SERVING THE QUANTITATIVE FINANCE COMMUNITY

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louiscarruthers
Topic Author
Posts: 26
Joined: June 28th, 2011, 10:12 pm

### Is joining a proprietary trading firm a good idea?

In the somewhat-distant future, I want to be a senior high frequency trader or something along those lines. I applied to a bunch of MFE programs but since most of them don't start until September, I have 9 months or so to kill. Also I'm in NYC.I was looking online and saw that there are prop trading firms with offices in NYC. If you put down some capital initially, they will train you and let you invest corporate funds. I was wondering, do you think this is a good idea considering my degree path and career path? Or are these things a scam?Thanks very much and happy new year!

yuryr
Posts: 402
Joined: November 5th, 2007, 12:47 pm

### Is joining a proprietary trading firm a good idea?

"scam" is a very big word... let's say, they are not very sophisticated-)):

prfj
Posts: 19
Joined: December 11th, 2011, 10:36 am

### Is joining a proprietary trading firm a good idea?

If you are prepared to not put the experience on your resume, it should teach you some thing or another (but not necessarily a lot).

katastrofa
Posts: 9442
Joined: August 16th, 2007, 5:36 am
Location: Alpha Centauri

### Is joining a proprietary trading firm a good idea?

Always steer clear from firms which want you to pay them for working for them.

lexington
Posts: 321
Joined: November 16th, 2008, 5:04 am

It generally works like this:You invest $10,000 with them and they will allow you trade up to$100K using their platform. If you make money you keep 80% and they keep 20%. If your losses reach $10K they will kick you out. capafan2 Posts: 924 Joined: June 20th, 2009, 11:26 am ### Is joining a proprietary trading firm a good idea? QuoteOriginally posted by: katastrofaAlways steer clear from firms which want you to pay them for working for them.Prop trading typically is how small trading firms operate in other countries (India for example). You invest your money and in return you get access to their systems. Plus there is a social aspect to it. One person I am very close to have been doing this for 30 years in India. He says going to work helps him gain ideas. He is quite successful but not super-duper rich or anything. He is very conservative and believes in staying alive the next day/month/year. Over the years he has built his own client list and makes money from commissions and margins. But primarily his income is from his own trades. lexington Posts: 321 Joined: November 16th, 2008, 5:04 am ### Is joining a proprietary trading firm a good idea? QuoteOriginally posted by: capafan2QuoteOriginally posted by: katastrofaAlways steer clear from firms which want you to pay them for working for them. You invest your money and in return you get access to their systems. .what systems? why should someone pay money to get access to trading software. broker gives everything. katastrofa Posts: 9442 Joined: August 16th, 2007, 5:36 am Location: Alpha Centauri ### Is joining a proprietary trading firm a good idea? QuoteOriginally posted by: lexingtonIt generally works like this:You invest$10,000 with them and they will allow you trade up to $100K using their platform. If you make money you keep 80% and they keep 20%. If your losses reach$10K they will kick you out.So they get unlimited upside with the downside being only the electricity you're using, and some gap risk. Sweet.

capafan2
Posts: 924
Joined: June 20th, 2009, 11:26 am

QuoteOriginally posted by: lexingtonQuoteOriginally posted by: capafan2QuoteOriginally posted by: katastrofaAlways steer clear from firms which want you to pay them for working for them. You invest your money and in return you get access to their systems. .what systems? why should someone pay money to get access to trading software. broker gives everything.I don't know exactly how the Indian system works. With online brokerages things are changing now but 30 years back you had to pay like 1 crore (approx $250K USD) to buy a broker terminal. Then you would sublet it to people working for you. Most people could afford the terminal, so became sub-brokers, some went down the tube other survived. This person I know just continued working for the same firm (broker) and is quite happy with the arrangement. He just works for himself now and pays some fees I think - but I am not sure. I will ask him when I speak to him. Never thought much of it to ask. capafan2 Posts: 924 Joined: June 20th, 2009, 11:26 am ### Is joining a proprietary trading firm a good idea? QuoteOriginally posted by: katastrofaQuoteOriginally posted by: lexingtonIt generally works like this:You invest$10,000 with them and they will allow you trade up to $100K using their platform. If you make money you keep 80% and they keep 20%. If your losses reach$10K they will kick you out.So they get unlimited upside with the downside being only the electricity you're using, and some gap risk. Sweet.It feels glamorous to a lot of people these days with the news about Quant Trading and visions of a cool life where "everyone wants to be you" but it is really not for everyone. I wonder why the OP will simply not use online brokerages like "Interactive Brokers" to try this out himself. Why get something like that on your employment records. Because chances are good that you will fail -statistically speaking.

rmax
Posts: 6080
Joined: December 8th, 2005, 9:31 am

### Is joining a proprietary trading firm a good idea?

QuoteOriginally posted by: capafan2[/i He says going to work helps him gain ideas. He is quite successful but not super-duper rich or anything. He is very conservative and believes in staying alive the next day/month/year. This is something that is mentioned in the New Market Wizards. You need someone to pitch your questions and answers even if they don't necessarily agree with your conculsion.QuoteSweet.[/QMy thoughts exactly.

riskguru
Posts: 79
Joined: August 11th, 2004, 4:24 pm

QuoteOriginally posted by: katastrofaQuoteOriginally posted by: lexingtonIt generally works like this:You invest $10,000 with them and they will allow you trade up to$100K using their platform. If you make money you keep 80% and they keep 20%. If your losses reach $10K they will kick you out.So they get unlimited upside with the downside being only the electricity you're using, and some gap risk. Sweet.Well they are also providing you leverage right?? lexington Posts: 321 Joined: November 16th, 2008, 5:04 am ### Is joining a proprietary trading firm a good idea? QuoteOriginally posted by: riskguruQuoteOriginally posted by: katastrofaQuoteOriginally posted by: lexingtonIt generally works like this:You invest$10,000 with them and they will allow you trade up to $100K using their platform. If you make money you keep 80% and they keep 20%. If your losses reach$10K they will kick you out.So they get unlimited upside with the downside being only the electricity you're using, and some gap risk. Sweet.Well they are also providing you leverage right?? Prime Brokerage of a bank provides similar service to hedge funds.

rmax
Posts: 6080
Joined: December 8th, 2005, 9:31 am

### Is joining a proprietary trading firm a good idea?

QuoteOriginally posted by: lexingtonQuoteOriginally posted by: riskguruQuoteOriginally posted by: katastrofaQuoteOriginally posted by: lexingtonIt generally works like this:You invest $10,000 with them and they will allow you trade up to$100K using their platform. If you make money you keep 80% and they keep 20%. If your losses reach \$10K they will kick you out.So they get unlimited upside with the downside being only the electricity you're using, and some gap risk. Sweet.Well they are also providing you leverage right?? Prime Brokerage of a bank provides similar service to hedge funds.Key difference is that PB gets paid a funding rate. Great business to be in as the Head of that business used to describe it to me: money for old rope.

Orbit
Posts: 492
Joined: October 14th, 2003, 5:34 pm

### Is joining a proprietary trading firm a good idea?

QuoteOriginally posted by: louiscarruthersIn the somewhat-distant future, I want to be a senior high frequency trader or something along those lines. I applied to a bunch of MFE programs but since most of them don't start until September, I have 9 months or so to kill. Also I'm in NYC.I was looking online and saw that there are prop trading firms with offices in NYC. If you put down some capital initially, they will train you and let you invest corporate funds. I was wondering, do you think this is a good idea considering my degree path and career path? Or are these things a scam?Thanks very much and happy new year!Complete.Waste.Of.Time.Anything you do where your income is somehow dependent upon a random series of events beyond your control will not work. The game is rigged. You cannot and will not win.If it were possible that you would "win," that is, actually make a living, then all the chatter on message boards would be questions about tax advice.People say, "I know a guy, who makes a nice living, not a fortune, mind you, but a nice living..." because it sounds reasonable. It just isn't true. Nobody wins. You make money in finance by charging other people fees or carry. Not by "trading" in this way.Sorry. It's the truth.DONT WASTE YOUR TIME IT"S THE ONLY THING YOU REALLY "OWN"