The Real Cost of being a Proprietary Equity Trader

Discussion in 'Prop Firms' started by limitdown, Sep 30, 2005.

  1. Casey30

    Casey30

    Limitdown,


    You are absolutely right when it comes down to those firms that do what you are speaking of. It is absolutely wrong for them to run a business this way.

    I was just speaking for the firms that are legitimate and straight forward. With that in mind, there a still alot of risks for someone to give this career a try, the individual does not always review and take into account all the risks they are taking when they enter into something like this.

    As for living wage, there are no guarentees in this business. If there were there probably wouldn't be the tremendous upside. How many jobs can you get where you sit at a desk all day(6.5 hours for Stocks that is) and make six to seven figures. You go home at 4:00 PM, when every regular working stiff is at the office till 5, 6, 8, or whatever. Sure when I started I would go in at 7:30 AM and leave at 8:00 PM. You have to work hard to learn, and still continue even though you do make money. But if you have ever worked at these firms 90% plus of the traders don't do this (even the ones that don't make any money). They leave when the bell rings and don't come in on summer fridays because they think it will be slow. A friend of a friend of mine used to work at UBS, He worked from 8AM - midnight some days....how many traders who you know do that. Another friend of a friend works at Goldman, he is lucky to get home by 9PM everyday, and he is in the back office.

    Getting back to the business of things, when you are new to something in any business, you usually don't get the best deal. Think about it, the first time you bought a new car, all the fees they try to get a way with. the first time you hire a contractor for your house, how they pull all theser tricks to get more money. The first time you buy a house or get a mortgage, you may not always get the best rate or price. My point is when I started trading I paid 1.4 cents a share and 45% payout five years ago. I didn't think anything of it. I worked hard and tried to run my business around what my costs were. As I learned the business I have negotiated my fees down dramaticly and my payout up to 99%. I learned over time and worked hard to get where I am. I have several trader friends who also have gone through the same process.

    When you get better as a trader you can get whatever you want. It is that simple. If you are new or your not successful(I am not saying anyone is on this board) you have no leverage. Sure, I have been ripped off by firms, but those have been learning experiences, and I have moved onto better firms where I know what to expect.


    Just my thoughts.

    Have a great weekend.
     
    #21     Oct 1, 2005
  2. BWDIK is internet short-hand for the self-deprecating statement "But What Do I Know?"

    I simply consider a prop firm to be a specialized broker. If a trader can utilize their advantages to increase profits, then it may be a smart business decision to trade via one.

    I think the big problem people have with prop firms, is they mistakenly believe that the firm is going to teach them how to make a living as a trader. If the firm really had some sure-fire system that new traders could use to make a living, then they would not disclose it. They could certainly make more money by just automating the system and trading the hell out of it. I'm not saying that prop firms don't foster the idea of trading for a living, but I doubt that any prop firm would claim that trading is easy or a guaranteed way to earn a living. Even when I joined my firm back in 1998, they didn't make any claims like that ... and it really was easy and almost guaranteed - all you had to do was wait for the market to pull-back and push the Buy button like a crazy man! Some prop firms do offer training, and I know that they actually do want you to succeed, because if you do, then they continue to make money from you via commissions.

    You'll get no argument from me that equity market conditions are difficult, and as a result stock trading is much harder than it used to be. It definitely may make sense to change to a multi-day trading style, but some prop firms can also provide the capital needed for this type of trading.

    I’m absolutely not trying to sing the praises of prop firms, but I personally trade via one for selfish business reasons.

    If anyone asks me about getting into stock trading, I definitely don’t paint a very optimistic picture. It’s an extremely tough business, and starting in the current environment is doubly tough.

    Regards,

    Slave2Market

    P.S. If you know of any businesses that have a very high profit potential but require a very low monthly outlay or initial investment … please let me know. I know this sounds an awful lot like prop trading, but please suggest something unrelated to the market.:)
     
    #22     Oct 1, 2005
  3. regrettably too many of them stand on this as a distinguishing factor in joining them over other firms.... or ... as a worthy alternative when seeking self employ....

    some in all sincerity and honesty and outstanding effort actively encourage continuous learning and attendance at their seminars, so that one could progressively improve oneself.

    I single them out for worthy mention for their outstanding and honest efforts (name withheld)

    I have seen the carnage of those having relocating their families to another state where there's no state taxes and working the trading desk harder than any $2 one arm paperhanger having to scratch his....

    and coming up with bubkiss. I can't imagine doubling up on your losses in a real scenario worse than that, and that's after blowing over $25,000 in their account and not having earned anything on a monthly basis (other than covering trading expenses, desk fees and such). So they were double dipping from their savings twice, no three times to live on. One for the trading account, one for the living expenses and one for the ongoing moving expenses and being in a new town.

    Schoenfeld... this is no advertisement to attempt or persue joining their firm, neither

    Many traders speak in such glowing terms about that firm, however from one of my closest Jewish friends, he frankly stated that the firm found it hard to hire outside of the clan, hence they were double blinded in that they kept their trading style (which remained highly profitable) restricted and selectively hired those who would be allowed to work there.

    They have grown into offering retail brokerage accounts using portions of their direct access trading platform. I have a friend who has used their services to high praise as a retail customer and doesn't have the scars of having a propritary trader to boot.

    Farming! :D

    and I say that because there's no differnece between the farmers and us traders since we all keep stepping in %%%%% :D :D
     
    #23     Oct 1, 2005
  4. Well, well, you certainly have done a good job in figuring out some cost structures involved...now please offer us what other business you could get into for less, with an unlimited upside and the ability to borrow a couple of $$million every day for free....(that would be "none").

    Now, let's talk reality, based on fact that I am happy to share:

    1. Education, at minimum: $3000

    2. Licensing: Less than $1,000.

    3. Capital put up (not "gone" as in a franchise) - $15-$25K.

    4. Monthly expenses, from $200 - $500. Many rebated.

    There is always: Medical school, law school, working for the government...buying a Subway sandwich franchise, etc.

    Trading is for the true independent business person.

    Continuing education is free, interaction with very successful traders is free.

    Or, you can go to Ameritrade, Schwab, etc. - put up money with the 14 Million who "donate" to those who have the education and skills to prosper. You'll do this with no use of capital (no free daily use of capital, etc.)....and ticket charges to boot, and your orders can be sold and re-directed.

    Take your choice,

    Just a voice to add to the realities of trading with our Firm, I won't speak for the others.

    Don
     
    #24     Oct 1, 2005
  5. Just as a follow up to what I posted above is that comment of not to expect for them to show you how to trade. If it is a real prop firm, although in most cases they do not show you much, it SHOULD be expected that they show you something. In a prop situation you are suppose to be on the same side as the firm is. If you don't make money they don't make money. It would be in everyones best interest to be trading in a manner that is profitable. For some reason though one of the big missing elements from prop futures and I assuming prop stock firms is that they are all focus on the very short term scalp trades. I know a lot of firms but do not know of one where they encourage and want their traders to trade the actual trend moves of the markets. Instead they focus on trying to steal a tick edge here and there or putting on large spread trades to try and squeak out 1/4 to 1/2 tick profit. That worked at one time when there was a technology and speed edge for the firms but for now for most firms everyone is on equal ground.

    As far as what kind of automated firms are out there I know for futures of 2 or 3 that I have visited (I am sure there are tons of hedge funds and firms doing the same thing) where it blows your mind how fast they can get something up and running to take advantage market anamolies. They can have an automated program up and running and trading size in 2 or 3 days. When the anamoly disappears they cut the program. The have several programs going at once in different markets looking for different short term mispricings. If you are a manual trader with a mouse in your hand you are not going to be able to compete for the same mispricing because while you are just recognizing it the machine already has the order in and took advantage of the same mispricing. However if you are trading a real move in the market then this does not effect you as much as you are no longer competeing on stictly speed. The unfortunate thing is that many firms still insist on their traders or "teach" their traders to try an compete in the time frame of all the black boxes. It doesn't make sense to me.
     
    #25     Oct 1, 2005
  6. buylo

    buylo

    I trade US, German bond futures, eminis, euro, oil (ICE).
     
    #26     Oct 1, 2005
  7. buylo

    buylo

    ITG/DE Trading in Chicago.
     
    #27     Oct 1, 2005

  8. outstanding comment....

    it is refreshing to see this thread not deteriorate thusfar, and to see just how many of us real traders not only get the point, but have come to these conclusions themselves.

    the word is consternation...that's what describes the realization of visualizing these tape reading patterns when these auto orders are firing off in droves...

    ever see negative earnings affect Coke while being in a KO/PEP spread?

    ever see negative financial news effect COH/RBK or COH/WWW while being is those spreads?

    automated trading plays an almost artificial role in its contributory participation in the markets and these factors are part of the added true costs of being a Prop Equities Trader, irrespective of whether or not there are competing or alternative career choices...

    from the perspective of the successful traders who escape the pitfalls there's nothing but blue skies...

    but for the vast majority of traders (figuratively) left slain on the battlefields of good intentions pursuing these puff dreams of success, from their perspectives (devoid of emotional outbursts) their comments are not so complimentary

    Bright Brothers remains the foremost outstanding firm in addressing these concerns and realities that Prop Traders face, hands down!,

    but that doesn't vary the discussion
    or
    realities

    of the experiences of just so many traders who have not achieved the stated goals and objectives, namely successfully replacing their prior careers... and yet it really should

    an honest accountant will state that most traders actually do make money, however, their year-end statements rarely show positive earnings worthy of taxation, so something must be going wrong....
     
    #28     Oct 1, 2005
  9. nitro

    nitro

    I trade "against black boxes" (they are actually white boxes btw) and enjoy doing it. real traders don't give a shit who's on the other side as long as they understand the logic of it all.

    nitro
     
    #29     Oct 1, 2005
  10. Everything you list is free at my prop firm.


     
    #30     Oct 1, 2005