Professional Trader Vs Profitable Trader By Sean Lee

Not every profitable trader will make it as a professional trader in the institutional world.

An institutional investor will break their analysis of a trader or manager into two parts; qualitative and quantitative.

Everyone has different rules and preferences when it comes to the quant side but these are the main areas that are considered;

  • activity
  • methodology, systematic or discretionary
  • overnight and weekend position policy
  • daily, weekly, monthly drawdown limits (always based on equity NOT on realised)
  • when and how much leverage is used (ie does leverage increase or decrease in drawdown periods)
  • profit-to-loss ratios
  • chosen indicators eg Sharpe, Sortino, Sterling etc etc

So even if you have been a reasonably consistently profitable trader over a lengthy period, a negative analysis on any of the above will probably mean that you won’t get an institutional allocation.

The qualitative side is much more subjective;

  • how long have you been trading
  • have you any institutional experience
  • can you provide at least 2 well-respected referees
  • have you managed any institutional funds or been in a seed-funding program
  • can you provide evidence that you are an upstanding citizen

Even if a trader can provide exceptional data, they may well be refused an institutional allocation if they cannot tick enough of these boxes.

Obviously the ex-institutional traders have a significant advantage in this department but there aren’t many of them any more. The FXWW rating gives investors peace of mind that significant due-diligence has been done on the background of all registered traders.

By Sean Lee in FXWW News



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