Working For Proprietary Trading Firms

[knocks420]

Does anyone have any experience or tried working for a proprietary trading firm, either in equities, commodities, or FOREX?? These are the companies that require a capital investment, then they teach you how to trade, allow you to trade some of their money and keep a portion of profits?? What are your experiences with this? Would you recommend it? Or is this just some kind of scam?? Thanks!!

[TheSundanceKid]

Originally Posted by knocks420

Does anyone have any experience or tried working for a proprietary trading firm, either in equities, commodities, or FOREX?? These are the companies that require a capital investment, then they teach you how to trade, allow you to trade some of their money and keep a portion of profits?? What are your experiences with this? Would you recommend it? Or is this just some kind of scam?? Thanks!!

Hi Knocks,

While I've never actually traded with a prop shop myself, I know of several people that do/did (equities). You ask some very broad and general questions - which will no doubt will have different answers depending upon who you're trading with/for and what you're trading.
Some firms require you to put up some/all of the money for your account, and some don't - it really depends on your situation/qualifications/experience and who the firm is and what their policies are.
I would say that the majority of the time they don't really "teach you how to trade", per se - at least not a style that I would consider "trading", more like a scalping style really.
Normally they're more interested in teaching you methods that produce massive volume and thus generate a lot of commissions for them (and then they usually kick back a percentage to you). Most/all of your profits will come from the commissions you generate - not the actual trades you make (they don't care about the outcome of your trades, as long as the commissions you produce cover your losses and then some).
Of course this is not how every prop shop operates, but most of the ones that I've heard of and that I'm familiar with do - at least for equities/futures.
As far as FX goes, I know FXCM/Refco has some sort of setup (though I'm not sure of the details) and also GlobalFX has one also (who also happens to be an IB for FXCM). As far as I know, I don't think there are very many firms in FX that offer proprietary trading - at least not yet.
Most of the time I'd say you're better off trading on your own - but that being said there are certainly people who thrive in that type of environment and find an advantage trading that way. I personally wouldn't recommend it though.
Whatever you do, make sure you perform LOTS of due diligence on whichever firm(s) you consider. I guess it goes without saying that you need to be careful of scams and watch for any indications of unscrupulous behavior.

You might want to visit EliteTrader and do some searching/reading on prop shops there. That's a common posting subject, and there's lot of people there who have direct experience trading with them.

Good Trading,

Sundance

[knocks420]

Thanks Sundance,thats some good information. I know very little about prop shops but hear a lot about them. Are your friends that do/did work in a prop shop become profitable? I'm still unclear as to the pay-out; you would receive a portion of the commission or profit that you make? Thanks and by the way, I'll look on elitetrader for more info also. Elitetrader was how I found this place!

[TheSundanceKid]

Hi Knocks,

Originally Posted by knocks420

Thanks Sundance,thats some good information.

You're welcome.

Originally Posted by knocks420

I know very little about prop shops but hear a lot about them. Are your friends that do/did work in a prop shop become profitable?

Well, one guy I know that started working prop straight out of college is doing well, currently. Another guy I know was trading for his self for quite some time before he tried prop - he was profitable, but the style did not suit him so he went back to trading for himself.
Basically, I would say out of all the people I know who trade or have traded prop, most are profitable (net), however it's pretty much a 50/50 split on whether or not they continue trading at prop (for whatever reasons). I don't know if that's indicative of the industry averages or not. I can tell you prop trading is definitely not for everyone - even if you are profitable, you may not like the environment and/or trading style.
Also, you'll probably find there's a very high turnover for most firms. Prop traders like to move from shop to shop, depending upon who offers them the best perks/payout/etc. Most of the time it's pretty much the same group of traders, just moving from shop to shop. Kind of like musical chairs!

Originally Posted by knocks420

I'm still unclear as to the pay-out; you would receive a portion of the commission or profit that you make?

Really that depends upon who you're trading with/for, so it's hard to give you a general answer. You should "shop the shops" for the best deal you can get - but beware of deals that seem to good to be true. Don't expect to much up at first if you're inexperienced. You will most likely have to "qualify" by passing stupid math/skill tests and doing interviews, etc. - so be prepared. The best thing you can do for yourself is to actually go and visit each shop you're interested in after you've narrowed it down to a few, and make sure you do plenty of due diligence before you committ to anything. It would also be a good idea to talk to some of the traders that work there and ask them as many questions as possible.

Originally Posted by knocks420

Thanks and by the way, I'll look on elitetrader for more info also. Elitetrader was how I found this place!

LOL
Yeah, ET is great - but unfortunately there's not too many people there who trade FX. However, there are plenty of people over there who really know their stuff - I'd say there's a better proportion of professionals to newbies/wannabes at ET than there is here at MoneyTec (no offense to anyone here).
You should be able to get some more specific/better info regarding prop shops there - you'll probably get some recommendations/offers too.
Just remember you always have the option of trading for yourself instead. I definitely would advise trying that first before even considering prop.

Good Luck!

Sundance

[knocks420]

Your right about moneytec, I think people here a little nicer because most are newbies, they don't want to piss anyone off. I have been trading a live account since Jan. I tried demo but its nothing like live, I only trade $1 a pip but so far I'm down $100 ~ 100 pips. I'm using Fib retracements level and BB breakout strategy. My money management is all wrong, keep getting stopped before a move in my direction. It also seems in the last week that a price will move mainly on news and then range for awhile with no real up or down. Is this just short term conditions or am I missing something?

[TheSundanceKid]

Originally Posted by knocks420

Your right about moneytec, I think people here a little nicer because most are newbies, they don't want to piss anyone off. I have been trading a live account since Jan. I tried demo but its nothing like live, I only trade $1 a pip but so far I'm down $100 ~ 100 pips. I'm using Fib retracements level and BB breakout strategy. My money management is all wrong, keep getting stopped before a move in my direction. It also seems in the last week that a price will move mainly on news and then range for awhile with no real up or down. Is this just short term conditions or am I missing something?

Yeah, trading demo can be very different than trading live. I trade demo whenever I'm bored between trades or trying something new for the very first time - but as far as testing, I think it's better just to use minis. That way you can add emotions into the equation, which can greatly affect your decisions and outcome of your trades.
If you've only been trading since Jan - you have a long way to go before you should even consider trading full time. If you want to trade at a prop shop, you could just jump in with one that hires inexperienced traders and go through their training program, etc - but don't expect to skip the learning curve altogether or that it will be a short cut to profitability/success. Like I said earlier, I would give yourself a chance at being profitable trading for yourself before considering trading prop - because I think you'd be happier trading for yourself than you would at a prop shop. You have to decide what's right for you though.
The fact that you're only down 100 pips after trading for over a month (your first month) is quite amazing to me - unless you're being very conservative. It also suggests that you're money management is not as bad as you think, especially if you're losing much more than you're winning.
As far as the behavior of the market this week, I see nothing unusual in what it has done - news is usually what moves the market, most of the time.
Personally, I only pay attention to major market moving news (such as NFP) - the rest, including why/how the market moves, is irrelevant to me and my trading system - so I'm not sure I'm much help to you on that.
The best thing you can do is be patient and stick with whatever you're doing (don't keep changing your trading system/technique each week/month to try and fit the market). Keep practicing - refining and honing your trading skills. Money management is an integral part of any trading system, so that's a good focus to start with. You can worry about timing your entries later.

Good Trading,

Sundance