Opportunity Cost of Retail Trading

Discussion in 'Prop Firms' started by Cre8UrF8, Jul 18, 2005.

  1. Why do retail traders keep $25k-$100k in a retail account? Retail will give you 4:1 leverage, $100k-$400k BP. A prop firm will give you the same BP with only a $5k-$20k deposit. Why not take the $20k-$80k the prop firm doesn't require and put it in a CD that earns a safe and easy 3-4%? Or use it toward a boat or a vacation home? What makes you want to tie up all this money in a retail account?
  2. Sashe


    prop firms arent SIPC insured, I lost bunch of money when AB Watley scammed all its prop traders by locking (read stealing) their capital. We only got 20% back.
  3. cash in a retail account earns interest. its not a total loss.
  4. But if you only put up $5k that is all you will lose. If you blow up in your retail account you lose $25k.

    Of the thousands of prop traders at prop firms, what percentage do you think have had their deposits stolen?
  5. What's the usual deposit in order to get $2 mil in buying power?
  6. alanm


    For me, little reward for increased cost and risk. In order of significance:

    1) Risk (no SIPC)
    2) I don't need the additional BP - what I do doesn't scale well
    3) Additional cost of quotes over several markets on three platforms.
    4) Hassle of passing and maintaining licenses
  7. because retail guys like to see there money in a nice secured retail account were they can get there money anytime they want. #2 many prop accounts are sub accounts and at the mercy of a person to pay you. i guess if you were prop in assent it ok but under joe schmo in a ub account forget it
  8. lescor


    This is one of my main points why to go prop vs. retail. If you go with a reputable firm, the risk of losing all your money to a firm blowup is miniscule. You think a place like Bright, Echo or Genesis is just going to take your money and not answer the phones? The fly by night, less than ethical operators have largely been flushed out of the marketplace. There are several choices where total blow up risk is inconsequential.

    Why earn nominal interest with your cash in a cd? Why not put it to work elsewhere like a side business or real estate. It's all about efficient use of capital. I've got accounts at two different firms where buying power is essential unlimited (if used appropriately). I can hold millions of dollars overnight if the opportunity presents. I'm using probably 1/5th of my liquid assets available to put to work to earn income or build wealth. The rest is deployed elsewhere, taking advantage of other opportunities. If I was strictly retail, I'd have 100% of my cash tied up and make a fraction of what I can make now. And I'd have all my eggs in one basket.

    And before you say you can't make use of the additional buying power, consider what kind of strategies are not even possible without alot of bp at your disposal. It is a legitimate edge in the market if you know how to use it.

    And that's all I have to say about that.
  9. lescor


    Oh yeah, and before someone brings up these points...

    I trade whatever I want, have no volume quotas, and withdraw cash whenever I please. I also keep 100% of my gains.

    #10     Jul 18, 2005