Friday, July 25, 2008

Training Successful Traders: The New Breed of Proprietary Trading Firm

Increasingly, I'm coming across prop firms that are succeeding by investing in training their traders. These firms tend to be owned and operated by successful traders with a passion for teaching their skills to others. It's a great win-win: the firm wins by earning a percentage of each trader's profit; the trader wins by receiving an education you couldn't pay for.

Interestingly, because veteran traders are running these training programs, they recognize the importance of both teaching skills and instilling proper trading psychology. In my opinion, this makes the training programs far more "real world" than many of the "trading education" offerings from self-anointed gurus.

As an example of this new breed of prop firm and the kind of skills and information they teach, check out the blog for SMB Capital. I had the recent privilege of visiting with SMB and witnessing their program first hand. Steve and Mike, featured in this video summarizing their ideas, strike me as experienced traders who run their firm with integrity. (Here is Part II to their video).

Perhaps the most interesting part of what they're doing is that they've opened up their training programs to traders who can't join their New York firm. This enables independent traders to receive the same education/training/support that would be available in a professional firm, thanks to the online medium.

Keep your eyes open; a number of proprietary trading firms--several of which have been in touch with me--will be entering this space: going public with the training they offer their traders. As they compete, they will be driven to offer more and better training. Eventually, the most savvy ones will integrate coaching with the education/training through videoconferencing and intermittent personal visits. If they're even more savvy, they'll use their public training efforts to identify future successful prop traders.

Few people realize it at the moment, but it's a great time--a very promising time--to be a trader.


Firebird said...

"Dr. Steenbarger, one of the top three trading coaches in the country"???

How dare they? ;)

Best trading,


Newton Linchen said...

Dr. Steenbarger,

I am a brazilian trader, pupil of Larry Williams (who introduced me to the work of Niederhoffer and so I got to know your blog).

I live in Brazil and trade the brazilian stock and futures market.

If you know any of these prop firms that would like to operate in Brazil, (or that are recruiting foreign traders), I would be very please if you could get us in touch with them.

Trading is my life and I do trade for a living. Any further contact with you and your collegues would be very pleasant.

Please forgive my poor English. Thanks for all your work!

Newton Paulo Linchen, brazilian trader.

upsidetrader said...

Dr Brett,
A lot of these "new" training scenarios were brought on by some of the problems at Tuco prop trading where the owners actually fleeced the traders. The SEC cracked down and these trading firms were forced to stop giving 20.50.or 100-1 leverage to the trader. The prop firms lost many traders because the smaller trader loves and needs the leverage they were receiving. I don't know the specifics of the SEC ruling or if there even is a final outcome, but my general understanding is that certain prop firms can now offer leverage again as long as it is done under the umbrella of offering "training." Power to them, I think it's a great idea.

itlntdr said...

Uh oh, traders wearing neckties. What has happened?

That said, I've talked with these folks and they do seem to have a great training program and excellent communication with traders that make it into their firm.

littlemog said...

Hi Dr Brett,

sounds great that we've training opened up, even remotely (though that SMB's 5000 price for their 'manual's too steep for me at the moment). It could also be a dangerous time to be a trader though, given that with every influx of a good training point you'll get couple more that sell bad products (wolves in sheep's clothing) peddling their wares.

At the end of the day, it'll still be left up to us traders to sift out the wheat from the chaff ya?

Brett Steenbarger, Ph.D. said...

Hi Jorge,

Yes, I had to smile. Thanks--


Brett Steenbarger, Ph.D. said...

Hi Newton,

I'm not aware of any prop firms in Brazil, but if readers know of any, please leave word in a comment. Thanks!


Brett Steenbarger, Ph.D. said...

Hi Littlemog,

Absolutely! Due diligence is key; the best education is not helpful if they're not teaching the skills you most want/need to learn.