Why no prop firms for non "active" traders !?

K

konviction

I have yet to see a prop firm that lets a trader use the firms money to trade but does NOT require that they are "active" aka day traders.

This is very annoying to me. I'd like to substantially grow my capital, but I can't seem to find a firm that will give me that chance.
 
Do you think overnight risk might be a factor? Do you think they might prefer guys that generate more commission income? Do you think they care if they make money?

I want Santa to bring me nice gifts but I'm not counting on it.
 
Because prop firms make money by betting against their traders and through commissions.

If a firm let their traders make only a few trades per year, 1) they wouldn't do enough volume to make money on commissions, and 2) there's a lower chance their traders would lose money (which means the firm would make less money).
 
1. I thought only retail firms like thinkorswim make their many on commission. I though props took a % of profits traders made?

2. Why would they bet against profitable readers, especially ones they took time to train?
 
It is actually the opposite. Prop firms want their traders to succeed so they will trade longer. There are 2 types of prop firms:

1. Ones that back you and take a percent of your profits. This has been beaten to death on elitetrader. You won't find one unless you have an Ivy League degree.

2. Ones that require you to put up a deposit and give you professional leverage and low fees that enable you to be profitable. These are the ones like Echo, JC Trading Group and Bright Trading. They WANT you to be profitable. The more profitable you are the longer you will stay with the firms and generate commissions. Just make sure you find a firm that gives you a fair rate!!

Since these firms mostly make their money by charging a commission rate, they are looking for active traders. But call around. If you are willing to make a deposit and give up a percentage of your profits you might find a firm willing to take a chance....especially if you have some sort of track record.

JT

Quote from 1a2b3cppp:

Because prop firms make money by betting against their traders and through commissions.

If a firm let their traders make only a few trades per year, 1) they wouldn't do enough volume to make money on commissions, and 2) there's a lower chance their traders would lose money (which means the firm would make less money).
More...
 
Quote from konviction:

1. I thought only retail firms like thinkorswim make their many on commission. I though props took a % of profits traders made?

2. Why would they bet against profitable readers, especially ones they took time to train?
More...

1. Some places may get rebates for a certain volume.

2. Here's how it works sometimes: when a trader sends an order, the firm takes the opposite site with real money. Since most traders will lose, the firm will make money. Each losing trader is told he is losing money and his "account size" is going down, but his orders were never actually sent to market because the firm took the opposite side. Now, a few traders will actually make money (since the firm took the opposite side of those trades, too, they will cost the firm money), and these traders will be paid from the winnings of the losers. Eventually, if certain people are consistently profitable, the firm may start actually taking their trades for real.

I wrote a bit about it in another thread. Here:

Hire a bunch of people. Have them trade on a sim account but don't tell them it's a sim. Take the opposite of their trades in a real account.

Most of them will blow their accounts (and you will make money from taking the opposite trades). The few who do make money, you can pay them their share of their "winnings" with the money you made off the other people's trades. Remember, these "winners" actually lost you money since you were taking the opposite side of their trades, but you'll have more than enough to cover it from the losing traders.

For example, you hire 20 people. Each of them puts up $5,000. That's $100,000 right there.

15 of these people lose $500 their first week. Their "accounts" are now worth $4,500 each.

You took the opposite of their trades so you actually made $7,500.

5 of the people were profitable. Let's say they each made $500 their first week. Their "accounts" are now worth $5,500 each.

You took the opposite of their trades so you actually lost $2,500.

Your net profits at this point are $5,000.

Your firm has a 50/50 split so each of those people gets paid $250.

After you pay your people 50% of their $500 winnings, you have paid out $1,250.

Your profit for the week is $3,750.

Repeat. Encourage people to over trade so they lose more money. The more they lose, the more you make. When they blow their accounts they can deposit more money or you can fire them and hire new people.

In the event you get someone who is consistantly profitable (unlikely), just set it up behind the scenes so his trades actually go through and make money on his trades.
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This is why they encourage frequent trading and why they have such high turnover.

If you took one trade every week or whatever you wouldn't make the firm any money.
 
No reputable firm does that. You can test if a firm does this by placing an order and seeing if it hits the tape. I recall reading that Oliver Valez does this. But a firm, especially a registered BD, cannot do that without disclosing it.

Quote from 1a2b3cppp:



2. Here's how it works sometimes: when a trader sends an order, the firm takes the opposite site with real money. Since most traders will lose, the firm will make money. Each losing trader is told he is losing money and his "account size" is going down, but his orders were never actually sent to market because the firm took the opposite side. Now, a few traders will actually make money (since the firm took the opposite side of those trades, too, they will cost the firm money), and these traders will be paid from the winnings of the losers. Eventually, if certain people are consistently profitable, the firm may start actually taking their trades for real.
More...
 
Quote from konviction:

1. I thought only retail firms like thinkorswim make their many on commission. I though props took a % of profits traders made?

2. Why would they bet against profitable readers, especially ones they took time to train?
More...

1a2b3cppp




is ignorant and spreading nonsense. You are 100% correct, don't listen to the garbage.
 
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