I've never heard of these firms until I joined Elite. What are the minimum requirements to get in? And why would someone trade with a firm if they are able to do it on there own? Margin?
It seems as, if you have experience and money, you're in like that... you're treated as a customer. But if you lack money, then you're treated like an employee and almost have to fight your way in. Sound right?
Pro firms are about making money, simple as that. You are pretty much right about there being two types of firms. The type where they employ you, pay you a salary and (maybe) part of your winnings, don't require capital and eat your losses. These are, of course, difficult to get into, for obvious reasons. The other type is the dressed up brokerage, like Bright, Echo etc. I am not trying to be mean, but there are very few differences between these pro firms and retail brokerages. Pretty much anyone who meets their capital requirement can get in and start trading. If you've read these boards at all, you'll know that Don Bright loves to wax lyrical about all the advantages of trading with a pro firm. However, his is hardly an objective point of view. I'll spell it out for you. With a pro firm, you have access to far more capital than the 4:1 margin of retail firm. Most props should give you about 10:1, and depending on the way you trade, much, much more. As Don would put it, "don't trade your own money...come here and trade the firm's capital." Which is just such a load of BS. If you take on huge positions you are very likely to wipe out your equity, and once of you have done that, you won't be trading the "firm's capital" for very long at all, will you. Pro firms also give you access to "bullets". These are really only necessary if you trade listed stocks, as getting an upbid even on a fast falling Nasdaq stock is pretty easy. With a pro firm, you'll most likely be trading in an office (although most are offering remote access.) THis may or may not be a good thing, depending on the people you are trading with. That's about it really. The biggest "advantage" is the huge leverage you have. If you trade listed, then bullets are a big advantage too. Beyond this, there's really no reason to trade at a pro firm.
I'll tell you one huge advantage of trading at a pro(p) firm: If you blow out your capital, you can still continue to trade and get paid at pro(p) firms, unlike retail. This all depends on your relationship with your firm, of course - but it's really one thing: what is the bottom line? If you are down $100G in your account but you paid $300G in commission, trust me - they will not fire you. Such was the case for me. In fact, they will give your "commission" rebates to keep you above water until you get positive, balh blah blah. You do not have that choice with retail. So if I were a new trader, I would certainly go pro(p) and risk other money while learning and try to get the best rates as your tenure grows with that firm. If I ever had $100G or more to put in AND I felt 100% sure that I could make money week after week, I MIGHT consider going retail for reasons like having absolutely no boss. But I can't think of any other reason to go retail. I know you can get as much as 99% (if not 99.9%) at pro(p) firms. So what other reasons could you possibly have to go retail if you are already at a pro(p) firm? You get much higher trading capital, access to bullets/conversions, better technology/software, almost 100% payout, NO RISK TO YOUR OWN MONEY....and others. I would never go retail myslef even if I were a millionaire...and, in fact, I know many traders at my firm who ARE millionaires - and they are still trading there. It's not because they are stupid.
the vast majority of them are simply brokerage firms. As long as you look at them that way and don't try to pretend that you are getting a "job" then you could be okay. If you go there thinking you are being "hired" then you are a sucker. The one sure fire way of knowing what kind of firm you are dealing with is whether or not they ask you for money up front. If they ask you for money, they are a brokerage firm, period.
kiss-assed-ness is another reason to go for a pro firm. If you are one of their top traders every other average-to-struggling trader will kiss your tail. Good for the ego. Everything you say comes out as a pearl of wisdom for other traders. As a retail trader, all you've got is the mrs. to tell you to take out the garbage after you just bagged a 5-figure day. Sheesh!