We know that in banks, traders trade together as a group. Same concerns prop firms. There are also individual traders who group together and either rent an office where they trade, or connect remotely via Skype and trade together as a team.
My question, what are the pro’s and con’s of group trading?
It appears the pro’s are the following:
You benefit from other traders, who can be good at different things (the Taylorist model, division of labor). One is good at fundamentals, another is good at scanning for opportunities, another at backtesting, etc. A well divided team can possibly operate more efficiently and be able to take advantage of more opportunities, share ideas, etc.
Psychological support. You’re there to offer support, encourage each other, offer a framework for discipline, etc.
Analytical benefit, you can analyze your trades together, notice patterns in your behavior, address these issues.
The cons might be as follows:
You might fall into ‘group-think’, where you begin to become too influenced by group opinion and not your own.
Your group mates might not be a good fit, they may have a different way of looking at the market (which could be an advantage in a way - get more diverse input), different asset class they like and afford to trade which you can’t, different way they like to trade (indicatoritis), etc.
Classic people issues: personality conflicts, social loafing, etc.
If you would choose a group, why would you do it, what kind of people would you seek out, and what would you choose to get out of the experience? Any advice from those who’ve been there? Thanks in advance!
Hi,
Personally, I think a group is good only if members do their own “homework”. This means everyone has to study, research for themselves then, they may introduce their opinions, reason why they do that to other according to their “homework” not according to some “hot tips”. Right?
I’m just a newbie and playing at fxdialouge and this is my view point. Forgive me if something wrong.
I have gone through your points but i tell you what trading is all about knowledge whether you are trading alone or in a group. if you trading in group and group members don’t have good knowledge about trading then you can imagine about results.Though there are some benefits like support, psychological benefits etc. but if you ask me i would like to suggest you doing trading with an experienced brokers whether alone or in a group. for Be smart while investing your money and remember one thing,your money always should be on safe hands.
Interesting you should talk about this now as I am just about to experiment with this idea. Joining up with another trader via skype from begining of next week to discuss our trading ideas… Is a pair a group?
We’ve had a very satisfactory 2010 each of us, our strategies are very similar and our stable relationship goes back a long way. Our money management systems differ slightly but this is personal and we don’t want to fix something that’s not broken, we’re just looking to improve stuff if we can over time.
I think your “pro” list contains many of the positive aspects to this little adventure that we are hoping for too. Before being formalised in this way our casual conversations would often allow us to review missed opportunities and often showed trade management ideas that could have been improved.
We both view trading as a performance exercise so the bottom line has been set out for all to see unambiguously. Performance is measurable.
I’m very much looking forward to it, but I’ll admit one reservation I have is that we need to avoid it being just a chat… because we can do a lot of that given the chance.
To this effect we have limited our link up time to try and keep the discour concentrated on the job in hand.
What should be considered is whether you want to share profits/losses or just insight/information.
What Ive thought about is teaming up with someone who trades different timeframes and to pool profits so that the both of us would get more out of the investment. This would obviously have to be someone you can trust.
My idea of trading in a group is not to share P/L, but to share ideas and research. For example, I sit down and do a correlation test, someone else finds a new pattern, a third is digging up info in the Economist and coming up with a long term view for some core trades, we all sit together and have a rap session, then get to work.
If everyone gets to know each other well, and trusts each other, then perhaps you can put together a real prop firm model where everyone contributes capital and you partly get paid what you trade, partly the pooled fund. This allows you to diversify, which is what prop firms are doing basically.
But I think if you have a group where people are free to share ideas and nobody is freeloading (that is, everyone is contributing something to the table), where you can freely debate and then decide for yourself, that can be a productive situation.
I went on a Forex course, and have formed a group with three other students from the course. We communicate over Skype while we trade, quite often. It works well in that we flag up pairs that are looking good, discuss the impact of news etc. But we each place our own trades, we often place different trades, and we make sure that we have each carried out our own research. But it is certainly helpful to have people to bounce ideas off, discuss fundamentals, Price Action etc. It helps us that we trade similar styles and are at a similar level of experience/expertise. I think, done carefully, it can really help. But then, we all trade different ways, I guess some would dislike being distracted at key moments!
i think it really depends on the people in the group, the size, & the goal/purpose.
it takes 1 bad apple to ruin the bunch… but there is something to synergy too.
i would add to what has been said by saying that a group could delegate duties… like the a-team or x-men. less stress, work, & u can maximize talents/skills/interests.
peoples can focus on their strengths & interests & share that with the rest of the group. instead of reading 4 reports & checking all your charts/indicators every morning have 4 people read 1 report & the rest check charts. share that knowledge & devise a general plan for the day/week/month… what ever.
then everyone can watch just 1 pair & alert members to entry/exit in that pair.
i could see this as not working well for scalpers (which u could do separately), though i think this would work extremely well for 15m or 30m & up traders.
of course when opinions are not in harmony problems can arise. the thing to do would be have what to do in a situation worked out before hand.
run the group like a corporation… everyone is a board member. rotate leadership positions on a regular basis. make sure everyone has a job, knows what it is, & does it.
Quite - in my small group, we often don’t even realize that other members have placed particular trades. We discuss the analysis, and each do what we will with it in our own time. We even trade the same move on different timeframes, sometimes, with different R:R. But the basic analysis is still helpful, still a learning point. Sometimes one of us will place a trade that the others think is crazy - however it plays our, the ensuing discussion is invariably a learning point.
Hi,
In most instances traders don’t lose because they can’t learn a system, they lose because they can’t apply the system with discipline and if you can’t do this, you don’t have a system
That is the best scenario that I’d contemplate if trading in a group. Once I did.
Otherwise I like only to share and take a view on the general picture, but the specifics on an entry point or a trade are made 100% by me. I stopped taking other people’s advice in this regard a while ago, as well as giving it, because many times it ends in psichological conflict with yourself when your points of view are different. But I’ve came to a point where I trust my knowledge and my views, and more than often they pay handsomely, and when not, they’re good for a safe breakeven.
My point is, I find great to have a collective view of the overall picture, while keeping your entry details and trade management to you.
