What is Proprietary Trading?
Proprietary trading or Prop trading is a form of trading where the trader assumes his own position with the capital of the firm. Prop traders use the firms leverage to magnify returns. Here is an example to illustrate proprietary trading. Suppose a man comes to you with an offer. He will give you $100,000 to trade. You have to put up $5000. He takes a percent of the gain. You take all the loss. This is proprietary trading. Essentially the prop trader is trading someone else’s money. Usually the money belongs to a proprietary trading firm. The prop traders don’t have clients their job is to trade the firms capital.
What is a Proprietary trading firm?
Proprietary trading firms are usually limited partnerships that put their own money in the market instead of clients’ money. Turnover is usually high in prop trading firms because firms do not tolerate poor performance.
Proprietary trading salary
Prop trading firms often pay a base salary and a good performance bonus. Newer firms often require the trader put up $10,000 to $20,000. In return the firm offers high leverage and training. Sometimes the firms will charge for training so new traders beware.
Proprietary trading can be a good job if you are a good trader. As a trader you will be provided with capital to trade. Your job is to make money. Some firms will offer opportunities and capital to trade to just about anyone with desire to learn to become a trader. Some do require that the trader put up some capital. If you are a good trader then this job can be a job that pays very well. Some firms offer the opportunity to work from home. That means you could work from anywhere. These jobs can be high pressure and very stressful. It is important to have a proven and tested trading system.