My Experience at a Prop Firm

Look guys, you are seeing everything as black and white when in reality there is a lot of gray out there. For example, at Worldco, we had guys that did not put up any capital. And we had guys that put up 5k to 15k. Generally we gave all the Ivy League guys a free pass. So was Worldco a real prop firm or half of one, or what? See what I'm saying? It's not so easy to define these firms. What about this scenario.

What about the firm where you put up nothing but they make you retain 20k or 30k of your money in the account as you made it to protect against drawdowns? We also did this at Worldco. We made ALL traders keep 35k in their accounts at all times. We just kept a portion of their paychecks until they were fully capped. How is that different from putting the 35k up front? It's your money either way.

What about the firm that helps you raise money from outside investors, i.e. fund incubation? They are not providing you any capital but neither are you. So????

What about the deal where you put up money and the firm matches that on the downside, i.e you go through your 15k then the firm allows you to go 15k into their money?

See there is a lot of gray out there. You guys want to simplify everything too much. And another thing, you guys act like it's so easy to go and find a fully backed prop deal. I can tell you right now, there are few out there. I talk to everyone in Chicago. I have 500 resumes on my desk from traders at Spike, Kingstree, Jump, Rosenthal, Breakwater, Allston, SMW, etc. These shops are ghost towns. Very few guys still around. Most of them trading outdated strategies, no mentorship, and even if they didn't put up capital, few of them are taking home checks after they pay their 5k a month desk fees and sky high commisions. So what's the point?

It doesn't change the fact that very few people make money at this. No amount of whining will change that.
 
Quote from supersizeit:

I'll be trying my hand at a prop firm sometime in the summer and all I can say is Win or lose... I wont be blaming anyone but myself.

Know the company, know the commissions and how their reputation, policies and ranking is relative to other firms. Learn what expected of you before you join! ASK QUESTIONS about their operations and speak to other traders if possible. Review them and research them on forums such as this one. If they try to tell you how to trade then leave for another prop firm. Why put up with any BS? Its your money at stake and they are just giving you the leverage in exchange for commissions.

I can understand some of the bitter feelings newbies might have about losing money at prop firms but posting about it without accepting any responsibility for the losses amounts to nothing more licking their wounds and sour grapes in open public.

Funny but you can bet that those same newbies would be singing the praises of ABC or XYZ prop firm if the trading gods had looked favorably upon them. Maybe not even posting at all since they are doing so well i.e. some posts are only to vent about losing money while re-directing blame in another direction.

The way I see it there is no real reason to even join a prop firm unless you are undercapitalized and need the leverage and already have a trading strategy that works for you. You get better deals on commissions elsewhere if you have enough capital to bypass the prop firm.

The traders who lose often blame the prop firm but I think the fact of the matter is that a good and disciplined trader is going to make money just about anywhere you stick him/her. Granted I'm more in favor of remote trading since I dont need to be distracted by any office politics, other traders and their ideas or unnecessary commutes.

I dont think the prop firm is the place to learn about trading. You should have already taken all your lumps in the head and/or gave pints of blood on the battle field and recovered as a wiser man or woman before you set foot in a prop firm.

The mistake is thinking the prop firm will educate you and teach you to make money. Learn only from another trader thats already successful and has the track record to prove it (if you absolutely must learn at the prop firm)
The prop firm in my humble opinion is just the venue by which you trade. They are not there to hold your hand and spoon feed you. You either know what you are doing or you dont. Its that simple.
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Supersize ;

Are you for real ( bookmark thread for new soon to be hotshot trader, will follow up with him ) ?




Know the company, know the commissions and how their reputation, etc. again are you for real ?

Have you ever heard about Refco, Enron, Tyco, etc. i guess "dishonest people" are not in your vocabulary


I did my due diligence, see my second post in this thread ! Again....let me saaaaay iiit reaaaaaaal slooooooooow for youuuuuuuuuuuu !


They lied, they made promises they couldn't or were not willing to keep, no amount of asking questions was going to help !


Also, few, if any from i have been on ET, or in this thread , or better yet, let me speak for myself, since you did not read my posts, money is, and never was an issue , if I loss 5k at a prop firms...shit, I have loss close to 8k dollar worth of options expire worthless on me.....you and others just don't get it ! let me try real slow again !


For me and numerous ppl, $ was not an issue, I was told by the head trader that I would learn from him,taking it at face value, who would turn down such an offer ? Only the scum of the earth would make such an offer and lie about it ! Also, that we were going to have formal classes, exchange of ideas, etc.... nothing of the sort ! no game plan, etc....

Only a crackhead who is down and out on his luck would i recommend to apply to these type of prop firms.


To me you are better of taking an online course on position trading than dealing with these incompetent people.
 
Maverick, Im aware of your reputation as a trader and a manager and generally I have a lot of respect for your thoughts and views on various subjects discussed here on ET. However, I find it a bit disturbing that you keep referencing Worldco as a model for a relationship between a firm and its traders. I too traded at Worldco while they were in business, and I'm still trading today.

I give them credit for giving traders like myself a chance at the prop game when I was fresh out of college and had no money, but at the same time there were many fundamental problems with the way the firm was operated. Rather than force traders to lock up 35K in capital uniformly and do their best to coerce you into building a deferred account for "taxes", they could have approached trading accounts on an individual level and done a much better job of risk management.

On one hand they had guys who made money 90% of the time like myself, hardly every losing more than 1k on a down day, holding large balances in their accounts.....yet there were supposed veteran traders who had made money when trading was an easier game that were negative in their accounts, in some cases up to 6 figures. These traders where killing the firm, and the consistently profitable ones were making up the difference. If they imposed proper risk management earlier on as the marketplace became grossly more competitive than they may have avoided the eventual demise of the firm.

Traders accounts should be looked at and judged as individuals. Forcing consistently profitable and proven traders to hold big balances in their account when they dont even require the level of buying power it would provide is unfair and exposes them to a greater default risk then they deserve. At the same time, I firmly believe that traders should not be allowed to drop below an equity level what would be considered a reasonable intraday loss and above all, traders should NEVER be allowed to have negative equity in the firm, its just too dangerous for everyone involved.

I am the first to admit that this alone was not the true cause of Worldco's failure, but the bottom line is relationships between firms and traders like you speak of at Worldco were not healthy.
 
Quote from Maverick74:

I can tell you right now, there are few out there. I talk to everyone in Chicago. I have 500 resumes on my desk from traders at Spike, Kingstree, Jump, Rosenthal, Breakwater, Allston, SMW, etc. These shops are ghost towns. Very few guys still around. Most of them trading outdated strategies, no mentorship, and even if they didn't put up capital, few of them are taking home checks after they pay their 5k a month desk fees and sky high commisions. So what's the point?
It doesn't change the fact that very few people make money at this. No amount of whining will change that.
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Great post. I totally concur. When I was propping 2 years ago, there were 50 workstations and 5 traders.
 
Quote from Maverick74:


It doesn't change the fact that very few people make money at this. No amount of whining will change that.
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Once again, even if we write this in the sky with a magical permanent marker, it will not change the fact that the prop firms HAVE TO KEEP HIRING IN THE SAME MANNER.

It's a business model based on numbers of failures vs successes for which the commissions, overrides, monthly fees & interest charges are specifically geared. Most of these "losing" traders ended up being a net profit to the prop firms. Even if they put no money down, and I know for a fact that Worldco at one time had a structure like this and still made money on most of the losing traders. So yes, they do owe you a little something if you are used as a revenue & commission generator.

People think that a badly run group or shady prop firm has no effect on whether a traders does not make it well I know of one example where a guy who definitely showed serious promise ended up leaving because of the problems. We even tried to get him back but he was already past it. There was another guy who was never even given a chance, through a "mistake" his rate was astronomical and stayed that way, even though he was told otherwise on occasions.

The fact is that these practices which have earned equity prop firms their reputation do have an effect on the success rate of SOME. For most, it does not matter, I am not arguing that.

I think you just do not realize some of the sh*t that went on and still goes on in prop firms. The reputation is very well deserved, unfortunately. Yet you can notice a significant difference in the good groups/firms. They even have greater success numbers. Their failed traders walk away on good terms with nothing bad to say about the group leader. And they can even specifically point that the failure was their own fault because the group leader made a real effort to make them a profitable trader. This type of a group is a rarity in the equity prop firm world.

Why do you think that all registered futures prop firms do not want your money? They want you as an employee, not a customer. They are SERIOUS about it. It's not a racket for commissions, it's based on a profit split, hence trader success.

Some people will make it out of any environment, I had to do it on two occasions. I can relate to your story and Im sure quite a few others can. But in retrospect I can only wonder just how much more money I could have made if I started out in a proper place and avoided the bullsh*t.

I'm not defending any poster who blames a prop firm for his/her failure. I am only stating that there is a significant amount of truth in those statements. Whether it applies to the particular poster, I don't know and do not want to play detective.
 
Quote from Hydroblunt:

Why do you think that all registered futures prop firms do not want your money? They want you as an employee, not a customer. They are SERIOUS about it. It's not a racket for commissions, it's based on a profit split, hence trader success.
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Keep in mind that futures props are prohibited from accepting trader contributions by the exchanges themselves. The exchanges are guarded about situations where higher fee "customers" can be disguised as member commission paying group members. The substance of your point is correct though, futures shops are after trading profits not marking up bullshit.
 
Quote from Pa(b)st Prime:

Keep in mind that futures props are prohibited from accepting trader contributions by the exchanges themselves. The exchanges are guarded about situations where higher fee "customers" can be disguised as member commission paying group members. The substance of your point is correct though, futures shops are after trading profits not marking up bullshit.
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You are correct, they are regulated by the exchanges regarding trader contributions. I forgot the exact memberships that the futures industry goes under, but that is part of it also. I'm no expert in the matter, I just did my digging by asking and talking with real prop futures traders. I would guess that it was a collaborative effort on behalf of all of the parties to make these decisions.
They simply did not want the issues & problems that occur with the fake prop game that the equity side practices.
 
Quote from Hydroblunt:

Once again, even if we write this in the sky with a magical permanent marker, it will not change the fact that the prop firms HAVE TO KEEP HIRING IN THE SAME MANNER.

It's a business model based on numbers of failures vs successes for which the commissions, overrides, monthly fees & interest charges are specifically geared. Most of these "losing" traders ended up being a net profit to the prop firms. Even if they put no money down, and I know for a fact that Worldco at one time had a structure like this and still made money on most of the losing traders. So yes, they do owe you a little something if you are used as a revenue & commission generator.

People think that a badly run group or shady prop firm has no effect on whether a traders does not make it well I know of one example where a guy who definitely showed serious promise ended up leaving because of the problems. We even tried to get him back but he was already past it. There was another guy who was never even given a chance, through a "mistake" his rate was astronomical and stayed that way, even though he was told otherwise on occasions.

The fact is that these practices which have earned equity prop firms their reputation do have an effect on the success rate of SOME. For most, it does not matter, I am not arguing that.

I think you just do not realize some of the sh*t that went on and still goes on in prop firms. The reputation is very well deserved, unfortunately. Yet you can notice a significant difference in the good groups/firms. They even have greater success numbers. Their failed traders walk away on good terms with nothing bad to say about the group leader. And they can even specifically point that the failure was their own fault because the group leader made a real effort to make them a profitable trader. This type of a group is a rarity in the equity prop firm world.

Why do you think that all registered futures prop firms do not want your money? They want you as an employee, not a customer. They are SERIOUS about it. It's not a racket for commissions, it's based on a profit split, hence trader success.

Some people will make it out of any environment, I had to do it on two occasions. I can relate to your story and Im sure quite a few others can. But in retrospect I can only wonder just how much more money I could have made if I started out in a proper place and avoided the bullsh*t.

I'm not defending any poster who blames a prop firm for his/her failure. I am only stating that there is a significant amount of truth in those statements. Whether it applies to the particular poster, I don't know and do not want to play detective.
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Excellent post :



Most don't realize why some Prop Firms would make you a partner.....guess who gets to deduct the losses from their taxes ?

Sure as hell is not the trader, that loss is taken by the firm to off set gains, multiply that by 10 new speculators( traders) leaving !
 
Quote from nysetrader78:

Maverick, Im aware of your reputation as a trader and a manager and generally I have a lot of respect for your thoughts and views on various subjects discussed here on ET. However, I find it a bit disturbing that you keep referencing Worldco as a model for a relationship between a firm and its traders. I too traded at Worldco while they were in business, and I'm still trading today.

I give them credit for giving traders like myself a chance at the prop game when I was fresh out of college and had no money, but at the same time there were many fundamental problems with the way the firm was operated. Rather than force traders to lock up 35K in capital uniformly and do their best to coerce you into building a deferred account for "taxes", they could have approached trading accounts on an individual level and done a much better job of risk management.

On one hand they had guys who made money 90% of the time like myself, hardly every losing more than 1k on a down day, holding large balances in their accounts.....yet there were supposed veteran traders who had made money when trading was an easier game that were negative in their accounts, in some cases up to 6 figures. These traders where killing the firm, and the consistently profitable ones were making up the difference. If they imposed proper risk management earlier on as the marketplace became grossly more competitive than they may have avoided the eventual demise of the firm.

Traders accounts should be looked at and judged as individuals. Forcing consistently profitable and proven traders to hold big balances in their account when they dont even require the level of buying power it would provide is unfair and exposes them to a greater default risk then they deserve. At the same time, I firmly believe that traders should not be allowed to drop below an equity level what would be considered a reasonable intraday loss and above all, traders should NEVER be allowed to have negative equity in the firm, its just too dangerous for everyone involved.

I am the first to admit that this alone was not the true cause of Worldco's failure, but the bottom line is relationships between firms and traders like you speak of at Worldco were not healthy.
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I reference Worldco a lot because they were the mother of all prop firms. They were pioneers in the space. Most firms COPIED their model. Most of the best traders I know either started there or at one point passed through their doors.

Now please understand I am not holding them up on a pedestal in terms of ethics or professionalism. In fact, the point I have been trying to make is that within Worldco, you had 3 different groups. One, you had good mentors who had large, successful groups, where guys consistently took home checks. I was a member of one of those groups. I don't mind referencing his name here (Adam Wasserman) as he had one of the best groups in the firm.

The 2nd type of group you had there were guys that simply brought people under their name and collected over rides and offered nothing in return. I had friends in these groups. Sometimes it turned out that the group leader just was not very sociable or wanted to focus on his own trading.

The third type of group there were simply the independents. They did not belong to a group. They did their own thing, came in, traded, left. They may have had friends within the firm but they really kept to themselves. Some of these people were successful, but most of them were not.

So we have these three groups. All under the Worldco umbrella. This is what I am talking about. You could almost say there are three firms here within one firm. The experience I had was amazing. I learned from the best and took home checks every two weeks. My friends on the other hand hated their groups. They bitched about this or that, their group leader offered very little in education and most of those guys were unhappy.

The independent guys mostly complained about tech issues or system problems. They didn't really socialize. If they made money , it's because they knew what they were doing. If they didn't make money, they wouldn't be around long.

So you can't just label Worldco as a bad firm or a good firm. There are many worlds within Worldco. This is the case with most "large" prop firms. If you with a good subgroup, you are loving life. If you are not, you are complaining about everything and you are miserable.

What I am trying to do is get you guys to understand you are not addressing the real issues here. You are simply attacking the symptoms and not the disease.

BTW, same goes for the trading floor. When I was clerking on the floor of the CBOE, I worked for many different market makers. Some guys were the biggest pricks in the world. You would ask them questions and they just yelled at you and treated you like shit. Other MM's were the coolest guys, and in one case, girl, in the world. They would be more then happy to talk to you if they were not busy. If you asked them why they took a certain trade, they would spend time explaining it to you. They would hang around after the close and test you on your synthetics.

You see, like anything in life, there is good and bad everywhere. You can't just make blanket statements. I agree, one of the keys to the business is learning from people who are willing to spend time with you. But the reality of the situation is life is not always that convenient or congenial.
 
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