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 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.
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, 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.
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.