Risk management: prop trader vs day trader
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- Опубликовано: 7 июл 2024
- In this video I go over the differences in how risk is measured and managed between a day trader and an actual (real) proprietary trader.
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What you are missing is that the greeks are used to understand your exposure to various risks.. in order to hedge the risks away , or not hedge them if that risk is desirable at a certain time. But, someone trading their own money (not client money on a commission) wants to take a managed risk, they don't want to hedge it away or they will make no profit. 'Risk' here is really limiting your maximum loss with a stoploss, so that your strategy can survive long enough for the Law Of Large numbers to kick in and reveal your edge, or not.
yeah this guy is starting to talk too much shit. He's comparing two ver different approach trying to look smart. Altough it's true most of the daytraders are stupid.
Also just to be clear, I'm a trader working for an hedge funds. We do use stop losses when trading currencies.
🎯
Ofc
Stop-loss orders do not limit loss in cases one continues to pile them up. They make sense mostly an approaches where it it possible to "recover" most of them.
I feel like this guy hates to much on non institutional traders, not every strategy needs complex software to execute, plenty of discretionary non institutional traders make money.
Yeah he's just like any youtuber. He will eventually sell you an 'institutional' tool
If you asked him to create an account and turn a profit, He couldnt.
He doesnt know how to trade, He knows how to code, Which is why hes a Quant coder and not a trader.
RUclips is getting full of these people recently, Watch him release a course in a month or 2 lol
We quant people really do hate youtube channels calling their technical indicators analysis “quant/quantitative”. Of coz all strategies could be profitable, having their own edge and could be simple. What we hate is they’re selling you the wrong concepts. Eventually you would come up with something profitable on your own but have all the wrong ideas on worst case scenario or what risk is. On upside everybody’s happy, but most cannot survive the downside. Simple technical analysis and stop loss “risk management” would never survive long enough. This is not quant, not even close to. So you can say you’re technical system, but not quant trader or risk manager or portfolio manager and disgrace the concepts
@@louisszeto31620000 i mean to your reply your 100% right on what you say and can fully understand why quants hate having their tools ripped. However you could be a Risk manager and a Portfolio manager without even being part of a hedge fund (i know because im a portfolio manager ;) But in complete agreeance with the rest. Whats a shame is the guy that posted the video did not display or exicute the information he was talking about in the same manor of your reply. He just out right called it all rubish. Oh and i dont trade TA i trade Dynamic ranges on williams 14 5m breaks
@@neel743 what in f are u even saying. are u even hearing what u spewed out? selling institutional tools to the public. why in world would he waste the time to give such tools to layman day traders. stay hating w ur broke ass 1k day trading portfolio lmao
A trader can make money in any way, and can manage risk in a way which is feasible. Discrediting people who are not quant developers in my opinion is wrong.
Shut up
A stop loss is a secured loss. If you’re a confident trader you wouldn’t be using it.
@@HoleGrayNotes You don’t know about trading 😂
@@markkonka I do I just trade with more confidence than you. Use leverage not a stop loss noob. If you can’t afford to get liquidated or cover your position you’re losing, guaranteed. We hunt stop losses over here. At least enter a short position, no “stop losses” here.
@@markkonka pretty presumptive comment. Plenty of traders make great returns using stops. Maybe even the guy who posted the comment. I trade oil, executing on the 1 min, monitoring on the 5 and 15. Simple execution and I don't always use stops, but I do use them. Make about 0.5% a day most days. Lose some days. Probably 1 in 4. And never greater than 0.5%. I know that my time in the market is limited and eventually guys like this will use tech to shut me out, but I'll adjust when the time comes. The benefit of being a small day trader is that I don't have any rules or limits forced on me and I can use instinct as well as a simple strategy. At the moment, its working well. Try telling your boss at a big firm that you took a trade based on your gut. These are often my best trades and I'll pick up 4 or 5 x R on those trades. You can often see weakness in price movement on the 1 min, but that weakness won't show on the chart as its evident within the movement of the candle so it doesn't show unless you are watching it. I can see the algos working hard in those moments and often get in in anticipation of what I perceive as their influence on price in the moment and what they are trying to achieve, which in many cases, I presume, is hunting stops. I use this to either exit or set up my next trade. Maybe my presumptions aren't based on how algos actually work but I get it right about 70% of the time so wrong or right, it works well for me.
Hi, you need to be aware there are many knowledgeable pro retail traders (scalp, day, momentum, swing trading etc.), making a lot of more % gain (consistent month to month) than institutions and doing it for quite a long time, some of them. You're providing the basics here. Telling people in so many vids that day traders are scam and discrediting them is simply not true, telling them that it takes a lot of learning, pratcice and mental worked out approach is more legit. About the tools, yes they have tools, there are many of them, some of them can build their own etc.
If they have tools that they build then they’re quants not day trader 🤦🏻♂️
@@skrilla. hes just pointing idiot arguments, he lost too much on daytrading cause he not doubled portfolio in 2 days
You think they are making profits, most of the time these guys/girls fund their 'lifestyle' with the huge amounts of money in which they make off courses.
@@Ken_griffin1963 That's true. There's also a lot more of what you mention than the legimitimate ones.
I’m confused so do people make money or not 😅
If you have a day trader trading options, very plausible, then you get the prop trader. Similarly, if you have a prop trader taking a large position on one asset on which he has conviction, plausibly once in a month during a data release, he cares about the risk reward of that big trade, then you have a day trader.
I think a better distinction is that a prop trader leverages the asset base and exchange connectivity provided by the prop firm to provide liquidity while staying within a certain VaR limit. He can do so because of his capital base. His stop loss is so far that it no longer becomes relevant; he will derisk by skews way before his SL is reached.
A day trader doesn't have his luxury, will likely become insolvent faster and so pays utmost attention to his risk reward, namely once his trade hits a drawdown, he's out
What do you mean derisk by skew
The more of your videos I watch, the more questions I have. Good work.
than you will never learn how to trade. it's around as simple as using a toilet correctly.
Coding Jesus ! Ahhh thank you so much. You are really killing it ! Great great content !
What you have described is Quantative trading vs prop trading. Prop trading is any form of trading with the companies own capital
Excellent video (imo), would love to hear more about how prop traders work
i respect this guy for giving us another point of view.
Yeah… let’s make fancy risk parameters models but with wack base assumptions, and let’s see our overfitted machine learning strategy blow up as soon as there a black swan event…. Like so many hedge funds
you are contradicting yourself here. in one video you said price is based on future discount what not and that the past does not predict the future. Now you saying you back test using which data? it means you still incorporate the past price movement because theres no way you are using price that hasnt appeared on a chart
Might not be a useful asnwer 2 years in the future, but will try
In prop environment backtesting is not so much of a research tool or a validator tool.
Backtest is used to simulate the parameters that influence trading (e.g what if the spread is 2x the normal, what if the latency is worse, etc.). It is rather the simulations of boundaries on the execution side.
Realistically speaking (unless HFT), you can't answer if you will be profitable with the backtest because you don't have enough data.
To comfortably say that strategy x has a sharpe 2.0 within 0.1 me and 95% confidence interval, you need 1154 years of data.
Lol wrong a prop desk has to manage their risk differently because they’re trading tens of millions if not hundreds of millions. Daytraders can manage their risk as well as a prop firm on any single trade if not better due to liquidity issues if a prop firm has to exit a big position quickly, that will change the price. Taking the Greeks into account makes sense if you’re trading a lot of money or options. A trader with a winning strategy can divide their account into 100 parts and use simple dollar risk per trade easily, granted their position isn’t too large.
F no! There is so much wrong with this post its hard to explain. Constructively telling you to study more because this is wrong.
@@ivotenotocensorship5247 lol maybe you should study what constructive criticism means.
You've yet to meet Mr.Vomma and Mrs.Speed. Good luck buddy 😂😂😂😂
You can use options to help with probabilities, although I prefer backtesting. My point is exactly that. You can too, you don’t need to work for a prop firm to win.
@@riankashyap1996 no but Ive met your Momma
Right to the point, excellent video!
Thank you for this video. Great information. Keep it up!!
Damn! I have to hire a quant now for my $50 portfolio!
Ah of course you want to turn $50 into $1 million. By day trading, people like you just don't want to accept the fact that you can only make lots of money with trading if you already have lots of money.
But the people at the top just want you to believe you can so you keep you keep losing money and create more liquidity in the market. To help the rich get richer
This is one of the only channels on YT that gives us reliable insight into the algos we're competing against- thank you.
I don't mind that you think day traders are simple: most of us aren't managing enough money to justify complexity.
Like most programmers and other nerds.... the God-complex is never far away with them... just like jocks in 80's movies
.... also, calling himself Jesus, but still begging for Patreons and subscribers while having a Quant paycheck. What a shallow faker
since i started following you, my knowledge of finance , and financial market approach skyrocket
I am a very open minded person. I fully listened to all of your videos and opinion, but now I can't help myself but to comment. I myself have built many automated trading strategies using machine learning, and using no stop loss simply doesn't work for me. Maybe there is some theoretical truth to that if you are doing complex options strategy. I would agree to you only if you are talking about strategies that include options selling instead of trading actual stocks themselves. However, I don't think that makes sense to not use a stop loss if you are simply long on a stock for example.
no SL only works if you have a huge balance....his is very biased
in simple terms, stop losses are used in speculative trading. As quant traders and strategic option traders we don't use speculation therefore stop losses are of no use to us.
Surely they have an exit strategy or are hedging at an opportune time instead of using a stop loss
I’ve watched a number of your videos and you seem to hate day traders.
Yeah he works for hft. Hft's have even manipulated him to speak -ve about traders. He is quant dev not even a trader
Hey Coding Jesus, I know you may think of us retail traders like a lot of the guys on Wall Street as “apes” but I thought this was an excellent video and it’s honestly refreshing to hear a completely different side of the trading world through you and I know now more than ever that I know nothing. Please make a comeback your videos are great.
Best Regards,
Ape retail trader ❤
Hi Coding Jesus, absolutely love your videos! At 1:35 you mentioned that you were going to make a video on how trading firms are structured but I can't find it in your list of videos. Could you (or anyone reading this comment) link to the video if it is available? Thanks!
yes i am also interested in this
SIR, Which support is more likely to hold-- A) one with fractal support Or B) one without fractal support?
Which support is more likely to hold A) fresh recent support--not tested before Or B) Support which has proved successful being tested many times before?
Which support is more likely to hold A) where price spent little time before being repelled away successfully Or where price spent a lot of time before moving away?And I Seek your wisdom on these life & death questions.
I feel indebted to you for such valuable content... thank you
When that Ricky guy came up I LOL'd
Hi CJ - can you include a video on socket programming and how it is used in HFT applications
In depth overview of the risk tools and how to code them and analyze against your positions would definitely be worth a video series or course.
the way you looked up and down at 6:55 as if you're checking me out made me feel an emotion that i didn't know i had ;-;
There are prop traders who don't trade quants. You are knowledgeable in the corner you are in, but there is a very big world out there.
Exactly! I have been all over the prop space in my 20 or so years, so many ways to skin a cat. As I watched, I kept thinking to myself in a few years this creator will really understand the quote "Smart enough to know, how little I actually know"
If you buy everything, you buy nothing. Winners pick assets individually
"Quant traders lose $$$ from making a small profit, retail traders/investors lose $$$ from stupid stock picks that went down" - Some quant from Wall Street
I think you fail to realize how much information retail traders have access to. Some retail traders are not as lamen as you think lol
Indeed, and retailers have several advantages over hedge funds, including trading very little money compared to hedge funds, so way more agile.
True
Your TA opine was checkers however I do enjoy your fluid delivery and your macro knowledge on trading infrastructure
Yeah you should just trade without a stop loss and rely on correlations, that way you can have a day where you blow up your trading account in spectacular fashion.
If instead of using a "trailing stop loss" I program a "trailing stop gap" (a trailing stop that follows the price , but when going forward again it waits to overcome the initial gap difference in pips between the initial stop and price, so it keep the channel when followin a random trend).. It will be improving my risk of getting closed? Do you use these kind of things?
that's when you can not extract much. Trailing sl is one of the worst ever.
Dropping gems 👏🏼
Thanks to You i start to understand one book ive read, thank You!
if you talking about options maybe stops are not really needed, but for stocks and equity I think stops are important if you trading low to medium frequency
great vid! I wonder why there is not more info on how a retail trader can be more savvy about risk management beyond stop loss, which is notoriously hazardous in itself.
what about you learn how to trade and you come back to have another comment? wouldn't be better for anyone ?
@@druntopronto7598 I know how to trade, clown. Most traders talk about risk merely as your stop loss level, position size, that's about it as far as measuring risk, otherwise you can plot trade probability wrt previous incidents.
Nice, an 8 minute commercial. You don't need to buy special tools or hire specialists to be successful, people. Start small and slow, and practice a lot.
If you have a direct access accoint and you use a hidden order it may help prevent your stop getting hit.
You're a Brutal Quant, but I freaking love it!
what you are saying about quants applies to day traders too. It depends on the trader I would say. You actually look like someone who tried trading and failed. Listen profitable daytraders know they dont have to just draw lines and execute trades and then make money because the market dont care about our lines. Understanding that, in the framework of all things that makes up a successful trade, execution is just 5%. I Love Videos tho
You are talking about two different things. Apple vs oranges I.e. portfolio vs non-portfolio. If you buying one stock only your risk will be different from managing a portfolio.
Having watched several of your videos, I have concluded that you are a discretionary day trader who couldn't make it😂
👍🏻👍🏻plz shoot more of these vid, love the insights of an actual quant
Can you share any thoughts on how you would determine the equivalent of vega for pure equity/stock portfolios?
Comparing risk management in an options portfolio to a single directional futures position does not make much sense in my opinion. Also why would a stop loss on a delta position be bad money management?
Do you have a future plan to develop software that gives day traders the same abilities traders have?
Absolutely not!🤣
What is the typical time frame used in order to determine if the P&L is garnering the desired Number ? Serious question
I made 150% last year but according this guy am not a real trader. 🙁
For systems trading a portfolio of stocks, the ideal stop is something like 20% below the current price. Day traders seem to either have stops that are super close and keep getting stopped out or have no stop and keep wishing for the stock to go back up.
Hi coding jesus, could you talk more about how to transition into tech with an non-technical degree (e.g business). Im currently doing accounting at college and I am wondering how could I get a job in tech. Thanks for your wonderful videos btw :)
I have a video about how I learned to code in three months. Check it out.
Hi dude, your channel is incredibly helpful! Could you please tell us about the coumbuter that using by quant trader, also what the specification are using in the firm you work at , wich can analysis terabytes of data for algorithmic trading .
Thanks for the kind words. Not talking about my work. That is private. If you want to learn more, suggest a video in my Discord. If you don't want to wait for a video, join my Discord and book a private session with me.
@@CodingJesus Jesus plz help me out ... I want to know from you softwares that are made by ur team so i can be in profit in forex market ...
This is quality - great insight most of us would never have access to. Thanks!
Do you code for investment banks as well as prop firms?
can someone tell me what overfill risk is? (7:28)
Thank you for sharing
Really appreciate the content! I'm looking for resources to study risk management related to quantitative trading but have no clue where to start. Any tips would be very helpful!
Study
More often then not, the Stop Loss will trigger, and after. the price will go back up. in my experience trading stop losses just limit you're Profit more than losses. heck, it will make trades that would have been Green, Red.
Then your stop losses are too tight, cut size and widen them. Place them in an area where it would be hard for the market to reach, and if it does, it indicates that the trend has genuinely changed, instead of getting stopped out by noise. Good luck!
Set your stop loss to just below the previous high low (or vise versa), an upward market shouldn't often drop below the previous high low, and when it creates a new high low you can even edge your stop loss up to just below this and make a profit even if you "lose" the trade.
@account3- Certainly, they are people they can trade, just nobody listen to them.
can somebody become a quantitative developer with zero coding skills at the time they become seriously going for it?
I've been in the army for 13 years and getting out. I love finance and the stock market, options, trading, long-term investing, etc. I've been trading for over 4 years and wanted to become a trader full-time for an institution but it's almost seeningly an irrelevant job at this point.
the plan was to go to school for finance with a concentration in economics, but I wouldn't mind trying to go your route and have always wanted to learn how to code.
is coding/programming/script writing, etc. something that you have to have knowledge of from a very young age? Or could I potentially begin pursuing it now in my mid-30s and learn adequately?
I already know about equities, micro/macroeconomics, options, the Greeks, indicators, how to interpret things like fed-minutes, interest rates, inflation, etc.
Could I reasonably become educated enough to become a Quant developer/trader if I've never coded before instead of going the finance route?
seems like that route would be way more fun anyways and wont be completely replaced any time soon.
Thanks in advance for your response.
I appreciate the balls this guy has lol. Many people do not understand how deep the trading waters are before they take a swim.
OMG, Coding Jesus thank you for preaching real shit
not what i expected but good stuff. subscribing...
Your comparison belongs to your perspective
Eye opening stuff
I just started learning programming from scratch and choose c++ for my first language (self thaught) and found your channel, hope you gonna upload more, Greetings from Poland my Christian Friend!
Nice to hear! I'm a Jew though. :)
@@CodingJesus LOL
Oh so only some characters overlap :D
@@hell0kitje Christ was a Jew, so full overlap.
@@CodingJesus what do you mean "was a jew" i thought you were THE coding Jesus
Exactly!!! Atleast there is someone who talks about the business... Stop loss is not something that stood there till the trade ends! There are diff risk parameters that should be done! So called social media guru traders don't even know what real professional traders do! They made money just by selling their courses! Real world is really scarry 😅
u need tons of data, amd cores as much as possible, correlated m to m, then found the skew. so hit the market
No matter how many trades you place, no matter how complex your portfolio is, there is a risk to lose as long as there is fluctuations in the market.
Your content is great.
Amazing.
How would you manage risk if you day trade only one futures instrument? Thanks for the info in this video!!
Futures don't have Greeks
@@CodingJesus would you consider it risk management by using options on future contracts?
You can think about what factors impact the outcomes of the trade. Exaples are liquidity risks yield risk or specific depencies with your underlying. If you want you can model these dependencies with "copulas". You could also do a scenario generatior with a monte carlo simulation. You can then calculate the value at risk by reverting the probability density function to know at what probability you will loose a certain amount. In the end you can also calculate a risk adjusted capital which you set aside to cover for risk. This is espcially important if you trade with other peoples capital.
@@rafkelly2841 i will look into this, thank you for the info!
I love this guy
Thanks, from Brazil
What does your company think of you making all these videos? Are you giving edge to the competition? Do they care? What is your goal with these videos?
Can you make a video about the working hours and work life balance for each division in the hedgefund industry?
I already made one "Day in the life of a software engineer". Can't speak as well for other roles considering I'm not part of them.
@CodingJesus, Can the market makers see our stoplosses?
Completely disagree. Stop loss allows you to step away from the computer and if you are wrong lose what you are comfortable losing. No stress. If you know your entries and exits, then it’s very valuable. If you don’t know where to get stopped out, then you have a good chance of getting stopped out bc your charting is bad. Then it might seem like a scam
yeah, he's comparing apples to oranges, they are both fruit but quite different. still, a valuable channel and been watching most videos.
I feel like there's so much to learn in the world of finance/trading, and the process of determining the order of learning things is overwhelming. What books do you recommend I read? Are there any courses you've done as well?
thomas kralow's course, check it out, it's expensive but great, i believe it recently got a certification
he has a video with a list of books
You may right but retail investors battle in totally different domain then prop traders. No prop trader is buying 100 shares f gmc
yeah knowing my greeks is nice anf such but i am happy to know that my maximum loss can not exceed 2% per trade.
what you do is programming the marketing for hedge funds, not the money making.
For a day trader, RR is the edge. And to survive in the market and to let the law of large numbers kick in, small, retail day traders need a specific SL.
Unless you are running multi legged strategies like iron fly, condor, jade, etc.
Still, there also, SL is important.
You cannot risk 200 to earn 100.
There is some options course or channel that you recommend? Most options channel seems to trade exactly any other retail trader.
I would get started with learning the greeks and really!! understand them and how they influence price , for this you dont need a particular youtube channel....
Any luck? Just stumbled upon your comment.
Thanks for spreading the truth Jesus
So why is Stop Loss a scam?
You are quite full of yourself. Respect traders man.
Thats so true xD i am a late master student in quant finance but i never heard about what a stopploss is...
Well. Traders using stop loss makes millions every month. Not that big of a deal.
People made fortunes in trading before computers where invented. 😂 this guy still needs to learn more
Yeah bro I get it you guys use very complex options spreads but what we should just all get out of the market because we can’t code or build a bot? Who makes a market? We do. Or would you rather the bots trade each other
discord link, didnt work for me...
This sounds like a disaster when the computers screw up.
Miracle !! Jesus comeback !! here on youtube !! LOL
What firm do you work at? Jane Street? DRW? Jump?
Ohh you are at Akuna!!! Are you based in Chicago?
Interesting comparison, what is the point of disparaging these day traders? Analyzing the greeks is another level or risk analysis that would be overkill for individual daytraders.
and the tools you talk about, there are free ones online. Most people just dont know how to use it
bro at the end of the day even prop traders care about one thing is it going up or down
Watched over 8 mins n understood nothing... 😂
Do you realize that there is a lot different strategies in the markets, the strategies that your firm use are not the only strategies that work?
Exactly
He wouldnt even know the strats they use anyway.
He is a Quant working on risk plans and tools they then send to the traders.
Its proven (by many prop and hedge funds) that they prefer their traders to use different strats so that when one strat doesnt work on the day, someone elses will.
1 thing they all have in common? The risk system. - What the quant makes.
This guy doesnt trade, doesnt day trade, never has. He codes risk algos for the traders to use, thats it.
Wait a month or 2 and he will sell a book or course on ''How to trade from a Quant prop trader''
First baby Ahaaa !!!