Proprietary Trading Firms, Arcades, and Scams

Discussion in 'Prop Firms' started by Canuck709, May 28, 2009.

  1. More thoughts from Mr Steenbarger

    I've received several emails lately in which traders asked me about joining proprietary firms that offer training for very high fees (many thousands of dollars/euros). The traders want to know, "Are these firms legitimate?"

    I have very sincere doubts.

    A proprietary trading firm is one in which you trade the capital of the firm in exchange for a split of profits. An arcade is a firm in which you trade your own capital, but the company provides the trading infrastructure, including member commissions/fees. At an arcade, you pay for the overhead/commissions but keep your profits. Prop firms can be good options for traders who lack sufficient capital for a meaningful account; arcades can be good options for successful traders who benefit from the lower overhead associated with economies of scale. Both options offer access to other traders, which can be a benefit.

    A firm that charges for training with the promise of trading proprietary capital sounds like a scam. It reminds me of modeling "agencies" that charge for classes with the promise of contracts that never materialize. They make their money from the training fees, not from splitting fees with successful professionals.

    At the very least, if you're considering such an arrangement, exercise due diligence and make sure that the firm can put you in touch with traders who have completed the training and are now trading prop capital for a living. If they can't do that, you surely know you have a scam. But let's face it: if a firm was successful in training traders and was confident of their success, they'd make plenty of money from the profit splits. They wouldn't need to talk traders into huge training fees with pretty promises.

    And, really, is a several week course going to turn a beginner into a successful trader? Caveat emptor.
  2. One of the many issues which has been discussed at length is training and commissions. It seems many prop firms don't train their guys and are commission focused, sounds like some brokerages I know. :p
    I have to say customer service is important especially if you scalp, your tech guys better have their shit together and you need a very stable platform. Commissions are only going to give so much edge, ie breakeven point on the trade. I would find out who has the best training, easier said than done. Let me know who has the best training program. :)
  3. see what I mean, not one reply. Ok prop firms why should I work for you? how will you HELP me be a successful trader or more successful trader.