In other threads I read about traders' experiences trading on the floor or on screen with prop firms. I thought I'd share some of mine as it seems to be more recent.
These are just my thoughts and conclusions based on personal experience.
I joined a prop firm in February of 2011. I was in the first intake with 6 other guys. Our office mainly traded European STIR products through spreads and strategies like butterflies and boxes. Within 6 months we got involved in softs and energies spreads as well.
We had support from senior guys with couple of years of experience as well as our managers who traded longer. Occasionally we had visits from our company's directors and they had chats with us about trading and how things were going generally.
Essentially, we were market makers, liquidity providers. We were selling
volatility expecting to get filled on the other side for a tick. That's what we were taught and that's how our group started seeing first positive results.
Now, some people may think there was more to it. And I will agree. Unfortunately, I could never understand what it was.
Some things in trading take time, like gaining experience, but I think I gave it a good shot. I must admit I wasn't among the best when I decided to leave 2.5 years after I started, but I wasn't among the worst either.
I made money both years but never even close to the bonus territory. The most disturbing thing for me was my complete disbelief in what I was doing. To me positive results didn't feel like a sign of my skill, nor did I think I had an edge. The way I saw it, people who made bonuses took more risks, made more intuitive decisions and enjoyed what they were doing (presumably).
Another important factor for me was that nobody could really explain logically why we were expected to make money trading for a tick or how to determine conditions when the market may strip 10 prices one way. I heard quite a few vague explanations and was satisfied with them while I was still in a "take a leap of faith" mode. I should mention that, in my view, it was a proper trading firm and we even got paid straight away to keep us going.
As I said, I was profitable. 2011 and first half of 2012 were quite active with a lot of uncertainty about European economies and interest rates. There was a lot of paper in the market and things looked rosy. But then something changed.
I noticed this change only on my year end review. I stopped making money in STIRs, which was my main market, and couldn't find another explanation to this fact apart from market being "slow".
That's when I turned my attention to outrights. Partially because how uncomfortable I felt trading spreads, partially because of the abundance of information available online. But intellectually I believed that this should be my future path.
I did economics at uni and after years of research I knew enough about market inefficiencies and changes that take place. I believed that manual market making in spreads would have the same story end as in outrights. Obviously the drop in volume, that could have been temporary, didn't help either.
I think being able to make decisions on your own is one of the main advantages an individual trader has compared to any institution. Now I trade what I got an understanding of working for a firm, which is how traders position themselves and how those positions influence future decisions.
Markets are always changing, I agree. But, in my view, an edge must be based on actual market mechanics, not on a temporary inefficiency or correlation.
If anything, what I wanted to say with this story is that there are no secrets in trading. The market generates more than enough information to enable a trader make decisions about what works and what doesn't. Keep track of your ideas and results and you will have as big edge in current markets as any veteran trader.