Are Prop Firms Designed for Financially Poor Traders?

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.
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I have many traders who came BYOS (Bring Your Own Strategy) and do quite well. They are low risk and use a good bit of Bright's capital to make significant money. No way they could make that kind of money with a retail account.

I also have many who learned out strategies as they didn't have one they were already successful. They then took that strategy and like they say on American Idol "Made it their own" and also do quite well.

If a trader has a successful strategy that works retail, I encourage them to continue to use that strategy with us, and SLOWLY increase their trade size or number of trades or number of issues to increase their bottom line. That's what the Bright capital is there for We want traders using it intelligently.

And if that trader with his own successful strategy inquires about ours, I talk with him to see if he's maximized what he's doing with his currently successful strategy. If he hasn't, I encourage him to focus on that before adding on one of ours. And if he does choose to add-on, I suggest he choose one that dovetails with what he's already doing, and doesn't interfere with it.

If a trader comes to us with no strategy and wishes to learn the ones that we use, I encourage them to start SMALL and work their way up as they prove themselves to be profitable. There is no need to leverage yourself 10:1 if you're not making money 1:1. There's no need to do 1000 share trades if you can't be profitable doing 100 share trades.
 
To the OP.

Two major types of Prop Firms where trader has to put up his own money is low money down and number 2 where there is a higher minimum amount of money down required.

1. $5000 down Prop firm
This type does allow trader to participate in the market with limited amount of his own money down.
Problems here include; a couple of bad trades and his $5k is gone and so is trader,let give trader 20:1 so at $100k only real strategy is to daytrade his capital, and what kind of return can trader make on his $100k capital as a yearly salary.

2. $25k to $50k down Prop firm.
This type does eliminate the above three problems.However with a higher deposit problems include;trader needs to trust the firm not to default with his deposit;also most firms payout monthly so trader will have to wait to get any of his profits;cost will rise do to more trading and interest cost rise if trader holds overnight or longer term.
 
quote from cashonly
I have many traders who came BYOS (Bring Your Own Strategy) and do quite well. They are low risk and use a good bit of Bright's capital to make significant money. No way they could make that kind of money with a retail account.

I also have many who learned out strategies as they didn't have one they were already successful. They then took that strategy and like they say on American Idol "Made it their own" and also do quite well.

If a trader has a successful strategy that works retail, I encourage them to continue to use that strategy with us, and SLOWLY increase their trade size or number of trades or number of issues to increase their bottom line. That's what the Bright capital is there for We want traders using it intelligently.
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Good to see Don Bright let loose some of his money to hire good people that help out traders instead of the "Normal" Prop model of HEY here's a computer and $100k in an account now go out and generate some commission.

However, this statement "No way they could make that kind of money with a retail account" is totally incorrect.

1. Some retail traders aren't completely underleveraged. There are other ways to have sufficient capital than Prop capital.

2. Higher commission cost at Prop firm makes the Prop trader less profitable than retail trader.
 
Quote from timcar:

1. Some retail traders aren't completely underleveraged. There are other ways to have sufficient capital than Prop capital.
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I agree. a couple $100K in a retail account would generally more than enough bp most traders will ever need

Quote from timcar:

2. Higher commission cost at Prop firm makes the Prop trader less profitable than retail trader.
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I don't agree. prop firm commissions are generally LOWER than retail unless you come in with little to no funds
 
That is a fair answer Man. Trader.

However, if a PROP firm does provide more leverage than retail(20:1 vs 4:1), if PROP firm has lower commission rates on a per share basis than retail, offers payouts when trader ask, has no lockup period of the traders capital, has at least a good trading platform and charges a fair rate of interest on any monies a trader borrows overnight and in return the PROP firms only unique requirement is that a trader pass an exam(such as Series 7) and be monitored for any exorbitant risk.

If this is the case above then:

Why would you not see more PROP firms trying to bring in more customers?

Is there some type of regulatory reason, are PROP firms prohibitive from advertising(similar as why hedge firm can not advertise while Mutual firms can) or any other??

It would seem a PROP firm would be more a lot more profitable(compare to a RETAIL brokerage) due to the fact it gives trader more capital to trade thereby allowing trader to trade more frequently and generating more commish for the PROP firm.

What am I missing ???????
 
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