The Perfect Trader and the Prop Firm

Discussion in 'Prop Firms' started by billsafari, Aug 30, 2011.

  1. I think some people do not understand what a 10:1(or more) ratio can do to a account. More or less, you will have to be a perfect trader or you will be churning like crazy.

    To me, having to put a stop in 10 cents below my entry is not my style. Do this 20 times a day to make 20 cents(or lose) is just not me.

    It is clear that Props have two models. Pay for training or trade like crazy regardless if you are profitable or not.

    When you throw in the mistrust, lock up periods, down right lies and scams, changing of leverage ratios, changing payouts structures, etc. it becomes clear why to just stay away.

    Although possible, To think one can take 5k and turn it into 100k right away is a pipe dream.

    If you looking for a mentor, or trading enviroment,etc there are good firms out there like Bright or Echo. However, it seems the reputable firms require at least 10k to 25k and require at least a s56. I would want a s7 out if it.

    So if you decide to put 5k in and had 50k bp what would you trade?

    Would you keep it simple and trade say 800 shares of the QQQ.
    Would you trade 300 shares of the beast BIDU?
    Would you trade 6000 shares of BAC?
    Would you trade 10 or 20 different stocks?

    Most likely your stops will be so close your trade would never get a chance to develop. Unless of course, every time your entered a trade it immediately went in your favor.

    What happens if you have a few losing trades to start out. Don't forget your losses are magnified too. Now your trading scared because you are getting closer to the account freeze threshold and now you can't fail. Unless you're trading 50 shares. But theres no money in 50 shares so why bother. One can do that from a retail account.

    To me, it seems these Prop firms carry no risk. They command tight RM policies (understandably). They are in it to make money, not lose, despite what you and your account does. They have no skin in the game, just yours. Do you really think they randomly bring in anyone off the street and give them 50k pb without tight control?.

    If you seek leverage only, try futures or options. I've been looking into the ES and at 50 bucks a point that is pretty good. You only need 3.5k to 5k to start. No lock out periods, you're insured. Read up on futures and take the Series 3 (pretty easy exam, studied 4 days and got a 90%). You don't need a sponser for the 3.

    I'm sure the firing squad is lining up about now. But to me, Prop firms are preying on the dream of being a profitable trader when they are really looking for commisions or training fees.

    My point is there are other alternatives until you become a profitable trader. When you become profitable then you approach a legit prop firm. But by then you won't need them.

    No need to pay someone to fail.

  2. rmorse

    rmorse Sponsor

    You don't like the structure that's out there. Design your own. Let's say you just found investors, plus all your savings, to put up $1.5 mm. You hire your own Compliance officer, risk manager, CFO, etc. You make a deal with a prime broker for the JBO, rent space, internet, etc... Now you have all this over head to cover, and want to make money. What would you offer that still meets SEC regulations, and gives you an opportunity to make a profit over your over head. BTW, your overhead is a lot more than you think.

    This is your chance to be the boss.....
  3. lionline


    have you traded prop ever?
  4. Maverick74


    If prop firms have no risk, then why have 90% of them gone out of business? Eagerly awaiting your answer.

  5. What I would do is build my group of profitable traders.

    But, I have trouble finding the right people. That's my problem.

    I usually find slimeballs. Tough to work with and build with slimeballs.
  6. You are pretty much right on.

    The business model should be profit driven with commissions to cover overhead.

    The emphasis should be on profits and not on commissions. You need profitable traders to grow your firm.

    That said, money isn't the most important aspect of a firm. You need decent people.

    I rather hire a decent trader that brings in $500k over a slimy trader that brings in $1,000k. One bad trader could kill the firm.
  7. Maverick74


    For all you guys bitching about prop firms, can you guys please answer me something. There are about 50 solid prop firms in Chicago. They trade everything under the sun. Almost every one of them backs you 100% and even gives you a salary! Yet you guys seem so stuck in this world of stocks. And even more stuck on these deposit firms. Don't you guys have free will? Do you just lack the motivation to apply to these firms? Are you lazy? Insecure? What is it exactly? I'm not talking about working for Goldman or Citadel. Just one of the 50 or so solid firms we have here. I honestly don't get it. I read these threads day in and day out and it's the same shit every single day. What is holding you back. You don't even need take the damn 56 exam most of you so much despise. I must be missing something. Don't all answer at once. :)
  8. Lucias


    Maverick and how many of these are high frequency automated options houses? Last, I looked I did not find many firms that are looking for discretionary traders. Most are looking for Phd's for HFT jobs.

    If you know of any Chicago firms that accept/focus on discretionary traders with full backing and trade futures then please do PM me.

  9. Maverick74


    Almost all of them have discretionary traders. In fact, very few of them are option houses. Most are just futures. You need to understand, the Phd's they are hiring are the programmers, not the traders. I'm assuming you are not applying for a programmer job. I don't know any firms in Chicago that hire Phd's to actually trade. It's a different skill set.
  10. Maverick74


    Wow, not a lot people responding to my request. Hmm.... :)
    #10     Aug 31, 2011