Putting up capital

Discussion in 'Prop Firms' started by RandyM85, Jan 25, 2007.

  1. RandyM85


    I've heard people tell me to never put up any capital if I'm going to work at a prop shop. Some people have told me to put as much as I can ... $5k or even $10k. I'd appreciate a discussion on, in general, why contributing more or less capital is a good thing and what you think the optimal contribution should be.

  2. Well, I'm not a prop trader but I would think it would depend on how much you want to trade in terms of $ at risk. Why should anybody be willing to let you lose their money once your capital is gone? Are you planning on trading $500K in securities, $1mil? A 1% hit on a $1mil position wipes out your meager $10K deposit. What if there's some unforeseen "event" and the market takes a hit and is "instantly" repriced 2-3 percent with no chance to cover?
  3. RandyM85


    Bump. I was hoping I could get some more feedback on this subject.
  4. It's simply a matter of running "your" trading business. Capital is required with any business venture, and you'll find that "employee" type "prop" will give you a short leash and if you do make money, you have to split it.

    In our case, you put up some capital, collect interest on it, use it offset any overnight interest charges...basically taking control of "your" business. And, as the other gentleman said, why would anyone pay someone to risk their capital? We allow the use of $millions of our money to each trader, free of charge intraday...that is certainly worth more than putting up a few bucks.

    As to the amount to put up...some firms will take as little as $5,000, but that most certainly destines the trader for failure. The reason most business ventures go out of business is for "lack of capital" - you need a little capital to make money, no way around it.

    We have traders who put up $7500, but we actually put another $7500 cash in their accounts so that they have a much better chance of making it through the learning curve.