DISadvantages trading with a pro firm

I sometimes make NO trades a day. If no signals no trades. I usually won't do too many in comparision. The firm wants to be profitable but they also need their traders to make money long term in order for them to survive.

MJT I missed your post. To my knowledge once you are flagged as a professional and then become retail you are now a retail. The NASD files paperwork on you and keeps your fingerprints. The questionaire that you fill out with real time quotes asks if you are CURRENTLY a professional not in the past to my knowledge.

rtharp
 
Lol, that is such an "outsider" question :-)

As most insider in this business would ask how much volume you do instead of how many trades.

The firms (at least mine) don't care how much volume you do. Sure, you probably won't get the best of the commission rates if you don't do enough volume, but they won't put ANY pressure on you to trade bigger.

Besides, if you are serious about day trading you will eventually trade very big sizes which translates into very heavy volume, so why is that a problem? I am not at that point yet but most veterans trade at least one million shares a month round trip . . .
 
Just curious. Is liability an issue with a pro firm?

One of the advantages that using a firm like Bright, etc., is that they offer use of the firms capital, something like 10-1, I've read. But to circumvent RegT, the common thing to do is for the firm to organize as an LLC. LLC's can avoid being members of NASD and are not subject to NASD rules because as a broker-dealer with no retail customers accounts, they only need to be a member of a national securities exchange, like Phlx. The firm will also participate in a joint back office arrangement, which allows them to further enhance their borrowing power.

To trade with these firms, a trader would typically buy interest in the firm or become a limited partner.

So the question arises, how far does the day-trading firms liability extend to the trader? Also if the day-trading firm incurs fines, lawsuits, etc., do payouts by the firm diminish the trader's capital? Is the capital put up by the trader actually for share interest in the firm? (I assume that's why there is no SIPC insurance)
 
two questions one thread.


HOw much volume I trade and how often depends on a few factors. I use the same amount of risk near the end of the year but my capital has grown nicely. This means I'm trading more shares.

It also depends on what type of system I am trading at the moment. I vary my systems by market conditions, usually putting some on a bookshelf till things are what I am looking for.

So with the shorting heavily overbought I may only do 3 round turns a day. If I get a lot of signals maybe 10 round turns.

If I'm scalping something than I might be doing a lot more volume.

Most firms don't put pressure on traders to do volume. There are small traders but the active big traders who do volume make up for all the little guys. They understand as long as the little guys are profitable than the other traders will grow too.


Originally posted by p2
Just curious. Is liability an issue with a pro firm?

One of the advantages that using a firm like Bright, etc., is that they offer use of the firms capital, something like 10-1, I've read. But to circumvent RegT, the common thing to do is for the firm to organize as an LLC. LLC's can avoid being members of NASD and are not subject to NASD rules because as a broker-dealer with no retail customers accounts, they only need to be a member of a national securities exchange, like Phlx. The firm will also participate in a joint back office arrangement, which allows them to further enhance their borrowing power.

To trade with these firms, a trader would typically buy interest in the firm or become a limited partner.

So the question arises, how far does the day-trading firms liability extend to the trader? Also if the day-trading firm incurs fines, lawsuits, etc., do payouts by the firm diminish the trader's capital? Is the capital put up by the trader actually for share interest in the firm? (I assume that's why there is no SIPC insurance)
More...


I can't speak for the other firms but Echo's liability extends only to your capital for YOUR trades. Payout's by the firm don't diminish capital unless you are directly related to the fine/ lawsuit. The majority of firms also have access to capital from the clearing corp. We are working with a few billion with PAX CLEARING.
 
So to clarify...Echotrade will charge you 1 cent/share + ecn fees, no trade minimums, 100% payouts,10:1 margin, and no holdbacks on account withdrawals? any monthly software fee?
 
The short list for most professional firms is more extensive.

This thread is getting off topic as it is supposed to be disadvantages.

I am finding myself repeating old posts and it's getting rather time consuming. Now I'm being accused of just being a hyper for Echo. Yeah Right, I'll I am doing is answering questions that I know the answers to. So I don't get accused anymore
I'll reply but will add a link for future questions about professional firms please add to the advantages thread of the message board here and read these threads.



The following link is for Advantages of Professional Firms:
http://elitetrader.com/vb/showthread.php?threadid=1446


Threads on Professional firms:

http://www.elitetrader.com/vb/showthread.php?threadid=819


One reason is we aren't held under Reg -T




This means we aren't held under margin requirements. I can short stocks under $5.00. This is one part of the list I have huge access to.

The reason most traders can't short under $5 is the SEC restricts those stocks as not being marginable (usually highly speculative) but as I'm sure you are aware there were quite a few dot.coms that went below $5.00 and soon to zero.

I was able to short 1200 shares KKD about 4 days before the split. Does that mean anything to you? I'm not sure how much more I could have gotten. Usually I get bullets but the floor couldnt' fill me a bullet due to not being able to short the stock.

There is a hard to borrow list, but I haven't had any stock yet that I haven't been able to short.



The software/datafeed is $300 per month. This is rebated back to the trader when they do 300,000 shares.

 
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