Those are newbie questions but even if I traded stocks and forex during several years, I don't know much about prop firms Can someone tell me what would be the total cost (with and without using leverage) for this trade at a competitive prop firm: - buy 1000 shares at $50 - resell 5 days later those 1000 shares at 55$ ? Another question about leverage : prop firms give you more leverage than retail broker ok ! If you win they take a percentage of the profit for them but what happens if you lose more than your initial deposit on a leveraged trade ? What I mean is in this case is the extra leverage (and lost money) really the prop firm money or will this money be substracted/recovered from your future profits (if any and assuming you don't leave the firm the next month) ? To avoid this situation, do they cut automatically your losses at some point or sue you if you try to leave after a big loss ?
Well no one can answer those questions ? No even an example of trade cost (exact amounts) at the firm you are trading ? Even a daytrade (but this hides overnight fees).. Are those fees so outrageous that no one want's to reveal them ?
The fees for most pro firms are pretty cheap nowadays. It depends on how you negotiate with them. If you are paying $50 for 1000 shares, that is very cheap. Most of the pro firms out there will probably charge you around $65 - $100 per 1000 shares each way, buy or sell. If you lose more money than your initial deposit, you will have to deposit more money. Pro firms have risk management that keep you from losing all your money, but if you do, then you have to deposit more money before you can start trading again. Hope this helps!
Search around a bit and you'll find lots of data. But as a comparison, you should not pay more than 1/2 cent per share traded, inclusive of all fees. So 1000 shares should cost you $5 in commissions. Desk/Pro fees run about $400/month. This is mostly professinal quote costs and should not vary a whole lot between firms. If you're trading at an office or hosting servers, fixed costs will be higher.
What planet are you from? Any prop firm charging more than .003-.008/share is simply uncompetitive. That works out to anywhere between $3-$8 per 1000 shares. So, for a round turn, you're looking at $6-$16 to buy and sell 1000 shares.
First off, you can't buy something and hold it for 5 days. There is intraday and overnight leverage. Overnights, if they are even allowed by the firm, is generally 4:1. There are exceptions, like Bright, where they apply a haircut (they pocket 1% of profits on open overnight per day), but don't expect to be given that if you're a newbie as you'll likely blow your account the first time you get short and it open 10 pts higher. Prop firms make money commissions. That's it. There is no reason for a prop firm to keep your profit unless they are putting up the deposit prior to giving you BP. Those that do take a percentage - well, I don't know how they stay in business. Your commission rates will be a function of the volume you do. The more shares you do, the cheaper the commish - pretty simple. Some prop firms charge additional fees for software etc, but frankly, if you are thick-skinned enough to succeed as a trader, you should be forceful enough to make them give it to you for free. You can't lose more than your deposit - they'll cut you off.
Well thanks guys ! Ok now I have a clearer picture of what prop firm trading is about ... Except the leverage and perhaps faster connections (but did anyone here make a real comparison ?) I really don't see how they can compete with well known retails firms for moderate day traders (only some trades per day)
Prop: Small upfront contribution used to buy leverage. Generally between 5k and 25k. Leverage up to 100:1 Limited overnight leverage. FAST platforms. FAST connection. You are around other daytrader (unless you trade remotely) and you get to see what works and what does not work. Retail: Max 4:1 leverage You watch Mad Money and enter orders. You look at the MA and check out what music your kid is downloading and buy stocks based on that crap. Basically, a hobby and a losing proposition. It should be noted that a DECENT prop trader can make anywhere from 1k to 10k per day, day in and day out. I've seen it happen. Granted, I'm at the low end of that range, but I'm only two years in
I'm having difficulty explaining why prop trading is different than retail accounts without sounding overzealous. Perhaps Don Bright would be willing to illuminate the differences.