Prop firm vs broker: pros and cons, fixed costs (pro data), etc.

The main components of prop vs retail depend on what your trying to accomplish.

  • Are you in need of more buying power
  • Does your model have room to scale ? If so a prop firm can help you grow the model with additional bp plus most shops will back a good portion of your risk.
  • Tech support is key for certain guys and most prop shops are staffed with well educated tech guys that understand routing , hot keys , locates etc
  • I know at Chimera our trading floor is a big plus for prop guys who like the being in a trading environment.
 
Georgii said:
Anything I'm missing? Thanks for all constructive advice...
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Calculate the number of shares you will be trading per month, and the amount of the commission on a per share basis vs. per trade basis, and if the retail account has a minimum per order ticket charge. With prop, you have to also consider the costs of taking liquidity each time you place a trade (selling on the bid, buying on the offer). In many cases, taking liquidity will add around the same amount as your rate, so basically double the rate you are paying to the prop firm.

Then compare retail vs. prop, and see which one comes out better.
 
Georgii said:
Here it's like a dozen little exchanges, ARCA, BATS, NASDAQ, etc. And what I don't like here is that you have to think about this stuff when you're trading, which I'm imagining can be a distraction. But I guess it's important to learn!
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If you're trading stocks/ETFs with lots of volume and liquidity, then routes aren't really a big deal. When I traded prop I set up just a few routes via hot keys and the fills were fine. Just use the big ones you mentioned. If you have a certain strategy to route to specific exchanges to get mid-points or something, then you'll need more routes.

EDGX worked just fine for the majority of trades, so the routes shouldn't really be something to think about, unless you trade thin volume or have a specific need to route out.
 
ScalperJoe said:
If you're trading stocks/ETFs with lots of volume and liquidity, then routes aren't really a big deal. When I traded prop I set up just a few routes via hot keys and the fills were fine. Just use the big ones you mentioned. If you have a certain strategy to route to specific exchanges to get mid-points or something, then you'll need more routes.
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ScalperJoe,

Did you also use their Smart Route? I'm new to day trading and I always wonder if using the Smart Route is "smarter", faster, and cheaper?
 
coskinas

I've been using some Smart Route for years - yes it is cheaper - depends on which I use cost me 0 to 2.35$ per 1000 shares. So this is a big advantage :)
 
Risk619 said:
If you get a chance, check out Flash Boys by Michael Lewis. It's not really 100% accurate, but it definitely introduces a lot of the terms and the overall topology. He makes HFT's out to be evil villains which really isn't true, but it's a pretty easy read and at least shows some of the dark sides associated with it.
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Risk619,

This is a very interesting book to read. Thank you for recommending it. I've just finished a few chapters and boy it really gives me a different perspective about the routes.
 
coskinas said:
Risk619,

This is a very interesting book to read. Thank you for recommending it. I've just finished a few chapters and boy it really gives me a different perspective about the routes.
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That book was a great read !!!! It's not 100% accurate but it sure does open the eyes of the Avg trader who needs to understand what happens when they send an order Into the mkt
 
coskinas said:
ScalperJoe,

Did you also use their Smart Route? I'm new to day trading and I always wonder if using the Smart Route is "smarter", faster, and cheaper?
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No, I had hot keys set for EDGX, BATS, NASDAQ and ARCA, and it was good enough.
 
murotrading said:
That book was a great read !!!! It's not 100% accurate but it sure does open the eyes of the Avg trader who needs to understand what happens when they send an order Into the mkt
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Watch "How to catch a trader" as well. It's good. You can find it in Netflix. It'll give you another perspective as well.
 
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