaintly put isn't it ?

high round trips and high rentals = no money of one's own ? Hmmm , and you wonder why the term proprietary trader is abused so much now that it has lost it's meaning .

Hi There,

I will be trading on stock indices mainly dax and dow. No more than 10 in the first year. Do you still think the round trips are still expensive ?

 

[Parky]

Hi There,

I was wondering if could give me your opinion on a deal I have been offere by a prop firm. The split is 50/50. They will back me 100%. I dont need to put penny of own money. Cost of a round trip on Liffe is going to be round £ 1.40. On Eurex its going to cost Eur 2.40. Does this seem reasonable ? Desk fees is round £ 1600 a month with access to one exchange. They will provide me with e-signal and TT platform to trade with. How good do you think this deal is ?

Shopfront, this is not a good deal. I am amazed and horrified by some of what I have been reading on this thread.
No graduate trainee should be putting up their own money and if the company does not have FSA registration to hold client finds then they definately should not be taking client money for any reasons what so ever.
FSA is red hot on inexperienced traders risking money on the markets as they will not have the skill sets to make a judgement as to whether they are making a wise investment nor be able to tell if the training they will recieve is going to give the skill sets required to give a reasonable chance of making money.
Some prop houses will pay draws or monthly retainers others wont, but the thinking is if you have a steady monthly income, albeit a small amount, you will not be rushed into trading too quickly or trying to run before you can walk.
A standard split in the market for a fully backed trainee trader is around the 65/35 to the 70/30 level in the traders favour. Commissions vary greatly but those you have indicated are on the high side. Desk fees will again depend on the trading system you will use, the quality of the office space the facilities and the bells and whistles such as quote vendors and anaylst services. Without knowing what you are getting for your money it is difficult too tell if you are getting a good deal or not but for one exchange it sounds a little toppy.

 

[Stockjunkie]

Hi There,

I will be trading on stock indices mainly dax and dow. No more than 10 in the first year. Do you still think the round trips are still expensive ?

what ? 10 round trips only per year ?

 

[police]

There are two ways to look at this.
1. you are being backed 100%, so unless you have a better offer this may still be a good deal.
2. You have a better offer in terms of costs and maybe training. So take that. Its a no-brainer.

You see someone is putting their money behind you so effectively, the round trips and desk fees are in reality FREE!!! You are not actually paying for anything are you? The person backing you is paying for everything including your likely trading loses to start with.

Whether you can become profitable over and above those costs depends on YOUR ABILITY.

 

[SHOPFRONT]

what ? 10 round trips only per year ?

Soory I wasnt clear there. They said they will start me on 1 or 2 lots and i can go up to 10 lots. I can trade them as much or as little as i want. Not allowed to hold the position overnight. I like trading dow so I am allowed to do that.

 

[SHOPFRONT]

Shopfront, this is not a good deal. I am amazed and horrified by some of what I have been reading on this thread.
No graduate trainee should be putting up their own money and if the company does not have FSA registration to hold client finds then they definately should not be taking client money for any reasons what so ever.
FSA is red hot on inexperienced traders risking money on the markets as they will not have the skill sets to make a judgement as to whether they are making a wise investment nor be able to tell if the training they will recieve is going to give the skill sets required to give a reasonable chance of making money.
Some prop houses will pay draws or monthly retainers others wont, but the thinking is if you have a steady monthly income, albeit a small amount, you will not be rushed into trading too quickly or trying to run before you can walk.
A standard split in the market for a fully backed trainee trader is around the 65/35 to the 70/30 level in the traders favour. Commissions vary greatly but those you have indicated are on the high side. Desk fees will again depend on the trading system you will use, the quality of the office space the facilities and the bells and whistles such as quote vendors and anaylst services. Without knowing what you are getting for your money it is difficult too tell if you are getting a good deal or not but for one exchange it sounds a little toppy.

Hi Parky,

Thanks for that. I will tell you more detail here. Firstly only 2 monitors. One monitor with e-signal and the charting package. The second one has the TT trading platform on it. Two keyboards. No Bloomberg or Reuters. There is no News channel or Squak box. They dont have an house analyst either. They want me to pay £1600 desk fee for this serivce. I just think some sort of news channel is very important while trading. I am going to be trading Dow.

The profit is split 50/50. The training is 3 weeks class rooom and 3 weeks on the simulator. I think 6 weeks is not enough but they dont seem to think that.

 

[Stockjunkie]

what sort of contro;s do they have for your losses ? ie. how much losses will they tolerate til they cut you off.

 

[SHOPFRONT]

what sort of contro;s do they have for your losses ? ie. how much losses will they tolerate til they cut you off.

Well I dont know. There have not mentioned that in too much details. I think its learn on the job kind of thing.

 

[Parky]

Hi Parky,

Thanks for that. I will tell you more detail here. Firstly only 2 monitors. One monitor with e-signal and the charting package. The second one has the TT trading platform on it. Two keyboards. No Bloomberg or Reuters. There is no News channel or Squak box. They dont have an house analyst either. They want me to pay £1600 desk fee for this serivce. I just think some sort of news channel is very important while trading. I am going to be trading Dow.

The profit is split 50/50. The training is 3 weeks class rooom and 3 weeks on the simulator. I think 6 weeks is not enough but they dont seem to think that.

OK, I am looking at a typical costing schedule, First things first ,TT one exchange is US$ 625.00 per month (Yes TT charge dollars). If I assume two PC's one for TT and one internet machine the rest should cost around £ 900.00 including two flat 19" monitors.
Also, as I have said before to others people, I hate houses with fixed training time frames, it just dosent work like that. People take to trading at different speeds, three weeks on the fundamentals OK. But on the simulator both you and the company need too be confident and take as long as is needed to build that confidence.
You havent stated whether you will be on a "buddy" system i.e. one too one with an experienced trader?

 

[SHOPFRONT]

OK, I am looking at a typical costing schedule, First things first ,TT one exchange is US$ 625.00 per month (Yes TT charge dollars). If I assume two PC's one for TT and one internet machine the rest should cost around £ 900.00 including two flat 19" monitors.
Also, as I have said before to others people, I hate houses with fixed training time frames, it just dosent work like that. People take to trading at different speeds, three weeks on the fundamentals OK. But on the simulator both you and the company need too be confident and take as long as is needed to build that confidence.
You havent stated whether you will be on a "buddy" system i.e. one too one with an experienced trader?

The firm only started 2 months ago. There is no such thing as a buddy system. But the 2 guys that run the firm are in their 50's. One has been option trader for over 20 years. So i takeit they will sit in and watch over you when you are learning to trade.

 

[Stockjunkie]

Well I dont know. There have not mentioned that in too much details. I think its learn on the job kind of thing.

Well , I am suspicious , any place that claims to back you and does not have strict risk controls in place seems to me not to know what they are doing to a large degree.

It seems also that they want you to trade like a madman to reap the comms plus your hefty monthly rental . The " backing " sounds more like a bait than anything I would consider proper and genuine . A real proprietary trader of the old school is 100 % back and paid a wage plus cut of wins , like what I used to do . none of all this sneaky cross payment pullava .

Also , on only 2 lots you are going to find it hard to make profits over your costs , especially in DT . Sometimes you have to hold ON to whack those large gaps .

 

[JTrader]

Trading arcade demographics

Hi

do traders need to apply, go through a selection process and prove their credentials to a trading arcade, even if fully self-funded?

Does the arcade only get a say on the methods you use to trade if they are partly or fully funding you?

Do you see many older people trading in trading arcades, people who have perhaps got into trading after retiring from another career/line of work, people aged over 50, and perhaps are now looking to boost their pensions!?

How old have the youngest and oldest people/traders you have been aware of down at the trading arcade?

What do you reckon is the average age of a trader that you see down at the arcade?

What do you reckon is the ration of males:females down at your trading arcade?

How social an environment do trading arcades tend to be?

Do people just typically chat with their trading neighbours about trading methods - the weather all day long while waiting to place trades?

Are arcades noisy places. or are traders requested to be quiet and talk in whispers as in a library?

Who is present to help keep things in order and resolve any problems, including technical problems?

Do you get traders sitting next to each other who basically do the same thing and take the same trades at the same time?

Many thanks

jtrader.

 

[Parky]

Hi

do traders need to apply, go through a selection process and prove their credentials to a trading arcade, even if fully self-funded?

Does the arcade only get a say on the methods you use to trade if they are partly or fully funding you?

Do you see many older people trading in trading arcades, people who have perhaps got into trading after retiring from another career/line of work, people aged over 50, and perhaps are now looking to boost their pensions!?

What do you reckon is the average age of a trader that you see down at the arcade?

Finally, what do you reckon is the ration of males:females down at your trading arcade?


Many thanks

jtrader.

Wow, what a lot of questions, OK from my experience.
No, self funded traders do not have to go through any form of selection process.
But if someone has a reputation as a disruptive influence then you dont entertain them. However if they require unusual leverage then you would need to look into the trading history and ask to see evidence of P&L from statements etc.

Trading methods? Yes and no, again if someone is trading within established risk parameters and are making money it is unlikely a trading arcade would involve themselves in their trading style if you are totally or partially funded.
However if you have unusual or volatile P&L swings it is likely any risk manager worth his salt would take a look at your trading style and may wish to discuss your methods.
If you are struggling a good arcade would assist you with suggestions on your trading, be it trying other markets or contracts other trading platforms or adapting your trading style.

Traders over fifty?Not many, but there are lots of forty years olds approaching it, but these are locals from the LIFFE floor days. I have not seen any evidence of people retiring and then trying to get into trading. This is probably because most people from outside the city dont even Know that trading rooms exist or its even an viable option.

Average age? Mid thirties, however those trading rooms that have graduate training programs of any size will have a lower average.

Here the ratio of males to females is 20 to 1

 

[bobltrade72]

Hi There,

I was wondering if could give me your opinion on a deal I have been offere by a prop firm. The split is 50/50. They will back me 100%. I dont need to put penny of own money. Cost of a round trip on Liffe is going to be round £ 1.40. On Eurex its going to cost Eur 2.40. Does this seem reasonable ? Desk fees is round £ 1600 a month with access to one exchange. They will provide me with e-signal and TT platform to trade with. How good do you think this deal is ?

Those round trip costs are HUGE. I pay approx half that on LIFFE and less than a third on Eurex, 100% backed by a well known company.

 

[JTrader]

Thanks Parky.


If you are a fully backed trader trading through a trading arcade, or a fully backed trader trading through a prop firm, are you basically doing the same thing? i.e. could such a trading arcade firm be classified as a prop firm?

In order to fully or partially back a trader financially, what are the arcade looking for in the trader? youth, profitable prior trading experience, or some other criteria?

How long could a full-time fully or partially financially backed trader be able to continue making a loss on their account, before being given the sack?

How come some trading arcades/rooms seem to charge £500-700 per month for a desk, while others charge £1700-2000 per month? What is the difference?

If you are self funded, can you pay for your desk on a rolling monthly basis, or do arcades tend to make you sign a fixed length rent contract?

If you trade only with mechanical trading strategies with TS8.1 say, is a trading arcade likely to just accept your methods, choice of software and platforms, and take you on, as long as they are/have been sound and profitable, if they are fully or partly financially backing you? Or would the arcade want a say on things like the timeframe that you are trading on, and the number of trades per day that result?


Many thanks

jtrader.

 

[Directional]

How come some trading arcades/rooms seem to charge £500-700 per month for a desk, while others charge £1700-2000 per month? What is the difference?

partly location. partly facilities (ie: office staff, IT infrastructure, IT staff, gateways etc) and partly profit margin. Here at Refco, the office could realistically fit 2-300 traders, though it only has about 150ppl here at present. Big office, cost divided by 150ppl = low cost per person. This is prime real estate though, so our office net cost is likely to be much higher than somewhere in a dumpy location. Refco's base cost for a desk is £750 sit down, with a machine and a screen. no software or charts or anything else. Realistic cost here with bloomberg, reuters, CQG charting, Execution software (ie: Refco pro), telephone, an internet PC with streaming TV and a bunch of screens is £1500. pretty reasonable IMO.

If you are self funded, can you pay for your desk on a rolling monthly basis, or do arcades tend to make you sign a fixed length rent contract?

should be a rolling deal - 30 days notice to terminate.

If you trade only with mechanical trading strategies with TS8.1 say, is a trading arcade likely to just accept your methods, choice of software and platforms, and take you on, as long as they are/have been sound and profitable, if they are fully or partly financially backing you?

if you have a proven system - in the market - they would certainly consider your methods, from a risk reward perspective. If the strategy is profitable/low risk, most places would consider backing, or at least part backing you.

Regards software, I've found Refco to be pretty accomodating, though it obviously depends what you want to do. I cant really speak for anywhere else, since I dont know. I could run TS here if I wanted to, since I am an 8.1 user, I could just install it on my internet PC and run it from there, though i'd be using my own subscription. Refco wouldnt be able to process tradestation generated orders though since TS8.1 is designed to send all orders via TradeStation Securities, so if using TS automation, you'd find it very difficult to interface it with the in house gateways and risk management, I dont even know if it'd be possible. You'd certainly be at a speed disadvantage using TS since TS uses internet delivered data, and internet order routing - one of the things you are paying for at an arcade is ultra fast data and execution.

 

[JTrader]

Thanks again Arbitagreur.

I'm getting the impression that trading arcades are often about very short term trading - 100+ round trips per day. Is this a false impression?

Could a fully or partially funded trader elect to trade from longer timeframe charts such as 5-minutes and above, thus becoming a momentum trader and not a scalper? What is the situation at Refco.

With regard to TS8.1, I was just thinking about using manual placeing/confirmation of trade signals rather than full automation.

What do you use TS8.1 for your role at Refco?

With around 150 traders presumably in one office at refco for example, how noisy a work environment does it tend to be? do traders where headphones for watching their screens, TV etc.?



How long could a full-time fully or partially financially backed trader be able to continue making a loss on their account, before being given the sack?



Any feeback gratefully received,

Cheers

jtrader.

 

[Parky]

Thanks Parky.


If you are a fully backed trader trading through a trading arcade, or a fully backed trader trading through a prop firm, are you basically doing the same thing? i.e. could such a trading arcade firm be classified as a prop firm?

In order to fully or partially back a trader financially, what are the arcade looking for in the trader? youth, profitable prior trading experience, or some other criteria?

How long could a full-time fully or partially financially backed trader be able to continue making a loss on their account, before being given the sack?

How come some trading arcades/rooms seem to charge £500-700 per month for a desk, while others charge £1700-2000 per month? What is the difference?

If you are self funded, can you pay for your desk on a rolling monthly basis, or do arcades tend to make you sign a fixed length rent contract?

If you trade only with mechanical trading strategies with TS8.1 say, is a trading arcade likely to just accept your methods, choice of software and platforms, and take you on, as long as they are/have been sound and profitable, if they are fully or partly financially backing you? Or would the arcade want a say on things like the timeframe that you are trading on, and the number of trades per day that result?


Many thanks

jtrader.

First answer is yes and no. The result is the same, you being backed by the company that takes you on but trading arcades are not the same thing as prop houses. Some prop houses have their own offices but a trading arcade will facilitate backed traders, brokers and can have several prop units all contained on the same trading floor.

What would the trading arcade look for in a backed trader? In a word profit, they are looking for someone who will make them money be it from commission or profit split. Ideally they want high volume high profit traders, but they also want the steady traders with medium volume, medium profit as these will be the traders that stay with them for long periods. Age is really academic as is educational qualifications.

How long would a trading group stick with a loss making trader? That depends on the track record prior to the loss, the nature of the loss and the traders reaction to the loss. In short if the trader is just going through a bad patch and has every chance of turning it around then you stick with them. If they are panicking and have totally lost their trading pattern and feel for the market then you may send them away for a couple of weeks, or put them onto the Simulator to regain their confidence. But if the trader has been consistently loosing and the chances are they will continue to do so then they have to go.

Differences in costs? A lot of this is how the trading rooms dress up the costs, some will have low desk fees because they have loaded the costs of the trading systems, quote vendors and equipment, some because thier round turn rates are higher, others as Arb has said because they have economies of scale and some offices are just very dated and their kit unreliable and the only way to get bums on seats is too discount.

Self funded or not I am not aware of any trading room allowing a rolling one month notice. Any trading room of any quality will tailor the trading space to the trader in terms if kit, screens and workstations. Also most front end trading systems require a minimum of three months notice and this appears to be the standard notice period around the various trading rooms.

Trading rooms want profits as stated above, if you have trading systems that works and the risk is acceptable then no quality trading room would want to interfere with your trading at all. Using the old adage, "if it aint broke dont fix it". Any one that insists on volume, or tells an experienced trader what or how to trade is not worth joining.

 

[Directional]

should be a rolling deal - 30 days notice to terminate.

I should have qualified this statement to say that this is the requirement here at Refco for self funded traders, as Parky has indicated this will very between firms and also depend on the deal you take and what licenses you are using etc.

What do you use TS8.1 for your role at Refco?

I dont use it here at all, I just use TS and RadarScreen at home for messing around with system idea's and to keep an eye on market quotes etc.

 

[JTrader]

Thanks chaps.

Sorry to throw a load of more questions your way but here goes...........

The trading arcades article in the traderpedia states -

The most common model for a trading arcade is a trading room where a trader can lease a seat, trade for his own account at reduced commissions, and often split the profits with the house in return for additional funding.

A "seat charge", which can range from $1,000 to $6,000 per month, includes some combination of market data, analytic package, connectivity and order routing technology. The most common offering is a high performance order entry system with sophisticated trading tools, market data and news services.

Arcades often will offer an individual trader some degree of leverage based on how much he deposits of his own money and how much profit he is willing to give up. Typical new traders deposit $10,000 and get an additional $50,000 in margin in exchange for a 50/50 profit split for a two-year lock-in deal. More experienced traders may be able to negotiate up to 70% of profits with no funds on deposit.

Parky -
What would the trading arcade look for in a backed trader? In a word profit, they are looking for someone who will make them money be it from commission or profit split. Ideally they want high volume high profit traders, but they also want the steady traders with medium volume, medium profit as these will be the traders that stay with them for long periods. Age is really academic as is educational qualifications.

It's good to hear that arcades do/may not discriminate based on age and education. Logically, profit is the key and this doesn't relate to d.o.b. or university attended..........
However, I've looked through the T2W traderpedia index of trading arcades. Many of these organisations state that they are proprietary trading groups on their websites. So the boundary between a trading arcade and a proprietary trading firm can seem blurred.
Also, many of these companies state that they are looking for fresh graduates to train and then back financially. Other firms will also consider experienced proprietary or futures traders seeking financial backing.
With all this in mind, why do many prop firms only deal employ fresh graduates, preferring those applicants with little or no prior trading experience?

It's also good to hear that the arcade may also not want to enforce their preferred trading style/timeframes on the trader. Is it likely that funded fresh traders would have a lesser say on the trading style to be used- at least initially, until they gained experience and proved their worth?

Does the arcade also allow the trader to choose their own market and instrument to trade, or are traders pushed towards certain markets/instruments?

It's quite scary to think what could be achieved with upto £50,000 in margin to play with .
Is this kind of deal typical for partially funded traders?
Or, can the additional margin put forward by the arcade, on top of the traders $10,000 input, be much less than $50,000?

Is it generally agrees that if you lose the arcades $50,000 - they would keep your $10,000? how does this aspect tend to be managed?

Can traders commence trading at their own chosen position size, or does the arcade control their progression in volume as and when they progress?

How would a trader with some successful home based intraday trading experience under their belt, and a comprehensive understanding of TA and financial markets, approach an arcade with a view to being partially or fully funded by the arcade?
What would the arcade want to see as proof of skills and performance etc. and what would they look for in the candidate?
How much experience is needed in order to be considered and "experienced trader" - 6 months? 1 year? or longer?
Does a large part of being selectable it involve presenting an effective business plan to the arcade, about how you would plan to trade and profit?

What backgrounds and experience do the non-graduate past or present trainees fully or partially financially backed traders, that you know of at your own trading arcade/s have?
Even for the non-graduates, have they typically initially had to have in house training to learn the arcades preferred method of trading?
Are experienced traders typically allowed to get on with using their own tried and trusted trading methods/strategies?

How often do traders split profits with the arcade?
Does this tend to be monthly, quarterly, deducted from the original account balance?
Or, can the trader fully manage their own account - i.e. determine how much margin they want to maintain and increase to, volumes traded, and how often or at what account balance they will split their profits with the arcade?
Or, to increase margin, does the trader need to ask for more funding?

Parky -
First answer is yes and no. The result is the same, you being backed by the company that takes you on but trading arcades are not the same thing as prop houses. Some prop houses have their own offices but a trading arcade will facilitate backed traders, brokers and can have several prop units all contained on the same trading floor.

Does this mean that a trading arcade is a bigger operation than a prop house, and that essentially a prop-house/firm is often just a relatively small group/team of traders?

Many thanks once again

jtrader.