I'm trying to figure out exactly how the payout system works for prop traders. Here's an example: Say your trades net $5,000/month (before your 40% payout) over the first 4 months. So at the start of month 5 you are up $20,000 net (before payout). Then during month 5 you lose $5,000 net, bringing you down to a level of positive $15,000 net since you started. Now I can understand that you get paid say $2,000 (40% of $5,000) for each of the first 4 months and nothing for month 5 (assuming no holds and delays). But then month 6 you earn $5,000 net again which brings you back up to your previous (career) high balance of $20,000. The question is, do you get paid for this $5,000 net gain for month 6 or not? Do you get paid whenever you have a positive net for the month and your running total is above $0 (ie: you are a profitable trader over your career)? OR do you only get paid for the amount you earn above your career high (ie: only get paid on what you earn after I have got back up to $20,000 net)? Sorry for the long question/example, but I really want to understand this before I consider joining a prop firm. Thanks
your making it more complicated than it is i think. If u lose 5k that 5th month, you have to make it back the next month. i dont see any prop firm paying you until u make back that loss at least. Furthermore, it doesn't matter what you made before, you already got paid for it!!!!!
For 1099 firms, is it true that any deposits made are recorded as schedule C expense as risk capital to offset gains?
At the beginning of each trading month, you start out at zero. It doesn't matter what you did the month prior . There is no rolling total. If you're net negative for the month, you won't get paid until you're net positive.
I had a negative first month, and a positive second month, but still negative overall. But they still cut me a check for the second month gains. They said the gains on the second month are taxable but that my deposit would offset that.
Man, when are people going to learn what a scam these companies are. First off, it takes 5-10 years to become good at very short term trading. Secondly, these firms give the worst possible deal. You pay commission and still only get 40% payout. How can you people be so gullible. You're going to make them lots of money, and wast 6 months of your life, and in the end you will have nothing to show for it. These companies prey on hapless dreamers with no experience.
You could set up a decent looking homepage and advertise: " I am with a prop firm, pass me the details of your strategies and participation deposit of $25K and we can arrange for you to trade like a fund manager Also, if you want to buy or sell any property, contact me too"