Are Prop Firms Designed for Financially Poor Traders?

B

Bear Plunger

I'm trying to figure out what is the benefit these days of joining one of these places. Are they the same thing as the day trading firms back in the Nasdaq boom?

Are they designed for under-capitalized individuals who are trying to speculate on razor thin accounts? Traders who want to get into the business, but don't have enough capital to trade on their own comfortably?

The leverage some of you talk of in this section sounds insane and reckless? One bad trade or one computer failure, and your entire capital base could be wiped out in one trade no?
 
They could perhaps be viewed as an arena in which to learn. In that regard better than sitting at home on your own if you are new to the game.
 
there are several advantages to prop trading:

1) you get to know other traders. Some of them may be more successful than you are and willing to share some of their insights
2) leverage. if you have a system that scales well but not the money to trade it, prop trading might be a valid alternative to borrowing funds from friends and family
3) *some* prop trading firms offer different levels of training. Most of the trading strategies they teach are usually high volume, but you can get ideas and build your own from them

anyone wants to add more?

a couple of interesting articles on the subject geared toward both newbies and intermediate traders

becoming a proprietary trader
surviving the learning curve
proprietary trading
 
NO.

"GOOD" prop firms are designed to help "GOOD" traders.

If you suck at trading, or expecting the firm to make you "GOOD", you have the wrong idea about them.
 
many traders *think* joining a prop shop will automatically turn them into profitable traders. that couldn't be farther from the truth. in my opinion, a prop trader is just a regular trader...with leverage.
 
Our model is simply the "Stock Exchange Floor Trader" business model that my brother and I enjoyed for so long (back in the day). After buying seats on the exchanges, we thought it was pretty cool that we could put up some money, and then "use" (not "abuse"), what is now Goldman Sachs money to trade with.

This allowed us to engage in good, profitable strategies versus having to be limited to directional only or other basic styles. And, yes, we were able to keep all of our trading profits.

And, yes again, this only works for traders who really have the drive and desire to work hard and immerse themselves in a trading career. Not for the "hey, let's try real estate on the weekends" crowd, LOL.

A way to engage in the same strategies and techniques the "big boys" use at Lehman, GS, etc. without having a few $million of your own.

Not for everyone, but when you can basically borrow a $million or more everyday, virtually for free, it can be a great benefit.

All the best,

Don
 
Quote from marky1:

They could perhaps be viewed as an arena in which to learn. In that regard better than sitting at home on your own if you are new to the game.
More...

Unless you are a sociopath.
 
Quote from Don Bright

This "Stock Exchange Floor Trader" business model allowed us to engage in good, profitable strategies versus having to be limited to directional only or other basic styles.
More...

Two possible problems with adding a new "business model".

1. If new trader does not fully understand the INS and OUTS of new trading models these new added strategies could be a money loser for trader. Adding more strategies for a trader could take time away from an allready profitable one. Maybe spending 8 to 10 hours a day on a basic strategy (thereby focusing all efforts on basic strategy) allows this trader to be profitable. Adding more strategies might backfire.

2. These new strategies might be commission heavy. These new strategies could include more trading but less profit to trader. Key to profitablity is net profits after all "Prop firm" fees.
 
Quote from timcar:

Two possible problems with adding a new "business model".

1. If new trader does not fully understand the INS and OUTS of new trading models these new added strategies could be a money loser for trader. Adding more strategies for a trader could take time away from an allready profitable one. Maybe spending 8 to 10 hours a day on a basic strategy (thereby focusing all efforts on basic strategy) allows this trader to be profitable. Adding more strategies might backfire.

2. These new strategies might be commission heavy. These new strategies could include more trading but less profit to trader. Key to profitablity is net profits after all "Prop firm" fees.
More...

Our traders are able to trade virtually any stock strategy that works for them, and also able to see what others are doing to make money. They should be able to both gear up their existing strategy...and broaden their horizons. I see that quite a bit.

We lead by example, we don't dicate. We monitor risk of course, to protect the trader and the Firm, but if you have a good working technique or strategy, then we leave you alone.

All the best,

Don
 
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