![]() You do not want to take an account where you know there will be trouble ahead of time. ![]() You don't want their garbage in your portfolio. When you're on your own, you have full discretion over the account and if the owner of the money has strong ideas, you can either pass on taking the account or have them open another account somewhere else that they can trade their hunches. If you are at a big brokerage firm or wirehouse, then you need to manage the relationship in a different way.īut being a Financial Advisor or Consultant is a marketing job - your expectation is to gather assets, not create trading gains. That's not what you do - you run the money based upon your rules or trading model and that's it. Whether you run an RIA or are a CTA, you have to have ownership over everything that happens in the account.Ĭlients often like to "run ideas by you" - I would strongly advise against this. When you run money for a living, you are always sitting at the head of the table. You can use your systematized set of rules to draw good boundaries between yourself and your clients. You only get paid on absolute returns :). Then you continue to grow your money alongside the client funds at the same rate and you can see how your wealth expands geometrically.Īlways play superior defense though: whatever drawdown you incur, you have to earn that back before you begin to participate in the profits. If you earned 15% in net trading gains, you'd be entitled to 20% of that.įor example, if you garnered $150,000 that would mean $30,000 to you in Incentive Fees.in addition to the Management Fees. ![]() That's your share of the net trading gains above the hight water mark. The profit allocation or Incentive Fee is what you're working for though. On an asset base of $1 MM, that's $20,000 in management fees that you'll receive over the course of the year in $5,000 quarterly payments. The first refers to the 2% Management Fee and the second refers to the 20% Incentive Fee. I have two words for you: two and twenty. And you'd be sitting there saying I got the entire metal complex is firing longs, which ones do I take?Ĭlick here to get your free copy of The Inner Voice of Trading audiobook There were times when in the mid 2000s, when China was buying up as much of the commodity markets that you could possibly get, you'd get signals on the same day in tin, zinc, nickel, high-grade, silver, and gold. Now, maybe you'll be lucky enough to say, Hey, that was the one that I was going with. But the point is that if you sit on your hands and let the auction process work, the market will let the individual name one of the five, maybe even two of the five, raise their hand and say, I'm the biggest winner. So I'm not going to get into it here, but the market will unfold accordingly in ways that you can maybe predict - maybe you can't. So if you're taking it home with you, you have your protective stops, whether you're trading off of a reversal, or whether you're doing some kind of swing trading technique, or whether you're trailing with ATR or whether you're trailing with structure, there's a whole bunch of ways you can offset winners which are hard to visualize on an audio only format. The market will tell you which one's going to be the best one. Will you take all of them with the requisite amount of risk that you're willing to take, then you let the market activity unfold. You get to choose what type of discomfort you want in your life.Ĭlick here to get your free copy of The Inner Voice of Trading audiobook. The question becomes "are you going to be remain uncomfortable sitting in your current dirty diaper getting the results you think you don't want," or "are you going to be uncomfortable making the changes you want?" You can fix that if you want to and it comes down to relative strength. If you focus on the results first, it is also predictable that you will lose interest because you have no emotional attachment to what you're doing. When you focus on 'process' you will get the results you want. I've seen people that you would otherwise count out make enormous strides in their lives and attain great success because they got clear and set goals, eliminated non-productive activities, reset their paradigm, and executed day after day. In order to change that - if you are not satisfied with your results - you need to change that programming. You are programmed to behave the way you behave and that makes the results you are getting in your life predictable.
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