Proprietary Trading Firm

2

A lot of people would like to relate their professional career with financial markets. Purpose which motivates it, above all, is to be as close as possible to stock exchanges, close as possible to emotions that accompanied it. Consequence, obtaining next certificates: investment advisor, CFA, series # etc.

Actually, above certificate isn’t a requirement to begin the adventure on the real platform.

There are two main paths: to start working in financial institutions, where to get to trading room is remarkably hard (which doesn’t mean that impossible), and if you will fail, then to remain a stockbroker, adviser. Alternative is to use the offer of companies such as: Proprietary Trading Firm (also called propfirms or prop shops) or Remote Proprietary Trading Firm.

If you decide that you would like to try – in this case the second option is right for you. I note: in this profession can find fulfilment both people fully experienced with a range of knowledge about the operation of stock exchanges, economics and finance. However, nobody closes the door for completely inexperienced, without any experience in stock exchange investments. Because not the development and knowledge are important, but real results, which systematically and without scruple are judged by the market.

Proprietary Trading Firms or remote equivalent Remote Proprietary Trading Firm

Those companies operate with their capital on the stock-market, generating this way income. It is carried out by employed investors – who undergo the recruitment process, then practice, and after they meet demands, they receive a title of trader. This is the common way the Proptrading Offices (branches) work.

  • Proprietary Trading Firms – have own headquarters/branches, where traders work.
  • Remote Proprietary Trading Firms (remote traders) – traders invest in their own homes with their own risk

The first question that arises: “Ok the company enables to operate with own capital, but what in case of loss. Who covers it?”.

The answer will satisfy you: losses in a period when the person is on the internship are covered by the company. If the intern finishes the given month over minus, another is reset to zero (the company pays the loss), and the intern begins a month from 0. This way it works in prop firms that are located in my country. Maybe it looks a little bit different in yours (you will need to check that).

The objective which is pursued to interns during the training period is to achieve monthly profit of summary at least 2000$ (in a given month, if in January the profit is 400$, in February 1600$, it is not considered as the achievement; but if in March the profit is 2000$, it is already the end of practice and obtaining the title of trader). When the intern becomes a trader – achieves 2000$ of profit, begins to receive payment. In the world, this type of work is based mainly on commissions – varies from 25 to 65% in case of Proprietary Trading Firms, and 60 to 85% in case of Remote Trading.

When the trader begins to earn, all extra costs become important, to which when choosing the Prop Trading Firm it is necessary to pay attention:

  • fees for data – it is normal charge – for non-professionals about 40$ per month, in case of professionals about 300$ per month for all quotes. At this moment all traders that cooperate with Prop Firms need to pay professionals fees for data

  • fees for the platform – many companies have their own dedicated, without any additional fees; some of companies use e.g. Sterling Trader Pro by charging additional fee of 130$ – the amount appropriate to the level/quality of platform

  • whether the trader bears the cost – so-called desk fee (per place, connection, rent, electricity, etc.) – so the additional costs may amount 50 up to 250$ per month (in prop firms offices)

  • whether there is an extra charge i.e. commission (commish) from the transaction –sometimes companies add such a payment. In this case in my opinion 20 cents for 1000 shares are such a maximum. In case of Remote Trading – this amount is much higher – 2-6 dollars for 1000 shares (therefore, the commission is on a level of 60-85 %).

However, these are not the monthly costs, which traders must carry into the office. They are deducted from their payment. Imagine this: the person who becomes a trader and earns 2000$ in a scale of month, receives from it about 35% (amount of the commission in most of companies), this constitutes 700$. There is no upper limit of earnings, trader may earn 5 000$, 10 000$, 20 000$ or 50 000$, and thus receives higher remuneration.

Everything looks nice and wonderfully, but it is a stock exchange, and there are not only pros. If the person, who is already a trader, will finish the month on minus (e.g. -500$), then:

  • consecutive month begins with this minus (+ additional monthly costs listed below, because they are deducted)

  • at first he must make up the loss, plus monthly costs, from that moment “is on zero” and can again start earning in order to receive the remuneration

However, if the person will state that this is not for him… that this work is too stressful, doesn’t have predispositions that allows him to continue playing the stock market and persist in this way –> may resign. He doesn’t bear any extra costs with it: the company pays the losses. If one day he will want to come back to the same company, must remember that will have to make up the loss :))

On which markets you can invest working for Prop Trading companies?

The choice is really wide. The basis for most of companies is US Stock Markets: Nyse, Nasdaq, Amex, Toronto. A considerable part of companies in its offer also has investment possibility on stock exchanges: Nyse-Euronext (Brussels, Lisbon, Amsterdam, Paris), LSE (London Stock Exchange), German Xetrze, Milan, Scandinavian stock exchanges, Tokyo.

Additionally, the companies enable to invest on futures markets.

What size of capital is managed by a single trader?

Most of Prop Firms offices apply the following rules:

  • the intern begins with the capital of 10 000$ and maximum size of 100 shares

  • if keeps profits the level of single maximum position is increased (which may reach a level of 50 000$ or 100 000$)

  • in such a case, automatically the capital is increased, which trader can operate (it may take out even 10 mln$)

If you considered cooperation as a Remote Trader with your own risk. These number looks much more diferent. All depends on your experienced. If you wanna check – mail me at remotedaytradergroup.com for more info.

What tools traders use in Proprietary Trading Firms?

At the beginning of work, the investor has a full facility necessary to invest: computers, monitors (at least 2). As well as the entire necessary software for investment: access to professional platform, tools for analysis of charts, system of news, filters, etc. But it depends on intern/trader how and whether will effectively use these tools – along with development it is worthwhile to invest more in better one.

This job isn’t for everyone

Every person, who will begin the adventure on markets, very quickly gets into the swing of this subject. Such is the nature of this work. However, it is necessary to remember that not everyone is able to work as traders – whether it is due to personality features (emotions and stress may be too overwhelming for some persons) or purely economic (work as trader in order to earn required minimum of 2000$ is disproportionate to effort and stress, which must put into the work). Therefore, all interested starting work as a trader in Prop Trading Firms in Poland, Europe or in the world – I encourage to establish one condition: 3-4 months for a monthly profit of 2000$. If in 4 month it will be nearly, a real chance will appear, you can extend this period by about 1-2 months. I write it, because amongst my proptrading friends, only two persons who devoted more than 6 months for trading, didn’t give up from their job after a quick time, and have developed very strongly!

Do Proprietary Trading Firms train interns?

Usually the managers in offices train interns from the scope concerning theories of given stock exchanges. However, it isn’t a norm. As for practical training – here actually every intern alone acquires the knowledge: as a result of conducting real transactions. Profit/losses and their further analysis learn us the most. Individual learning, and thus building own investment strategy, is the best solution for persons interested in the work of this type.

If you wanna join Prop firms as a Remote Traders – then experience is demanded. Companies don’t train traders remotely.

Hope this help

Soon I will publish more articles that are focused on Proptrading industry. I hope this will help you if you wanna start on US Stock Markets with cooperation with Proprietary Trading Firms.

If you have any question regarding prop firms – write below. I will help you!



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