Why a Prop Firm instead of a Retail Firm?

Discussion in 'Prop Firms' started by VoodooMMI, Apr 23, 2008.

  1. I'd like to hear from the Prop Traders out there. Why do you choose to trade at a Prop Firm instead of just opening an account at a Retail Broker?

    Correct me if I'm wrong, but I see a few possible reasons to go with a prop firm that may or may not be available if you went to a retail broker:
    1) more capital to trade with
    2) higher leverage
    3) trading room with good technology
    4) a specific trading platform you can't get elsewhere
    5) ability to trade in the same place as other traders

    Why do you choose to trade at a Prop Firm?
  2. Didn't you just answer your own question by listing the reasons why people go to prop firms??
  3. I have to say LightSpeed Financial has retail account services with same technology as Prop firms .... including commission and fees ... except the leverage ...
  4. Yes, but I don't trade at a Prop Firm. To me, the 5 items seem to be small advantages at best. For example for items 1&2 if need capital and leverage trade futures or FX, little capital is needed and you can have huge leverage. For 3&4 Trading platforms and technology are everywhere and very similar in many cases. For item 5 the ability to trade in the same place as other traders sounds like a disadvantage in that I would be tempted to socialize instead of concentrate on trading. Anyway, I'm wanting to hear from Prop Traders. Do you trade at a Prop Firm, if so why?
  5. Trist88


    your 5 reasons + ;

    6) commission fees that ecn give to add liquidity,
    7) low transactions fees...
  6. I trade stocks and I like having at least 1M of BP, which I can't
    get retail without a pretty big deposit.

    Commissions are low. Good platform for my style.

    I like trading with other people (we're a pretty small group anyway).

    Disadvantages : perhaps a lack of flexibility, and sub-100% payout.
  7. I would say 1 & 2 are the most popular reasons. But a stock trader can't just go trade Futures or FX and make the same money. These Assets classes are completely different animals. Just because someone is a trader dosn't mean they can trade every kind of asset well. For example, you can't take an Athlete that plays baseball in the MLB, and say because you are an Athlete why don't you go play basketball in the NBA, you will be just as good at basketball as you are at baseball because you are an athlete.
  8. Here are my thoughts and why I am chossing retail becasuse a few reasons:

    1) No series 7 license

    2) I have no real experinece trading full-time. As such having 1MM buying power with 20k of my own capital will only eat my capital quicker.

    3) I rather take my 25k and go retail. Since I am trading 100-1000 shares for the first few months anyway, it will not eat my capital while I get used to trading full-time.

    4) Lightspeed is offering the same comm, rebates as prop firms.

    5) I do have a trading plan and a few strategies.

    6) I like retail becasue no as much regulations as a licensed trader.

    7) Fees are cheaper for non-professional (non-licensed).

    If you do not have 25k to trade fulltime, and you are not a professional already, then you should not go trading fulltime until you are ready anyway. I guess catch22, if you are professional trader then you should already have more thatn 25k ...

    So at this point I am studying for Series 7 just in case I want more capital when I am ready.
  9. ramora


    I have enough buying power in my retail account but considered prop as a way to limit downside risk. If there was a major meltdown in the markets my max loss would be limited to the amount deposited in the prop firm.

    Is this correct? Does the prop's LLC limit individual member's risk from major economic events to the amount of his deposit?
  10. I never thought of it that way. They all have risk managment policies built into their software.

    They have settings like "Max loss per position", "max loss per share", etc.... they will liquidate positions automatically once the policies are met ....
    #10     Apr 23, 2008