Read the SEC.gov focus report, and it will answer your question regarding the specific firm. dealmaker is correct, you'll have to see where you stand as far as risk. In general, you can't lose more than your total capital contribution, however it's pooled with other members' equity. So in theory if others "blow up" their accounts then it could potentially be harmful if the firm is not well capitalized and the owners (Class A) don't have enough capital to cover the losses.
Guys thank you for all of your input. It's been awhile since I've posted in here so I figured I'd share some info from my meeting and give some insight. Sat down and had about an hour and a half convo with the manager of the firm here in my local area. Got some basic information that's been covered here in this thread and some other fine details. The fee's are a bit (in my opinion) high .005/share with about $250~ a month in platform and data fees. I wouldn't be coming in trading with high volume to start so I'd be getting that price. $5k minimum capital contribution (was recommended 10k) locked in for 1 yr. 90% payout on profits. I also have to get my series 57 license. All relatively standard stuff. That's the basics. My main thing was getting a feel for the traders and the trading floor. I was trying to gauge whether or not I'd be able to become a better trade, gain an edge, and figure out what advantage (if any) I'd be gaining. When I was there a lot of the traders were on vacation so I didn't really have an opportunity to meet or talk with any. According to him, I'd be gaining an edge by just being there on the trading desk talking to people 5 days a week and hearing out their calls and suggestions. I'm (obviously) newer to the professional side of trading and I'm looking for a bit of hand holding and guidance. Maybe I "sold" myself enough or something because he mentioned a couple of times he personally felt I wouldn't really need much hand holding. My gut says I would need it. We talked about a possible mentor ship program with one of the head traders. What that would entail would be a one-on-one interview with him closer to when I'd want to come on board to determine if he'd be willing to take me on. Also, I'd have to up my capital contribution to around 15-20k and my payout would be dropped to 80%. According to him the reason behind that is to ensure I am committed and not here for a 4 month flier and then leaving, wasting his time. I'm certainly not wanting to take a 4 month shot at this.. this is a 1yr shot. Then re-evaluate. To me I was a bit skeptical about that.. Here's where I am at... to me I get the business model of these "prop firms" but at the end of the day he did a decent job at selling me the idea I could be successful. Turn over rate is about 75% there he said. I have to be dedicated and work hard otherwise I'll be out the door. He wasn't selling me yachts, gold watches, unicorns, rainbows. But he was bragging about how good some of his traders are. (aka: making 1k a day). But on the flip side he did talk about how a newer trader wasn't doing well at all. I'll come back in here and explain more in detail where I'm leaning and give a bit more background to where I'm at in my trading skill/career so maybe I could get some insight from you guys what I should/shouldn't do. Thanks for reading.. long post here.. just getting out a lot of thoughts.
itradeRisk: Read post #47, and use the .005/share figure to develop a profit model as to what you'll need to make to justify your variable and fixed costs. At $250/month in platform fees, you'll bleed $3,000 or 60% of the initial $5k annually (not including commissions), so if you're not making profits up front, then you will churn and burn the initial capital rather quickly, and you'll have to top off the account. I do agree that trading from an office will have its advantages, since it will feel more like a 'real job' working in a professional environment where you can bounce ideas off other traders, rather than trading remotely from home. I'm not sure about the mentorship program, it's subjective and you'd have to get a feel for it once you're in the game. Ask the manager about the traders who are making $1k/day: how long they've been trading, how much capital they are currently trading with (not buying power, EQUITY), and how many times they had to refill their accounts. Just separate the fantasy from reality, and you'll be fine.
itradeRisk, here is an older post from Maverick74, read it carefully, because it reveals the truth about the correlation between equity and success (emphasis in bold). "Let me re-phrase what I'm trying to say. A trader with 10k in capital has close to zero chance of ever making it. I know that, Don Bright knows that, Bob Bright knows that and everyone on the street knows that. This is what I was trying to get at when questioning Don about taking in 10k accounts, or youngsters as he likes to call them. Look, when I started at Worldco back in 2000, we had arguably one of the best markets in history to trade. The only way we could produce good traders was to let them go anywhere from 25k to 100k deep in the red in their accounts. Even the guys that came in with capital, usually 10k to 20k, we let them go 50k into firm money. The good ones dug their way out and did well. The bad ones we cut. Net net they never really lost that much money on them as it was mostly commissions. I know I'm not suppose to say this but the biggest fraud of the prop firm business is not commissions, or leverage, or whether or not you need a series 7, it's the fact that firms sells the dream of success to young guys that don't know any better. Well I do know better. I know it not because I'm a smart ass trying to pick a fight with Don, this really has little to do with Don in particular, it has to do with the fact that I've been in this business for 10 years and have been around over 1000 traders who have gone through the system. I know the numbers because I've seen the numbers. There is a direct correlation between the amount of capital you have to trade and your odds of success. Not leverage, CAPITAL! These numbers are indisputable. I know them, I've seen them. At the end of the day, after 10 years, I realized the biggest edge in this business is not computers, not charts, not leverage, but equity. Pure old fashioned good american equity. If anyone tries to tell you otherwise, they are probably trying to sell you something." The actual post is from this closed thread: http://www.elitetrader.com/et/index...-new-payout-model.204053/page-14#post-2915051
At most prop firms desk/ software fees are waived after certain volume eg at Bright & Echo it was 200k shares a month ( when I was with them don't know now) which is very reasonable for a day trader.
itradeRisk, The upside is clear for the prop if within one year you do pretty well. What is the downside for the prop if that is not the case? Can you put down there 20k and 1 year of living expenses covered, or are you planning on trading profits after 4 months to pay for your living expenses? And also, there is an online firm that for between 200-400$/month ( Topsteptrader) allow you to test yourself under constraining trading. Why would you find it difficult to prove that you can do this type of hurdle before taking the plunge so to speak?
Yes, 200k is average of 10k/shares a day, not excessive at all for a daytrader. However, even if they waived the $250 platform fee, at 200k/shares/month and .005/share, he's going to spend $1,000 in commissions without considering the cost for ECNs. Since most new traders will NOT be adding liquidity, his true commissions are around .008/share, or $1,600 monthly at 200k shares. A person putting up $5,000 trading 200k/shares would bleed the account dry within a few months on commissions alone unless he makes a 32% return on equity in his first month. At Bright, you had at least $50k of EQUITY to justify the volume of shares traded, a newbie with $5k doesn't. Besides, he doesn't imply what volume he'll be trading, other than to say it won't be "high volume" which is relative. This implies he will probably have to pay the $250/month platform fee regardless of any potential volume waiver, at least to start: "The fee's are a bit (in my opinion) high .005/share with about $250~ a month in platform and data fees. I wouldn't be coming in trading with high volume to start so I'd be getting that price." As Maverick74 correctly stated many years ago, there's a reason Don Bright did not take $10k accounts, while virtually all of his competitors did. While there are always exceptions with any equity prop firm where a newbie with $5k can create a livable income stream, Don knew the statistics, because the stats don't lie. R.I.P. Don Bright.
Don't do it. The offer is lousy, equities are extremely challenging to trade now. You need a minimum of 100k to even try to get to the point where you could support yourself and pay your monthly bills. Get a real job. This is coming from a guy that use to run an office. The failure rate is conditional on a lot of things. With that deal in this environment and your background I put the failure rate close to 100%, not 75%.
I wonder what itradeRisk is making of all those comments, how he is feeling about these comments as some must have gone against his desires.