Security Deposit and Loss Deduction

Discussion in 'Prop Firms' started by elitetradesman, Apr 1, 2011.

  1. At prop firms requiring security deposit, how is loss deducted from the deposit?

    Say I put a $5K security deposit for 10:1 leverage.

    If I lose 5K at the start, is the entire loss deducted from my deposit, or just a portion of it?

    If I have made the firm money larger $5K in the past and then lose just $5K, will the loss be deducted in a different way?

    Or is it different from prop firm to prop firm?

    Thanks!
     
  2. mickmak

    mickmak

    it has nothing to do with leverage. if you lose $100, $100 is out of your account.

    They give you leverage on more money. But that doesn't mean they will supplement you loses.
     
  3. J J aapl

    J J aapl

    ^^ correct.
     
  4. With most prop firms, your "deposit" (capital contribution) is a hedge against the firm's losses in its master account on the trades you make in the sub-account.

    If you lose the 5k, then it is deducted from your deposit. If you're profitable, then any forward losses are still taken out of your profits (assuming you're keeping a running balance over and above the original deposit). If not, then a loss dips into the original deposit.

    Hope that helps...
     
  5. Thanks all for your answer.