Broker vs. Proprietary trading firm

Hi Guys,

Could you please explain difference (pros and cons) between brokers(e.g. alpari, IB) and proprietary trading firms? For which trader is better to trade with prop firm and for who is better to use broker?

Thanks.

Matucer

What type of prop firm model do you want to compare?

The answer would depend on this.

I was thinking in general, because I don't know much about prop firms and their models. Could you please explain some of these models and compare with brokerage firms?
thanks

There's way too many differences between various prop models to explain them all here and give pro's and cons of each... I could write a book about that. :/

The basics are:

 

1. At a prop firm you trade the firm's capital and keep a portion of the profits.
2. Often you are on the hook for the full losses, though some will cover the losses in exchange for keeping the majority of the profits.
3. People go to prop firms in equity markets to gain experience, support, mentoring, low transaction costs.. and (very important) leverage, that they can't get in a retail account.
4. There aren't many forex prop firms since leverage isn't hard to come by in the retail space, and transaction costs are pretty cheap. That only leaves providing mentoring and experience to keep talent but most traders would be tempted to leave once they feel they can trade independently.
5. Since talent leaving is a huge risk for a firm, some have switched to a model that charges traders for training..

Thank you for explanation

Sorry to be jumping into this old thread guys, it is my first reply ever on FF as I am not allowed yet to start my own thread.

Myself I am a swing trader/trend trader (I have been trading for roughly a year and net around 8-10% on my capital), and I have recently attended an interview at a prop-trading firm and explained my trading style to the interviewer, and I got a harsh response. They had frowned upon my trading style as I described it to them, and stated that they only trade intra-day with all positions closing out at New York close. Their trading condition were as follows for starting junior traders:

- Capital would be 50000 EUR
- Leverage set at 2:1
- Maximum loss allowed per day is 480 EUR (He mentioned that if you lose 3 days in a row you are out, additionally a high watermark rule applies)
- Maximum Stop Loss per trade is 12 pips
- The minimum return per month would be 2000 EUR
- The profit split between the company and trader is 50/50

Do these terms seem unfair for a Junior trader at prop firm? Also dont you think that a maximum 12 pip stop loss is a bit tight.

Looking forward to your answers folks.

cpnivestment, forget about that prop firm.

The guys who run that prop definitely are on the losing side over the long term.
The conditions imposed there are plain unrealistically.

1. imho, the fact that they want you to trade only intra-day is already a red flag.

2. "He mentioned that if you lose 3 days in a row you are out,"
who do they think that they are? JPMrgn? Not even in HFT you can avoid 3 losing days in a row, unless you are doing something against the law.

3. "Maximum Stop Loss per trade is 12 pips"
They are talking about pips and not %? - red flag.

4. "The minimum return per month would be 2000 EUR"
2000/50000 = 4%
A 4% monthly return consistently? No such thing!

This conditions are unfair for everyone.
I see two possible explanations there:
- they don'y want you to trade for them and they just throw some unrealistic conditions.
- the guys who run that prop firm are immature and childish.

As reverse already said, this "offer" is complete crap.

Keep in mind that of all traders who sign up to a Prop firm, only a handful of traders are actually profitable. The vast majority of traders that join a prop firm are NOT profitable. That's why they join, they hope to get better traders by joining a prop firm, which often turns out to be wrong.

In the Equities Market, going to a prop - might - have some advantage, because you can get a leverage of let's say 30:1.

hello iam new to FF But what is said in this post is very true and honestly good advise he is right about this firm there are nuts.
And more then likely just salesmen that dont have a clue. they sound like skimmers they want a large account that takes small pips 10 15,20 then close out, the costs can become very high for you. while they take 50% free and clear and you get stuck with all of the cost to carry that account. Oh and who are you paying those cost to.
thank you