i read some threads on here about guys at prop firms who have used a similar straegy to the one i would be using at this place and i got pretty concerned. it seems like, even if they were able to be consistently profitable, most of their profits got swallowed up by fees. to make it worse, it seems like the fees actually go to the firm, so a lot of people found themselves flat after a certain amount of time, but flat after generating a lot of money in commissions, so essentially the firm makes all the commission money and their principal remains about the same, but the traders make just about no money. is this a common thing? some kind of scam where prop firms make most of their money on the commission?
_________________________________________________ di1836: Fees can eat up lots of the commission, so it depends on the fee structure. You mentioned a 50% split of your commission on profits, but are you making a capital contribution against losses, or does the firm provide all the capital? If a firm charges .007/share with fees, and you're scalping 1,000 shares, then it will cost you $7/trade each side, or $14 r/t, so your breakeven is LESS than .02/cents move on the stock, which isn't bad IF you're high volume and IF the stock moves in your direction. The "churn and burn" aspect comes into play if you've put up capital and all you do is end up breakeven on the trades due to fees. If your firm is a registered broker, then they can negotiate fees with the clearing firm and charge a markup, perfectly legal. If the firm keeps the override on all the fees that it charged for your trades, while also keeping 50% of your wins, then you MUST add the 50% split as a cost of placing the trade, which will determine your true cost of the fees. So those are some issues to think about before you make a decision. Hope that helps...
Joe, there's no capital contrib but I sstill feel like the place may just b set up to have u remain flat and generate fees, thereby wasting you tome and making them money. Elizabeth - not title trading.
unless you are getting a 150% payout, paying $7/1000 shares at a prop firm = rape. no one pays even remotely close to that. for places with low payout like swift and title, great for beginners, the fees are more like 20 cents a TICKET, meaning you could take a position with 1 million shares and pay 20 cents. other places with 80% payout have fees of 15-20 cents/1000 shares.
so fullblotter, a place that charges 25 cent per thousand, asks for no contribution and gives you good payout, say 50%-75%, would be a good place to be at? that kind of fee structure wouldn't eat away at your profits scalping a cheap, not-so-volatile stock?
fullblotter: "no one pays even remotely close to that" According to Don Bright at Bright Trading, an SEC registered FINRA firm, currently charges .007/share for 1k shares for traders who do 200k/month shares or less, and .003/share for higher volumes. (the reference to "rape" is uncalled for and disingenous). Many CBSX registered firms are .003 to .004/share, so that's why I posted. Of course, that's if you're trading remote and providing your own capital, and payouts are 75-95% on up to 20x buying power. If they employ traders to trade firm capital, the fees could be much less. "the fees are more like 20 cents a TICKET, so you could take a position with 1 million shares and pay 20 cents." I don't know about Swift and Title, so I'll definitely check them out. "other places with 80% payout have fees of 15-20 cents/1000 shares." Team Trading (now defunct) did charge .02/cents/100 (20 cents per 1,000) before raising it to 50 cents per 1,000, so I agree with your sentence above. That was for props only, not individual traders providing their own capital contributions. Care to post these firms with 80% payout and 15-20 cents/1000 share fees that are still in operation? Or if you prefer, send a PM. Also, liquidity rebates and ECN pass throughs must be considered. All traders should conduct their own due diligence.
I started at a place like that. I got beat pretty badly, but I learned how to trade, and was able to go off on my own to another firm and pay drastically reduced commissions, where I was able to make money. If you can get trained how to make consistent gross p/l, even if the comms eat it up, that's okay because you can move on. This is a business where if you spend 6 months to a year not making money net-net but you learn how to trade, you're doing well.
not sure what you mean by the fee structure eating away at profits, but I don't see how beginner traders can possibly go wrong by starting at a prop firm like swift or title. it's like going to trading university.