Prop Firm Proposal

[ScalperJoe]

Wouldn't it be less risky to just put $5k down in a retail prop account and get $100k intraday buying power?

Relatively low risk and diversify
my swing strategy with day reading for small risk.

Yes, it's "less risky" with $5k, especially if you're going to trade with a prop firm that is well capitalized (you can check via their SEC.gov focus reports).

However, keep these facts in mind:

1. Your fixed costs will be around $200-$300/month for professional data and platform fees. Since your capital is locked up for one year as per SEC rules, you are starting out with a guaranteed drawdown of over 50% of your starting equity!

2. Your variable costs (commissions and ECN fees) will depend on your trading style. If you've reviewed several threads on ET regarding experiences of prop traders with small starting balances, then you'll notice that many end up depleting their equity from commissions alone within just a few months! If you're removing liquidity (which is what usually happens when you start), then add another $2 to $3 per 1,000 shares traded. If you trade 100k shares a month, and you have a $2/thousand commission rate, your estimated variable costs PER MONTH will be around $450-$500/month, PLUS your fixed costs.

So before you even get your license, you may want to develop a game plan on how you will execute a strategy to leverage the $5k starting equity by computing your monthly estimated fixed costs plus variable costs.

Another option is to utilize the simulator account for $35/month with TopStepTrader. Go back to trading futures like you did before. However, this time you'll trade within a very structured environment with strict parameters. When you're making consistent gains, then you can try one of their trading combines. In my opinion, the 100k and 150k combines, when passed successfully, will provide higher odds that you'll build up equity faster once you start going live.

In summary, the key is to having enough equity while day trading, not leverage or buying power. Futures make it a lot easier to build that equity.

Just my 2 cents.

 

[ScalperJoe]

So, how do you guys do it? What's your workflow and platform that would allow that? See something move and click or key comb that would buy me X shares automatically. I don't seem to be set up with the right tools. Or maybe IB can do that but I just don't know how.

I don't mind look at other daytrading platform(and pay the monthly fees) if it's fast and has that scanner to buy/sell integration with one button/click. Seems like to do daytrading need a lot of technology/tools.. correct me if I'm wrong

Any advices are greatly appreciated.

thanks

When I was daytrading equities I used several products. TC2000 is good however you'll need to upgrade to their "Gold" product for faster utilization of the software. Also check out MadScan, I used their free version and it was decent. I knew a guy who got his picks from Vector Vest, but that has a monthly fee.

TOS (Think Or Swim) has its own scanner and you can customize it to your style.

Some trading platforms have a built in "Top 10" list which change throughout the day.

The problem I've found (and you found as well) is by the time you find the "runner" it's already made the run!

Then you will end up jumping around from stock to stock, trying to chase the runner, which will only eat away at your equity through commissions.

It's better to make a list of highly liquid and volatile stocks that you're comfortable trading, and simply trade those stocks again and again.

 

[trader99]

Yes, it's "less risky" with $5k, especially if you're going to trade with a prop firm that is well capitalized (you can check via their SEC.gov focus reports).

However, keep these facts in mind:

1. Your fixed costs will be around $200-$300/month for professional data and platform fees. Since your capital is locked up for one year as per SEC rules, you are starting out with a guaranteed drawdown of over 50% of your starting equity!

2. Your variable costs (commissions and ECN fees) will depend on your trading style. If you've reviewed several threads on ET regarding experiences of prop traders with small starting balances, then you'll notice that many end up depleting their equity from commissions alone within just a few months! If you're removing liquidity (which is what usually happens when you start), then add another $2 to $3 per 1,000 shares traded. If you trade 100k shares a month, and you have a $2/thousand commission rate, your estimated variable costs PER MONTH will be around $450-$500/month, PLUS your fixed costs.

So before you even get your license, you may want to develop a game plan on how you will execute a strategy to leverage the $5k starting equity by computing your monthly estimated fixed costs plus variable costs.

Another option is to utilize the simulator account for $35/month with TopStepTrader. Go back to trading futures like you did before. However, this time you'll trade within a very structured environment with strict parameters. When you're making consistent gains, then you can try one of their trading combines. In my opinion, the 100k and 150k combines, when passed successfully, will provide higher odds that you'll build up equity faster once you start going live.

In summary, the key is to having enough equity while day trading, not leverage or buying power. Futures make it a lot easier to build that equity.

Just my 2 cents.

ScalperJoe,

Thank you for your long detailed response and a reminder for me of how brutal the prop/arcade trading is/was. It's been a while since I was in that world. But your detailed laying the bare facts is a good reminder that it's a tough gig.

Maverick has already convinced me to not trade prop/arcade.

I'm doing well on my retail Robinhood account with NO desk fees, ZERO commission, and very little stress since I have a full-time job. I just swing trade on the side and I make very decent returns so far with it.

If this continues to do well, then I'll withdraw a small portion($25-$30K) to daytrade retail. No need to pay huge desk fees and have min shares quotas. IB's market data fees are about $20-$25/month and it's even waived if you do volume(very minimal). I can easily have those fees waived once I get back into intraday trading.

I just want to continue with my swing trading account for a while more. Also, because I really don't have time to do daytrading and no right technical setup.

Thanks!

99

 

[trader99]

When I was daytrading equities I used several products. TC2000 is good however you'll need to upgrade to their "Gold" product for faster utilization of the software. Also check out MadScan, I used their free version and it was decent. I knew a guy who got his picks from Vector Vest, but that has a monthly fee.

TOS (Think Or Swim) has its own scanner and you can customize it to your style.

Some trading platforms have a built in "Top 10" list which change throughout the day.

The problem I've found (and you found as well) is by the time you find the "runner" it's already made the run!

Then you will end up jumping around from stock to stock, trying to chase the runner, which will only eat away at your equity through commissions.

It's better to make a list of highly liquid and volatile stocks that you're comfortable trading, and simply trade those stocks again and again.

Again, thanks for the suggestions. TC2000 scans are not bad. Pretty decent. IB also has a scanner too.

But as you found out, the problem with intraday scanner is that by the time you find something that is moving it might be late. But there are a few runners that continue to run for hours. But the chance of hitting on one of those seems to be rare. I think it's possible, but I just have figured out the exact workflow for daytrading that works for me yet.

For swinging trading, things are so much slower. You look at the 1min, 5min, hourly, daily, and weekly charts. Pick a good spot get in. You can average in. Hold for a bit. And you can wake up to some nice gains(or not so nice losses). But luckily, so far my risk/reward ratio has been good.

Maybe I need some semi-automated solutions for daytrading. But that means I would need to spend time programming things up, which I really don't have time yet. Perhaps in the future.

Or I can follow a few stocks. The universe of stocks are HUGE. I guess a few volatile ones can be a start. Good idea ScalperJoe! Maybe a basket of 10-15 volatile stocks and follow it closely enough to get a good daily/intraday feel.

I'll try that to see how it goes.

 

[JesseJamesFinn]

Trader99, there is zero chance anyone will even spend 10 seconds on your proposal. I ran a prop office for several years. I understand the economics well. Not a chance in hell. You are not even in the right universe of offers. Honestly, your best bet is to trade futures where you can get 20 to 1 overnight leverage on avg in most products. I'm just being honest here. There is no one out there that will have any interest in that model. Sorry.

God, if only he saw what some of us paid to trade at Broadway Financial early on in the Day Trading Prop Shop Evolution. Maverick did you attend Broadway's school or meet up with the late Harvey Houtkin or trade with Russian Boy Wonder Serge Millman? Compare them to the Trading situation run by Greg and Oliver Velez "Pristine Trading" Miami. Maverick your right, we paid so much more, had to provide our own grubstake without anything he's asking for.



I am not trying to be rude but there are some good traders who blew up trading with 4 to 1, I had 10 to 1 but had to sign one of my ranches as collateral too. Please rethink your proposal because I think it's kind of insulting to the Prop and your setting yourself up for huge risk considering how fast the Market can move with our new friends the HFTS Gang!


If you can't make consistent money with 1x, 10x won't help you until you master 1x, I am using 2x at the most and rarely tap in to 4x BP, I think it's bad news going higher than 4x after seeing so many people blow up with 2x BP. I saw professionals blow up with 4x, sorry to be a Negative Nelly!

 

[trader99]

God, if only he saw what some of us paid to trade at Broadway Financial early on in the Day Trading Prop Shop Evolution. Maverick did you attend Broadway's school or meet up with the late Harvey Houtkin or trade with Russian Boy Wonder Serge Millman? Compare them to the Trading situation run by Greg and Oliver Velez "Pristine Trading" Miami. Maverick your right, we paid so much more, had to provide our own grubstake without anything he's asking for.



I am not trying to be rude but there are some good traders who blew up trading with 4 to 1, I had 10 to 1 but had to sign one of my ranches as collateral too. Please rethink your proposal because I think it's kind of insulting to the Prop and your setting yourself up for huge risk considering how fast the Market can move with our new friends the HFTS Gang!


If you can't make consistent money with 1x, 10x won't help you until you master 1x, I am using 2x at the most and rarely tap in to 4x BP, I think it's bad news going higher than 4x after seeing so many people blow up with 2x BP. I saw professionals blow up with 4x, sorry to be a Negative Nelly!

JesseJamesFinn,

I'm not sure if you have been following the thread, but it's curious that you keep on saying "If you can't make consistent money with 1x, 10x won't help you until you master 1x" The ENTIRE reason why this thread was started was because I have been consistently making money on my retail 1x non-margin Robinhood account.

Then I thought given I have done prop in the past, maybe, it would be good to revisit this topic and get more leverage.

Maverick, however, has CONVINCED me that it's suboptimal. So, I'm sticking with retail 1x on Robinhood and eventually will move probably 25-30K to regular IB(I also have a IRA IB) to get 4x intraday and 2x overnight. Unless Robinhood gets margin soon(they said it's coming..).

But I'm cautious so I want to make sure I have good technology and setup before I dive back into intraday trading.

As to my proposal that is insulting to the prop, then fine. So far, my retail setup cost me very little to nothing. No platform fee, no comm, and no market data fee. I pay like $30/month for TC2000 and maybe $25/month for IB market data. And I make orders of magnitude more than my daytrading prop days.

Different strokes for different folks.

 

[JesseJamesFinn]

trader99, sorry I must be going blind and ask you to think about keeping your costs low and proceed as you plan to move in to a more active trading status. You don't need to spend a fortune in buying-power to make a nice living if your still young, please remember this solid truth, over-trading and churning don't work and only make Brokers money, its the fastest way to destroy your equity!


If we do move in to rough waters the advantage is yours because your use to trading 1x, I think your ready for 2x if everything you say is par. I worry as the Market begins to get creepy you might be entering the Market with 2x as trading get's very whippy. I wish you the best of luck, keep those costs as low as possible and don't over-trade if you do go PDT!

 

[trader99]

trader99, sorry I must be going blind and ask you to think about keeping your costs low and proceed as you plan to move in to a more active trading status. You don't need to spend a fortune in buying-power to make a nice living if your still young, please remember this solid truth, over-trading and churning don't work and only make Brokers money, its the fastest way to destroy your equity!


If we do move in to rough waters the advantage is yours because your use to trading 1x, I think your ready for 2x if everything you say is par. I worry as the Market begins to get creepy you might be entering the Market with 2x as trading get's very whippy. I wish you the best of luck, keep those costs as low as possible and don't over-trade if you do go PDT!

This is freakin' unbelievable cool! I'm on Jury Duty today. While waiting at the court, I got out my laptop, turn on TC200 for intersting intraday scans. Tons of stuff going down. Unfortunately, I CAN NOT short on Robinhood yet. So I have to figure what to go long.

Found a stock that's been beaten so bad and ridiculously slammed. And I saw it started to climb up.

So, I got in. Bought 400 shares(the only remaining capital the rest is in my longer term swing trades which today had a HUGE up day as well).

And my intraday swing is going nice steadily. haha! I was fearful for daytrading given my negative experiences in the past. But my swinging trading discipline and results have been good.

So, I applied the same rules. I'm doing INTRADAY SWING trading.

Of the 400 shares, the first one hundred shares I got out 33 cents profit. Not bad for daytrade profits. I'm still holding on the remaining 300 shares since it's still going up.

Obviously, I can't do this everyday since I have a nice corporate job. Perhaps the first hour of trade(opening). But I have to be fast. Still working out the workflow.

I was complaining to others that I have to pay $20 for parking near the courthouse. Well, that's more than paid for by my daytrades so far.

Of course, my swing trades are up orders of magnitude more.

Hopefully, they don't call me for anything and I can stay in court and daytrade all day. haha.

Actually, Jesse, you have a good point. It's NOT the frequent manic trading that is making me money both swing and intraday. Finding a good trend and holding is what making money swing(obviously) and now intraday.

As the other Jesse, Jesse Livermore, that is, famously said:

"It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine--that is, they made no real money out of it. Men who can both be right and sit tight are uncommon"

or more aptly for daytraders:

"The desire for constant action irrespective of underlying conditions is responsible for many losses on Wall Street even among the professionals, who feel that they must take home some money every day, as though they were working for regular wages."

Zero comm! Zero platform fees.

Just reporting back to my traders friends/bros of my trader development and progress.

 

[trader99]

Only 100 shares left out of the 400.

Got in $28.47 for 400 shares. I wanted to get in for 1000-2000 shares. But not enough capital since most of it is tied up in swing trades. HENCE, the start of this thread.

1st 100 got out at $28.80
2nd 100 got out at $30 (thank goodness that limit order hit)
3rd 100 got out at $29.52 (should have gotten out earlier or just held for the ride. it was a short term reactions. But what I learned is to protect profits rather than let it come all the way back)

4th 100 shares still holding.. of course, it's coming back and blasting past $30 now. haha

So far, all very good for daytrades.

P.S. Put in stop limit order for the remaining 100 shares. It went as high as $30.12 now back in the $29.78s... Let's see.

P.S.S. Jury Duty lunch break. Stock still holding steady. Let's see...

 

[trader99]

My stop limit order got hit.

The last 100 shares out at $29.715.

So, in summary
1st 100 got out at $28.80. Profit: 28.80-28.47 = $33
2nd 100 got out at $30. Profit: $30-$28.47 = $153
3rd 100 got out at $29.52. Profit: $29.52 - $28.47 = $105
4th 100 got out at $29.715. Profit: $29.715- $28.47 = $124.5
=====================================
Total Profit: $415.5

Not bad for a day sitting in jury lounge! Get this? I paid ZERO commission, ZERO platform fees, and was trading on what amounts to FREE semi-delayed quotes data from Yahoo Finance with pseudo real-time chartings on TC200 through Robinhood on an iPhone!
I've noticed TC2000 charting is not real-time for whatever reasons.

No expensive RT trading platform that I had to pay hundreds of dollars to get the latest tick.

I remember during my "lost years" I was subscribing to eSignal and Tradestation and paying hundreds every month and I was NOT making any money! In fact, losing $$$ was the normal and got saddled by all these platform and charting software fees.

Here, my fixed cost are almost nothing and I'm making nice coin.

This is a nice addition to my swing trading. During my old daytrading days, I would get excited over this profit but now that my swing trading dwarfs this I'm content. If I can do this consistently then not bad.

Now, getting back to the topic of this thread. If I had 2000 shares then my profit would have been over $2K assuming I sold in same proportions. Now, we are talking serious money for daytrading.

Hence the need for leverage. Actually now that I think about it, I could have done all of this in IB! But then I have to withdraw my money from Robinhood and move it to IB in order for that to work. That day will come once I hit a certain threshold in my Robinhood. At the rate things are going probably by year end if not sooner...

The annoying thing about Robinhood is now that I've sold my stock, my capital will not be available until 3 days. Which the last time I saw how they counted it it means not until next Thursday. Friday is one day. Monday is 2nd day. Wednesday is 3rd day. And Thursday it's available. A scam.

They say they are working on shortening that while they are earning interest on my capital.

It's all about progress in trading development....