how would one even begin to start a prop firm

Discussion in 'Prop Firms' started by TIMMY57, Sep 11, 2008.

  1. TIMMY57

    TIMMY57

    Say you'd like to do the "sub llc" approach and design it where people don't "get leveraged" they just pay a "membership fee" and trade the firms money.


    Okay, How do you get the damn money?

    You're only getting 4:1, what are things you can do to raise more money?
     
  2. ERTW

    ERTW

  3. 77 Grand to get up and running looks a little over optomistic to me...
     
  4. xicaju

    xicaju

    How profitable could this potentially be? I have doubts. Can someone explain what the advantages would be to assume the risk of neophyte traders blowing up your "trading floor?"

    It does seem like it could be fun though. I would be interested assuming the returns are there.
     
  5. This is something I have tossed around a many times.

    Most of these shops do it wrong in my book.

    If you aren't successful at trading, I wouldn't do it.

    I want an equities desk as well as a futures desk. Finding the right people is key and having a stellar risk management system set up.

    My idea was and still is(if I find the right partner) to have no capital deposit required but a profit split instead. Too many of these prop shops are more interested in volume than quality.

    Back in the day, I would be up 20k in the first hour and not many trades...sometimes only 2. LOL. And they would push me to do volume, volume, volume. I would rather see us split the profits.
    This way the firm has more interest in 'your' success.

    I enjoy teaching others and making kick ass money along the way.

    Once this is done, the sky is the limit...I can get order flow from funds ALL day long and charge commish(that would be a different desk, for obvious reasons)

    Oh well.
     
  6. xicaju

    xicaju

    I started my trading career fresh out of school in the beginning of 1998. Man, it was a hard road.

    But I am still here and have traded several different markets over the past 10 years. One thing that I have learned is that some people make better traders. If I had a team of traders, more than likely one of them would be a better trader than the others (including me). If I funded him, wouldn't it be nice to profit from his abilities?

    I have never been I high volume trader. Thus, if I had my own desk and the traders followed my approach to the market, I wouldn't make very much on the team's volume.

    Are there any other turnkey options besides this Swift Trade?
     
  7. Bushido

    Bushido

    To explain this I will make some assumptions:

    1) You have an office with 10 traders and you are the manager.

    2) Your recurring monthly cost (basic) is $5000 (rent, internet, management and accountant etc).

    3) You have 1 consistent experienced trader (either you or someone else) who can make $2000 a day average. It could be as much as you like it to be.

    4) Traders are allowed to have a max. loss of 50-60$ a day.

    Hence:
    using (2)
    5000/20 trading days = 250

    Remaining amount: 1750

    Max loss incurred from newbie traders $600 (actually should be 500)

    Remaining amount 1150, to be on a safe side hold it at 1000.

    Now, depending on how well you train the traders you 2-4 traders will be profitable and bringing in 2k-3k a day total (not being too optimistic)

    Assuming that you get to keep 30% of it you will be making 600-900$ a day on an average.

    In 2 months that would be 24k-36k. The reason I mention this is because that maximum a trader will land up loosing if monitored properly over a period of 6 months would be 2k-3k. hence once they are profitable you will make back what you invested in them in 1-3 months.

    I know it doesn't look to attractive to begin with, but economies of scale is applicable here, so it will grow fast once the ball starts rolling.

    There are other options apart from swifttrade out there, but that depends on where you are located, i know for sure you cannot start in the US. Let me know your location and I could suggest something.

    Cheers!!
     
  8. Just a comment...$2000 per day, but cutting losses at $50 bucks.... a bit of a tough set of parameters in my opinion. Also, if you're making $2k per day, why bother with overhead etc., just duplicate what you're doing in different stocks, pay a small salary or something (as many of our people do).

    FWIW,

    Don
     
  9. bone

    bone ET Sponsor

    Bump to Don. Entirely unrealistic business model assumptions being bantered about here. Especially in terms of risk - and that includes the swift-trade brochure.
     
  10. First things first....When you say "firm" do you mean your own FINRA registered firm or do you mean you want to have an LLC that trades in an office somewhere and you pay the rent and take the profits and losses?
     
    #10     Sep 12, 2008