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Prop Firms

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  #1 (permalink)
Paradise, USA
 
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What are the advantages of trading with a Prop Firm?

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  #3 (permalink)
 
 
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rtrade View Post
What are the advantages of trading with a Prop Firm?

comes down to a lot of factors but IMO the main ones in order of importance are:

- Access to Funds
- Trading Costs
- Risk Management
- Technology Access

If your strategy requires to leverage Millions to generate profits (trading straight equities for example) then a prop firm is for you. If you are looking to scale your profitable strategies (need funding in other wors), then a prop firm is for you (but the terms are critical in a eat what you kill situation)..

If you have the funds and dont need the outside capital, but you still need the risk management piece and the technology access, then the prop firm is for you.

above is just my opinion, and what I see as an advantage to going with the right prop firm.

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  #4 (permalink)
Chicago, IL
 
 
Posts: 35 since Feb 2011
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Are you asking what are the benefits of working at a prop shop?

Some prop desks actually require an initial start up deposit where you actually give the firm money to trade. They say this money is to train you but most just give you a generic education along with some basic technical analysis stuff. Usually when you start out you have a pretty strict loss limit too.... if you mess up towards the beginning you could be held liable and shown the door.

If the desk has a strong reputation you could be around some really bright people from multiple disciplines. This means that you get access to various viewpoints and methods. However, from my past experience, the costs were too high ("desk" fees). Some traders produce around $1 million annually, and end up only walking away with around 10% of that. You're usually not paid a salary either. Theres a big difference between you making money for firm and the firm making money just off your trading. Some of the larger US desks are being shut down though because of dodd/frank - I know Goldman was closing their global macro desks, pushing their traders out. However, their big and famous desk (The Special Situations Group) remains. A lot of big fund managers got their start there if i remember correctly.

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  #5 (permalink)
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Depending on the shop you might need a Series 7 and/or Series 3...

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  #6 (permalink)
Paradise, USA
 
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sysot1t View Post
comes down to a lot of factors but IMO the main ones in order of importance are:
- Access to Funds

So, how would that work? Let say I have 25k and I want to trade 100k, I'm using 75k of their money. So let's play to scenarios:

1) I make a trade and make 50k...how much of that is mine?

2) I make a trade and loss 50k...how much do I lose from my own account?

"Faith is the substance of things hoped for, the evidence of things not seen." --- "Therefore, I Believe it and I will see it. And every day and in every way, I am healthier, wealthier, and wiser."
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  #7 (permalink)
Paradise, USA
 
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Arpeggi View Post
Are you asking what are the benefits of working at a prop shop?

yes, and thank you.


Arpeggi View Post
Some prop desks actually require an initial start up deposit where you actually give the firm money to trade. They say this money is to train you but most just give you a generic education along with some basic technical analysis stuff. Usually when you start out you have a pretty strict loss limit too.... if you mess up towards the beginning you could be held liable and shown the door.

Yes, I've read that and most are just a scam, I believe.


Arpeggi View Post
If the desk has a strong reputation you could be around some really bright people from multiple disciplines. This means that you get access to various viewpoints and methods. However, from my past experience, the costs were too high ("desk" fees). Some traders produce around $1 million annually, and end up only walking away with around 10% of that. You're usually not paid a salary either. Theres a big difference between you making money for firm and the firm making money just off your trading. Some of the larger US desks are being shut down though because of dodd/frank - I know Goldman was closing their global macro desks, pushing their traders out. However, their big and famous desk (The Special Situations Group) remains. A lot of big fund managers got their start there if i remember correctly.

This is the part that I don't understand...you sit next to another person without any privacy...you're crammed with other traders in a large room.

I mean I can get every thing as a retail trader...I have a computer like them, I have a feed and trading platform like them, I have access to knowlegdeable traders here in futures.io (formerly BMT) like them, if I want an education, I can buy a course like them...and I have privacy with no one looking over my shoulders sort of speak....and I don't need to get fired...

"Faith is the substance of things hoped for, the evidence of things not seen." --- "Therefore, I Believe it and I will see it. And every day and in every way, I am healthier, wealthier, and wiser."
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  #8 (permalink)
Paradise, USA
 
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MXASJ View Post
Depending on the shop you might need a Series 7 and/or Series 3...

Ya, what's up with that....I just want to trade, not bring in clients...why is that?

After getting through 2/3 rds of the way in Market Wizards, the majority of the Trading Wizards allude that 99.99999999 percent of the brokers with series 7 or whatever series don't KNOW HOW TO TRADE...they only take orders and give out close quotes, basically.

"Faith is the substance of things hoped for, the evidence of things not seen." --- "Therefore, I Believe it and I will see it. And every day and in every way, I am healthier, wealthier, and wiser."
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  #9 (permalink)
Legendary Market Wizard
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Most of the so called "prop shops" today, are not prop shops in the literal sense. That's because most of them require a capital contribution on the part of the prop trader. When that capital contribution is exhausted, you are finished with the prop firm. In essence, all you are doing is opening a brokerage account.

The alleged value add of joining a prop firm is lower commissions, higher buying power, and access to technology and training. Quite frankly, it's all a bunch of B.S. There are some "true" prop houses, especially when it comes to futures, but they are predominantly interested in "quant" types who have a proven methodology. By proven, I mean they want to see a 2 year track record, and be convinced that your strategies are not only robust, but scalable.

There are still some equity shops that offer a pure prop deal, but they are also going to want to take a look-see at you track record. I was offered a position with one of the top 3 shops NYC. I was offered 25MM in buying power to start, based on my experience and P&L, with a quick bump to 50MM, after I proved to them I could mange risk properly. They offered me a 30 -70 split, where the house keeps the 70. That meant that I would have to scale my P&L by 5X to match what I was already making, and I would have to trade out of their offices in Manhattan. I turned them down, and stayed independent.

If you are under-capitalized, and you are able to find a "true" prop shop, that does not require a capital contribution, then it makes a lot of sense. Unfortunately, there are very few shops that continue to follow that business model.

BTW: I would check Schonfeld Group, to see if they are hiring. They are a true prop shop that does not require a capital contribution, and they even provide lunch for their traders. Who said, " There is no such thing, as free lunch?"

https://www.proptraders.net/

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  #10 (permalink)
 
 
Posts: 1,176 since Nov 2009



rtrade View Post
So, how would that work? Let say I have 25k and I want to trade 100k, I'm using 75k of their money. So let's play to scenarios:

1) I make a trade and make 50k...how much of that is mine?

2) I make a trade and loss 50k...how much do I lose from my own account?

IMO of course..$100K is not much money to trade... access to capital means you already generate $100K+ from your account and you are looking to take that north, which means you already have well over $100K on your account, more like $500K+. Also, to if you loss of $50K on a single trade, your account is not $75K; and if the account is $75K, risk managment already took you out of the trade even before it ever got to that level.

I would recommend you ping @aztrader9, I think he participated for a while with the whole topsteptrader combine,.. or visit the site for more info as well, it might answer some of your questions.

Top Step Trader | Learn to Trade | TopStepTrader

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  #11 (permalink)
 
 
Posts: 1,176 since Nov 2009


rtrade View Post
I mean

(1) I can get every thing as a retail trader...
(2) I have a computer like them,
(3) I have a feed and trading platform like them,
(4) I have access to knowlegdeable traders here in futures.io (formerly BMT) like them,
(5) if I want an education, I can buy a course like them...

I took some editorial liberty with your reply.. I hope that is ok...

1) not true, there are lots of things that professional traders have that you and I wont. It comes in terms of support staff and availability to research and technology.
2) yes, more than likely you do and you can get one that is also just like them.
3) not true, you have access to retail platforms which are not the fastest. Unless you spend money on bloomberg, retures, or others that allow you to build your own order book into your own trading platform (custom) that you dont have access to; or if of course, your account size is $1MM+ and you can go with the same firms they use for clearing.
4) hmmm... IMO, there are some that know, there are some that think they know, and there are those that like to poster as if they know.
5) not 100% true, the education comes from senior traders that are successful and train others on their desk.

just my opinion based on what I know...

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  #12 (permalink)
Paradise, USA
 
Experience: Beginner
Platform: Big Charts
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Posts: 502 since Nov 2010
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tigertrader View Post
Most of the so called "prop shops" today, are not prop shops in the literal sense. That's because most of them require a capital contribution on the part of the prop trader. When that capital contribution is exhausted, you are finished with the prop firm. In essence, all you are doing is opening a brokerage account.

The alleged value add of joining a prop firm is lower commissions, higher buying power, and access to technology and training. Quite frankly, it's all a bunch of B.S. There are some "true" prop houses, especially when it comes to futures, but they are predominantly interested in "quant" types who have a proven methodology. By proven, I mean they want to see a 2 year track record, and be convinced that your strategies are not only robust, but scalable.

There are still some equity shops that offer a pure prop deal, but they are also going to want to take a look-see at you track record. I was offered a position with one of the top 3 shops based NYC. I was offered 25MM in buying power to start, based on my experience and P&L, with a quick bump to 50MM, after I showed them I could mange risk properly. They offered me a 30 -70 split, where the house keeps the 70. That meant that I would have to scale my P&L by 5X to match what I was already making, and I would have to trade out of their offices in Manhattan. I turned them down, and stayed independent.

If you are under-capitalized, and you are able to find a "true" prop shop, that does not require a capital contribution, then it makes a lot of sense. Unfortunately, there are very few shops that continue to follow that business model.

A personal thank you...I had my suspicion regarding this topic. So a reasonable plan would be for me to just build up my account for 2 years and then consider my trading style as if I were in a prop firm.

A key note is that I need to make my system robust and scalable as you said.... hmm... at least my R&D is coming along ahead of schedule....knock on wood.

"Faith is the substance of things hoped for, the evidence of things not seen." --- "Therefore, I Believe it and I will see it. And every day and in every way, I am healthier, wealthier, and wiser."
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  #13 (permalink)
 
 
Posts: 1,176 since Nov 2009


rtrade View Post
Ya, what's up with that....I just want to trade, not bring in clients...why is that?

After getting through 2/3 rds of the way in Market Wizards, the majority of the Trading Wizards allude that 99.99999999 percent of the brokers with series 7 or whatever series don't KNOW HOW TO TRADE...they only take orders and give out close quotes, basically.

Series 3 & 7 IMO have nothing to do with knowing how to trade... but everything to do with ensuring the person trading understands the instruments they are trading.

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  #14 (permalink)
Paradise, USA
 
Experience: Beginner
Platform: Big Charts
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Posts: 502 since Nov 2010
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sysot1t View Post
I took some editorial liberty with your reply.. I hope that is ok...

1) not true, there are lots of things that professional traders have that you and I wont. It comes in terms of support staff and availability to research and technology.
2) yes, more than likely you do and you can get one that is also just like them.
3) not true, you have access to retail platforms which are not the fastest. Unless you spend money on bloomberg, retures, or others that allow you to build your own order book into your own trading platform (custom) that you dont have access to; or if of course, your account size is $1MM+ and you can go with the same firms they use for clearing.
4) hmmm... IMO, there are some that know, there are some that think they know, and there are those that like to poster as if they know.
5) not 100% true, the education comes from senior traders that are successful and train others on their desk.

just my opinion based on what I know...


Thank you for taking it a step further and clarifying it more...

"Faith is the substance of things hoped for, the evidence of things not seen." --- "Therefore, I Believe it and I will see it. And every day and in every way, I am healthier, wealthier, and wiser."
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  #15 (permalink)
Chicago, IL
 
 
Posts: 35 since Feb 2011
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The series 3 is great teaches you the fundamentals behind futures. from there you can learn some great stuff. you can sit all day and look at charts but it really helps to understand mechanics. One way or another you need to familiar with them so there are no (major) surprises. more importantly, you can sponsor yourself and it's not even that expensive

And I wouldn't go as far as saying that everyone has access to the same information. You would be amazed by how much you pick up on from being around others. When i worked in the pit i would pick up on so many small things (like how people talked, how people reacted) and i didn't even know it. Its the same way with a prop shop. And i would have to agree with who ever said that its not so much "prop" anymore. i would even it an "arcade." One of the main disadvantages of trading alone is that you can be your own worst enemy at times because there is no one there to balance you out. whereas if you work with a couple different traders you can work to pick-off certain opportunities.

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  #16 (permalink)
Paradise, USA
 
Experience: Beginner
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Posts: 502 since Nov 2010
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Arpeggi View Post
The series 3 is great teaches you the fundamentals behind futures. from there you can learn some great stuff. you can sit all day and look at charts but it really helps to understand mechanics. One way or another you need to familiar with them so there are no (major) surprises. more importantly, you can sponsor yourself and it's not even that expensive

And I wouldn't go as far as saying that everyone has access to the same information. You would be amazed by how much you pick up on from being around others. When i worked in the pit i would pick up on so many small things (like how people talked, how people reacted) and i didn't even know it. Its the same way with a prop shop. And i would have to agree with who ever said that its not so much "prop" anymore. i would even it an "arcade." One of the main disadvantages of trading alone is that you can be your own worst enemy at times because there is no one there to balance you out. whereas if you work with a couple different traders you can work to pick-off certain opportunities.

OK, I think you may have a point about the series 3. I will look into it, but not to get a license, but for an education. I plan on going short on Corn and Wheat, but will post it on your commodity thread.

As far as the prop firms, from the response, I realize there is no advantage of trying to get into a prop firm, it's schemed against the new trader.

"Faith is the substance of things hoped for, the evidence of things not seen." --- "Therefore, I Believe it and I will see it. And every day and in every way, I am healthier, wealthier, and wiser."
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  #17 (permalink)
toronto
 
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I tried a prop firm in 2005 because it provides the option to over-ride the nessesary paperwork by charging a desk fee. I paid $200 a month. I had no capital to invest however had to prove myself on sim first and then on to live account. The split was 70-30, 30 for me. We traded the emini's and the turn around was high. I think it was a great experience and would recommend to anyone to try if they find a true house. The problem today is everyone is out to make a buck without stepping in the ring, lol....anyway I have seen the new rooms and it is a great marketing camapign. You can always spot something too good to be true. Hell you give me 25k and I will train you and when you run out of money, oh well, who's next.

If you can trade the mini's, you do not need anyone but you

If you are trading stocks, well more cash is needed unless you are having your way with options

Mercury RX

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  #18 (permalink)
 
 
Posts: 1,176 since Nov 2009

here is an interesting article about trading arcades..

Article - Introduction to Trading Arcades

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  #19 (permalink)
NYC
 
 
Posts: 187 since Dec 2010

Churn and burn..Chicago is insanely cheap right now.

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