What does it take to be a futures trader?
As a plethora of trader training academies, courses and prop
houses tout their wares, Alice Attwood takes a look at some of the prop trader
training options.
For those who dream of a trading career, a quick scour online shows that there are numerous trading houses and education programmes available, but it is hard to know which firm to go with.
While rumours of “dodgy” and “churn and burn” approaches to
practical training for trading are still rife, with experienced traders able to
regale unsavoury practices in trader trading, a number of firms are trying to
dispel such rumours with their own trading offerings.
Yet traders tell FOW that while the market for training may
seem plentiful, the number of credible and training programmes available for
up-and-coming futures traders is not.
The recent arrest of British futures trader, Navinder Sarao,
thrust proprietary trading firms, as well as the futures market itself, into
the spotlight. Indeed the prop firm that trained Sarao, Futex, found itself,
and the subject of trader training into the spotlight.
Futex
Futex was established in 1995 and has been offering trader
training since 1998. The first off-exchange electronic trading floor for
futures and options traders, the firm now operates out its headquarters in Woking
and the city of London, and also has sites in Wroclaw in Poland and Sotogrande
in Spain, with a new Frankfurt office planned to open in the final quarter of
the year – a joint venture with a Futex alumni.
Futex describes itself as training academy for individuals
who want to carve out a proprietary trading career. The company itself has two
strands; training for potential futures traders and Futex Live – an online
knowledge centre for market analysis and resources.
The programme includes technical understanding, trading
psychology, personal management and market analysis elements.
The firm found itself the centre of scrutiny in April when
Sarao was arrested because the British futures trader started his career with
the firm, on its trainee trader programme. Described by the firm as a
‘diligent’ trader, Sarao worked at Futex from early 2003 to the end of 2008.
Head of business development at the firm and ex-Liffe
trader, Dan Goldberg, estimates the training is worth approximately £50,000.
The firm runs 12 week courses three times a year, typically
with an intake of 25 students – half on a scholarship basis, and half
self-funded students.
The firm’s full-time training programme is also
university-certified. The 12 week course is a precursor to the one-year
Proprietary Trading MSc at Hertfordshire University. Cited as a “fast-track to
becoming a high-earning, professional trader,” the course is a combination of
theoretical and practical trading and is the first internationally recognised
postgraduate degree in futures trading.
The £12,000 course fee is split between Futex and the
University, £7,200 and £4,800, respectively.
After graduating some students will continue to trade on the
simulated trading system; Goldberg said 95% will trade live markets before
getting to the end of the course.
“At this point, you have a good idea of who ‘gets it,’ being
a trader isn’t for everyone. If we believe in someone, we will back them.
Sometimes this incurs a loss, but that is a part of the business,” he said.
Futex’s Goldberg describes it as an “ethical business,”
delivering high value, which ultimately is leading to higher profits. It is
ethical due to the fact that the firm tells traders what it takes, from the
lifestyle and discipline required to succeed in the market. The course aims to
give a complete introduction and instruction to life as a futures trader, even
down to the psychology of being a trader.
Once students graduate from the course there is no guarantee
they’ll ‘go-live’ and trade. “It may be another three or six months, it comes
down to personal performance,” said Goldberg.
The reasoning behind this is simple: the firm is taking the financial risk. Futex pays trainees a £500 ‘expense’ per month after the three-month training, for a five-month period. Classified as self-employed, students will continue to be mentored while trading in a demo environment until deemed ready to trade real markets. Desk and clearing fees are charged once the trader goes live.
OSTC
Prop firm OSTC was founded in 1999 in London and specialises
in point-and-click proprietary trading strategies on global futures markets.
The firm offers a practical training programme, supported by partnerships with
a number of universities, focused on financial markets, with particular emphasis
on derivatives.
The OSTC approach to trader training sees the firm take on
prospective traders as salaried employees, demonstrating the investment the
company is making, CEO Jonny Aucamp told FOW.
The firm hires potential traders from various sources, and
has a number of collaboration deals with universities. Ex-students have come
from backgrounds including engineering and financial services, for
example.
OSTC said it invests time and effort while students are
still at university, meaning they can see the characteristics of potential
hires throughout their courses and – importantly – ahead of hiring them,
through frequent meetings and seminar situations.
“We are behind our traders and want to teach them not how to
make money but how not to lose it; we are interested in the long-term
development. Execution of this is not complicated, but our training looks
further than this. We cover the infrastructure of the market, analysis, the
psychology of trading, economics, and the long-term relationships and investments
behind what we are doing,” said the CEO.
The time devoted to the pre-selection and searching for
potential traders is key: “We are after a specific breed of potential traders -
highly driven, highly disciplined, and that’s an ethos instilled across the
business.”
Once training is completed, there are opportunities for
graduates to step into mentoring and office management roles, through which
they will assist new students in learning OSTC’s values and theoretical
tutelage.
The firm recently signed an agreement with Chinese broker
Yongan Futures to set up its first office in China. The new site - set to open
in Hangzhou in the fourth quarter of the year - will be the 17th OSTC office
and mark its entrance to its 10th country.
“The borders between the East and West opening up is the
next big opportunity in our sector and with the right strategic local partner,
we have the experience and expertise to maximise on this opportunity,” said
Aucamp of the new site.
Looking ahead, Aucamp warns that impending regulations will likely continue to cause frustrations, partly due to the lack of understanding around them, but regulatory changes will benefit firms such as OSTC, as they will ensure that “undesirables don’t get through”.
Divento Financials
Divento Financials, headed up
by James Sullivan, is a trading firm offering specialised training, guidance
and risk management for futures traders.
Divento Financial’s model is again, slightly different.
Created as a joint venture, the company’s trading course is
the ‘Level 5 Financial Trading Diploma,’ which was in development for just over
a year. The diploma has just been approved by the UK’s Office for Standards in
Education, Children’s Services and Skills (Ofsted).
Operating out of Tower 42 in the City of London, the prop
firm’s trader trading academy offers access to experienced traders with
dedicated instruction on fundamental analysis, technical analysis, algorithmic
trading and market-making.
Much like the other London-based counterparts, there is no
“typical student,” with the course taken by a mixture of students; some
graduates, some experienced traders, some traders who are looking to retrain in
a new market or asset class, as well as ex-athletes looking for roles after
their sports careers.
The course is still in its infancy, though trader training
at the company is nothing new. The course will see its first official course
intake join the ranks in early June. At a cost of £5,000, the course will see
the traders continually assessed while trading on real news and market action
on demo accounts, and each will have to take an examination in order to
graduate.
Like most of its counterparts, the Divento diploma will also
see a split between students backing themselves, and those funded by Divento.
Upon completion of the Ofsted-stamped course – which is set
to run five times per calendar year - Divento will retain those it deems the
best students, or those with the most potential, as a way of growing the
business with Divento-trained traders. Once graduated, students will still
continue to trade on a demo account for the next six weeks or so.
The attraction of students with sports backgrounds is
important to the firm. “We have seen a lot of interest from ex-athletes, and
that’s exciting for us. The discipline required to be a successful trader can
be likened to characteristics needed by sports personalities; the drive to be
the master of a craft – this drive is an exciting prospect for us,” said
Divento owner Sullivan.
Looking ahead there are plans to build a full suite of training courses, such as a two-day introduction to trading and ‘finance essentials’ course for younger students, we well as the scope for the flagship Level 5 Diploma to be translated and run in other countries.
LAT
Headquartered in London’s Tower Hill, The London Academy of
Trading offers a 12-week Level 5 Diploma in ‘Applied Financial Trading,’
accredited by the Association of Business Executives, as its flagship course.
Student fees fund the company. The cost of the flagship
course can be up to £8,000, depending on how each student wishes to undertake
the training, with all-online (£2,000) to all on-campus (£8,000) options, as
well as a mixture in between, whether students are effectively charged a desk
fee for on-site earning and support.
LAT runs a range of other courses, including a two-day
introduction to trading, to a new nine month Level 3 ‘Access to Higher
Education Diploma in Trading and Finance,’ with most deliverable online,
on-campus, or a blended combination of both.
Across the trading courses offered by the academy, CEO John
Devonshire expects LAT to train 155-200 students this year, and 3000-4000 in
2016.
The education structure is headed by academic dean, Paddy
Osborn, an ex-bonds trader and technical analyst. He told FOW that around 50%
of students undertake the ‘blended’ option, a mixture on on-campus and online
learning.
LAT students come from various backgrounds, as with students
from Divento and Futex, there’s a split between graduates and mature students,
from London and abroad, looking for a career in trading.
The training programme – which centres on commodities,
equity indices and the foreign exchange markets – is focused on technical and
fundamental analysis risk management and trading psychology.
LAT rents trading desks at the academy to students once they
have completed the training, Osborn said. Once set up, they can trade their own
funds while still receiving help and advice from professional traders and
mentors. For exceptional traders, “those who prove themselves,” said CEO
Devonshire, there is the potential offer of a job, trading company funds on a
revenue-share basis.
“Other students have been employed in other roles within
LAT, for example trade mentors, social media, new projects and sales, while
also trading live accounts,” said Osborn.
For those that move on, past students have been successful
in forging trading careers, due in part to a key focus by LAT to produce
‘desk-ready’ traders, new hires that won’t need time and money spent on
additional trading. The academy also spends time helping course graduates with
job searches, CV writing and careers advice.
“Just because a student leaves it doesn’t mean our
relationship ends with them as we continually want to monitor and assist them
with their progression,” said Osborn.
Unlike recruitment to some other market offerings, if a
potential LAT student can pay the fees, and passes the pre-qualifying exam,
they’re admitted onto the course.
The firm is keen to distance itself from the promises of
overnight riches and success made by some trading courses.
“We specialise in financial market trading and offer an
accredited qualification. There are many companies offering courses in trading.
Some are very good at marketing - “you’ll be a millionaire by Christmas” - but
most have a very poor reputation in the market,” said Osborn.
“Our challenge is to reassure students of our honest and
robust approach to training. Our accredited status ensures the quality of our
service and consistency of our assessment procedures. One major benefit for
students that we pride ourselves on is the level of commitment to students,” he
added.
A new dawn?
The inclusion by prop training firms of trading psychology
in their education programmes is interesting. All firms stated that it is a key
part of the training.
Sources at various companies state that learning to trade
and learning to be a trader are very different things, thus the psychology of
trading is an ever important aspect for a prospective trader, as well as the
discipline and technical know-how.
The approach to learning may differ between them but each
firm purports to devote time to the psychology of trading and adopting formal
and structured practices – a shift away from ‘old school’ prop trading shops which
would start the week with a room of potential traders and make daily, or hourly
culls until they were left with a few potentials.
This acceptance of the importance of a more holistic
approach to being a trader, rather than just how to trade, could be the
differentiator between new and old school trader training. Perhaps this marks a
new era for requirements and options in the trader trading space, and the end
of the “churn and burn” approach.
However, a few things remain clear: securing your seat at
one of these training houses comes at a price, is no fast-track to success and
the life of a trader is still not for the fainthearted.
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