So this is how I think it works: You go in to a pro firm, put of 5 grand for example, then the firm lets you trade 100 grand of their money for example, your 5 grand shields the firm against your losses, and you get to keep a cut of any gains you make with the firms money. Am I right? Sounds like leverage to me. So what are some of the reasons people go pro? Why would a firm ever let someone with no trading record use their capital without putting up any of his own to cover risk? I saw some pro firms saying they have 90% + payout, why would they give you that much of your profit when they are putting up the capital? I've heard of some firms requiring that you take a $1000 training course, which to me sounds like a scam. Why would they care if you took their course if your capital is shielding them from losses, or do they just want your $1000? Oh yea, and will pro firms let you join if you swing trade instead of daytrade? Thanks in advance.
Firms have risk controls in place to prevent you from hurting them too much as a new member. Like starting you off with only 100 shares. Those ticket charges add up pretty quickly, especially at only 100 shares. This topic has been discussed to death in the past. Try searching on Hitman or Worldco as a starting point. A lot of the prop firm discussions branched off of Hitman's journals.
just quickly, cos, as tom said, this most certainly has been discussed to the death, - low capital requirements. can daytrade with less than $25k. - leverage is a bonus, especially for certain strategies. obviously a degree of common sense is required.. - some payout 100%, others pay wage and cut.. (heaps on this. do search) - ready access to bullets - interact with other traders (if in office) - ready access to tech support prop firms (often just brokers in disguise) make money on commissions. just understand that one point and a lot of the other crap they spin becomes a lot clearer.. the $1000 fee for training is, imo, near enough to a scam.. but to answer your question, the reason firms care how well u do, is because if u make it as a trader and get good, they stand to make a lot in commissions (name of the game). will they let u swing trade? usually... but it's discouraged..(think commissions)
You put it perfectly. Leverage is the key, plus most firms have a risk manager that watches your P&L, and will shut you down if you're losing a ton of money.
& training.........more training........and more training with the right pro firm The ability to really push myself is the other I love I like being in a room that has heavy hitters. Their P&L does growsl for the month and I find myself pressing harder to do even more. Being at home at a desk nobody around to push me to a higher level. Robert
So let's say that I make about 10-20 trades a week, and avg. about 20-30% per year in profits with no margin. Would pro firms take me with that kind of trading style?
They may, but you would be paying for the lack of trading. Prop firms make money on volume. Low volume = higher commissions. For 10-20 trades a week, your probably better off at a retail shop. They may be more competitive for this type of trading. Most prop guys are doing well over 100, if not 200 trades a day. Unless you trade in higher volume blocks.
most won't including my firm. It doesn' t make business sense for them nor usually the trader. Robert
Depends on the firm, but if you have enough capital in your account, it usually isn't a problem. There is much more risk on overnights, so if you want to hold 2000 shares of IBM with $5k in your account, forget it. I can carry 15-20x my account equity overnight in diversified, hedged positions. Straight up, not hedged, about 5x. But most shops are flexible on these things as they learn your style and you establish a track record.