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Archive for June 2011

Capital Traders Group and Apiary Fund: False Proprietary Trading Company Claims

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We have moved the blog here.

I look for information on companies allocating capital to independent traders.  I´ve my own opinion that allocation of capital to multiple independent traders is the most intelligent investment approach for foreseeable future.

Unfortunately, by far most of the firms claiming allocation of proprietary capital is doing anything but that. Usually such allocation claim is just a smoke screen for another service – like training course or day-trading brokerage account.

Two examples are Capital Traders Group and Apiary Fund.

Capital Traders Group claims to allocate proprietary capital for individual trader to trade. When one reads through the small print, basically the offer is to pay $2500 fee and trade $25000 of ¨proprietary capital¨ and keep 99% of profits.  The trading is stopped, if the ¨fee¨paid does not cover incurred losses sufficiently. Obviously, the service is most suitable for persons who want to day-trade stocks, but do not have USD 25´000 to open day-trading  account. Probably, the terms are different for experienced traders with track record, but the standard terms suggest there is no genuine allocation of capital to independent traders.

Apiary Fund delivers a smooth sales pitch for the crowdsourcing the trading performance. It is only late in the presentation when the sales pitch switches to promoting the training and trading platform they provide and disclosure that they charge $695 enrollment fee and $97 monthly technology fee. There no mention of the amount of captital they have in the fund and there is little justification for the fees other than that Affinity Trading Group charges $4995 for 7 day trading and SMB Training charges $6000 for 4 month training. The very fact of comparing themselves to training companies implies that Apiary Fund promoters consider training fees rather than profits from trading proprietary capital as the primary source of income. The low capital allocation (as low as $1000) at entry level just confirms the same.

My vision is that genuine proprietary trading company should not charge any obligatory fees to prospective system traders, but use adequate process of evaluation of the trading systems on risk/reward basis. If the trader and his system passes the evaluation test, the trader should receive competitive remuneration from proprietary trading company rather than pay to it.

What Exactly Is Trend-following?

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Some suggest that trend-following is the only investment style any thinking man should ever use. As opposed to all other investment styles. But what exactly is trend? Seems an easy task to define trend as a general direction in which any particular price tends to move.

Yet, when to apply time frame to price series, then the term gets more obscure. Day trader is just someone who trades intra-day trends. And a scalper is just another trend-follower who trades very short-term trends lasting minutes, if not seconds.

I once asked to Ed Seykota, a well-known apologete of trend-following, on his blog, if he considers trend-following as the only valid approach to markets. His answer was that all profitable systems trade trends; the difference in price necessary to create the profit implies a trend. However, he expands it a bit further. Full article available here (scroll down to Trend as a Law of Nature?).

I personally think that the term trend-following is more a notion than an investment style. Basically, the only important trend is the performance trend of any particular investment strategy.  If performance, on risk-adjusted basis, is good, one shouldn´t care if the underlying strategy is trend-following or not.

Written by A.S.

June 1, 2011 at 6:44 pm