In March the experienced a truly historical event: the Faculty of Detailed Learning of the Masterforex-V Trading System opened the Investment Management Department in an attempt to bridge the gap between ‘the suffering and the thirsty’ – traders and investors.
The problem of effective capital management has been there as long as goods and money relationships or, simply put, the market. Today, in our context, the problem is that:
- there is a trader – a professional capital manager that has no capital of the size large enough to meet their personal needs;
- there is an investor – a person with free capital who would like this capital to work but has neither time nor professional skills to effectively manage this very capital.
How can these two people be brought together so that their union results in maximum possible satisfaction and prosperity for both? Isn’t this what the new Department has been created for? This is what we’ll ask Head of the Investment Management Department, Sergey (Rich_man).
Market Leader: Goof afternoon, Sergey. As far as I know, the Academy already has a forum threat ‘Trading Contest. Traders and Investors’. At first glance, you have an identical area of activity with it. Why was another threat created, then?
Sergey: Indeed, the area of activity is actually the same but… What difficulties do the trader and the investor face when looking for each other? Mutual mistrust of the parties when their relationships are only developing. The investor wants a proven trader. Both understand that statements can be faked, and traders provide the investor password very seldom and very unwillingly. The investor wants to know who they are hiring, what kind of person the trader is, how he or she trades. The investor would like to get this information from independent sources rather than from the trader him or herself in an understanding that the latter can stretch the truth, to put it mildly. The trader often colors their abilities. And I don't mean those who lie openly. The trader simply wants to get the largest amount for management, overstating their skills, psychology etc. in a biased manner. On the other hand, because of simple ignorance of the investor, the trader ends up under relentless pressure in case of any drawdown (even though operating losses is something any trader can experience - these are the side effects of the profession). A row may blow up and promising relationships fall apart even because of a difference in temperaments of the investor and the trader. In general, there are quite a few problems in investor-trader relationships both during their development and further cooperation.
IMD is intended to check traders, develop their skills of working with investor funds, explain principles of cooperation with a trader to the investor, offer assistance during development of their relationships etc.
Market Leader: Trader-investor relationships are regulated by an agreement they sign. Does the Department plan to be involved as a third party in the pre-contract campaign and resolution of conflicts that may arise between the trader and the investor?
Sergey: Of course, the Department will be actively and directly involved at the stage of preparation of a contract, serve as a neutral party, and ensure that contracting parties' rights are respected. We also plan to support them for two weeks following execution of the contract. What we will do during this time is monitor how contractual clauses are met, participate in resolution of impending conflicts and, most importantly, watch if the parties follow recommendations offered by the Department before the contract was signed. Further intervention will be more of an exception than a rule and only based on mutual consent of contracting parties.
Market Leader: Naturally, a beginning investor will want to protect themselves from a dishonest trader, to put it mildly, as best as they can. The internet is rife with stories about how investor accounts were ruined, how traders 'disappeared' with investor money. How do you plan to protect the investor from such a scenario?
Sergey: This is an important question. But is it worded appropriately? Any person who makes a decision to start a business (including investment) should be clear about a few things: firstly, any commercial activity bears commercial risks that you cannot avoid; secondly, no other person, apart from yourself, can protect you. Risks can and should be limited based on information available on this issue and other people's experience. So, I would reword the question more appropriately: 'Will I get information adequate enough for me to limit investment risks, fully control my funds and prevent the trader's disappearance with my money?'
Of course, before we start selecting a trader for the investor, all questions will be discussed, the investor will get all necessary recommendations and instructions and only then, when they understand they can follow them, we'll start selecting the trader.
Market Leader: What will you take into account when choosing traders and investors?
Sergey: Firstly, mutual interests. What amount and on what conditions the investor is prepared to provide, what amount and on what conditions the trader agrees to accept. Secondly, their interpersonal compatibility.
Market Leader: What is candidate traders' checkup about? What criteria do you plan to use in selecting traders for investors?
Sergey: Of course, the first thing we'll check is whether traders meet criteria they claim, such as the average monthly return, maximum and average drawdown during the trading period, compliance with MM rules and trading discipline. A three-month checkup period actually excludes the 'luck' factor in major trading figures. Traders will be taught to manage investment funds. Accounts opened with the Department's funds will be offered to them. This is where the Department consciously takes financial risks during the checkup. Yes, at first, these accounts will be small, from $100, but later, depending on trading results of specific traders, they can grow. Traders could also provide statements from their own accounts as proof that they are mature specialists. They will not be checked but will merit more trust from the investor if similar results are achieved during the checkup.
When selecting a trader for a specific investor we will look at both investor's and traders' suggestions about whether they accept the amount offered for management, conditions put forward by the investor. We also plan to check basic compatibility. A mismatch of temperaments may destroy mutually beneficial relationships. Just imagine that the trader works in the medium term and the investor is so impatient that cannot sit still and will enquire about trading results a few times a day. In this case the trader also requires respect for himself and his opinion even though he is a hired person.
Market Leader: Is study at the Academy in general or the Faculty for Detailed Learning of the Masterforex-V Trading System , in particular, a determinant factor in trader selection? Or it does not have to be an 'in-house' trader - they only have to possess a necessary level of professionalism?
Sergey: The candidate trader must be a student of the Academy the reason being the need to speak the same language rather than knowledge of MF TS or any other TS taught in the Academy. Development of the Department is quite a difficult thing, so I don't feel like making additional effort to find a common ground in terminology as well. As such, Academy students perfectly understand each other despite varying approaches to trading. Whether they have studied at the MF TS Faculty is a plus rather than a must.
Market Leader: What about investor professionalism? If there is none, the trader risks coming under unrelenting pressure as you properly pointed out.
Sergey: As far as future investors are concerned, I recommend that they study the basics at the Academy only to understand and appropriately align relationships with traders and be aware of how to control their operation.
Market Leader: What minimum amount will serve as a 'pass' for the investor to your Department?
Sergey: Currently, there is no such minimum. For example, during a conversation with one candidate trader I understood he was not interested in amounts with many zeros. Of course, he wants to reach that level, but gradually, not to be traumatized. He's bodily even prepared to start with one thousand dollars.
I.e. everything will depend on traders and conditions that prospective investors are prepared to offer.
Market Leader: Do you plan to set up an investment fund and raise money from different investors?
Sergey: No. The Department will not create an investment fund to raise money from third parties. It is my own funds only, and nobody else's, that will be involved in the project's operations. This is why I am primarily interested in efficient candidate checkup and selection. Investors will be offered only those traders that have proven their ability to manage other people's money - my own funds. I repeat that here I am consciously taking a financial risk.
Market Leader: Do prospective investors contact you in search of traders already now?
Sergey: The number of prospective investors is currently large and constantly grows. Very different amounts are offered - from several thousand to several hundreds of thousands of dollars. This is another proof of great trust that investors have of the .
Market Leader: It is no secret that many professional traders are very unwilling to manage other people's money. Don't you have concerns that your project might experience a similar situation with many investors and few traders?
Sergey: The project is set up to attract the Academy's graduates that have already proven their professionalism but haven't worked with investor funds yet. This is an opportunity for them to walk the path of serious work of a trader under supervision of professionals. On the one hand, this will make the investor's account as secure as possible and, on the other, allow the trader to move painlessly to a real job. This is why we expect trader numbers to grow constantly. I could say this is one more objective of the project - the Office for Employment of the Academy's graduates.
Market Leader: What are the prospects of the Department's development? Are you planning to deal only with traders that work in the forex or other markets will also be involved?
Sergey: The forex has been chosen as the initial stage of the Department's development for one simple reason: low costs. Dealing Centers offer an opportunity to trade mini and micro lots which help fully use MM systems on small accounts.
Brokers that provide stock exchange trading services have slightly different requirements to the minimum trade. Besides, shares and futures trading involves such concepts as the 'tape', the 'market depth', volumes etc. This is paid information. So, you understand that opening real training accounts means financial costs which are larger by two orders of magnitude. I am not prepared for this yet.
Naturally, we will come to these markets as well, and quite soon. Now we are choosing brokers with terms and conditions we find most attractive. There are people within the Academy that can help us here.
One prospective investor suggested an interesting idea, in my opinion: training of risk managers. I.e. the person is involved at all stages of trader checkup, from an interview to trading on an investor's account, as a risk manager under the 'supervision' of the Department's staff, gets knowledge they need as well as consultations and recommendations from the Department's staff. Naturally, he or she gets to know traders, their trading principles and will be able to choose traders from those whose checkup he or she was personally involved in.
Market Leader: Sergey, thank you for detailed information about the new brainchild of the Academy. I am positive that this subject will raise a keen response among many investors and traders. I suggest you tell about how your Department moves on in the next issues of the magazine.
Sergey: Thank you for thorough and pertinent questions. In the future I would like to cover typical problems that the investor and the trader face in their cooperation, offer ways of solving them, hear other opinions on these issues. I would also like to cover further ways of the Department's development, find out what our magazine's readers thing in this regard.
From the Editor's Office: Investment Management Department is another stage in the development of the .
Capital Management is an objective equally relevant and painful for both traders and investors. However, ever since its inception the Academy has repeatedly proven that its goals are serious and it is honest in achieving them. This alone can serve as a guarantee that the new project will be robust.
Interview conducted by Andrey Kurmygin
