I remember the day very well. I received notification from Axi that they (along with many others) were pulling out of the US. Dodd-Frank and the new regulatory requirements pushed many foreign based brokers away from US Clients. While this would normally not be a major issue, as there were still other brokers I could trade through, I faced a dilemma. After years of working towards my goal of managing client funds, I had succeeded in kicking off that dream. I was currently managing funds for a small group of clients as an exempt FX CTA when I received word that I had 45 days to close all open positions. My PAMM accounts with Axi (along with the investors I worked so hard to obtain) were given the red card. After only six months of fund management it felt like it was over before it even started.
I will be honest, I was pretty devastated that all the years of work to get to this point were wiped away in one fell swoop. I considered going the full CTA route since I had my series 3 and series 34. After much research on what it would take to run a fund under the new Dodd-Frank arena, I unfortunately came to the obvious conclusion that the AUM needed was exponentially higher now. The need for a compliance manager, auditing/accounting, and other industry costs make it almost impossible for the newer/small CTA to thrive. Unless you had well in excess of $10,000,000 under management, you were going to face an uphill battle. Simple math can sometimes shed uncomfortable truths that cannot be disputed.
What to do now?
I took a few years off and went back to trading my own account. It is hard to explain unless you have done it, but going back to trading a personal account vs. managing funds was a hard transition. Although there was added pressure of trading other people’s money, it was a welcome challenge and trading my own account was not quite the same. There is a certain feeling of accomplishment and professionalism associated with managing funds. Although not required, I provided monthly performance summaries with commentary as well as benchmark comparisons. While I still tracked my personal performance, it does not compare to growing funds for a group of investors. Both my certifications had passed the two years allowed for registration requirements as a CTA and I assumed my shot at managing funds was permanently in the rear view mirror.
The Prop Trading Quest
Sometimes in life it is hard to truly let go of something you are passionate about. While I continued with my career in finance I couldn’t quite get the fund management idea out of my head. I had heard before about
the prop trading route, but never fully investigated it. After some initial digging I came across several places that charged ridiculous “education/training” fees, but also had other issues more concerning. I am not a scalper looking for 5-15 pips on a trade and I often hold a position days. I am a swing trader by nature and most of the requirements of the prop trading companies I reviewed had daily minimum trade requirements and/or did not allow open positions overnight (outside NYC close). My approach is based on opportunities presenting themselves, i.e. being patient for the right set-up. Being forced to place a minimum number of trades or close open trades that are doing what I want takes away my edge. My strategies are about making more on winning trades relative to losing trades. High win percentage strategies with skewed/reverse risk relative to reward is not my game.
As I was ready to scratch off prop trading as an option I came across Blue Point Trading. I am a very cautious trader and not much different when it comes researching prop trading firms. I spent a few days going over the website and learning about their education program as well as the specifics on trading requirements. The virtual trading office was a must, so that option interested me from the start. No daily or weekly minimum trade requirements along with no expiration on open trades was a breath of fresh air. They provided a list of what instruments can be traded as well as stop maximums. Surprisingly they did limit the number of open positions to two at one time. It is “forced risk management”, which makes sense when you delve into how the program works. Your trades are copied to their capital accounts which forces the undisciplined trader to take a loss vs. holding on to a losing position past the point of a sane/reasonable level.
Some of the highlights that sealed the deal for me are listed below:
- Most inexpensive (in case it was not legitimate I did not want to spend thousands)
- Traders earn from month one if profitable and can increase payout rates quickly successful
- You talk with a real person for an interview to discuss any questions/concerns you might have
- Very Black & White (nothing left to interpretation)
- My interaction with Julius and the staff was always extremely professional
- Did not force scalping or day trading; they care about returns
While hitting the monthly targets, especially consecutively, is no easy task I decided to move forward with Blue Point. Worst case I would probably learn some new things from their educational program. Best case it could open the door for fund management or working on a trading desk. Even if the best case didn’t happen, it was clear that a trader could still potentially earn substantial income as they advanced through the trader levels. At this point, there was plenty to gain relative to what I could lose. As with trading, the risk reward had to be there and it was.
So Far So Good
I am now in month two and have profits locked in that guaranty I move on to month three. I have earned back my cost for the program already and I am cautiously optimistic I will get past the defining third month to become a Blue Point Trader. The professionalism of Blue Point carries not over to their speedy payment to traders but also to response time on any server/connection issues related to the MT4 Blue Point application.
In summary I am very thankful for the opportunity Blue Point provides aspiring traders. If all goes well I will be announcing successful completion of the trial period soon and moving closer to the fund management world I tasted for a brief time.