What should one take into consideration when trading for others? Is it better to trade for oneself or others? What are my thoughts on trading for others? Those are some of the questions I will be discussing with you today.
Trading For Others In A Nutshell
A trader or investor can be asked to trade or invest for others who provide him or her with the investment fund. It is a partnership between the two that allows the trader to earn commissions. One is providing the trading fund and the other is trading or investing.
One can also trade for others or clients if one is working for an investment bank or financial institution.
In that instance, one has zero contract with the clients, but one is only working for the investment bank. The clients will fund their investment account and agree with the investment bank on how to invest those funds. Traders that are working for the investment bank will implement an investment strategy in view to generate gains for the clients in a short, medium and long term.
Really, traders are effectively trading with other people money.
Things To Consider When Trading With Other People's Money
Be sure to have a written agreement with the clients even if they are your friends, cousins or neighbours. Do not fail on that otherwise you will regret it. Go to a solicitor or lawyer, and get it done by the book. Be sure to put in every detail.
Next, be sure to let them sign the risk disclosure. The risk disclosure is a legal binding document between the two parties. Under the next subtitle, I will disclose the full risk disclosure.
It does not matter how good one is as a trader or investor, one must adhere to a viable money management plan. I always recommend the five percent money management rules. Do not violate them even if the client says not to worry about it. Those rules will help one if there is a conflict.
Believe it or not, unhappy clients are unpredictable when they take losses. Do not give them room to mess you up after the trading or investment turns sour.
Use an investment account, and do not use a normal trading account even if you are swing trading. One wants to give oneself enough time to hold on to positions instead of being kicked out of positions because of the short term fluctuations.
Do not invest more than 20% of the total fund in one sector. And only invest in sectors that you have mastered.
Do not tell anyone to buy or sell unless you are a qualified financial adviser.
Yes, you can trade for others if you agree to it, but you can not advise them if you do not have the credentials. Be aware of that. You can say that there is a high chance or probability that this or that stock rises or declines. Or, one may say: in my opinion that stock can rise or decline. Get it? Alright.
Use a specific trading strategy or system, and stick to it if it is working. The same rule applies to the investing strategy. A capable market player must work with robust markets trading or investing tools. That helps to avoid wandering without a specific goal.
Be sure to put in place a written exit agreement that all clients sign. That may be thirty or forty days notice. So, every client that wants to exit the agreement and get their funds must give you the specified notice. Do not compromise, but be professional with a smile in the face.
All exit procedure must be followed by both parties. Sign those agreements in the presence of two witnesses and your solicitor.
Be sure to send monthly or quarterly statement to each client. They must have it whether they like it or not. Do not bend that one.
Be sure that clients have your priority email and telephone so they can call you when need to. That is it really.
Trading foreign exchange, ,stocks, commodities, options, futures carries a high level of risk and may not be suitable for all investors. Before deciding to invest in foreign exchange, stocks, commodities, options or futures, you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your investment and therefore you should not invest with money that you can not afford to lose. You should be aware of all the risks associated with foreign exchange, stocks, commodities, options,futures and seek advice from independent financial adviser if you have any doubts.
Why I Do Not Like To Trade Or Invest For Private Individual Investors?
I would rather trade for an investment bank than individual investors.
The pressure is very high, and those friendly clients can become really emotional when the markets are really moody. It is you against them.
Hopefully, many will behave decently and comply with the agreement without resorting to a tribunal. I like to go home and sleep well without having anyone calling me or bringing me to court. Alright, that is me.
Having said that, happy clients on the other hand will bring you more clients. How many clients can you take? Do you want to accept every client?
Of course not. Let them fill in an application before you take them on. Happy clients will also be more tolerant and patient in difficult times.
How To Start Trading Or Invest For Others?
Start small with few clients and ask for a minimum of $10000 requirement because of the 5% rules.
See it? 5% x $10000 is $500. Alright. Open a business bank account. Never put those funds in your own bank account because you will be sending out monthly or quarterly statement. After you have been making your clients very happy for two years or so you can expand and take on more clients. Within the first two years, limit the number of clients.
May be seven or 12 clients. Are you greedy? Do not push it too far if you are alone and just get started. One is focusing on building a lasting foundation instead of building on the sand. Right? I think so.
That first step will determine how long you keep your reputation intact. Keep learning. Do not stop learning. Learn like there is no tomorrow. Check on your competitor and be well informed. Be honest with the clients like if they are your wife.
Never lie to them. Do not hide anything from them. Have a trigger alert. You must inform a client if he has lost twenty five percent of the initial investment. Or ask them, when should you inform them about losses apart from the regular statements.
So, start small for two years before expanding. Expand only if you have been successful in the first two years. If not, give back the funds, and go back to the drawing board. Define the average term of the investment from the get go. Alright, you get it.
Last point be sure to put in the same minimal capital like the clients. That helps to gain more trust. So you are in it together to lose or win.
As a beginner fund manager trading and investing for others, you may skip asking for the entry fees right away. After two years of success and experience, feel free to ask for the entry fees that are adequate. Do not forget to state how much commission you will take from profits. Is it 3%, 4% or 7%? The decision is yours. Do not ask for 50% though.
To trade for others is a big responsibility. One is responsible for other people's money.
One can damage one's reputation if things really go belly up. One must be ready to deliver above average gains to clients, and defend oneself against eventual litigation.
On the other hand, one can also become a reputable and wealthy financier if one continues to put the smile in the face of those demanding and greedy clients. When things are becoming difficult, be ready to communicate and explain what has really happen.
Though, I do not trade or invest for others, it does not mean that everyone should avoid it. The question is are you ready to do what it takes to please investors? Whatever you do, start small and grow steadily without failing to learn more.
That is it. I hope I have answered all questions very well. If yes, please bookmark and share this article. I will also appreciate it if you can say few good words about us in your favourite forums.
Please do not hesitate to post your comments and questions in the comments at 24stocktrader YouTube channel, and I will answer them in due course.
I wish you the very best.
Happy Trading And Investing To All
This article is written after a TSTW SYS 008 trader talked to me about his plan to trade and invest for individual clients. I would like to take this opportunity to thank that trader and wish him well indeed.
This article is written by George Beaulieu Founder Of Stochastic-macd