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.