Prop Shop?

you sign a piece of paper.

they own your ass for life.

simple as that.




just kidding. prop shops let you trade firm capital rather than your own. in exchange you generate commissions for them through your trading volume. there's your good and your bad with all prop shops. but for someone like me who doesn't have millions of my own money to trade with, prop is the only way to go. besides, they take care of all your accounting, computer systems, market data, trading environment, real estate, etc....

Quote from Scottie:

Can someone explain exactly what a prop shop is and how they work?
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Quote from GreenTraderTax:



A proprietary trading firm is either a broker dealer or a smaller company giving traders access to capital.

The BDs require you to join as a licensed broker. The others may not.

Prop firms give you more leverage (access to more money) then you could get on your own. For many it's a way to get around the "pattern day trading" rules, which limit margin (leverage).

To pay for this leverage, you may have to share some of your gains with the firm. You usually have to pay all your own losses. In most cases, the prop trading firms derive most of their profits off your relationship from commissions.

So they want you to trade a lot and close positions daily. Another reason to close positions daily is to limit risk on losses, which you are responsible for, but for which they put up the money with some risk.

Prop trading firms offer you a physical trading room location, and some also allow remote access trading from your home. Many traders like the group environment which may help their trading results.

Prop trading firms also offer help and education.

Some prop trading firms offer health insurance coverage.

For more information on prop trading firms in terms of tax, legal, accounting and more, visit our site at http://www.greencompany.com/PropTraders/index.shtml

In the old days, many prop firms offered "jobs" to trade, but when you looked closely, you realized it wasn't really a job, but you were putting up your own money to trade with them with more leverage. Now the prop trading firms are more straight forward about their relationships and opportunities.

Most of the prop trading firms are LLCs now and you become a LLC member and get a partnership K-1 at year end for tax reporting. Others hire you as an independent contractor and give you a Form 1099-Misc at year end for tax reporting. With the K-1, you are exempt from self-employment (SE) taxation. By default, with a Form 1099-Misc you owe SE taxes, but in some cases you may be able to avoid it.

Prop trading firms provide an excellent opportunity to many traders. Evaluate what they offer versus opening your own direct access account. Both are good.

Robert,

An excellent and cogent description......thank you.

rttrader -

Take care,
Robert A. Green, CPA
www.GreenTraderTax.com
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Quote from GreenTraderTax:

John Armstrong
Redwood Trading LLC
http://www.redwoodtrading.com
markets@redwoodtrading.com

Thanks for sponsoring the Career Trader thread at Elite Trader. I try to answer many questions here and appreciate Elite Trader and your firm for making this possible (to help traders tax and business-wise).

Feel free to contact me anytime if you want me to focus on any special areas.

Thanks,
Robert Green, CPA
www.GreenTraderTax.com
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...you're welcome! Thanks Robert you've answered many questions for a lot of us on these boards for a while.

rttrader/John - :D
 
Quote from GreenTraderTax:

John Armstrong
Redwood Trading LLC
http://www.redwoodtrading.com
markets@redwoodtrading.com

Thanks for sponsoring the Career Trader thread at Elite Trader. I try to answer many questions here and appreciate Elite Trader and your firm for making this possible (to help traders tax and business-wise).

Feel free to contact me anytime if you want me to focus on any special areas.

Thanks,
Robert Green, CPA
www.GreenTraderTax.com
More...

Robert,

You are welcome. I've known of your firm for a long time and have had several traders using your services. GreenTrader Tax has an excellent reputation here and in my community of friends. I myself plan on using you soon for my own trading tax needs and I also am looking to form and LLC. We look forward to working with firms like yours and providing information and trading services for the active trader.

rttrader -
 
woops...I am sorry for the double posting, my appologies. I forgot I had already replied to Robert.....gotta stop at 3 cups of coffee in the morning....:p

rttrader -
 
Quote from Scottie:

Can someone explain exactly what a prop shop is and how they work?
More...


Excellent opportunity best taken only in good weather or market conditions...

that's what prop shop means...

all those other wordy replies, just don't seem to hit the mark
 
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