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Starting a fund
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Starting a fund

  #1 (permalink)
Trading Apprentice
Gyor,Hungary
 
Futures Experience: Advanced
Platform: NinjaTrader
Favorite Futures: ES S&P 500 mini,Crude Oil
 
Posts: 27 since Jul 2015
Thanks: 26 given, 18 received

Starting a fund

Hi,

Trading has been a fulfilling journey for me.I know at some point one might consider starting a fund.

On average,I net 6-8 points a day in ES.Once or twice a week in huge trend days I make much more.5 min chart seems too slow for me & 1 min charts have many false signals,so I added Crude Oil recently & experiencing similar outcomes.I look forward to add Silver after some time period.

If all goes accordingly,I am looking at a high percentage yearly return.Of course,with large size I've to rely on more swing trades & less scalping-so profit may suffer a bit.

In that case,I'm open to currency market.Markets are really all the same,with slightly different personalities.

As based on outside US,I know starting a fund will be difficult.So I think I've to relocate to US.By Investing in US properties or other means-I invite any possible suggestions.

People want to see a large account as judgement for trader's efficiency.So I'm compounding my account. Just don't know how big is satisfactory.Is 10 million enough for starter?Or more?

I can trade stocks-but only liquid & TIER-1 ones like AAPL,MSFT etc.I'm sure I can't tolerate huge moves of small stocks on regular basis with emotional highs & lows-I'll probably crash there.If I added a few liquid markets & traded other timeframes rather than only 5 mins-profit returns will increase significantly.

I'm building my record & account currently. In 5 years,I'll definitely want to start a fund.It's the next logical step.

For hedge funds,20-25% consistent annual return is considered good.I believe I can provide much more than that,but I've to start somewhere in industry initially.

Feel free to contribute.

Regards,
Katalyn


Last edited by katalyn; January 3rd, 2017 at 12:37 AM.
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  #2 (permalink)
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  #3 (permalink)
Elite Member
Chicago, IL
 
Futures Experience: None
Platform: NT8,NT7,TWS,FOREX.COM app
Broker/Data: InteractiveBrokers, NinjaTrader Brokerage FOREX.COM, IQFeed
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Blash's Avatar
 
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Check out Jack Schwagers latest project. If you are good enough they will help you do exactly what you are looking for.

https://fundseeder.com/home


And here is a thread on it https://futures.io/vendors-product-reviews/33582-fundseeder-www-fundseeder-com.html

Also a FIO webinar on Jack https://futures.io/traders-hideout/20856-webinar-jack-schwager-market-wizards.html

Ron

It is an axiomatic fact that while you meditate you are speaking with your own spirit. In that state of mind you put certain questions to your spirit and the spirit answers: the light breaks forth and the reality is revealed.
The steed of this Valley is pain; and if there be no pain this journey will never end.
Buy Low And Sell High (read left to right or right to left....lol)
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  #4 (permalink)
Market Wizard
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you do not have to relocate to the USA, rather think about licensing yourself here with the NFA and the CFTC.
If you hold all the right licenses you have the ability to solicit US based customers and institutions.
When the time is right for you, you can contact me and I will tell you who you should use in order to create a legitimate and compliant disclosure document.


As for your plan: One of the challenges of money managers in any asset class is scalability. Just because you make these returns in your personal accounts, does not mean you can automatically duplicate across a large asset pool. Some traders start out successful while trading their accounts yet can not replicate the same results across due to a large number of reasons. Some can't trade OPM (other people's money), while some simply do not have an organized back office.

You have a long-term plan, so find out what are the structural challenges that face money managers.

I wish you well with your plan.

Matt Z
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

PM with any questions about optimusfutures (800) 771-6748 (561) 367 8686. THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES TRADING.
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  #5 (permalink)
Trading Apprentice
Gyor,Hungary
 
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mattz View Post
Just because you make these returns in your personal accounts, does not mean you can automatically duplicate across a large asset pool. Some traders start out successful while trading their accounts yet can not replicate the same results across due to a large number of reasons. Some can't trade OPM (other people's money), while some simply do not have an organized back office.

You have a long-term plan, so find out what are the structural challenges that face money managers.

I'm aware of these facts.That's why I've a 5 years plan-to figure things out in between.

I think I prefer to relocate to US.Most money managers are based on US-one can gather valuable knowledge & experience from inside industry.

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  #6 (permalink)
 Vendor: www.orderflowdashpro.com 
North Carolina
 
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Posts: 264 since Nov 2011
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The biggest question you need to ask yourself is when things are going well why change anything? Why do you even want to start a fund? On base value, it makes sense if you don't have the money to trade or if you want to create the greatest possible value. However, in reality it is very difficult to get funding and if you have your own trading and things are going well then most will come to the conclusion it is not worth the effort. As far as funding opportunities go, first let me tell you the "lie". The lie is that great trader talent is highly coveted and sought after. That's more or less a lie especially if you are a discretionary trader. Very limited opportunities for discretionary traders.

Next, what's your background outside of trading? Do you have a premier quantitative background or Phd? Have you published original research in some other field? Do you have wealthy family and friends who are looking to fund you? It might not seem to matter but reality is that a lot of people are going to judge you on stuff beyond your profits. It kinda makes sense because past performance is no guarantee of future performance but if you have the performance and also demonstrated exceptional capability in another background then that adds a bit of confidence.

Be prepared if you do convince anyone that you can trade that whether or not you are dealing with prestigious hedge funds, prop firms, or reputable gurus for them to attempt to steal your strategies. Most prop firms, just as part of their own due diligence, will be analyzing anything you do and feeding it to their PHD quants. As far as hedge funds, they need to know how the strategy fits with their other strategies in terms of correlation and whatever. You can't copyright an idea and there's no way for you to even know if they take your strategy, improve it, tweak it, or whatever make a million dollars from it while never giving you anything.

These are your options and pro's con's of various options

1. Open a trading account at a managed futures broker. This will give you a track record and other traders can subscribe to your system/trades for a fee. There are a few of these and the nice thing is that among the better ones your customers are charged on a per contract basis. You don't have to get any licenses or deal with any of that. The downside is that you sound like an active day trader and these firms will tack on a premium fee to your subscribers for managing the system. What makes it really difficult is you have to both manage a very high profit per trade to overcome the frictions and also still maintain a decent trade frequency. So, these tend to almost always be quant systems because the frictions are too high for discretionary day traders to overcome.

2. Start a seed hedge fund. You have to look up the restrictions but if you have less than so many investors (I think 9) and follow the rules then it might be one of the easier routes. There are restrictions how much you can invest and regarding your ability to charge performance fees.

3. Become a CTA/start a CTA fund. You have to make a document that describes your strategy. You have to keep records. It can be an expensive option that would not be worth doing with less than 50k to 200k. Be very careful of any claims you make and be sure to have everything checked by a lawyer. There will be fees every year.

4. Start a trading room/advisory service. This might be most in-line with what you are doing. Self-marketing is where it is at today. However, you need to be very careful not to run afoul of any rules. If you trade on sim you need to make it clear. If you provide performance stats or records then you need to make sure to have proper disclaimers and also not to leave anything out, keep everything updated, etc. Reality is it might be best just not to make any claims at all. The biggest vendors who've been at it for years have always carefully tiptoed around that. Even if you are honest and you make some claims then you could be creating problems for yourself if you later on have a drawdown.

5. Join a prop firm. Prop firms come in a few flavors. But, there are very few sterling firms. Do not be surprised if most of the firms that contact you are actually fishing for information, trying to find out what works, etc. Every firm is different. But, the reality is a lot of the real firms just try to hire local people without experience or friends because they know most will fail and/or they have some sort of "edge" in a particular product or way of working that they want you to follow. But there are very few real firms out there remaining.

Most of the upper level prop firms I've contacted wanted to see 1 million in prior profits the previous year produced with a strong return of 70% or better. However, your ability to articulate your strategy and demonstrate a breadth and depth and of knowledge about markets will probably be as or more important. Beyond the returns, they will have other agendas that you can't anticipate--much like hedge funds which deal with how your strategies and returns fit into their existing mix. It sounds like your methods might be more suitable to a prop firm but again very few of those around and even fewer that fund discretionary traders esp futures traders.

Most firms today value programming and quantitative background because it would enable you to program up your strategy.

6. Join a hedge fund. Similar to the upper prop firm but they will be looking more at your educational background and more importantly you will need to fit into some sort of "slot" they have for you. A hedge fund might want an expert in energy market for example or an expert in currencies or emerging markets.

As you can see: no easy route.


Last edited by tpredictor; January 4th, 2017 at 07:30 PM.
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  #7 (permalink)
Trading Apprentice
Tampa florida usa
 
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I agree with going the CTA route. Quick with many advantages. You can invest in US commercial real estate through title III of the jobs act. If you structure that correctly the realestate investments can be used to meet the net worth requirement for your CTA license. It should also qualify you to enter the US as an investor. Thus killing two birds with one stone. Best of luck to you.

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  #8 (permalink)
Trading Apprentice
Gyor,Hungary
 
Futures Experience: Advanced
Platform: NinjaTrader
Favorite Futures: ES S&P 500 mini,Crude Oil
 
Posts: 27 since Jul 2015
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Traderjohnsblog View Post
I agree with going the CTA route. Quick with many advantages. You can invest in US commercial real estate through title III of the jobs act. If you structure that correctly the realestate investments can be used to meet the net worth requirement for your CTA license. It should also qualify you to enter the US as an investor. Thus killing two birds with one stone. Best of luck to you.

Seems decent.I'll dig up more information.

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  #9 (permalink)
Trading Apprentice
Gyor,Hungary
 
Futures Experience: Advanced
Platform: NinjaTrader
Favorite Futures: ES S&P 500 mini,Crude Oil
 
Posts: 27 since Jul 2015
Thanks: 26 given, 18 received


tpredictor View Post
As you can see: no easy route.

I assumed it will be difficult than I thought.But anything worth achieving is usually difficult.

My motive to start a fund is solely monetary.Currently I trade 14 contracts-I figured if I could trade a lot bigger size; profit will expand significantly,even only from managing fee.

Besides I think I'll love to manage money.I was cautious & good with money as I grew up-I think this drive is extension of that habit.

CTA fund seems a nice option.Trading room is an option I'm currently working on.I don't know any room where trader shows live trading 14 contracts week in & week out-so I think I've to charge more which may not be suitable for many.Besides, I'm not acquainted fully with laws regarding this yet.

For hedge fund-I know quants & stock markets are more preferable.I'm trying to expand my stock trading basket.As my strategy is developed based on future market,it's not optimal for stock market.

Trading is my background-I left my study unfinished for it.Until recently,I always thought it's a good background. Now,I'm not so sure.


Last edited by katalyn; January 5th, 2017 at 05:12 AM.
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  #10 (permalink)
Elite Member
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Futures Experience: Intermediate
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Net Profit



katalyn View Post
On average,I net 6-8 points a day in ES.


katalyn View Post
Currently I trade 14 contracts-I figured if I could trade a lot bigger size; profit will expand significantly,even only from managing fee.

@katalyn

To clarify, do you net 6-8 points a day in total (by trading 14 contracts per trade) or do you net 6-8 points per contract (i.e. 6-8 points per day x 14 contracts = 84-112 total points per day)?

Why do you trade 14 contracts? Is this the number you have built up to so far? Do you implement some type of money management (i.e. position sizing) plan to arrive at a current quantity of 14?

Would you mind sharing your statistics regarding account size and the rate of return you are able to achieve on this account size? I am trying to learn more about account management, specifically for intraday trading.

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