OK, let's review a second. Retail is limited to 4 to 1 or less in capital usage. "Most" prop firms only pay once a month, LOL. It takes a $million or more to make a good living (yes, there are some exceptions, but IMO, the lower risk, higher reward strategies tend to be capital intensive). Our traders tale their money out whenever they like...did we, by simple deduction, come up with the "best of both worlds" .... as my brother and I tried to design the business model? The same business model we enjoyed while on the exchange trading floors. Our traders control their own finances and their own destiny. Don
i disagree with this as well. i trade w/ one other trader via chat, and we trade almost identical styles. the last thing i want, is a room full of guys trading completely different styles distracting me from my own trading.
I think I can speak to some of the advantages. I have supported myself off of trading since the late 1990's and during the past few years have switched from retail to prop trading, and back to retail. Some of the benefits of retail (listed in order of importance) are: 1) Security. You have a greatly reduced risk of losing your capital due to the failure of the firm. With a prop firm, some other trader can potentially blowup, causing the firm, and your capital, to evaporate. Other factors can also cause a firm to implode, resulting in the loss of your money. Worldco and Refco are a couple of examples where traders lost their hard earned capital, through no fault of their own (i.e. not through their own trading losses). With a retail account, this is much more unlikely, and accounts are also insured to some minimal amount (100k cash and 500k securities) with SIPC protection. While these kind of losses are possible with retail, they are much much much less likely. 2) No need to deal with registration hassles. With a prop account, you will typically need Series 7 and 55 registrations. Passing these tests may not be especially difficult, but they do require some level of study and generates a level of nuisance to the professional trader that has better things to do. 3) Interest Income on your capital balances. Not all prop firms pay interest on overnight cash balances. With a retail account, however, you will earn interest on these balances which can amount to significant dollars for larger accounts. 4) Cheaper data fees. While data fees are an insignificant cost to most traders, the prop trader must pay several multiple higher fees for some of the data costs. This might amount to ~$1k over the course of a year, perhaps. Overall, however, I don't think that retail versus prop is a lopsided choice. There are significant benefits of each and I could be convinced to switch from one to the other if the situation were right. Compared with commission rates and system reliabilty, the importance between choosing retail versus prop for the success of most traders is much less significant.
Hmm, let me try to respond to a couple of "retail trading myths" -- Security is determined by how much due diligence you do, not a matter of retail vs. proprietary (IMO). Yes, a trader must pass an exam. Retail does not receive interest on their short sale money...who do you think keeps it? And, yes, our traders receive interest on all cash balances. All traders who trade 200K shares per month pay for no data feees...they use their rediplus computer, along with spreadsheets for everything from charts to automated order entry and pure black box operations. (If someone wants to get some outside vendor's service, that's up to them). All in all I agree - there are benefits to both, depending on what your amount of participation in the markets is. Not everyone "should" be a licensed trader, I freely acknowledge that. All the best, Don
Absolutely, you can go to my homepage, click on the link to "Series 7 materials" - get a nice discount, study some, and go for it. When people ask how tough is the exam, I simply reply that "every stock broker passed it....how tough can it really be"...LOL. Don
I dont know the answer to that question but if the answer is you have to be licensed its no big deal, it is just a Series 7 test.
At one point we had another firm "Bright Securities" that allowed traders to trade while the studied for the exam, trade with restrictions. We closed that firm last year, we simply ask our people to study before they trade in BT. Don