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

Quote from Don Bright:

Retail firms could let you trade for free...they keep all the short stock interest, and have wide spreads on cash balances, loan out your stock without paying you for it, act like banks, paying you xx%, charging you xxxxx%, etc. etc. etc.

We pay you interest on short stock, very small differential between long and short interest, and we pay Goldman by the share.

Retail makes "money on your money/stocks" - we simply have economies of scale and try to make a profit (as above).

(I encourage discussions, always have, and would be glad to take part in a live Forum again, either alone or with anyone else in the industry...talk to Baron).

Don
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I do not trade With IB...but I had heard they pay short interest....any idea if this is correct?

Also, I am referring to scalpers more than longer term position and swing traders. Assuming a trader needs no additional leverage, is holding 1-3 month tbills (thus no need to worry about money market rate etc.), and holds no overnights....what is the advantage to a prop firm vs. retail firm. This question is based on the assumption that the trader trades around 100k to 1mil shares a day. Don or other prop folks, can you give us a range for commissions or not (I am trying to skirt the line "give us a call and we can talk about it").....Can you get to .02 or below for such active traders??


Good trading to you all
 
Quote from Bullet:

I do not trade With IB...but I had heard they pay short interest....any idea if this is correct?

Also, I am referring to scalpers more than longer term position and swing traders. Assuming a trader needs no additional leverage, is holding 1-3 month tbills (thus no need to worry about money market rate etc.), and holds no overnights....what is the advantage to a prop firm vs. retail firm. This question is based on the assumption that the trader trades around 100k to 1mil shares a day. Don or other prop folks, can you give us a range for commissions or not (I am trying to skirt the line "give us a call and we can talk about it").....Can you get to .02 or below for such active traders??


Good trading to you all
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Yes, almost every broker gives you short interest, but the question is how much? I think prop firms give a better rate than a retail.

You can get to .02 or less if you are a profitable trader. Search the prop forum.
 
you don't need a series 7 to trade prop.

becoming a partner in a sub llc provides one the leverage etc without need of the series 7.


please correct me if i misunderstand the legality here.


surf
 
Quote from Cache Landing:

... 2. Day job. Most traders that I know have other steady income. I personally don't pay bills with any of my trading gains. It's the, "don't eat your children" mentality. Thus, I have a "real" job and trade. If I went prop I would have to quit my other job. No safety net.

Cache
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You don't necessarily need to quit your day job. I have a number of traders that are leveraging every day pre-"day job" and making some nice money.

If you're trading profitably now, and would like to increase your size, but don't have enough capital, that's a straight forward scenario where you can use a prop firm's capital to increase your bottom line. For example, let's say you have an average trade size now of 500 shares and you would like to go larger, but don't have the capital, as a prop trader, you could easily change that 500 to 2000, thus multiplying your bottom line by 4 (all other things equal and liquidity not being an issue). And you would still be able to keep your day job (as it would probably only take about .05 seconds longer to type 2000 instead of 500 :D )

So it's all about how you trade and what your strategy requirements are to make the determination of giving up the day job or not.

Cash
 
Quote from jackpearson:

...I'd suggest that the vast majority of the true long term profitable traders don't use 30-1 margin.... ...and if they do, they're walking a tightrope everyday. One never know when a 9/11 incident or other unknown events will happen. Exposing one's self to massive leverage seems like a great way to have a very short trading career.
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It all depends on your timeframe and strategy. A 9/11 event is an overnight thing. Any of our traders that were leveraged overnight that much would have to have been hedged, so while their longs took a hit, their shorts made up for it. It's risk-managed trading that keeps that from happening.

Any trader that is 30:1 intraday is more than likely in multiple stocks and as such is fairly well insulated from a midday halt on one stock and then it going against him ugly on the re-opening. If he's 30:1 when something like that happens, then he's not using good risk management. If he's trading QQQQ, the likelihood of something like that happening without being able to close the positions would be minimal. (ie all ECNs and exchanges where the QQQQs trade qould have to be hit by a bomb at the same time so that no more QQQQ trades could be executed... or something like that... as they say in Law & Order when the witness is pressed by an overzealous defense attorney "Possible? yes. Probable? no. Likely? Almost certainly not., but yes possible).

Cash
 
Quote from cashonly:

It all depends on your timeframe and strategy. A 9/11 event is an overnight thing. Any of our traders that were leveraged overnight that much would have to have been hedged, so while their longs took a hit, their shorts made up for it. It's risk-managed trading that keeps that from happening.

Any trader that is 30:1 intraday is more than likely in multiple stocks and as such is fairly well insulated from a midday halt on one stock and then it going against him ugly on the re-opening. If he's 30:1 when something like that happens, then he's not using good risk management. If he's trading QQQQ, the likelihood of something like that happening without being able to close the positions would be minimal. (ie all ECNs and exchanges where the QQQQs trade qould have to be hit by a bomb at the same time so that no more QQQQ trades could be executed... or something like that... as they say in Law & Order when the witness is pressed by an overzealous defense attorney "Possible? yes. Probable? no. Likely? Almost certainly not., but yes possible).

Cash
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Cash, care to give some input on my last couple of question (posted above) directed at Don or other Prop Folks?

Thanks.....
 
Quote from Bullet:

I do not trade With IB...but I had heard they pay short interest....any idea if this is correct?

Also, I am referring to scalpers more than longer term position and swing traders. Assuming a trader needs no additional leverage, is holding 1-3 month tbills (thus no need to worry about money market rate etc.), and holds no overnights....what is the advantage to a prop firm vs. retail firm. This question is based on the assumption that the trader trades around 100k to 1mil shares a day. Don or other prop folks, can you give us a range for commissions or not (I am trying to skirt the line "give us a call and we can talk about it").....Can you get to .02 or below for such active traders??


Good trading to you all
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If you are able to trade with adequate capital, and limit yourself to scalping, then pay by the trade...or see if "Freetrade" is still in business. If I could get .002, then I would jump on it...and I mean "me" as in Don Bright" (with a reliable, safe, firm of course). Am I to assume that you can trade in 2500-5,000 share lots on multiple stocks intraday?

If that is the case, stay where you're at...you fit into a very (very) small sampling of traders. Using a average of 3,000 shares on a small number of stocks (say 6), with an average NYSE price of $38...you only need $684,000 in your account...if you want to trade more, or utilize longer term (and generally more lucrative) strategies, then consider changing.

We fill a very large niche for many, but not all, traders.

All the best,

Don
 
Quote from Don Bright:

If you are able to trade with adequate capital, and limit yourself to scalping, then pay by the trade...or see if "Freetrade" is still in business. If I could get .002, then I would jump on it...and I mean "me" as in Don Bright" (with a reliable, safe, firm of course). Am I to assume that you can trade in 2500-5,000 share lots on multiple stocks intraday?

If that is the case, stay where you're at...you fit into a very (very) small sampling of traders. Using a average of 3,000 shares on a small number of stocks (say 6), with an average NYSE price of $38...you only need $684,000 in your account...if you want to trade more, or utilize longer term (and generally more lucrative) strategies, then consider changing.

We fill a very large niche for many, but not all, traders.

All the best,

Don
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Don, thanks for the response. You are one the few that will answer questions in an open forum. While I understand and appreciate everything you have said, I still have yet to get an answer to my main question....which is....Will You (or any other Prop trader/manager) give this forum an idea (not a vague response) as to what you or other Prop firms would charge an individual trader that does from 100K to 1 mil shares a day.

I understand risk and methodology all play a part in a commission scale, however, a range should be possible. I am not trying to put anybody's feet to the fire here, but I think it would be helpful for folks considering the Prop route to understand what they should expect to pay commission wise.


Thanks for the time!
 
Quote from Bullet:

This is what happens on a slow summer day!!!
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You'll understand that, for business reasons, it is better to not post details of what our traders pay per se'.

A million shares a day on average? Your giving me a pretty wide range (100k to 1Mil shares per day)...that's like me saying 1 cent up to 10 cents.... There would be a sizeable difference.

.004 for all shares above 1,000 on any order NYSE. First thousand is a sliding scale, or a negotiated rate based on capital usage requirements, overall volume, account size and several other factors....I really can't be more specific on a public forum.

I think pricing bottomed out about 18 months ago, and may actually be going up. The number of traders coming here from other major firm's has risen considerably over the last 6 months.

If you're trading nearly a $million shares per day of NYSE, then it would be worth your while to come out here, or Chicago when I'm there...and then call the other guys, see what they tell you.

It makes no sense to get into a public price war....and I don't see anyone else "showing their hands" here (but I never really have). Generally we see traders trying to out - do each other, LOL. And, it's generally "apples and oranges".

(Sorry)

Don
 
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