What does it take to be a futures trader?

As a plethora of trader training academies, courses and prophouses tout their wares, Alice Attwood takes a look at some of the prop tradertraining options.

For those who dream of a trading career, a quick scouronline shows that there are numerous trading houses and education programmesavailable, but it is hard to know which firm to go with.

While rumours of “dodgy” and “churn and burn” approaches topractical training for trading are still rife, with experienced traders able toregale unsavoury practices in trader trading, a number of firms are trying todispel such rumours with their own trading offerings.

Yet traders tell FOW that while the market for training mayseem plentiful, the number of credible and training programmes available forup-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, intothe spotlight. Indeed the prop firm that trained Sarao, Futex, found itself,and the subject of trader training into the spotlight.

Futex

Futex was established in 1995 and has been offering tradertraining since 1998. The first off-exchange electronic trading floor forfutures and options traders, the firm now operates out its headquarters in Wokingand the city of London, and also has sites in Wroclaw in Poland and Sotograndein Spain, with a new Frankfurt office planned to open in the final quarter ofthe year – a joint venture with a Futex alumni.

Futex describes itself as training academy for individualswho want to carve out a proprietary trading career. The company itself has twostrands; training for potential futures traders and Futex Live – an onlineknowledge centre for market analysis and resources.

The programme includes technical understanding, tradingpsychology, personal management and market analysis elements.

The firm found itself the centre of scrutiny in April whenSarao was arrested because the British futures trader started his career withthe 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-Liffetrader, Dan Goldberg, estimates the training is worth approximately £50,000.

The firm runs 12 week courses three times a year, typicallywith an intake of 25 students – half on a scholarship basis, and halfself-funded students.

The firm’s full-time training programme is alsouniversity-certified. The 12 week course is a precursor to the one-yearProprietary Trading MSc at Hertfordshire University. Cited as a “fast-track tobecoming a high-earning, professional trader,” the course is a combination oftheoretical and practical trading and is the first internationally recognisedpostgraduate degree in futures trading.

The £12,000 course fee is split between Futex and theUniversity, £7,200 and £4,800, respectively.

After graduating some students will continue to trade on thesimulated trading system; Goldberg said 95% will trade live markets beforegetting to the end of the course.

“At this point, you have a good idea of who ‘gets it,’ beinga 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 isethical due to the fact that the firm tells traders what it takes, from thelifestyle and discipline required to succeed in the market. The course aims togive a complete introduction and instruction to life as a futures trader, evendown to the psychology of being a trader.

Once students graduate from the course there is no guaranteethey’ll ‘go-live’ and trade. “It may be another three or six months, it comesdown to personal performance,” said Goldberg.

The reasoning behind this is simple: the firm is taking thefinancial risk. Futex pays trainees a £500 ‘expense’ per month after thethree-month training, for a five-month period. Classified as self-employed,students will continue to be mentored while trading in a demo environment untildeemed ready to trade real markets. Desk and clearing fees are charged once thetrader goes live.

OSTC

Prop firm OSTC was founded in 1999 in London and specialisesin point-and-click proprietary trading strategies on global futures markets.The firm offers a practical training programme, supported by partnerships witha number of universities, focused on financial markets, with particular emphasison derivatives.

The OSTC approach to trader training sees the firm take onprospective traders as salaried employees, demonstrating the investment thecompany is making, CEO Jonny Aucamp told FOW.

The firm hires potential traders from various sources, andhas a number of collaboration deals with universities. Ex-students have comefrom backgrounds including engineering and financial services, forexample. 

OSTC said it invests time and effort while students arestill at university, meaning they can see the characteristics of potentialhires 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 tomake money but how not to lose it; we are interested in the long-termdevelopment. Execution of this is not complicated, but our training looksfurther than this. We cover the infrastructure of the market, analysis, thepsychology of trading, economics, and the long-term relationships and investmentsbehind what we are doing,” said the CEO.

The time devoted to the pre-selection and searching forpotential traders is key: “We are after a specific breed of potential traders -highly driven, highly disciplined, and that’s an ethos instilled across thebusiness.”

Once training is completed, there are opportunities forgraduates to step into mentoring and office management roles, through whichthey will assist new students in learning OSTC’s values and theoreticaltutelage.

The firm recently signed an agreement with Chinese brokerYongan Futures to set up its first office in China. The new site - set to openin Hangzhou in the fourth quarter of the year - will be the 17th OSTC officeand mark its entrance to its 10th country.

“The borders between the East and West opening up is thenext big opportunity in our sector and with the right strategic local partner,we have the experience and expertise to maximise on this opportunity,” saidAucamp of the new site.

Looking ahead, Aucamp warns that impending regulations willlikely continue to cause frustrations, partly due to the lack of understandingaround them, but regulatory changes will benefit firms such as OSTC, as theywill ensure that “undesirables don’t get through”.

Divento Financials

Divento Financials, headed upby James Sullivan, is a trading firm offering specialised training, guidanceand risk management for futures traders.

Divento Financial’s model is again, slightly different.

Created as a joint venture, the company’s trading course isthe ‘Level 5 Financial Trading Diploma,’ which was in development for just overa year. The diploma has just been approved by the UK’s Office for Standards inEducation, Children’s Services and Skills (Ofsted).

Operating out of Tower 42 in the City of London, the propfirm’s trader trading academy offers access to experienced traders withdedicated instruction on fundamental analysis, technical analysis, algorithmictrading and market-making.

Much like the other London-based counterparts, there is no“typical student,” with the course taken by a mixture of students; somegraduates, some experienced traders, some traders who are looking to retrain ina new market or asset class, as well as ex-athletes looking for roles aftertheir sports careers.

The course is still in its infancy, though trader trainingat the company is nothing new. The course will see its first official courseintake join the ranks in early June. At a cost of £5,000, the course will seethe traders continually assessed while trading on real news and market actionon demo accounts, and each will have to take an examination in order tograduate.

Like most of its counterparts, the Divento diploma will alsosee a split between students backing themselves, and those funded by Divento.

Upon completion of the Ofsted-stamped course – which is setto run five times per calendar year - Divento will retain those it deems thebest students, or those with the most potential, as a way of growing thebusiness with Divento-trained traders. Once graduated, students will stillcontinue to trade on a demo account for the next six weeks or so.

The attraction of students with sports backgrounds isimportant to the firm. “We have seen a lot of interest from ex-athletes, andthat’s exciting for us. The discipline required to be a successful trader canbe likened to characteristics needed by sports personalities; the drive to bethe master of a craft – this drive is an exciting prospect for us,” saidDivento owner Sullivan.

Looking ahead there are plans to build a full suite oftraining courses, such as a two-day introduction to trading and ‘financeessentials’ course for younger students, we well as the scope for the flagshipLevel 5 Diploma to be translated and run in other countries.

LAT

Headquartered in London’s Tower Hill, The London Academy ofTrading 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 flagshipcourse can be up to £8,000, depending on how each student wishes to undertakethe training, with all-online (£2,000) to all on-campus (£8,000) options, aswell as a mixture in between, whether students are effectively charged a deskfee for on-site earning and support.

LAT runs a range of other courses, including a two-dayintroduction to trading, to a new nine month Level 3 ‘Access to HigherEducation 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 JohnDevonshire expects LAT to train 155-200 students this year, and 3000-4000 in2016.

The education structure is headed by academic dean, PaddyOsborn, 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 onlinelearning.

LAT students come from various backgrounds, as with studentsfrom 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 andfundamental analysis risk management and trading psychology.

LAT rents trading desks at the academy to students once theyhave completed the training, Osborn said. Once set up, they can trade their ownfunds while still receiving help and advice from professional traders andmentors. For exceptional traders, “those who prove themselves,” said CEODevonshire, there is the potential offer of a job, trading company funds on arevenue-share basis.

“Other students have been employed in other roles withinLAT, for example trade mentors, social media, new projects and sales, whilealso trading live accounts,” said Osborn.

For those that move on, past students have been successfulin 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 onadditional trading. The academy also spends time helping course graduates withjob searches, CV writing and careers advice.

“Just because a student leaves it doesn’t mean ourrelationship ends with them as we continually want to monitor and assist themwith their progression,” said Osborn.

Unlike recruitment to some other market offerings, if apotential 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 ofovernight riches and success made by some trading courses.

“We specialise in financial market trading and offer anaccredited qualification. There are many companies offering courses in trading.Some are very good at marketing - “you’ll be a millionaire by Christmas” - butmost have a very poor reputation in the market,” said Osborn.

“Our challenge is to reassure students of our honest androbust approach to training. Our accredited status ensures the quality of ourservice and consistency of our assessment procedures. One major benefit forstudents that we pride ourselves on is the level of commitment to students,” headded.

A new dawn?

The inclusion by prop training firms of trading psychologyin their education programmes is interesting. All firms stated that it is a keypart of the training.

Sources at various companies state that learning to tradeand learning to be a trader are very different things, thus the psychology oftrading is an ever important aspect for a prospective trader, as well as thediscipline and technical know-how.

The approach to learning may differ between them but eachfirm purports to devote time to the psychology of trading and adopting formaland structured practices – a shift away from ‘old school’ prop trading shops whichwould start the week with a room of potential traders and make daily, or hourlyculls until they were left with a few potentials.

This acceptance of the importance of a more holisticapproach to being a trader, rather than just how to trade, could be thedifferentiator between new and old school trader training. Perhaps this marks anew era for requirements and options in the trader trading space, and the endof the “churn and burn” approach.

However, a few things remain clear: securing your seat atone of these training houses comes at a price, is no fast-track to success andthe life of a trader is still not for the fainthearted.