Beginning to Trade
I caught the market bug and started trading - mainly self-taught - while I was at uni, studying computer science at King’s College, London University. After a couple of years trading in the futures markets - S&P500, Bund and FX - and some blown accounts, I eventually began to gain some consistency by employing technology to iron out my flaws
After graduating, I traded for a prop firm in the City of London and started to program my simple game theory derived strategies into algos.
I had spectacular success with packaged algo trading strategies and grey box semi automated 'cash machines' which attracted traders and investors. And so I thought about setting up my own firm with traders deploying my algos across various markets… and this is how BluFX started!
Starting Blueprint Capital
I set up Blueprint Capital as a prop trading firm in London in 2013.
Initially, I only interviewed experienced traders. They were confident, bold and had a proven track record. But they didn’t perform as well as I'd hoped, and losses were consistently made. The losses from the newcomers simply reduced the profits from the core team.
So, how could we fix this and expand? We tried many different avenues...
1. Using demo accounts
We asked our applying traders, even the experienced ones - to sit on a demo account for two to four weeks to measure their performance. Then we backed only the traders that made a profit on the demo.
But once they switched back to the live accounts, we found the same issues with loss. They did not have the behavioural skills required for consistent returns even when handed a winning system, and their previous results were more a function of luck
It was time to try something else.
2. Asking traders to use their own capital
We decided to stop backing traders fully and, like most other prop firms, asked them to contribute some of their own capital alongside ours.
But this didn’t seem to work either. I quickly realized it was time to re-write the business model completely. The best traders never had enough funds to live off whilst developing the skills required over the realistic amount of months required. Any potentially successful trader would always at least have some funds but never enough for multiple months, especially when paying for professional market access.
So how could we change the prop trading model to benefit both the firm and the traders?
The Future Of Prop Trading
I realised I could start from scratch to create a brand-new type of prop trading firm.
I head hunted an established hedge fund/investment bank head trader with decades of experience guiding institutional prop traders from graduate trainee to star rain makers.
We spent a long time modelling the benefits and issues that the traditional prop model posed to both traders and firms - assessing everything from unstable incomes to trading restrictions, evaluating factors like high running costs and all or nothing career progression opportunities.
After months of research, an exciting new model started to take shape - one that was based on equal opportunities and built for traders by traders, with a non judgmental approach to the inevitable loss at the early learning stage. The following objectives were set;
- ✓ More accessibility: we wanted to reduce the monthly fixed cost for traders to make it as accessible as possible to anyone ambitious enough to reach out for funding
- ✓ More flexibility: our aim was to trial talented traders globally, offering professional market access instead of the desperate and predatory experiences available on the low cost platforms
- ✓ No unfair barriers to entry: traders reaching out should be fully backed with zero screening process; no historical trading advantage; no background, wealth, education, class, nationality barriers, with real-time BluFX parameters and targets the only verification required to receive extra funding and status,
- ✓ Easier processes: we wanted to create a meritocratic platform that was easy to access for rich or poor, part or full time traders. The subscription model offered a perfect solution if it could be adapted.
- ✓ Trader freedom: our goal was to enable a genuine market microcosm so that users can implement their own trading strategies without any signals, directives, mandates or restrictions from the funders
- ✓ AI risk management: we would need to manage the trading risk dynamically to maximise profitability. The profits from the winning traders would always have to cover the losses from developing traders. The AI risk manager would have to monitor every trader, identify behavioural patterns and to be continually learning and optimising the capability to minimise the inevitable losses and maximise the profits of those with winning behaviour
- ✓ Instill professional trading habits: we would have to instill professional trading habits and behaviours to retail traders, enable them to trade like a professional (with minimum $50,000 real account at FCA broker) without the usual 'conflict of interest' facing the underfunded retail trader at the small account 'b-book' broker or dealing desk of an offshore broker.
- ✓ Transparent career paths: we wanted a clear and practical path for any one starting with as little as £99 to become a successful professional full time fund manager
I believed the model above could revolutionise the traditional prop trading industry. So - we began our exciting journey…
After a year of hard work and thousands of simulated trials, our first trading software was launched in 2015. With an adaptive neural net risk management system, our trading software allowed users to trade six major FX pairs.
In the first month of launching, we had over fifty traders - and reduced the monthly cost for traders from £3000 to £325.
In 2016, we launched our web-based trading platform which further transformed the trader’s behavioural experience.
We then upgraded our risk management system with AI and removed many of the old-school rules and pre-screen processes and trusted the AI to direct the parameters.
We fully replaced the old-school rules and approaches with a new set of AI driven risk parameters based on transforming retail traders into professional fund managers. Central to this was the reduced use of leverage. AI introduced innovations like a monthly payday, set trading hours and growth targets set at levels based on vast amounts of trading data. Simply put we configured an environment geared for maximum success yet at a lower cost than the traditional retail broker journey.
With that, our client base grew from 50 to over 500 users.
We rebranded the project as BluFX and, after listening to trader feedback, adopted the MT4 based trading platform.
We also added overnight trading, trader growth path and further reduced our monthly subscription prices to £249 (Pro) and £99 (Lite).
We had enough proven and successful traders to return a consistent profit to our investors based on 2-1 leverage. We reduced the minimum commitment from $1,000,000 to $250,000..
We attracted over 3000 traders from over 60 countries globally.
We went from “too good to be true” and lots of scepticism to a well-known brand that has revolutionised the prop trading world and redefined trading in the FX industry - and there are plenty of innovative developments ahead!
Thank you for joining us on this exciting journey!
Yu Song, CEO