Since I created my site, and it was in 4th quarter of 2007, my aim was to show how my career will roll in trading on U.S. stock exchanges. I join proprietary trading firm in Poland.
I merged with the proptrading industry, i.e. companies of Proprietary Trading Firm. At the beginning it was a branch of Trade Swift Company in Gliwice. After a few years I decided to leave and I started to work as a Remote Trader. I did the same thing, but already directly for myself. Of course, the reason was cash. As a remote trader I took the financial risk on myself, but thanks to that significantly my percent of profits increased.
Today I will describe the first part, i.e. what is trading in the proptrading office. What are the pros and cons? You will learn who to recommend such a work, as well as what challenges does it face 🙂
This article belongs to “Proprietary trading” cycle, in which I discover the proprietary trading world to you. The industry, in which I am from 2007 and I try to popularize it since then. I invite you to read other parts in chronological order:
Part 1: My history in proprietary trading firm and little motivation – i.e. how I began my adventure on the U.S. stock markets
Part 2: Proprietary Trading Firm – job in the proptrading office
Over the years my site become the largest and in principle the only place where in Poland you will read about trading on U.S. stock exchanges, written by the trader related with the proptrading industry. I receive a lot of e-mails from very interested persons, who would like to follow the path which I started.
Today you will read to whom, in my opinion, the job in proptrading office is directed. Please remember that I focus here on offices that offer trading on U.S. stock exchanges – physically in the trading office, employed by the owner of given office.
Which group do you belong to when considering proprietary trading firm?
At the beginning I think that you must assign yourself to one of following groups. Thanks to that it will be easier to lead by the footpaths possible for you in next sections (there I will refer to individual groups):
Group #1 – You have no experience in trading on U.S. stock exchanges. You don’t have any trading history and you don’t generate currently any profits on NYSE, NASDAQ and AMEX stock exchanges.
Group #2 – You have an account at the broker on the U.S. stock exchanges or CFD. You don’t generate any profits or bigger losses. You just study and search for your path.
Group #3 – You have an account at the broker on the U.S. stock exchanges or CFD. You already generate profits.
Group #4 – You currently trade in the proptrading office.
It will be easier for me to suggest the best potentially path for you in the following part of the text. Do you already know, to which group you fit? Let’s go farther 🙂
As a part of cooperation with companies of Proprietary Trading you can distinguish two models:
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job in the proptrading office, which was founded by the owner – without financial security (usually)
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Remote Trading directly for the proptrading company (you omit the trading office) with own financial security
I believe that if you belong to Group #1 and Groups #2 it makes sense for you to consider seeking employment in the proptrading office. However, I recommend Remote Trading if you belong to Group #3 and Groups #4.
What is the difference between these two models of cooperation?
At the beginning I will focus on the work in proptrading office. What are the pros and cons. Part of information is universal, because this also includes aspects which have provided Remote Traders. About the work as Remote Trader you can read in the next section of “Proptrading” cycle.
Trading in the offices of Proprietary Trading
At the beginning I will explain what the Proprietary Trading office deals with. This are branches established by persons who have invested their money in opening, development of offices, equipment, bear the financial risk (usually), and deal with training and teaching of traders (usually).
These companies provide everything, starting with the trading position, learning, strategies and financial security. You risk only your time. Either you will manage to do it or you will simply resign after some time or earlier an owner of the proptrading office will resign from you.
Since the owner of offices bears the risk, from profits generated by you, he charges specified %. Standard in proptrading offices is 30-50 % of payout split. When it is 30% this means that from generated profits after fees you will receive 30%. When it is 50% you will receive as much from generated profits after fees.
Why trading in the proptrading office?
It is all about a few issues; things which the proptrading company provides to its traders. The following regards both proptrading offices (in 1-6 issues), as well as cooperation on the level of Remote Trading (issues 1-4).
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Trading Capital – so-called buying power
You have good trading strategies, but for example you don’t have a capital. Buying power offered by the proptrading company will provide it for you. Buying power, i.e. capital, which you can use in trading. Here I emphasize that this aren’t the customer’s money of the company, etc. The company doesn’t accept any deposits from people from the outside. Therefore, you don’t manage money of third parties.
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Commission level
You are an active daytrader, carrying out a few/several or dozens of transactions within a single session. In such a case you start calculations. Where it will be cheaper? In proptrading companies it is the cheapest on the market. No broker will provide such a low commission level. Differences are gigantic. Soon you will be able to recalculate it exactly.
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Payout split
In case of Proptrading Company, with regard to above, the company charges % from generated profits by the trader. In case of proptrading offices – payout split usually is 35% to 50%, which receives the trader from generated profits.
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Charges for data/platform
Traders in proptrading companies are treated as pro traders, i.e. they pay for stock market data in a professional form. Therefore, all quoting cost about 300$, while unprofessional traders pay 5-6 times less – about 50-60$ for the same data package. Broker decides about your status – you are obligate to answer specific questions on the basis of which you will be assigned to pro or non-pro group.
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Trading station
In the proptrading office you have provided full post trading – computer, monitors, platform. That is all what is needed to trade for you.
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Development/trainings
Most of proptrading offices have its training program. Some offers it for free, other charge a fee. The quality of trainings is on a different level. Being honest, I believe that even the best training will not be tantamount to the fact that you’ll achieve results. All depends on you, your determination and how much you will work to achieve results. Luck only works for some time. Here stability is needed.
For whom is a job in the proptrading office?
If you are completely green on the market (Group #1) or you trade something, but chaotically (Group #2) – it can be an incredibly good solution for you.
Proptrading offices usually lead a permanent recruitment or to a few times a year. Proptrading offices that employ traders you will find without o problem in Google. I won’t advertise here any of them. Look for the opinion on the Internet, see what they have to offer and simply try. I just did. Without greater thoughts – I knew that I must try. In this period when I started in Poland there were a few places where I could start, but only one close me so and I had a small choice 🙂 But I don’t regret!
Who knows whether I would be a trader, if then I wouldn’t take a risk. No risk, No fun!
Why I suggest this way for Group #1 and #2… due to the fact that proptrading offices take the entire financial risk on themselves (well, let’s say most of proptrading offices, some have a different model than the one in which I started). So if you don’t have financial resources, but you have a huge determination and you want to fulfil your dreams – act and don’t think. The longer you wait, all the older you will be – and all the harder it will be to take such a decision. Along with age, your obligations changes whether it is financial or other.
What are the formalities in employment to the proptrading office
When you are employed in the proptrading office, one of agreements you sign with the owner of office. In what form – I won’t tell you that, because all offices have a different form of cooperation with traders.
Another agreements – as a part of platform, quoting, trading account – you sign with the company, which provides services in the given proptrading office.
Of course, all paperwork is handled in the office. There is no worry to be afraid 🙂
What is the time limit for termination? When I finished the cooperation with proptrading office, I let them know in a given month, that it was my last. I didn’t have a notice period in the agreement.
Settlement of taxes
Traders in the proptrading office are usually as a part of :
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employment contract
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junk agreements
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business activity is required
Depending on chosen form (1 and 2) you get paid after deduction of tax, contributions, etc. In case of activity, there are additional commitments (accounting office, personally you must pay contributions, taxes, etc.).
Remuneration in the proptrading office
Whether in the offices is a basic level of remuneration? No, there isn’t. I mean here the proptrading offices of U.S. markets. In proptrading offices which offer futures, calendar spreads – there is a base which is included in desk fee. Well, that’s all for sitting, even without results.
Trader only earns commissions from generated profits. It sounds nicely when I say that there is no upper limit on those profits. It’s a truth 🙂 The better trader, the pleasant market – all the results increase.
How much you are able to earn is just up to you. Usually persons, who are hired into the office, profits that allow them to receive payout split start from 3-6 month. Some of my friends started to generate profits after 8-12 months.
When it is the best time to seek for a job in the proptrading office
No one needs dust in their eyes. It is rare to meet in the office people older than 20-30 years, with assumption that those who have 30 years already from a few years trade in the given office.
What it is so?
First of all, the best time to start is a period in which you don’t yet have greater obligations, wherever financial or family. You can afford for months of probationary period, in which you won’t receive any remuneration. As I mentioned above, you are not sure of success. But usually persons interested in trading devote from a few up to 12 months in order to develop own abilities.
It is harder to allow yourself to all of that, when you are older, you have family and financial liabilities. Then I can see a chance only when you already have an appropriate amount put off – you can afford for a break from work, or when you simply have such a work that you are able to do both.
How much time is it worthwhile to devote?
It’s up to you. I tried to be a realist. I gave myself 3-4 months as evaluation whether I have any potential generally speaking. I managed in 3 month to reach the profit level required in the office. If in 4 month I would see that I need a little bit more – I think that I would stay one month longer.
Give yourself some maximum. At some point and the owner will also suggest you that perhaps it isn’t worth to farther get lost in it. But remember that until (assuming that the minimum required to make a profit is 2000$) you reach even smaller profits; you still bring profits for the company. So probably nobody too quickly will resign from you. When you’ll achieve losses, this can happen faster.
I think that it isn’t worth to wait more than 6-8 months.
Whether trading in the proptrading office I must pay my funds?
Generally not and what’s more this regards worldwide. It just differs trading in the proptrading office, where the financial security is on the owner’s side, from holding the account as a Remote Trader. As far as I know, some offices require a security deposit in the amount of monthly payment for the platform and quotes.
However, there are other costs which shall be borne by the trader.
Costs of the platform and quoting from U.S. markets change over time. Platform cost, which I use is 135$ per month.
Price of quotes is imposed by the stock exchanges. Traders in the proptrading offices and remote traders are treated as PRO traders. Also the cost of platform and quotes in case of purchase all is about 430$ per month.
Do I have to come to the office? Whether working in the office is mandatory?
When you are employed in the proptrading office, you are working in the proptrading office. Manager or owner of the office has a control over you. And so it looks in most offices in the world. Peculiarly this regards beginners, who just start in the office. It is not possible to train that person remotely.
Sometimes traders, who have already experience, can play from other places than office for the owner. However, in my opinion when de facto you don’t trade from the office – you want to have more freedom, so it is worthwhile to think about Remote Trading.
Remember that it is day trading!
Whether I must close all positions to the end of trading session? What if I’ll stay with the position?
Yes. Proptrading offices offer day trading. That is single-session investments, in which you are required to close the position at the end in of trading session. There is usually a person in the offices, who makes sure that traders have closed their positions.
If you leave the position overnight, you must be aware that you are taking the entire financial risk. During the night some news may appear that will cause a strong change in the price of given company. On the next day, there can be a big gap in the time of pre-session trade – thus automatically your loss will be greater. Of course, it may happen just opposite – and your position will earn a lot. However, then the head office of proptrading company takes over the entire profit. It is such a form of penalty 🙂
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It is worthwhile, even when this work isn’t for you
Trading in the proptrading office it is a remarkable adventure. Of course, best when you will find fulfilment in it. But even when it will turn out that it is not a profession for you – you will have what to recall 🙂
Trading is not for everyone. The same as not everyone will become a pilot or teacher. Therefore, even when for you will fail – remember that there are many other great activities in life. And maybe it is not the end of your adventure with trading. Different market, different interval – will be good for you.
I invite you to subscription and to watch videos, which I post on my YouTube channel – in which you will find what to expect from trading and how it looks like on U.S. stock exchanges.
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