Why Prop??

Discussion in 'Trading' started by Smikkey Trader, Dec 27, 2001.

  1. You get to "write off" all of the above via your LLC reimbursements, the valid expenses. BTW (watch your Schedule C computers above $1,000, you are supposed to depreciate at that level).

    The only difference is the "tax planning" (in quotes on purpose this time). You pay 15% in Self Employment tax to be able to defer your taxes, not eliminate them. There is a lot of "hocus pocus" with those selling retirement plans. I can speak directly as to having been talked into such "defined benefit plans" myself, which go over-funded and taxed horribly.

    I just prefer to keep things as simple as possible, and to keep payments to others at a minimum.

    Good Luck!
    #31     Dec 28, 2001
  2. DeeMan



    Funny you should mention that. I have never had a winning day when my wife has taken a day off from work and stayed home. Even if she stays completely out of my way and stays in the bedroom with the door closed, my concentration level is just not there. I know it is completely my fault, but at this point, when I know she's taking a vacation day I just plan on sitting on the sidelines.

    #32     Dec 28, 2001
  3. I doubt that I would be comfortable in any trading room for a similar reason. I have learned from experience that the thought of anyone figuratively "looking over my shoulder" at my trades makes me very uncomfortable. Therefore, I never discuss my trades while they are on.
    #33     Dec 28, 2001
  4. I agree with you to a point, my boss runs 2 offices and I've noticed I did better in the past when he wasn't around but lately I'm less conscience of it and am just trading away.

    However, his "looking" over my shoulder has "burned" in my his pet peeve, don't go against the 15 min. MACD, which more often than not has saved me money.
    #34     Dec 30, 2001
  5. blinker


    What about worldco's deferral policy? Don't they hold 1/2 of your profits above a 50% payout.
    For instance, you're offerd a 90% payout
    that is 40% above the standard 50%. They then hold 20% for a year. So infact, you're only getting a 70% immmediate payout. You have to wait a long time for the other 20%. Golden handcuffs, bigtime.
    Where's Hittman?
    #35     Dec 30, 2001
  6. Hitman


    The policy is simple.

    If you have a 90% payout and you make 10K first month, 4500 of which goes into your capital account, 4500 of which is issued to you as a check.

    Let's face it, once you become more experienced and trades multiple 2000 share positions at a time, do you really expect that our firm will hold the bag for you if you go on a losing streak? There has to be a little bit more of your own money on the line.

    We require every profitable trader to eventually have 30K in their account. That's the cushion for us to absorb potential blows and it gives you incentive to protect YOUR OWN money. 30K is not much cushion for our bigger traders who does 5000 share positions regularly.

    Once you have 30K, you get full checks, when you leave the firm, we hold on to your 30K for three months. Yes, we have to make it a little bit inconvinient for you to leave us in the cold, just like every other firm in this industry.

    That said, we are extremely flexible. If you get into a bad streak and need to pay bills, feel free to withdraw from your capital account.
    #36     Dec 30, 2001
  7. Hitman,

    This may sound dumb but I don't know much about prop firms. Are traders personally liable for their losses? Say a newbie comes on board and immediately runs up a significant loss and you decide he has to go. Who covers the account deficiency?
    #37     Dec 30, 2001
  8. blinker


    In regards to the deferral account
    Good explantion, but I believe it's a general llc rule that capital contributions need to stay with the firm for 1 year. The $30,000 would be defined as the capital contributuion. Also,$30,000 is one of higher contributions for a capital account.
    Are you sure Worlddo hasn't come down recently?
    #38     Dec 31, 2001
  9. Hitman


    Nobody is responsible for capital losses at Worldco, which is why we encourage people putting up a little bit money of their own ($500, $1000, $2000, whatever) so we can give them better commission rates, simply because we want to provide some incentive for those who can put up something of their own to lose.

    Fortunately, people starting out with no capital (if you can supply previous trading record however it is a different story) will start with 100 shares and unless risk management totally fall asleep it is usually not possible to lose much money with that size.

    In the end, me and the firm split losses before commissions, thanks to the fact that we self-clear. Usually, it is not very likely that a new trader will create a big loss before commissions. The killer blow comes from those that trade size and blows up. In any case, regardless of how my team perform the damage will be within the team account, and it will not affect my own trading account.


    As with everything else, it is negotiable.

    But let's put it this way, if you routinely have high four digit days in both directions, 30K is pretty much mandatory.
    #39     Dec 31, 2001
  10. First off, thanks to Hitman for taking a number of questions about Prop firms in general. I should point out that policies are different at different firms, and each trader should understand all the complexities before signing up.

    Whether you put up money initially, or have it kept for you by the firm when you make, it is still your money at risk. If you make money, and keep it in the account (whether it is the firm's or your "sub-account") it is still at risk for losses by other traders and the firm. So if you "split your profits" with the firm, and they keep $25K or more as their share, then effectively you have put up $25K and still don't get 100% payout.

    Many methods to get started, but be sure to switch to the program that best fits you when you have achieved some success.
    #40     Dec 31, 2001