Why successful traders chose to work for prop firms?

K

kitty1996

I am very curious. Why successful traders would rather work for a prop firm than work by himself?

1.Is it because of leverage?
2.Wouldn't a successful trader have more than enough capital to trade at home for himself only (since successful traders must have a lot of money)?



Please give some insight. Thank you.
 
Quote from kitty1996:

I am very curious. Why successful traders would rather work for a prop firm than work by himself?

1.Is it because of leverage?
2.Wouldn't a successful trader have more than enough capital to trade at home for himself only?



Please give some insight. Thank you.
More...

Some might have enough, but with maxing out an individual k every year, paying the mortage and other investments in general I think it would be a poor idea to trade ones own money. I trade with 2 million bp every day which means I would have to put up $500,000 to get that bp through retail. I don't have that type of money in my bank account. Some of my prop friends have more bp than me and would never even consider trading retail.

I really think it depends on what you plan to do as a trader. If your ultimate goal is to be trading 1000 shares of aapl intraday then go retail. On the other hand if you want to have multiple pos's of 1000's of shares of fslr,bidu,goog etc I think prop is the best route.
 
Quote from jd7419:

Some might have enough, but with maxing out an individual k every year, paying the mortage and other investments in general I think it would be a poor idea to trade ones own money. I trade with 2 million bp every day which means I would have to put up $500,000 to get that bp through retail. I don't have that type of money in my bank account. Some of my prop friends have more bp than me and would never even consider trading retail.

I really think it depends on what you plan to do as a trader. If your ultimate goal is to be trading 1000 shares of aapl intraday then go retail. On the other hand if you want to have multiple pos's of 1000's of shares of fslr,bidu,goog etc I think prop is the best route.
More...

What does bp mean?
 
Quote from kitty1996:

I am very curious. Why successful traders would rather work for a prop firm than work by himself?

1.Is it because of leverage?
2.Wouldn't a successful trader have more than enough capital to trade at home for himself only (since successful traders must have a lot of money)?



Please give some insight. Thank you.
More...


Successful traders may prefer prop over retail, or retail over prop. There are successful traders on both sides and one is not better than the other.

There's a trade off on both sides. Making the transition from one to the other after doing one for years may or may not work.
 
Sometimes a definition of "successful" is required. IMO, it takes at minimum a $million to engage in good, solid strategies (opening only, MOC imbalances, pairs, mergers, etc.), and since most retail traders don't have access to that much $$ (bp), they are not able to participate.

If said this quite often, my brother and I enjoyed the "floor trader" business model, keeping 100% of trading profits, putting up a token amount of capital ($20K or so), and then using (not abusing) what is now Goldman Sachs money to trade with. This allowed us to engage in these working strategies "back in the day" and we duplicated that business model back 1992, and we have been working with traders ever since.

If you can enter a business with what is basically an "unlimited" upside for $20K or so, and borrow a $million every day for little or no money, not a bad way to run your trading business. Over half our traders have been with us for 5 or more years, so yes, it can be a good long term relationship.

Of course, after making a few $million, then you have other options available (B/D for example).

Some people think about "Return on Investment" (not how I look at trading, but...) and if you're "good" then you can get 10 times (or more) return on that same investment, not bad either.

I prefer to think the $capital is just another tool to be used by hard working, well trained traders.


FWIW,

Don

edit: Now if you're talking about the firms that keep a percentage of your capital forever, then I agree with trading on your own in some capacity (after your free learning curve, if it worked out that way).
 
Quote from Don Bright:

Sometimes a definition of "successful" is required. IMO, it takes at minimum a $million to engage in good, solid strategies (opening only, MOC imbalances, pairs, mergers, etc.), and since most retail traders don't have access to that much $$ (bp), they are not able to participate.

If said this quite often, my brother and I enjoyed the "floor trader" business model, keeping 100% of trading profits, putting up a token amount of capital ($20K or so), and then using (not abusing) what is now Goldman Sachs money to trade with. This allowed us to engage in these working strategies "back in the day" and we duplicated that business model back 1992, and we have been working with traders ever since.

If you can enter a business with what is basically an "unlimited" upside for $20K or so, and borrow a $million every day for little or no money, not a bad way to run your trading business. Over half our traders have been with us for 5 or more years, so yes, it can be a good long term relationship.

Of course, after making a few $million, then you have other options available (B/D for example).

Some people think about "Return on Investment" (not how I look at trading, but...) and if you're "good" then you can get 10 times (or more) return on that same investment, not bad either.

I prefer to think the $capital is just another tool to be used by hard working, well trained traders.


FWIW,

Don

edit: Now if you're talking about the firms that keep a percentage of your capital forever, then I agree with trading on your own in some capacity (after your free learning curve, if it worked out that way).
More...

True - I agree with some of these benefits, but at the end of the day it's the trader who makes or breaks it. There are a multitude of strategies and no cook book formula exists. Some things work for some, some things don't work for some.

If you can make money, you can make money...that's all that matters. If you like to use extra leverage, and it works for you - by using other peoples capital...then this could benefit. If you have your own capital, and you are satisfied with the amount of leverage you have, and you pay reasonable commissions, then this can also work.

There's so many factors.

If someone likes the idea of putting up a small amount of money but able to control alot, then you can always end up in the futures market. There - you can really gear up if you want to. Use it wrong, and you'll go bust. Use it right, and you'll probably still go bust.
 
discipline - you must get up and go to the office.

distraction - wife doesn't see it as a job (since you are at home asks you do this or that).
 
The answer to that question seems to be:::::: too obtain extra trading capital.

If a Retail trader has say $100k in his trading account and can earn 30% a year thats $30k revenue for the year. If he puts $25k at Prop firm and uses $500k and earns 30% then his revenues are $150k for the year. His all important “NET PROFIT” amount is then determined by deducting his expenses from this revenue amount.

Other traders might like the trading platform at a certain Prop firm, other may see benefits in the training program, others may like to work in an office environment while trading.

The main reason seems to be::::::: to obtain more trading capital.
 
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