Private Placement Programs / Trading Platforms: What They Really Are
Trading Platforms are pools of capital that invest in a wide variety of financial instruments including stocks, bonds, commodities, ETF's and foreign exchange. These pools of capital may be a number of legal entities, however, the most common is known as a PPP, an acronym for, "Private Placement Programs". Private Placement Programs are not offered to the general public. They are exactly what their name implies, offerings of membership interest to a select group of chosen investors who meet certain financial requirements.
The minimum investment in these Private Placement Programs can often be quite high and require a lockup period, where the capital is committed to the Trade Program for a certain amount of time. The minimum investment levels and principal commitment periods vary depending on the type of investments and the objective of the investment. One year lock ups are no uncommon and in some investments the lock up period may be even longer. Lock ups serve a very important function. Platform Traders want to know that the capital allocations they have been given to trade are for a long enough period of time to allow a particular trading strategy time to mature.
If you were to look at the returns of outstanding Platform Traders you would see profitable results over time. However, in the short term they may have a period of negative returns. If your interest is in traders with no down periods, please read no further, as they do NOT exist, contrary to popular belief. There is no such thing as free money. Trading involves risk. Every investor dreams of opening the door today and finding tomorrows Wall Street Journal, but this only exist in fantasy. Platform Traders utilize many strategies to help determine profitable trades, such as macro analysis, price theory, fundamental analysis, value analysis and many more investment strategies. What superior and outstanding Platform Traders can do is number of their trades will not be winners. A large part of successful Private Placement Program trading is risk management, controlling losses and preserving investment capital.
One of the very basic risk management techniques utilized by Private Placement Program Traders is only risking a very small percentage of the investment capital o every trade. It is usually between one half and two percent on a particulate trade. If a trade loss his a defined percentage allocation, the trade is close out. The average investor has an extremely difficult time taking a loss. In fact, it is a human tendency to hold on to losing trades and cut winning trades short, which is the very opposite of what great Platform Traders do. Risk management systems can get very complex and Platform TRaders often write complex algorithms to mange risk when there are many positions and trade strategies running all at once.
The advent of the computer has radically revolutionized trading, just as it has every facet of our lives. Modern Trading Platforms are heavily dependent on mathematics and the hard sciences. Most Platform Traders today have advanced formal education and training in mathematics, probabilities, physics, computer science, economics and engineering. Trade rooms are more similar to busy computer driven laboratories than the old image of guys in a boiler-room shouting into two telephones at one time. Almost all orders are input electronically and trades are matched up by sophisticated software. Private Placement Programmers and software engineers are indispensable to successful Private Placement Programs and Trade Platforms.