Best Leverage for New Traders?

Discussion in 'Prop Firms' started by sobepehopeful, Nov 15, 2008.

  1. What prop firms offer the best leverage for newbie traders?
    I've read recently in another post of this forum, that Echotrade offers 50/1 for new traders, can anyone confirm this?
    What are other prop firms offering?
     
  2. I wish you the very best and hope you do well. Taking your time and going slow without feeling the need to make money right away will help you as you learn.

    Pilots don't start out flying F18s for a reason.

    The best thing I can tell you from my time trading is that if you don't use any leverage while starting out your chances of 'making it' go up by my best guess a factor of 10 or more.

    Again, best of luck to you and some brokers for prop trading that I know of (I trade retail) In no order

    Bright trading
    Echo
    Assent
    Hold bros

    you can expect to pay more commissions but yes you will have a little bit more leverage (think 10-1 intra day and 2 to 3 overnight) and you wont have to deal with PDT rules(if that appliesto you). That does NOT make it a good idea
     
  3. dancalio

    dancalio

    Why would a newbie trader want 50 times leverage? Are you looking to enter a casino?
     
  4. Suggest you trade the SPY on NO leverage until you get your bearings...
     
  5. If you put up $5K and get $250K leverage, that's hardly earth shaking. It's only enough to generate a decent living.

    Remember, even if the prop firm gives you 1000 to 1 leverage, it will be yanked out from under you once your risk deposit goes to zero. And then you'll just have to ante up again. The prop firm really doesn't risk anything because a new trader is kept on a tight leash.
     
  6. 0verbyte

    0verbyte

    i don't know where you all trade, but every prop shop in the New York City - Jersey City area start out new traders with 50/1 intraday with 5K minimum down.

    the trading industry is mostly commoditized.

    50/1 leverage is the min leverage you will get. 5K is the minimum capital contribution .7 cps is the usual starting out commish, with 90% payout

    if you have an established record you can get up to a 100/1 leverage, maybe more. comms above .45 cps are an insult, hell i know a few cash cows that are paying .35, one guy paying .3 cps and a 99.99% payout.

    as always SEC fees and pass thrus are paid by the trader. but i even hear that some places will give you an all in rate if you use their black box algo's


    *Addendum* "Leverage" has become an ugly word in this industry this year so many brokers prefer to use "Buying Power" instead.

    so they will say 5K deposit will yield you $250,000 buying power, 10K will yield you $500,000 buying power. etccc
     
  7. dancalio

    dancalio

    I'm trying to understand how trading with so much leverage works. Don't fairly common down ticks completely wipe you out?
     
  8. I understand your view of a new trader w/ 50/1 lev.
    But on a $5k deposit, that's just enough money to trade and pay the bills. When I say newbie trader, that doesn't mean I've never traded a security in my life, I have a pretty good retail account, I only trade a few equities that I know behavior in and out, and I'm EXTREMELY disciplined when it comes to cutting losers quickly!:cool:
     
  9. Chagi

    Chagi

    I cannot really comment on the truly high levels of leverage, but I can say that intraday trading is not quite as risky for a firm as you might think, for the following reasons:

    - Risk control. A day trading firm will typically place limits on the allowable losses for a trader. This does not protect against stock halts, unexpected gaps, etc., but it does reduce one common source of "blow-up" by a trader. For example, an undisciplined trader might refuse to cut the loss short at some point, might average down, etc., but could potentially be prevented from doing so by risk control software (e.g. closing orders only at a certain threshold).

    - Time factor. I would say that the potential for profit and loss increases with the length of time. In other words, given a risk control system, it is much less likely to experience a large loss if the loss is cut (position closed) rapidly once "x" criteria is hit. Similarly, it is typically fairly unlikely to see a large instantaneous profit once a position is opened, it typically takes some time to develop.

    - Diversification. A trading firm is likely to have traders trading a fairly wide variety of securities at any given time. This is less risky than, say, all traders holding the same position in the same security at once (fairly unlikely).

    - Previous profits. A trader taking a large loss is fairly likely to have a series of relatively large gains in the past, which provides some cushion against a loss. This is an element of risk control, in that trading firms often base current risk criteria on the past performance of a trader.

    - Profit splits. Taking a portion of all trading profits and holding traders responsible for full losses means that a trading firm should likely have some extra capital in the event of large trading losses. One could look at it as part of the cost of doing business.

    The situation for the individual trader is a bit different, and leverage can indeed be a bad thing if used unwisely. One method of reducing this risk somewhat would be to scale into and out of positions, as well as to cut losses very rapidly. For example, a trader that scales into a position as it moves in the correct direction would have a lower risk profile than a trader that goes "all in" at the time of opening a trade.
     
  10. spamula

    spamula

    I need a firm that can do this for a UK guy, I have 5k start up now. Anyone know a firm with a good rep?
     
    #10     Nov 16, 2008