Prop trader vs Day trader. 50/50 vs 100%

Quote from CarolinaCpaGrad:

i'm just trying to get a handle on the psychology of the average newbie trader out there.

i'm a prop trader. i have a 90% payout but my capital is at risk. my firm has a no capital in, 50/50 ish payout plan but i cannot fathom how, why it makes sense.

sure, they claim they'll eat the loses but don't people realize they'll never let you draw down any significant amount of money? for most of the traders, their systems have auto liquidate feature when they lose a grand or so.

seems like if they can join a "prop" firm as a "prop" trader, put up no money, pay a high commish rate and then get slammed with a 50/50, 60/40 payout then that it is a great deal. not to mention the onerous contracts that these firms usually make u sign and lock you in indefinitely.

is it a just the label and the fact that they haven't any of the money up ? their paying .008 or higher commish rates and label the shops such as Bright as an "arcade".

aren't people just selling out their long term profits to protect a small amount of upfront risk capital ?
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it all depens on amount of capital you get to play with.
50% on 5M is a much better proposition than 100% on 500k.
 
Quote from WinItAll:

Carolina,

When I first started trading in the late 90's, I traded prop in the real sense of the word and took home 40% of what I made and you can probably guess what shop I was with even though I won't mention it up here. Why do you ask would I have taken a 40% payout? Firstly, I was just out of school and didn't want to risk my own capital. Secondly, why the hell wouldn't I want to learn on someone elses dime with no money up, thirdly the house I was with probably is one of the more prestigous and has the best day traders on the street and lastly b/c they let me swing a 8 digit line. If you've been trading for a while I'm sure you know what house I was trading out of and taking home 40% of a 8 digit line is a hell of alot more than taking home 100% of whatever I would have made trading my own money. This is not b/c i didn't have enough to trade on my own, but instead it was b/c i didn't have millions to trade on my own.

If you can't see the benefit of trading at a real prop outfit, and I put an extreme empasis on the real part, then you're too narrow minded and in all likelyhood was either never offered the opportunity or you're simply just a moron. You've obviously never traded any substantial size or you would realize what the difference is.

You shouldn't be putting these kids down b/c for a lot of guys who actually are smart and talented, they may not have enough money to trade the way you're talking about and that shouldn't hold them back from persuing a trading career. And for beginners, if you're trying to say that they should make 10k to 40k "banging around stocks" then you have never traded before. You seem like the narrow minded moron that would rather have a hundred percent of a 10k company instead of 50% of a million dollar company. I would like to know if you still don't understand why someone would go the prop route? B/C the only way you're coming out of school and trading right away is if your mommy and daddy gave you money, there's nothing wrong with these kids trying to make it on their own.
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some good points but no reason to act like your three. i never stated newbies should be making 10-40k/mth. go back and read my posts.

just some comments, i've been trading long enough to see the rock stars of the late 90's blow out and are now working in other careers. having a larger line to play with does not equal greater profits. i've seen numerous traders hang themselves with the extra rope provided. sometimes owning 100% of something is better that whatever % of a larger entity, especially if your business is not scalable.

this may not be 1998 but i'll take multiple repeats of 2008 everyday. i know several traders that started in 2007 doing just that on a $250km overnight / $1m day buying power line with probably the most recognizable shop out there and keeping 90%.
 
I think you're misunderstanding me.... I'm not talking about 1 million BP.... I'm talking about 25MM intraday BP and that makes a huge difference b/c it's not possible to trade with or even learn how to trade with size like that when you're using your own money. You not only have to have the money to trade with that type of line but you also have to learn to work in and out of your positions.

But even if it's a 500k BP type thing where you're starting off at 60% it takes alot of pressure off of a new trader, especially a young one. I know for me, when I started out, atleast I knew I'd be able to make rent and pay my bills b/c even if I was losing at work it wasn't coming out my bank account. Not to mention that when you're trading your own money, especially at the beginning when your balance is low, your BP is affected on a day to day basis. If you put up say 10K and get leveraged out to 200k, it wouldn't really make a difference that you had that buying power if you had three days where you lost a few K and your balance was 0. In the end getting leveraged is multiplying your downside as much as your upside. So, if anything is a waste of money it would be giving away a piece of your profit and paying higher commissions just for leverage, b/c it helps just as hurts as much as it helps. I would much rather give up 40% for someone to eat my losses than give up 10% or 20% for the opportunity to trade my own money with size I have no business trading..... That's the difference. In a real prop deal they're getting a piece of the gains and all the losses..... With a shop like you're trading for they get a piece of the pie and YOU eat the losses.

Which sounds like a better deal to you? In actuality you're trading that extra 30% on the upside if you go prop, for not have to pay 100% of the downside. And I've traded both ways and turned out a much better profit trading prop. I now have enough to trade the way I want with 4 to 1 leverage so I'm comfortable doing it, but I would never want to have 20 or 30 to 1 leverage while trading my own money even now..... You end up taking loses that you don't want to cover personally if you're position trading and not just scalping in and out.
 
ok, then back to my mid thread question. if 50/50, 60/40 is such a great deal - why are u self funding ?

imho, self funding is the only way to go unless your a superstar trader slugging around huge size and risk.
 
Quote from CarolinaCpaGrad:

ok, then back to my mid thread question. if 50/50, 60/40 is such a great deal - why are u self funding ?

imho, self funding is the only way to go unless your a superstar trader slugging around huge size and risk.
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Curious why you are so anti- prop deals. Most of the people I know who have gone the self funding route couldn't make enough without using huge leverage. A few of them did ok, others lost everything due to over leverage. But in the end they would have been much better off having a large backer and taking a smaller cut.
 
I'm trading my own money b/c I've built up enough to do it comfortably at a high level. And I built it up by trading other peoples money, not putting up 5K. You are telling new guys to put up money and just learn.

I WOULD LIKE TO ASK YOU THE SAME QUESTION THOUGH, IF YOU'RE SO SUCCESSFUL THEN WHY AREN'T YOU KEEPING 100% OF WHAT YOU MAKE AND WHY ARE YOU GIVING A PIECE OF YOUR EARNINGS AWAY TO A FIRM IF YOU'RE TAKING ALL THE RISK??

That doesn't make sense to me. Atleast if you're giving up a piece of your profit and getting something in return. You're giving up a piece of your money just to have leverage. And if you're trading at a level where you need more than four to one and using your own money as an experienced trade, then you're probably trading above your head.

Self funding is ONLY THE WAY TO GO after you made your money elsewhere and are profitable. Why the hell would you tell anyone to self fund if they've never traded before, I have never met a trader that doesn't piss away money for about the first year.
 
i also trade fixed income. even with portfolio margining in my personal accounts - i still have the need for extra bp. office, phones, bbg, tech support and someone to deal with BS that comes up occasionally.
 
Quote from l2tradr:

Agreed. It's the ones that prey on the newbies with 2K and a dream is that you have to watch out for. Which most would probably fit under :(
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2k only? it is more like 5k, 10k, 12 k nowadays. by the way, your account start out with a big 0 (zero), not any of the money u give the prop.
 
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