Sean Lee

French and Chinese language chatrooms now available

The hugely successful FXWW suite of chat-rooms on Reuters Messenger continues to go from strength to strength and we have now added a French language chat-room to supplement the existing Mandarin room. These will soon be followed by a German language room.

The main FXWW chat-room provides access to most bank research pieces as well as inputs from professional traders and analysts.

The best way to check out the entire range is to apply for a 2-week free trial.

by Sean Lee

4 Prizes- management of Axi Select trading accounts

The prize for the overall winner of the new Axi Trader-sponsored trading competition is the management of a $1 million Axi Select trading account. Axi Select is the development program for aspiring professional traders managed by FXWW.

There are three secondary prizes; the management of one $250,000 and two $100,000 Axi Select trading accounts.

Funded Axi Select accounts pay a 25% commission on profits earned; a high watermark applies. All participants who register via FXWW will receive complimentary access to the FXWW Chatroom and FXWW Connect for the duration of the competition.

Those traders interested in the competition can register via this link.

by Sean Lee

Premier Traders Application Form

All those who have applied for Hedge Fund positions, funding programs or the Hedge Fund mentoring program will find that the processes are greatly expedited (speeded-up) if they fill out the Premier Trader Application Form.

Please take your time and fill out the form as accurately as you can and provide as much corroborative material as possible like performance reports, track records etc.

by Sean Lee

Trader EoY reports: Patrick, systematic

We are very excited about Patrick's prospects for 2016. His models have been extensively back-tested and have been running on live accounts for over two years and we are delighted that Patrick has chosen FXWW to help consolidate his profile and take him to the next level.

We started again with the minimum $100,000 allocation and with a very conservative approach. Patrick's system will run up to 11 pairs at any one time but we started with only 1 pair, EUR/USD, and have only in the last few weeks added a second pair, GBP/USD.

Based on the one pair, the program has shown a very consistent return of around 0.25% per month whilst utilising a very conservative leverage of around 1:1.

Another highlight has been the systems ability to dramatically adjust risk based on whether its picking the market correctly or not.

It's hard to find many flaws in Patrick's approach and he will definitely be aiming at the money-management rather than the prop-trading development route.

by Sean Lee

Trader EoY reports: UA, discretionary,

UA graduated from the Axi Select tracking program in September 2015. Even though he was only managing a relatively small personal account, this was of relevant risk to his own personal situation. He is a purely discretionary trader and trades primarily intraday.

He was allocated the minimum $100,000 and after 3 months has shown a steady profile which confirms much of what we witnessed on his personal account. Always a very good sign.

He returned 2.1% in the first 3 months utilising leverage of approximately 1:1, which is an excellent return.

He tended to over-trade in the beginning, not in terms of trade size or trade volume, but by trading far too many instruments. This is a common fault amongst non-systematic traders. He also tended to spend too much time in his losing trades, which is very draining on ones energy levels, but he showed a willingness to address and change these traits, another positive sign.

We have high hopes for UA in 2016. He will get an increased allocation from Axi Select in early 2016 and we hope to have him operating at a semi-professional level (at least) by the end of 2016.

by Sean Lee

New generation of trading talent coming from non-traditional sources: FT

http://www.ft.com/cms/s/0/7880dc7a-77d8-11e5-a95a-27d368e1ddf7.html

Hedge funds are drastically rethinking the way they recruit new employees as a decade-long production line of trading talent from investment banks has ground to a halt.

Some of the world’s biggest hedge funds, including Man GLG, Brevan Howard and Tudor Investment Corporation, have been forced to design new training programmes because they can no longer count on attracting seasoned traders from Wall Street and the City of London.

US banks culled their ranks of proprietary traders following post-crisis regulation that all but banned them from the often contentious practice of trading and investing for their own profit in an effort to prevent large losses.

Trading used to generate huge profits for investment banks, but since the introduction of the landmark Dodd-Frank act five years ago, this trend has reversed. Goldman Sachs, once renowned for its prop trading prowess, last year reported its lowest total trading revenues since 2005.

The dearth of talent has meant hedge funds, once used to snapping up the best performing prop traders, have been forced to tear up the traditional way of hiring staff.

“Pre-crisis the vast majority of hedge fund hires were ex-bank traders. Today hardly any are,” says Mark Jones, co-chief executive of Man GLG, and who takes part in the fund’s recruitment.

“Joining the hedge fund industry from anywhere other than a bank was a rarity 10 years ago, but the supply from the banks has largely dried up”.

As a result some hedge funds are starting to believe that training up their own talent makes more sense than simply relying on costly hires from their rivals. “It is more expensive to hire established talent, and more hedge funds may soon realise it is a better business proposition to grow talent,” said Mr Jones.

At Man GLG, one of the world’s largest hedge funds by assets, its graduate training programme, which was launched in 2013, focuses on training up junior staff to the point where they can take charge of investing billions of dollars.

Other hedge funds have adopted similar programmes. Brevan Howard, which was itself founded by a group of ex-Credit Suisse prop traders, this year launched its own in-house training programme in response to the lack of suitable candidates coming out of investment banks.

Tudor Investment Corporation, one of the world’s oldest hedge funds, has backed a joint venture with HC Technologies, called LaunchPad, where a small group of rookies will be given the chance to hone their skills making bets on bonds, currencies, commodities and other markets.

“Previously, the industry could largely get a free ride from the training going on at banks,” says Mr Jones of GLG. “Taking on graduate talent is still alien to the average hedge fund, most try to do lateral hires. I believe we are ahead of the curve”.

This new approach to training hedge fund managers comes in the wake of the Volcker rule — named after former Federal Reserve chairman Paul Volcker — which prohibits banks from making speculative bets from their own accounts. The rule is one of the critical provisions of the Dodd-Frank financial reform legislation.

As well as reviewing the way in which they recruit, hedge funds are also having to rethink their relationships with clients.

In the past, investors in hedge funds were wealthy individuals seeking short-term knockout returns. Now, clients are more likely to be a large pension fund or endowment who prefer lower octane, stable returns as they look to diversify their investment portfolio.

"Joining the hedge fund industry from anywhere other than a bank was a rarity 10 years ago, but the supply from the banks has largely dried up"

- Mark Jones, Man GLG

Traders are expected to grind out a fairly modest and consistent profit for his or her client, providing large amounts of information about individual trades and reassurances about compliance procedures to jittery pension fund trustees

This means the new generation of hedge fund recruits have to be trained to interact with outside investors, which demands a broader set of skills.

The proprietary trader was once one of the most revered animals of finance. Encircled by flickering trading screens, these near-mythical figures appeared to answer to no one apart from their own profit and loss number, frequently earning the largest bonuses of all investment bankers.

Investors in hedge funds believe that although the prop trader as a species is extinct, the industry will gradually become more comfortable in adopting new ways of recruiting and training staff.

“It is not that there is a dearth of talent all of a sudden,” says Anthony Lawler, a portfolio manager at GAM, an investor in hedge funds.

“It is that learning to trade on a prop desk was just one avenue. The industry will adjust”.

Prop traders struggle to adapt

Helped by their own legend as the archetypes of the modern-day financial “Masters of the Universe”, many of Wall Street’s highest earning proprietary traders raised billions in capital by investors who were confident they could replicate their success at the bank on their own.

But many of those who grew up under the pre-crisis regime have struggled to adapt to trading outside an investment bank.

“We tend to be sceptical about ex-prop traders,” says GAM’s Anthony Lawler. “They are not used to running capital for outside investors, and therefore have a different mentality. They could just allocate a billion dollars to one idea a year, and then sit back. When you are running a fund, you can’t do that.”

Edoma Partners, founded in 2010 by Pierre-Henri Flamand, the former co-head of Goldman’s prop desk, closed down just two years after raising $2bn in one of the most hyped hedge fund launches since the crisis because of poor performance and investor redemptions. Mr Flamand has since joined Man GLG.

Four months later Benros, a London-based fund co-founded by Daniele Benatoff and Ariel Roskis, both ex-Goldman prop traders, closed down after its largest investor pulled out its money.

More recently, a $510m equities hedge fund set up for KKR by Bob Howard, the former chief executive of Goldman’s US equities and credit proprietary unit, shut its doors in 2014.

Mark Jones, co-chief executive of MAN GLG, argues that many ex-prop traders have been successful after leaving banks, but acknowledges that more hedge funds will be forced to look elsewhere for the traders of tomorrow.

“The idea that ex-prop traders can’t make money is wrong, but there is not going to be a return to prop traders coming out of banks anytime soon, in my view,” Mr Jones said.

by Sean Lee

Attributes which professional investors look for in emerging traders

I get asked this question on average 3 times per day and the answers are fairly logical.

1. Profitability:

- Consistent profit relative to the size of positions you take.

- The ability to make more on a 'good day' than you lose on a 'bad day'.

- Being comfortable managing increased risk when you are seeing the market correctly.

If you can provide verifiable confirmation that you positively tick these boxes, then you are already in the top 2% of all traders.

2. Risk Management

A sensible drawdown policy which is NEVER breached.

3. Trustability

- If you make claims about yourself, you must be able to back them up with references, data etc.

- If you are promoting a track record based on one account and hiding poorly-performing others, you will have no future in the industry.

4. Activity

- Active, enthusiastic traders are much more likely to receive allocations than traders who trade once a quarter in size and then go on holiday!

5. Education

- All else being equal, the well-educated trader is more likely to get an allocation and much more likely to get a job with a bank or hedge fund (where university degrees are often compulsory).

by Sean Lee

When it's not just about the money...

A highly talented young trader can earn $50k or $200k a month from the comfort of their own surrounds, and remain in complete control of their own destiny. Of course these traders are very rare indeed, less than 100 worldwide in my estimation, but it does raise the question as to why these traders would bother to leave their well-paid comfort zones and enter the institutional battle ground.

Here are a few reasons why:

1. Trading is an intoxicating vocation, similar to that of a professional sportsperson, and the level of excitement rises significantly when the trading amounts go from 100k to 100mio. When you are timing the market well and trading in sizeable amounts, you will even see that you are able to subtly influence the market.

2. When you go from being an under-the-radar retail trader to a well-credentialled institutional player, you will be amazed at all the new best friends that you acquire. Banks and brokers will hang on your every word and laugh at all your jokes. The level of service you receive will go through the roof.

3. It's in most peoples nature to like being recognised and acknowledged as being at the top of their fields. You may well be a better trader than the guy managing $1 billion for a big-name hedge fund, but no-one apart from your inner circle is going to know this.

When you are ready to make the transition, contact us here.

by Sean Lee

Axi Select September update: Ups and Downs of portfolio management

FXWW has been managing the Axi Select program for 18 months and we continue to experience the usual highs and lows of any market activity. Some of the traders that we had harboured very high hopes for have fallen by the wayside and others that we thought might take a long time to build their business, have blossomed immediately. It just goes to show that you never can tell, to borrow a phrase from Mr Chuck Berry.

From an asset allocation perspective, the big winners have been the systematic day-traders. The market currently wants managers who can use a common-sense overlay on top of a system which shows a conservative risk management profile and a logical trading methodology. Established professional trading businesses with these attributes are having no difficulty in attracting significant allocations from some of the biggest players/investors in the market.

If your goal is to make it in this particular space, I'd be keeping my monthly (notional) drawdowns well below 2%.

I think it's safe to say that Axi Corp has been pleasantly surprised by the performance of the retail traders who have made the transition into a funded account from their own tracking account. With one exception (who panicked and started over-trading) the other traders have been very responsible and have all started to find their feet. It's a difficult transition from managing your own personal funds to starting a career as a professional trader, and these traders have done the right thing by making sure their rookie mistakes don't derail their professional aspirations (trade conservatively in the beginning).

September 2015 will be the new benchmark month for Axi Select with 4 traders making the transition from tracking to funded account; we've already publicised Harkanwalpreet's promotion and he was joined this month by Vlad, UA and Patrick.

We've noticed an extremely high correlation in the performance of the ex-interbank discretionary traders. Even though they have no contact with each other, the 6 ex-professionals in the program all seem to thrive and struggle at the same time. (I think we have some work to do on reducing correlation when it comes to trader selection!).

Thankfully the team at Axi Corp is made up of industry professionals and they understand that price swings and p/l swings are all part of market experience.

by Sean Lee