Why You Should Avoid Most Prop Trading Firms That Require an Investment
So, here is my take on the "action" in today's market: The only longs people want to hold are things "going up" or stocks that are already up 50% or more in the past six months...
They can justify the chart and the stock holding to their bosses, put in a stop loss, and look smart (for now).
No attention is paid to the underlying business and all of the trading focus is just on the chart.
Likewise, undervalued stocks that are moving down regardless of the strength of the underlying businesses or value of assets are moving lower, creating a good long short opportunity versus the index funds for now and the manic bubble as it eventually will pop (use tight stops until it does; you don't want the wind in your face).
We gapped lower today which is making me skeptical of the decline, even though we are well below 100 day and 50 day moving averages.
We may have one more retest of the $57.
25 level to make on the QQQ before heading lower...
We still have POMO in the market, but I don't expect this effect to last very long...
Likely we are heading lower for a good while without a QE3 announcement -- this all seems like on big pump and dump experiment with a Keynesian euphemistic label.
Keynes would not have pushed for hyperinflationary short term policies without a corresponding reduction in wastefull military and intelligence spending.
Moving on - Never put up your own trading capital to "trade prop" for a firm.
They have a tremendous incentive to "trade against you.
" In other words, they will hedge their risk by shorting your positions and trying to squeeze you out of your holdings...
It's the oldest trick in the book and the same basic setup as the bucket shops in Jesse Livermore's day.
Make sure any prop shop that requires an investment of YOUR money along side their own capital guarantees you a 70-90% payout (industry standard rates) and commission free trading.
Also, sign a huge waiver requiring them to disclose any positions that overlap with your own and make sure they guarantee that they will not trade against you (ie take opposing positions against your account) - there are a million fraudsters on Wall Street at the second and third tier brokerage levels and they are dying to generate fees.
In any event, look for a job and don't get hustled.
If you can't get someone to let you trade THEIR capital strictly, don't take the "opportunity" unless you have strict confidence in the model and the best terms imaginable in such a "structured product" type investment arrangement.
Furthermore, you probably want to be more of a longer term trend follower or value investor (my personal bend) here as the strategy is totally out of style right now and under performing badly.
The chart guys are barking louder than ever, etc.
Think Boiler Room: those guys yelling "Rico" have no clue what Net Current Assets are or what a PE ratio is, but they understand P&L and some even learn how to read a chart, but not most.
Try to get an analyst position, and do not fall prey to the seedier houses out there - most (if not all) of the houses that want you to risk your money first and then their money second on a trade are simply betting against you and even if they are not the deal is really good for them and really dumb for you.
Hope that helps - that, traders, is the Hedgephone tip of the day.
They can justify the chart and the stock holding to their bosses, put in a stop loss, and look smart (for now).
No attention is paid to the underlying business and all of the trading focus is just on the chart.
Likewise, undervalued stocks that are moving down regardless of the strength of the underlying businesses or value of assets are moving lower, creating a good long short opportunity versus the index funds for now and the manic bubble as it eventually will pop (use tight stops until it does; you don't want the wind in your face).
We gapped lower today which is making me skeptical of the decline, even though we are well below 100 day and 50 day moving averages.
We may have one more retest of the $57.
25 level to make on the QQQ before heading lower...
We still have POMO in the market, but I don't expect this effect to last very long...
Likely we are heading lower for a good while without a QE3 announcement -- this all seems like on big pump and dump experiment with a Keynesian euphemistic label.
Keynes would not have pushed for hyperinflationary short term policies without a corresponding reduction in wastefull military and intelligence spending.
Moving on - Never put up your own trading capital to "trade prop" for a firm.
They have a tremendous incentive to "trade against you.
" In other words, they will hedge their risk by shorting your positions and trying to squeeze you out of your holdings...
It's the oldest trick in the book and the same basic setup as the bucket shops in Jesse Livermore's day.
Make sure any prop shop that requires an investment of YOUR money along side their own capital guarantees you a 70-90% payout (industry standard rates) and commission free trading.
Also, sign a huge waiver requiring them to disclose any positions that overlap with your own and make sure they guarantee that they will not trade against you (ie take opposing positions against your account) - there are a million fraudsters on Wall Street at the second and third tier brokerage levels and they are dying to generate fees.
In any event, look for a job and don't get hustled.
If you can't get someone to let you trade THEIR capital strictly, don't take the "opportunity" unless you have strict confidence in the model and the best terms imaginable in such a "structured product" type investment arrangement.
Furthermore, you probably want to be more of a longer term trend follower or value investor (my personal bend) here as the strategy is totally out of style right now and under performing badly.
The chart guys are barking louder than ever, etc.
Think Boiler Room: those guys yelling "Rico" have no clue what Net Current Assets are or what a PE ratio is, but they understand P&L and some even learn how to read a chart, but not most.
Try to get an analyst position, and do not fall prey to the seedier houses out there - most (if not all) of the houses that want you to risk your money first and then their money second on a trade are simply betting against you and even if they are not the deal is really good for them and really dumb for you.
Hope that helps - that, traders, is the Hedgephone tip of the day.