Need help sorting thru the prop firm maze

Discussion in 'Prop Firms' started by DLama, Dec 20, 2007.

  1. DLama


    Hello all. I have recently begun considering trading thru a prop firm. I have virtually no experience with them. I have sifted thru this thread trying to gain some insight. What I've read gives me reason to pause. There seems to be such a wide range of "deals" and many speak of getting ripped off by unsavory firms, etc. I am not looking for specific firm recommendations. Rather I'd appreciate if I could get some feedback about what a "reasonably fair" deal is, in terms:

    1. capital contribution and payout percentage
    2. leverage
    3. commissions and other fees
    4. volume requirements or pressure to trade

    As a point a reference, I had a discussion with a firm that offered 65% of the profits and I didn't have to put up any money. They said I would initially get 2 million dollars in buying power and I would get my payout monthly, assuming profits. I believe commissions on stock was .006 per share. I don't have any point of comparison so I ask, is this a good deal?

    I would so appreciate any feedback.
  2. That sounds like a decent deal.
    Would you mind disclosing the firm ?
  3. Datradr


    that is a very good deal....take that my friend ...take it smiling

    considering you dont have to put up money and get 2 mil BP...I have never heard that before
  4. "I had a discussion with a firm that offered 65% of the profits and I didn't have to put up any money. They said I would initially get 2 million dollars in buying power and I would get my payout monthly, assuming profits. "

    Sign me up!
  5. tradethetrade

    tradethetrade Vendor

    Don't think it's that great of a deal. What's the lenght of the contract? If your payout and commish are negotiable as you progress then it might make sense otherwise shop around.
  6. oraclewizard77

    oraclewizard77 Moderator

    Its a good deal if you know how to trade, if you don't and lose a $ million of the firms money. If you do lose the money, I bet their is a clause in the contract that says you have to make up the losses out of your money.
  7. DLama


    I would certainly read all the fine print before signing on but, as far as I'm aware, there is no language of a personal guarantee or having to make up for losses from personal capital outside the account. My understanding is all initial capital risk is on them. If I lose from day 1 and they get rid of me, the loss is all theirs. It's certainly possible that you know something about these deals that I don't, so please advise.
  8. DLama



    I was told if I made money and wanted to leave a portion of the payout behind in the account, the future payouts could go as high as 90%. Commissions likewise are negotiable based on volume. My experience is I'd rather sit on my hands and wait for a setup in my strategies than trade just to trade. This is why I asked if any of these firms put pressure on you to do a lot of volume. They told me they want to build a relationship based on providing the leverage to allow for profitable trading that we'd both benefit from, rather than churning commission. Am I naive to believe that?

    There is no term of the contract. Either side can terminate at any time. Is that a situation to avoid? As I said, these questions may seem naive, but I'd rather ask them now rather than get into a bad situation down the road.
  9. lescor


    There are two main kinds of stock prop firms. The ones where you put up no capital and the firm takes the risk, and the kind where you put up and risk your own money.

    In the former, they are going to be looking for a cut of your profits as well as make something on your commissions. In the latter they make their money on your commissions and probably maybe something off your capital (they collect more interest on it than they pay out to you).

    Both will provide you with software and leverage. There may be training available, the value of which can vary a lot.

    What's a good deal for you depends on your experience and how much cash you have to work with and what you're trying to achieve with your trading.

    The only thing you have to go on is a firm's reputation. Try to talk to current traders who don't have an interest in the business. This site is a great resource for finding out who's on the up and up and who's a shyster to watch out for. The big name firms are all pretty safe to go with. They have too much at stake to jerk guys around with bs like holding your money, not paying profits, nickel and dime hidden charges.
  10. why don't you trade for a futures prop firm? you can make a lot more money (and lose it!) a lot quicker and it is not corrupt like equity markets the fills are first in first out or FIFO as it is known. No specialists taking their cut and giving you bad fills. And no capital contribution...
    #10     Dec 20, 2007