A trading office, also known as a floor, refers to a place where buying and selling of financial assets like stocks, commodities, and currencies happen. The floor can be owned by a large institution like an investment bank and hedge fund. It can also be owned by an individual.
And what is the primary focus of these offices? Obviously to generate profits through trading.
We at DTTW™ have made this our business, which is to allow those interested to open their own trading office (even starting out on their own) and become its manager.
In this article, we will look at some of the top strategies that will help make your trading profitable based on our experience.
Hiring your team
The team is the most important part of the trading office since they are the people who will be implementing the trades. Therefore, the best and easiest way to make your trading profitable is to invest in having a good team.
To do this, we recommend that you look for people who genuinely love the market and those that have some experience in the market. You should also choose a team that embraces teamwork and one that follows the rules set by the trading manager.
If you need more tips on hiring traders, we created this article in consultation with our Pro Managers.
After hiring the team, you should spend some time training on all aspects of the financial market. In this case, you should introduce it to your trading style and the rules you follow. At DTTW™, our trading coaches and mentors can help you in this training.
Also, we have the Trading Mode Superb (TMS), which is a demo account that gives you access to the financial market. It gives you real data and fake cash that you can use to learn more about the market.
Managing your team
Hiring a team is just the first part of running a trading floor. The next most important part that will make it highly profitable is managing it. There are several strategies that will make your team better.
First, you should set rules about basic things such as order creation, office time, and the markets that one should trade.
Second, you should establish the order of authority. A good trading office has a team manager, who is responsible for directing the entire team. In most cases at DTTW™, the owner of the trading floor is usually the office manager. You should also delegate some of the duties, such as the deputy floor manager. As you grow, you should also have someone to deal with human resources and other administrative duties.
Third, you should ensure that you have a friendly team environment. Some of the things you could do include having communication standards, team building activities, and other team activities.
In general, having a good team environment will play an important role in making your floor highly profitable.
Trading journal and trading order types
Another way of making your trading office floor profitable is about having a trading journal or diary. A journal is a document where you write all details about your trades. It can have several entry points, including the trades you are waiting for, the reasons for entering these trades, profits per trade, and other details.
The journal will help your traders become better at what they do. They will also help the floor manager assess the performance of his traders. You can read more about a trading journal here.
Another simple thing that will make your trading profitable is about order types.
Broadly, there are two main types of orders in the market. There are market orders, where orders are implemented right away and pending orders where they are implemented only when conditions are met. In most cases, pending orders are usually better than market orders.
For example, if a stock is trading within the range of $12 and $14, you can set a buy stop at $15 and a sell-stop at $11. In this case, if the stock breaks out and rises, the buy-stop trade will be initiated and if it moves to $11, the sell-stop trade will be initiated.
In our experience, we have found that market orders are usually relatively riskier.
Meanwhile, risk management will play an important role in ensuring that your trading office is highly profitable. The goal of this management is to ensure that you make as much money as possible while minimizing risks. There are several things that will help your trading office reduce risks. They include:
- Diversifying - Diversifying is the process of having several trades or investments at once. The idea is that betting on a single trend is often riskier than having one trade open.
- Stops - Another way to reduce your risks is implementing stops. A stop-loss will automatically stop your trade when it reaches a certain loss level while a take-profit stops a trade when it reaches a certain profit level.
- Capital allocation - You should allocate more money to your highly profitable trades. This will reduce the risk of providing more money to traders who don’t perform well.
- Timely reviews - Another way of reducing risks is timely reviews where the manager looks at the performance of his traders and takes actions.
- Backtesting strategies - You should always ensure that you backtest your strategies before you implement them on your floor.
If you want an even more in-depth list, take a look here.
There are other technical factors that will make your trading office more profitable. They are all about how the office is set and the technical items that are in it. Some of the key items you need to look at are:
- Computers - You should invest in quality computers that are relatively fast and effective.
- Internet - A fast internet is essential since all trading is done through the internet. You should also invest in a good backup system to ensure that your team is always online.
- Furniture - A good trading office should have good furniture like desks and chairs to ensure that the traders are comfortable.
Trading offices or floors are becoming relatively common these days. At DTTW™, we actually received more requests for offices during the Covid-19 pandemic. In this article, we have looked at some of the top tips on how to improve the profitability of the floor.
External Useful Resources
- Managing a Trading Office Without Trading Experience?