The bad parts of Pro Trading firms

Ktm has it right. It is about making money. I was at a prop firm (ETG) used their leverage and did well. I saved enough to do it on my own. A fill is a fill. Its the implementation and liquidation of a good idea that counts. At a prop firm, you just trade larger to make up for the house's share. If sensitivity to cost is that important, you are on the margin to begin with.

Prop firms by definition are in it for money. The only question you need to ask is do they provide a service for their cost? IS the leverage or access or training or whatever they claim to have worth the added burden. Sometimes it is and sometimes it is not. The more money you have the less likely it is.
 
Is there some reason why only Pro firms have 'bullets' available to their members?

Why can't my retail DA broker make them avalable to me at the same low rate? Is is strictly a margin issue or some other regulatory problem?
 
I've said it before and will say it again.

Notice guys who are arguing about pro firms have never traded with one, but professional traders say they will never trade retail again.

They both can be done successfully.

Robert Tharp
 
I have a question for Don or Gene. Or anyone else who can shed some light on this. Do prop. trading firms such as yours pay any type of upfront money or perhaps a better structured deal to a top trader who is not with any firm? I know some firms will pay a referral fee to a currently employed firm trader who refers another trader to his firm. This can be a payout of upto 10 percent of that new traders gross for his first year production. Since this new trader is not being referred, is it unreasonable for this trader to ask for atleast a 10 percent higher payout that first year since the firm wouldn`t be giving it to anyone within the firm? But I heard some firms were willing to pay upfront bonuses equal to that traders golden handcuffs he would be giving up by leaving his current firm. Any comments or insights on this subject would be much appreciated.
 
The whole concept of "referrals" is a bit weird. If you are happy with a good deal where you are, and you know someone who is not getting a good deal, why would you not want that person to come join you? Some firms promise all sorts of stuff, like reducing your rate by xxx of another guys commissions...which causes all sorts of dissent within the offices ("why are you paying him from my share, why not give it to me", etc.)...and some firms will slip a percentage back only up to the amount that the recruiter is paying...so if you bring in 10 guys and get back 10% each, then you pay nothing (??)...what if you bring in 20 guys (see, there is no incentive ...and it can really cause problems).

We have found that "recruiting" is much better by "attraction" to the firm by the firm itself. Some firms, as I mentioned above, even pay "non traders" to "hard-sell" this profession as if it were an Amway product...I think that this is absolutely reprehensible (and a rather foolish business plan that is not working very well since there are so many untruths bantered about from the person who doesn't even know the "deal" because they don't know enough about the industry to even make sense to an experienced trader.

We build a good comaraderie within the trades, and will pay a one time fee to a trader who brings in a new person to talk to a manager or someone at corporate directly. This way we can be sure that no "lies" are being spread (and this has happened in the past), and that the "deal" is clear. If a trader brings in someone, and they decide to stay with us a few months minimum, then we give the friend a few hundred bucks, one time. That way the traders can focus on trading, and the "attraction" of making money has been working well.
 
Referal fees make no sense. WHat if I refer a trader to a firm and he loses. THen the firm is worse off if it takes a percentage of his profits and losses (I assume most firms take at least a equidistant loss as gain) then would I owe the firm for the referal? Mr. Bright is right. Go to the firm that has the best overall package for you -- if that is low cost or training or capital or location or whatever. If you know someone who could benefit from a different deal why wouldn't you be a friend and tell him regardless of the referral fee?
 
I'll put it this way........you own a prop. firm, you meet a top trader from another firm , the top trader feels like moving on from his current firm for what ever reasons other than performance. Maybe his current employer and him just don't get along. Would it be out of the question for the trader to think like he's a free agent and work out a deal that included a upfront payment to sign on with the new firm for several years. Mind you the trader knows he's counted on to continue his past trading performance and than some.
 
That makes sense. If a guy can negotiate his own signing bonus. I agree that traders are no differnet than athletes or Wall Street analysts etc who can and should try to get an upfront signing bonus. Do firms do that? I don't think firms should pay one trader for reffering another. An entrepreneurial thinking manager or owner would pay a trader to entice him to join.
 
Gene - loved your tax summary and your professionalism in referring others to at least 2 or three tax accounting sites that are familiar with LLC / Trading scenarios. These web based sites are superb and offer the novice to sophisticated tax-man an excellent service. Remember, our focus is on trading not taxation. I would love to pay $1,000,000 in taxes in a year.


I will give 5 (five) Cyber credits to the first answer that tells me why that's a worthy goal for all's us.....
 
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