Inside Prop Trading & Prop Trading Firms | MartinKronicle - Michael Martin
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Inside Prop Trading & Prop Trading Firms

I know many of you look for trading jobs as Prop Traders, b/c you send me emails asking about certain firms.

You are perplexed and you should be. A typical firm will advertise that they are “currently hiring” or “looking for the next Bud Fox.” YAWN. So you go ahead and apply only to find out that you need to bring your own capital.

Well, this is not prop trading and the firms in question are not Prop Trading firms either. They are broker/dealers who are looking to leverage their computer systems and real estate. Nothing wrong with it, but it’s a very, very loose interpretation of what a Prop Trading outfit does.

If you want to check one of these out, know beforehand that you’ll most likely have to share in the computer costs, the data costs, parking, desk rental, and you’ll likely have ticket charges. None of this is illegal nor unethical – it’s just a bit of a stretch on the definition of a Prop Trading firm.

You might be able to use their capital too. B/D’s as such have better than 4:1 day trading buying power, as well as higher than 2:1 overnight leverage. All that means is that you’ll be able to lose your money first AND FASTER.

The best example of a real Prop firm would be what Commodities Corporation was when it was founded by Helmut Weymar in the late 60s. They traded their own firm’s capital. They had investors, but they were shareholders.

Another example could be like what I do – I trade for an entity/fund that is well capitalized. I don’t know who the clients are – and I don’t really care to either. I have one boss. All I have to do is make money. There is no need to bring your own capital, but you can oftentimes invest alongside the firm’s clients by investing in the firm or the fund itself.

Personally, I would be exhausted to have to do what they propose to do, both physically and emotionally. While I appreciate day trading skills – I have them – it’s too little money for too much work. Ultimately, even the lowest costs will eat up too frequent trading.

I use the techniques for intraday risk management and sometimes to enter back into a market that’s in a strong trend.

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  • Chris Lineberger

    Thanks Michael, this was a great article and I feel like i'm learning more and more each day. Right now i'm 24 years and have high interest in doing what you do.

    Will your classes at UCLA going to be able to prepare us to possibly work at a firm like yours?

    MM: Yes, any firm.

    I'm trying to put together a 5-year plan on how to achieve my goals as become a independent commodities trader. I've been trading currencies daily but with low capital and 1 lot trades I feel I need to step back and really learn what i'm doing. I make little moves here and there for profits using my fibonacci tools and things i've picked up from seminars.

    What i'm asking you is what steps to take to become a successful trader and be able to be independent as you are.

    MM: Read, read, and read. Turn off the TV, and read. Read everything you can get your hands on.

    I didn't know that having your own capital wasn't a big deal so I just wanna learn and be prepared to trade like you.!!!!!

  • Chris Lineberger

    Thanks Michael, this was a great article and I feel like i'm learning more and more each day. Right now i'm 24 years and have high interest in doing what you do.

    Will your classes at UCLA going to be able to prepare us to possibly work at a firm like yours?

    MM: Yes, any firm.

    I'm trying to put together a 5-year plan on how to achieve my goals as become a independent commodities trader. I've been trading currencies daily but with low capital and 1 lot trades I feel I need to step back and really learn what i'm doing. I make little moves here and there for profits using my fibonacci tools and things i've picked up from seminars.

    What i'm asking you is what steps to take to become a successful trader and be able to be independent as you are.

    MM: Read, read, and read. Turn off the TV, and read. Read everything you can get your hands on.

    I didn't know that having your own capital wasn't a big deal so I just wanna learn and be prepared to trade like you.!!!!!