I feel that I have given you half-ass information. Right now, if you're new, it doesn't make much sense to deposit 5k, because you will lose it all not only to the market but also to the firm in commissions. It took me a while to realize this...However, when you start making a lot of money, you will feel exactly the way Steve said, because 80% of what you make will NOT be yours with the deal they start you off with. Yes, payout is 45-50%, but the effective payout is actually around 20% after ALL the fees. But this does not mean that starting out at a prop firm is a waste of time. I used to think that it was a waste, but now I realize that it is not. A prop firm like Hold is the only place where you can get a tremendous amount of chance at success. Here's how:
1. Creating a Buffer:
The more commissions you generate (ie. churn), the more privileges you get. Privileges such as higher loss limits, large buying power, and eventually better deals. Why? Because now, you have created a cushion to fall back on. If you have made 25k in commissions (gross profit), and if you have a bad week and lose 5k, you can still be in business. On the other hand, this is not the case with traditional retail brokers, where if you make 25k just in commissions, you will get nothing for it. Whatever deposit you made woulda been melted away in fees and they will close your account. When I talk about making commissions, I am assuming that you have made enough money from the market to cover those commissions. If you can't make money from the market to cover the fees, then this is useless.. In other words, your primary goal for the first 6-9 months is to make money from the markets, that is gross profit. Forget about getting a check for yourself. I've seen guys come in saying "oh I am gonna kill it" and end up losing 15k to the market and get fired in about a month. They WILL let you go if you consistently lose their money to the market. You've got to show some discipline and risk aversiveness.
2. Going up the ladder by churning:
Buy and sell continuosly based on the principles you were taught and make sure you minimize loss to the market and maximize gross profits. This is also a great way to learn. When you see that you have pulled in 10k from the market, ask for a better deal. Then after 20k, ask for a better deal again. And they will not turn you down as long as you show consistency. However, it will be difficult to get the rates down too much. They will give you higher payouts, higher buying power, and they will even give you commission rebates and wipe out your commission balance (I cannot think of any other firm that will do this). But, for some reason they're hesitant to bring down the rates. I guess they will bring it down if you do a lot of volume. Thats probably the reason. I don't do much volume these days.
So be prepared to dig yourself into a commission hole and out. Be prepared to be depressed, because i went home many days with my head hanging since i would make $400-$500 every day and all of it is gone in fees. The positive side to this is that you are building a trading career with none of your money at risk. I hope ya read this. I spent an hour writing this...
