'Prop" then drop

I would like to get a thread started encouraging people with experience with trading for prop shop “(s), both good and bad.
I would be real interested in writing a story for a “trader” magazine or large newspaper about how they work. Where the money is actually made and risked each day if at all. Particularly I would like to start with this:
The reason I believe that associated traders, partners what have you troll these message boards is to help solicit new business. Not new business in the traditional sense. I think it is rather well known inside (and not known o unsuspecting people) that these new traders produce a guaranteed income for them however with an astounding fail rate. Rather unusual to have a business that has such a high success rate but won’t last! On top of this if the trader happens to “work hard” and does end up finding a strategy that is working at the moment (because there are some that do for a while anyway), the prop shop will jump on it too. So in effect you pay them in the form of commission for trading shares while you are “working hard”. Further that, the prop house will secure their risks by taking a “deposit” and to even further THAT lots of them have the gall to charge you on top of all this hard work for some “training”.

 

you would get more responses if your handle was not a few weeks old

very suspicious

 

Why who cares?

Yeah I just signed up so ?

 

Its a legitimate story idea... pursue it... do not be distracted by some negative or some positive comments...

 

I think the first step should be to distinguish between arcades and actual prop firms. Arcades are firms which provide a highly leveraged retail account to a client that puts up a initial contribution. He is also generally responsible for fees such as quotes, the platform, and other tech services. He receives 100% payout, so the firm profits solely from commissions. This set-up may be preferred for experienced traders who have a profitable system. Arcades do not assume any financial risk off the trader's loses.

On the other hand, prop firms also provide a similar service (leverage) but they provide more capital and services (automating system) to their traders. A initial contribution is also the norm for experienced traders, but new traders or trainees usually aren't responsible for a penny. Prop firms pay about 50% - 85% of the profits to the trader, so they are more invested in a profitable P/L. These firms are also more likely to assume financial risk... Chicago firms that actually ask for audited results may back up a strategy solely with their money. They also fund their trainees and sometimes provide a small salary or a draw. Hiring trainees is a number game in which they only expect 1 of 10 to actually become profitable.

I personally traded for a year for a private fund with a prop model in Stamford, CT. It was a great learning experience and I wasn't responsible for a penny. Unfortunately the parent company eventually didn't want to provide capital to our division. I'll be starting at another prop firm shortly where I will also not have any financial risk (no initial contribution or fees). I am responsible for commissions which get deducted from my P/L. In the event I am negative overall, I am not responsible for them or the losses.

Again to summarize... arcades are firms that essentially make more money churning the client with commissions and other fees. Prop firms are more invested in a trader's P/L. It's unfortunate that all American firms go under the prop title. Most of the respectable firms are in Chicago. Many operate like hedge funds. Look into FirstNY, D.E. Shaw, Wolverine and Citadel to see how top-notch firms operate.

 

Thanks monty,

What makes you think you cn make money trading is the question?

You have to have a structure of some sort, cant possibly be by seat of pants ?

MACD and RSI is all BS. What statistics bear out that you can print p/l ?

Thanks

 

The only technicals I use is support and resistance. Don't believe in any MA's or oscillators.

I do have a strategy that I am developing in Excel. I don't want to go into detail on a public forum, but its related to finding correlations between stocks (catalysts, leaders, laggards) and instruments in different markets (oil, long-term bonds.... always changes but w.e effects market sentiment). My former boss was the CEO of Broadway in the 1990s, so I have some idea's from when I worked in Stamford... how to better gauge overall market strength and how to select the better candidates (not enough for profitability though). I'm sure at the new firm the head guys will also provide newer insight.

I'll try to combine all the knowledge to make a system. The odds are against me and I know my firm only expects 1 of x guys to be profitable. I'm young, have no debt, and no family to support so I can afford to try this venture for x amounts of months. But I do think there is opportunity for guys that trade off intuition. I've seen my former boss make several thousand 80% of the trading days. Of course he is more experienced, but a fancy algo that does arbs, pair trades, etc. may not be necessary. I am developing a computer program to visualize and quantify all market data every second... the computer won't be doing the actual trading though.

 

While your system/strategy sounds quite interesting and I'm sure it will prove to be quite profitable, I am a firm believer that a trader can beat an algo black box - of course, that trader must be the unusual specimen that is the top 1% in our profession

 

I was told by someone in the black box industry that out of 100 black box systems... 1 makes a ton of money... 9 make a small profit or break even after cost of doing business... and 90 outright lose money.

It's very difficult to make a black box that will be profitable in a ever changing market. Requires a lot of tweaking too.

 

IMO... thats a little exaggerated...
From my experience.. if a black box, is losing money...its shut down quickly.

but i am open to any supporting documentation you can find to support that belief.