Who says you need overnight leverage? With either a track record or three months relationship time you can get 1 mil (and you don't even need close to that much to make a nice living). That makes "prop" worth it, as long as you're not hitched up with any of the innumerable scumbag firms out there.
Do you know how long the average trader is going to last with 5k behind him? I'm not saying prop is bad or not worth it, I'm saying get some cash behind you. Some cash plus prop is the best route.
Regulation creates the impression that there's someone out there trying to create a level playing field. This breeds investor confidence, which breeds liquidity, which breeds more investor confidence. Inspite of recent scandals, the US markets are distinguished by the fact that US regulatory bodies do exist and do make an effort to clamp down on unfair practices and attempt to level the playing field, but this cannot be said for many other markets around the world (middle east markets is another example)... There's still more work to do though, especially when it comes to prop firms, like ensuring that trader deposits are secured somehow. Wouldn't regulation of prop firms bring them more business, as a result of a higher level of confidence in dealing with them? I don't understand why retail firms are much more regulated than prop firms, why the double standard? Maybe the regulators are much more worried about the financial security of the general public vs pro traders..any other ideas?
you know, not all prop firms are bad. I joined one and the president gave me a $30K leash. Guess what, I lost every penny of it, in three months. This was after a successful 3 years trading merger arb, with a salary and bonus, etc. Okay...so three or 4 years being a good trader, then a crappy few months, and now I trade on the smallest account ever, with a mere $100K buying power, and my firm hates me cuase I trade low volume. That is one thing I hate but it's the reality at a firm that gives you free leverage, they gotta make their money off commish override on you. Data etc also costs money. It's a business, and you gotta take care of all the people involved. I don't do it anymore but sometimes I would put on trades with the goal of scratching for volume. At the end of the month, sometimes that makes a difference in rebate or even if it just makes one's manager happy. It's part of the job. So while I struggle now, I don't agree that all prop firms are bad. One took a risk and trained me and made plenty of money, another took a risk and lost. Right now I have low confidence and low capital. This is probably the toughest point in my career, but i won't blame the structure of a firm. I believe that at the end of the day, I create my results, and the largest factor of my results is..well...my own trading, not the particular firm I am with. No prop firm has every absconded (with) my money or failed to pay me when due. I feel bad for those that that has happened too, however, if you are a good trader you can start again and make the money if you trade well.
Maybe my post was a bit off topic, but I really do not think most firms are out to screw you. Most newer firms are run by inexperienced guys (maybe not inexperienced traders but perhaps inexperienced managers) and when the shit hits the fan, everyone loses. Somteims the guys who you think are screwing you are in a much worse position than you think. My current firm got sued, lost, and the owner wants out. That has nothing to do with how I trade, it's just his business decision. The longer I last in this business the more respect I have for the firms who stay in business consistently. The update to my last post is that my last firm was Carlin. And after paying .045 per share, with their restructuring and complaining about my volume they want me to pay .075 and put up like 20K more. For me, that's pretty much telling me my trading volume isn't worth it for the risk I present, and that's okay, it's business. Even with all this, it's all business and I don't take it personally. I have not traded for 3 days that's why I have time to post here. I am considering a deal where my manager went, but it's my opinion that that firm's parent is not really too thrilled about their prop division (ASsent/Sungard). Shonfeld wants minimum 100K. Bright is looking like the best one for me. The longer I am in this busines the more I respect firms like that one. Living where I choose there are more limited options for a true prop arrangement, most of those deals you need to physically be in an office, (NYC or CHICAgo etc). I used to commute to LA to do mergerarb. So now I am remote and choose to pick from those firms that offer remote trading, even if some people call it glorified retail + leverage.
Why do people get so bent over "prop" shops that require risk cap? It is what it is, it allows you to trade with leverage you wouldn't have otherwise along with low commish and a chance to have a go at it if you think you know what you're doing and once your deposit is gone, your gone. So whats the problem exactly? If you dont want your deposit to disappear, check the balance sheet.
it seems to me that this "checking the balance sheet" to protect ones self is a misnomer. think of all the supposed credible companies with good looking balance sheets that folded for any number of reasons. one needs to check way more than the balance sheet...... surf