When I started reading about trading, I read about brokers, and the first ones I knew where thinkorswim, IB, Speedtrader.com, and some others. These ones seem to be good, but as far as I know retail brokers are for people with 25K or more right? So I have several questions: 1. If you have 100K why would you still use a proper firm instead of a retail broker? 2. I heard that one difference between them is that prop firms have DAS which means that orders go directly to the execution floor, and retail brokers, the order goes first to the broker, and then to the execution floor, is that a big difference? 3. When researching prop firms, whats the homework I should do?, In another post somebody asked me to request a focus report but international prop firms dont have it, I dont even know what a focus report is lol!!! And the last question, which prop firms do you recommend, and which ones, you dont?
It all depends on your style. If you don't have a style yet, the prop firm's value is in being able to sit next to people who know how to make money (if there are any at a given firm.) If you don't see anyone making money at a prop firm day in day out and putting up multiple green weeks, don't walk -- run. One issue with prop firms is that the guys who don't know how to make money are the ones that talk the most. Fetch coffee and make friends, if you must. The sorts of characters who shun a day job and go sit around in a prop trading firm generally are somewhat rough around the edges.
Prop firms are able to offer higher leverage and cheaper execution for the most part. Retail will give you at best 4-1 which on 100k is 400k more than enough to earn a living if you are a good trader. Prop firm will give 10-1 or higher so you are playing with a million bucks. Only downside is I wouldn't trust many prop firms with $100k of my cash, the oversight is not the same as you would get with ToS. To answer your questions 1- With $100k and 4-1 leverage at retail = $400k. You can trade at a prop firm with the same buying power and depositing $40k freeing up an extra $60k of your cash to invest elsewhere. Now In terms of pricing speedtrader is 39 cents per 100 shares, a prop firm can easily beat that. I've seen some firms offer a flat fee per trade which completely blows away the retail pricing. 2- I don't think this is a big difference, you are talking about a difference of half a second at the most. If your strategy is -THAT- dependent on speed than from what I have researched you are doomed to failure. Only HFT algos pumping out millions and millions of shares a day need to cut down execution speed. The average retail trader won't notice a half a second difference in execution and they are kidding themselves if this is on the top of their priority list. 3- Find a firm that you are comfortable with and you can find unbiased reviews. Google search the name of the representative you are talking to and look for one that is quoted in trading publications or has written articles on trading that are published. This is usually a good indication that the rep and firm are legit and know what they are talking about. Find a firm that will take the time to answer your emails quickly all the better if someone answers on the weekend or evenings, although be reasonable and don't expect a response right away on a weekend. If they answer your e-mail within an hour during the week it shows they care and want your business. A FOCUS report is only required for nyse members, most international firms won't even know what a focus report is.
Thanks a lot for this answer, I dont have 100K but I was thinking in starting with 10K at a prop firm,so I will get 100K buying power, and after one year or so when I have more money, then I would switch to a retail broker, I have researched a lot and Interactive broker has a very ice software, easy to use, and at 1 dollar per trader I think its really cheap, even if their customer service sucks.
In my experience the best trade groups are the ones that never advertise/promote, if your traders make money they will always bring on board their trader friends. Real groups lay low.
"1. If you have 100K why would you still use a proper firm instead of a retail broker?" This depends on whether or not you are willing to take on the risk of the $$ being uninsured and the firm possibly going under; however, I'm sure MF Global customers won't see their $$ for quite a while and they were heavily regulated. There are a various range of regulatory protections/oversight depending on which country/territory the firm is incorporated in. Stick with a retail broker if you can live with 4:1 leverage. If you need the discounted rates & leverage to be profitable or to maintain equity rations or many other reasons I won't get into, then prop is your only choice. "2. I heard that one difference between them is that prop firms have DAS which means that orders go directly to the execution floor, and retail brokers, the order goes first to the broker, and then to the execution floor, is that a big difference?" It depends on your trading style, but if you're trading intraday, it does indeed make a difference. 3. When researching prop firms, whats the homework I should do?, In another post somebody asked me to request a focus report but international prop firms dont have it, I dont even know what a focus report is lol!!! A FOCUS report is for FINRA-registered brokers. These are US firms who choose to operate under FINRA's regulatory oversight. A FOCUS report isn't for international firms. Most of that is private. You really have to go based off reputation and who they do business with. A good rule of thumb are basic questions that you can ask to get an idea of how the firms operate: 1. Do you allow traders to trade remotely? 2. Do you require Series 7 or Series 56? 3. What are your commissions rates? 4. What's your payout split? 5. Do you pass back exchange rebate fees? 6. Do you offer advanced order routing mechanisms? Do you have access to midpoint routes and dark pools? Please elaborate 7. Do you have special relationships with floor brokers (floor routes)? If so please describe the fee and rebate structure? 8. What is the capital contribution requirement? Please describe any risk management parameters (such as max drawdown per day) that you have. 9. Do you offer any training for your platforms and entry systems? 10. Please elaborate on how much buying power you provide? If this depends on capital contribution, please elaborate on that too. 11. How do you process payouts to your traders? 12. What trading platforms are available to traders? What are the available data entitlements and other associated fees? 13. Please describe any other fees that you require traders to pay?
""2. I heard that one difference between them is that prop firms have DAS which means that orders go directly to the execution floor, and retail brokers, the order goes first to the broker, and then to the execution floor, is that a big difference?" It depends on your trading style, but if you're trading intraday, it does indeed make a difference. " it does not make a difference. for online brokers it is just to make sure u are meeting margin requirements. there is no human review. you are losing less than a small fraction of a second.unless you are doing HFT (high frequency trading) it makes no difference