So today I had an interview for a day trader spot and there is no salary, just 50% commision on the profit from your own trades.
I didn’t ask at the interview how much they make, but I assume very little. I think it is some people’s dreams to just trade on the stock market and make a living off it, but now I have to imagine trying to make a living through stock trading as a job.
Any input, any former traders out there? I imagine I’ll be making like $50 a month as a newbie…
you will be making very little. Did they tell you how much trading costs are going to be? Because that will eat into your profits
Yeah, I forgot to ask who foots the transaction costs, us or them. But the guy did say that they use a propriety system… like they are their own broker so I assumed costs are at a minimal, he said cheaper than Questrade which does them for $5…
Ask if there is a capital contribution. If there is, run. Holla at my man Former Trader for more info.
Agree that you should avoid firms that require capital commitment. Also, ask them what their turnover rate is. I don’t have first hand experience, but I have heard a lot about prop trading firms. Some people make A LOT of money. But I suspect this is after 95% of other people drop out.
It’s nearly assured you will foot the trading costs. Turnover will surely be sky high.
Ya, you don’t have to contribute capital, I’ve already ran as fast as I could from firms like that. But I am thinking, like itera is saying, that I will have to cover the trading costs from my gains :S. I’ll make a list of things to ask the guy for when he calls back
do some searching on the internet. I do remember a discussion on the various trading costs each shop charges. There’s an exact $cent amount. You should be able to dig around and compare what differnt shops charge you for. good luck
If it seems like a boiler room operation run. Because there are many of them out there.
I worked for a reputable prop firm trading futures, not Nasdaq stocks. I had a small base but the majority of my income was commission (started at 50% of profits then went to 75%). I had no capital to contribute nor did I have to pay for training. Desk fees (bloomberg terminal, trading software) and trading fees were taken from our profits. Thus, if you were in the red, you had nothing to pay…but at some point they will can you if you don’t show potential you could turn it around. You start with small size until you show consistency so you won’t sink the company if you suck.
Compensation varies big time. I worked with people that made 8 figures on the high end and others that made peanuts. Our group started on fire (the first few years) but 10 years later I believe there is only 2-3 traders still in the game from the 25 originally hired.
Thanks, former trader. That explains a lot. Your experiences sounds a lot like mine would be with this firm. The hiring manager told me back then it would be easier to make money because there were more arbitrage opportunities, but now it’s tough. So I’m thinking I’ll go for the experience, and over look the lack of salary for now
Hey former trader, got any advice for me? Looks like I got the job and I’ll be starting soon. Any seasoned warrior advice for me?
Discipline, discipline, discipline. Successful traders don’t get emotional. That’s easier said than done.
Don’t ever revenge trade. If you have a bad trade, step aside and take a walk. The temptation is to get right back in. Markets will be open tomorrow and a century from now. No need to rush back in to make back what you just lost.
Don’t be stubborn or marry yourself to a trade. When you have a position on, you have a biased view. It helps sometimes to ask others who aren’t in a trade what their views are. They’re more objective.
Don’t ever blame markets and think you are smarter. Markets can be irrational longer than you can be solvent. Live to fight another day.
If you’re in a slump, trade smaller size until you get your mojo back. You will go through slumps…limit the damage.
^ good advice
Congrats ryan. I gotta give it to you. I’ve always wanted to go prop but I never went for it since i have a steady job that’s count towards for cfa experience at towers watson (not my actual firm but same job as investment analyst at towers). Just passed 1 yr experience. Do you want to drop your email and ill msg u after cfa exam. Would love to find out your experience of the prop world.
Formedtrader, if you don’t mind me asking how come you left the trading world?
I think I would love prop trading but realistically I seriously question the sustainability of the business, chances for having a profitable career, and the luck to be under the right wing. It also severely hurts exit opportunities from what I understand.
If investments is a mentorship game then it’s probably infinitely more necessary for prop trading. Maybe I’ll give in since I do know some people at pretty decent firms by non-quant prop standards and I am pretty sure that I’d love it.
+1
Very early in my career I gave prop trading a go, left a good entry-level position straight out of college to join a prop shop. Things were different then; specialists on the floor still controled much of the order flow, there were quite a few “sure things” to make money realtively consistenly (front running short sellers by using “bullets” to get short, market-on-close imbalances). Income was nothing or next to nothing for first year-two years, then had a decent year (not enough to make up for all the time of lost wages), then income steadily and dramatically decreased as more and more traders started using high-speed computer algorithims to trade.
Could you make a profit today, sure. It was tough then and will be tough now, turn-over rate was definately above 90%, probably above 95%. I think it would require having a good algo yourself (the guys I know that were successful with their algos had PHD’s in comp science working for them), or using longer time frames for your trades so that you’re not directly competing with the high-frequency algos for execution.
Here’s a cool video that shows all the activity that takes place during 1 second of high-frequency trading. Certainly would be tough to run an arbitrage strategy with this type of competition for order fills. http://www.ritholtz.com/blog/2013/05/what-happens-during-1-second-of-hft/?utm_source=dlvr.it&utm_medium=twitter
***EDIT - I should probably add a disclaimer that you might only think video is cool if you have some HFT experience, otherwise it’s just the lamest 4th of July show ever.
wow, formertrader, that is great advice. one up
middleclass, is there a way I can private message you on AF?
cfaretake, haha you are right, it looks like a very cheesy 4th of July show. But I get it, the volume is immense and that’s just in one half of a second!
I did great my first 2 years. I basically broke even the next 2 years. We were cannibalizing each other; most people in the office were in the same trades at the same time.