Prop trading looks great, then why most retail traders don't simply join in?

Quote from Don Bright:

What makes you think that prop traders only day trade? Heck, our guys keep dozens of pairs, mergers, and even "swing" trades overnight...that's a big part of why it makes more sense to join a firm.

Don :confused:
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many moons ago i spoke with a few out of curiosity that strictly prohibited overnights. The local swift trade branch also does not allow them...I met the owners the other day.

glad you guys realize the value of longer term holds and strategies. that should give you a real leg up.
 
Quote from dac8555:

many moons ago i spoke with a few out of curiosity that strictly prohibited overnights. The local swift trade branch also does not allow them...I met the owners the other day.

glad you guys realize the value of longer term holds and strategies. that should give you a real leg up.
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Yes, the smaller firm's, who aren't particularly well capitalized, have their traders close out positions every day...finding that out is part of of a new trader's due diligence.

(Sorry, but since there is some confusion here...I offer the following).

1. Put up $15-$25 grand to start your own business within our business. Money is your "tool" so that you can trade.

2. Since it generally takes over a $million to make a decent living from trading, allowing you to participate in strategies that actually work vs. most retail attempts (mergers, pairs, market making, automation, etc.), it makes sense.

3. Being part of a successful group tends to lead to success, as in most things in life.

4. The ability to simply "turn up the volume" (share size) to make more money as your confidence increases.

Just FYI for some of you...

Don
 
Quote from OddTrader:

Isn't that because perhaps particularly remote prop trading is available now?
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That could be a part of it, yeah. I think a large part is also that prop trading drew a particular kind of "unsophisticated investor" during the boom, both with firms and traders. If you made a ton of cash buying dips and leveraging into net stocks, you decided, "Hey trading is easy, I'll why don't I be the casino at the same time as being a trader!" and pooled your funds to start a prop firm with some other guys. These prop firms (or sub-LLCs, more like it) are undercapitalized as a result, compared to retail, and the guys running them don't really know what they're doing.

Retail traders tend to be people with money, slightly older and more conservative, and thus less prone to take $5000 shares and hold it overnight to satisfy a need for adventure. Additionally, their money is with more established firms with more capital.

That said, if you're a retail trader and you already know how to trade with a scalable model, I see --zero-- reason to not go prop AS LONG AS you're going with an established, fair, trustworthy firm.
 
If you go prop, and put up $100,000 and start trading and the firm goes belly up, aren't you also liable for general losses? Meaning you could end up oweing more than $100,000?
 
Quote from dac8555:

i couldnt think of the name before...now i remember. Swift trade. they are a big one right?? I know the office near where i work does not allow overnights.
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Isn't that because Swift using a licensing (Franchise?) business model, perhaps lacking of finance resources?
 
Quote from ozarka:

If you go prop, and put up $100,000 and start trading and the firm goes belly up, aren't you also liable for general losses? Meaning you could end up oweing more than $100,000?
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(Broken record time, sorry)...

You could be, that's why it is imperative that you check the balance sheets of any firm you get involved with. Make sure that the owners have a lot of $$ in the traders portion of the LLC. We used to keep a minimum of $10million (100 times SIPC protection) in our traders side, and now we keep several times that to assure trader protection. We have never had a trade's account affected.

Don
 
Quote from cashonly:

I would think there are two primary reasons why people don't trade prop:

1. Series 7 license
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What's this mystical series 7? Difficult to get? How much work?

And how much leverage do prop firms offer to directional swing and position traders, i.e. overnight holders? There's enough leverage in futures, but the 2:1 in stocks could be improved on.
 
Quote from Don Bright:

We don't bother checking 500-600 traders' positions...and most are pairs or mergers...no conspiracy here. Hedge funds give away 80% of their profits, our traders keep 100% and are given enough capital to do well, without having to borrow from investors.

Just a comment,

Don
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And you make your money via...... commissions?
 
Quote from moo:

What's this mystical series 7? Difficult to get? How much work?

And how much leverage do prop firms offer to directional swing and position traders, i.e. overnight holders? There's enough leverage in futures, but the 2:1 in stocks could be improved on.
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Generally, if you take a decent home study course and work at it for an hour or two a day for a month, reading the material, taking the quizzes, practice chapter tests, and practice exams, most people are able to pass it.

Leverage varies with your style and how much you have hedged (long stock vs. short stock), but starting at 5:1 and up (many use 30:1) is typical.

Cash
 
Quote from dac8555:

really..i dont know any firms that DO allow overnights. but then again..I am not an expert on props.
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Lots of firms allow overnights. In fact, some firms frown about daytrading and focus only on longer term trading.
 
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