Alpha-factor in prop traders
A good interbank spot trader had the capacity to generate $2 million in profits in a good month and whilst a certain percentage of this could be attributed to ‘franchise’ business, it still required a particular psychological mind-set which allowed the trader to fully take advantage of the times when they were reading the market correctly.
Prop traders operated a bit differently, usually taking bigger and longer term positions and often with the help of the options market, but they too also had that rare ability to squeeze the maximum amount of profit out of their good ideas and positions.
Life is certainly more difficult for the emerging trader today who has to operate without the large flow information that the bank trader had. Nevertheless it is obvious that this alpha-factor gene is alive and well in the FX market. The ability to generate profits is still the most sought-after trait and if you have this, the drawdown management side can be learned.