If you speak to traders whom have started at ETG and now trade somewhere else....the consensus is usually the same. I myself had a favorable experience there. But many will tell you different. They were overcharged considerably on commissions(But then again most never have to post capital). Also, were tied up in a contract (Never sign a restrictive one of those in daytrading) that locked up a portion of their profits. Many when they wanted to leave either had to sit around and wait for that $$$ or just left and wrote it off as a loss. They are a business ran by traders. That is so true. That make snap decisions and can-out traders and employees alike in a heartbeat with no notice. This is what I have witnessed after talkin w/ lots of current and former traders and employees under their roof. Like I said I got along with them fairly well. But they can be quite "prickly" to deal with on the business end. For some reasons justified but, for others reasons not. When choosing a firm as a beginning trader talk to everyone you can and always have an attorney READ ANYTHING YOU SIGN. Then gain full understanding of what that contract locks you into. You can be sure that the firm is doing the same. Also know that any trading firm (Daytrading) shop's lifeblood is the commissions/bullet charges that you generate. Bear that in mind when you are negotiating/interviewing with them. Good Luck all.
I would say that the prop firm that requires a capital contribution, but charges say .006 as opposed to .012/share has a greater likelihood of success for the trader. The firm, with less capital at risk in this case, can charge the lower commission. A trader has a better probabiliy of success with lower costs. I assume that a "no-capital up front" firm would also reduce your payout if you were to lose their money, so this has less advantages to the trader IMO.
I agree with you somewhat. To make my points, let me just define .006 with 5k capital contribution as CASE A and .012 with no capital contribution as CASE B. From the trader's standpoint, I agree with you. A trader would definitely benefit from CASE A since he would have lower overall costs. However, since most new traders lose money in their initial venture into the markets, they will most certainly be down 5k from their own pocket. How will a certain trader deal with being down 5k. Some people can handle this fact and some people simply cannot. In CASE B, a trader's costs may be higher but there is no risk involved whatsoever to the trader. You may be down but if the firm asks you for money, you can simply walk away. From the firm's standpoint, they would much prefer CASE A as there is very little risk to them. In CASE B, they are at risk from day 1. Someone's got to pay the firm to take on that added risk. Firms are not charities. Hence, they must charge higher commissions to help offset that risk. CASE B used to be the norm in the proprietary world of trading up until recently. My belief is that the only reason firms offer deals similar to CASE B these days(and not all of them do anymore) is the mere fact that there is still a strong demand for them still. Many new traders would prefer not to risk their own money while some simply do not have the funds to make a contribution. So it's the trader's choice. Put up capital with lower costs OR put up no capital and pay higher costs. Still not quite understanding why you think a particular model is "sinister". An added note, your example used .006 and .012 as examples. In my experience, the discrepency between the 2 numbers seems a bit extreme. I would expect the difference to be anywhere from .002-.003 cents per share which for a new trader who doesn't trade many shares is not all that big a deal. If the difference between success and failure lies in fractions of a penny, then I don't think you're in the right business. But that's a whole different argument I don't want to get into here. :eek:
I wouldn't;t call the prop models sinister either...I mean, it's their money and they are entitled to earn as much profit as possible of it....and if 1.2 per share is a for no capital down...then you probably are spoiled because 4 years ago retail guys were paying 1.5 per share to use their own $$
Don't be shocked....They take advantage of me because Im disabled and a minority. _____________________________________ Abby, If thats the case. You have to look around and find a new shop. There are deals out there these days commish-wise. There are plenty of desks that are either disable-person friendly or just flat out want your business (volume). J-Law
Of course the firms need to make a profit, but that is not the compelling issue for the trader. The trader's concern is putting him/herself in a position where they can have a positive expectancy for success, usually defined as "being able to make a living trading". People talk about any number of strategies, and TA, and edges and on and on. Any firm owners who knew the first thing about trading know that the commission costs is not just an afterthought, it is vital part of that equation that determines if someone succeeds or not. This is less true for the swing trader, but very true for the scalper or daytrader, which is the dominant style in these prop firms. Your commission costs help determine whether or not you will succeed, just as your psychology, style of trading, platform, leverage, support are factors, your rate is too. This results in a conflict then, between the trader and the firm. The firm must charge the higher comms to make a profit, and the trader needs lower comms to have a higher chance of success. This is not disclosed to the trader by the firm, obviously because the firm does not want their comm structure called into question. Now, I have no problem with firms offering any type of deal (free country), but the trader should be aware that these conflicts of interest exist, and that conflict seems more pronounced in the no-capital up front model. The firm is reducing the trader's chance for success at .012 as opposed to .006. (By the way, I get these rates from actual rates being paid by traders at both types of firms.)
I think we agree for the most part. My main point though is that just about nearly all firms require capital upfront these days and that firms actually prefer that newbies put up some capital. There are only a few firms out there willing to cut no capital upfront deals but only because there is a demand from traders for these type of deals. It is up to the individual trader to decide what deal suits him best. Since you singled out Worldco by name, I just wanted to clarify that most new deals require some cap upfront which makes their business model no different than any other firm. They may offer no cap deals to rare exceptions, but either way it's the trader who ultimately decdes which deal he/she wants to accept.