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Nick1984

Prop Trading firms

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I've seen heaps of prop trading firms advertise on the net for "new blood' so to speak and have always been interested to know exactly what goes on in there. They dont really exist here in Aus so its a foreign concept for me.

 

What I do know is however that you are employed to trade the firms on equity on the markets and you get a cut of the profits you make.

 

Question: If you are working for a prop firm and making money on a regular basis, why would you continue to stay there when you could easily use your same strategy to trade individually from home?

 

Another question: Because they are trading their own equity in the firm, wouldn't the firm require you to follow a pre-set strategy? i.e: wouldn't your own personal trading style become cramped in there?

 

Just a little curious cause next year I wanted to go to the US for a while and thought it might be fun to apply for a position when I'm there!

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They're probably called trading arcades in Australia and are just facilities (like direct access to exchanges and subscription to services like Bloomberg) shared by traders. There's probably one near where you live. I personally prefer to trade at home.

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I was thinking of the ones where you trade but off the firms own account.

 

Edit: yea in the long run i dont think being surrounded by a bunch of other people would be very pleasant when trading. I love to have my music on when I trade, and they'd probabbly frown upon me lol.

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I had some experience prop trading for a bank. But this is alot different from prop trading firms. From my experience, everything was automated. I was on a trial basis for a period of time but the head of trading had told me that I was the first discretionary trader they had seen.

 

I never saw my boss (head trader) actually execute an order. All I saw was sound alerts like every 10 minutes and automated execution. The main strategy seemed to be arbitrage trying to take a tick here and there. Btw.. this bank I was at did 10% of the total volume on the Nikkei. So imagine all the sound alerts going on everywhere.

 

My first day there was quite an experience. It was my first time seeing the Nikkei futures. One of the things that stunned me was that the Nikkei was tanking early in the morning. However, I saw a trader continously buying on the way down. From my day trading mentality.... I could not understand what he was doing. It seemed like he was simply fighting the market. The Nikkei dropped about 10 ticks... and he bought all the way down. By the close, the markets rallied over 20 ticks from the lows to make new intraday highs. Its really a whole new different way these guys trade.

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I have friends in investment banks who I've learned a lot from. Most investment bank work is not directly related to trading but a humorous phrase often used about traders is that they "trend towards zero", meaning in the long term they don't make any money. These traders are typically moved to another part of the bank. Only a minority actually succeed and make their career in trading. Investment banks are also moving at a very fast pace towards automated trading. They employ more programmers than traders. I've never heard of prop trading for a bank. What does that involve?

 

There's a prop trading forum over at ET. Here's what one honest person says about prop trading:

 

"I tried my hands at Prop trading about 12 months ago, it was the worse job I ever had, I was better off selling Kool Aide at the corner of Wall St & Broad, The truth of the matter was that I was conned by the smooth talking Head trader there, yes he sold me a planet in our Milky Way and I bought it, at least i am man enough to state that i tried it and I failed at it....I still love trading but the Prop Industry is nothing more than a legal Racket !"

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What are the advantages of these firms then in having such a liberal hiring policy?

 

I read a couple of sites from Prop firms and they all talk about taking you on for a probationary period where you trade mostly simulated markets and they give you intensive training etc...

 

The reason I liked the idea was cause I thought this might be a way to get trade mentorship for pretty cheap!

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In Steenbarger's new book, Enhancing Trader Performance, he talked very well about a prop firm in Chicago in which he collaborated to produce the book. There are some legit ones I guess, just have to get a recommendations from insiders.

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