Should I join this prop firm or keep trading for myself?

[SteveM]

Hi, I've been trading for myself for 5 years, and I'm thinking about joining up with a prop firm. In those 5 years I've made just over $500,000 total (before taxes). I struggled early on, but gradually improved and in the past year I made $190,000. I am very consistent now.....

I think you would be insane to fiddle with your current situation.

 

[JSOP]

Hi, I've been trading for myself for 5 years, and I'm thinking about joining up with a prop firm. In those 5 years I've made just over $500,000 total (before taxes). I struggled early on, but gradually improved and in the past year I made $190,000. I am very consistent now and I'd like to scale up my operation and possibly join a prop firm.

There's one I've been talking to (I won't say which one in case they're reading this) which is offering a 40% payout but no capital contribution (no base salary, but I'm confident enough in my edge). They also have a better fee structure than what I currently have. My trading costs would be cut in half with them.

I am based in Milwaukee, Wisconsin but they are in a much higher cost of living area (at least 2x higher) and they won't let me trade remote. However, the no capital contribution required is appealing to me, and I think I'd be able to scale to the max immediately with their capital. I am worried about working in an environment with other traders though. Maybe they'd steal my ideas and destroy my edge? I'm so used to trading by myself. This prop firm preaches about their "open environment" too but I think it could be just more potential for traders to try to steal edges away from each other. I mostly scalp stocks, but I still think I can scale it up to a point where even getting 40% payout it could be at least twice to three times as much as what I make now. And even if there's some desk/data fees, I think the no capital at risk is a huge plus.

But my main concerns are relocating (I like it here in Wisconsin) and being surrounded by others who might eat away at my edge if they see what I'm doing. Is it worth the move and the experience?

Well the calculation is simple: Is 40% payout of the profit on the $1 - $2 million capital given to you by the prop firm with absolutely zero capital contribution on your part minus all the living costs of New York larger than 100% payout of the profit on your current capital minus your living costs of Milwaukee Wisconsin? If yes, then the move to the prop trading firm in New York is worth it. If not, then it's not worth it. Looks to me, this prop trading firm is just looking for cheaper ways to have profitable traders to trade their money and to get a bigger piece of pie vs. investing in hedge funds. So if you can make consistent and decent six-figure profit a year with healthy profit ratio, then maybe it's time for you to start your own hedge fund instead of trading for others. That might be a lot more effective way for you to raise capital if raising capital is what is essential for you at this point of your trading career.

If you are considering the prop trading firm though, forget about other traders stealing your strategy, as long as they don't publish your trading rules/systems/strategies, nobody can gauge anything by just looking at your entries and exists. And besides, if everybody copies trades from you, then they will even move the market for you and might allow you to profit faster and allow the firm to be in a better financial position if your trades do indeed have a high profit probability.

 

[ShortBoca]

I'm currently on my own for the last 5 years, after 17 years of trading at 3 prop firms (4 if you count the time my new firm sold me back to my old firm just 3 months after the switch -- minus the bonus I gave up). My general equivalency rule was that in a prop firm manager's eyes $1000 in my pocket was worth about a penny in theirs. You meet some good people along the way, but Abraham had better luck with Sodom. In the end they won't honor any drawdowns, loss limits, BP etc etc unless you have it in writing. The thing is, you'll never get it in writing. Small slice of big pie, versus big slice of small one. Figure out what works for you.

 

[Ajm1734]

Well the calculation is simple: Is 40% payout of the profit on the $1 - $2 million capital given to you by the prop firm with absolutely zero capital contribution on your part minus all the living costs of New York larger than 100% payout of the profit on your current capital minus your living costs of Milwaukee Wisconsin? If yes, then the move to the prop trading firm in New York is worth it. If not, then it's not worth it. Looks to me, this prop trading firm is just looking for cheaper ways to have profitable traders to trade their money and to get a bigger piece of pie vs. investing in hedge funds. So if you can make consistent and decent six-figure profit a year with healthy profit ratio, then maybe it's time for you to start your own hedge fund instead of trading for others. That might be a lot more effective way for you to raise capital if raising capital is what is essential for you at this point of your trading career.

If you are considering the prop trading firm though, forget about other traders stealing your strategy, as long as they don't publish your trading rules/systems/strategies, nobody can gauge anything by just looking at your entries and exists. And besides, if everybody copies trades from you, then they will even move the market for you and might allow you to profit faster and allow the firm to be in a better financial position if your trades do indeed have a high profit probability.

Very solid points, although I have zero connections to people with lots of money besides talking to this one firm so starting a hedge fund (not to mention one where I'd just scalp stocks) probably isn't realistic right now. But your first question is exactly how I'm looking at it and trying to weight in my mind right now.

 

[JSOP]

Very solid points, although I have zero connections to people with lots of money besides talking to this one firm so starting a hedge fund (not to mention one where I'd just scalp stocks) probably isn't realistic right now. But your first question is exactly how I'm looking at it and trying to weight in my mind right now.

That's fine. All I am saying is if what you are looking to do is raising capital right now which is what attracted you to the idea of joining prop trading firms in the first place, there are other alternatives such as starting your own hedge fund.

All the best!

 

[murray t turtle]

We do not have prop firms where I live and that might be the reason I simply do not understand how running a prop firm can be a good business.

I assume the prop firm requires that you cannot continue to trade for yourself if you join them, correct?

%%
Because the general business rule is if you make a $1; they pay you $00.60 or $00. 70-if they're honest.And it changes; the super earners tend to get ripped off much more, in sales or banking, new cars.Or if one is female the pattern is to tend to rip them off more in used or new cars.
Even an honest banker can make a mistake; i remember one asked me to buy some more property, larger tract- but too much expence road frontage for me.May or may not have worked out?? If it didnt- I was on the hook for sure -not him.

 

[JSOP]

I'm currently on my own for the last 5 years, after 17 years of trading at 3 prop firms (4 if you count the time my new firm sold me back to my old firm just 3 months after the switch -- minus the bonus I gave up). My general equivalency rule was that in a prop firm manager's eyes $1000 in my pocket was worth about a penny in theirs. You meet some good people along the way, but Abraham had better luck with Sodom. In the end they won't honor any drawdowns, loss limits, BP etc etc unless you have it in writing. The thing is, you'll never get it in writing. Small slice of big pie, versus big slice of small one. Figure out what works for you.

That's dangerous if they won't commit anything in writing. What made you stay for *17* years in prop trading firms?

 

[monee]

I think you would be insane to fiddle with your current situation.

Couldn't agree more.
Wouldn't be crazy about everyone being able to see my entry's and exits either.
If your trading futures leverage is pretty insane already.

 

[lindq]

But my main concerns are relocating (I like it here in Wisconsin) and being surrounded by others who might eat away at my edge if they see what I'm doing. Is it worth the move and the experience?

Keep doing what you're doing. Don't go looking for a new adventure.

Recall that pigs get fed and hogs get slaughtered.

 

[TreeFrogTrader]

Very solid points, although I have zero connections to people with lots of money besides talking to this one firm so starting a hedge fund (not to mention one where I'd just scalp stocks) probably isn't realistic right now. But your first question is exactly how I'm looking at it and trying to weight in my mind right now.

Just get a dog and be happy where you are.

A month after you get the dog you will realize that it is only what he wants that counts, and he does not want to go to New York, so put that idea out of your head.