Prop Trading - is it all its cracked up to be?

[Great white shark]

Hi
I am thinking about getting into Prop trading - I am an Accountant who has spent their career in Investment Banking - but lost my job in the recession. Trading has always been an interest of mine. If I had my time again, I would go into Trading rather than Accountancy.
For an average trader (ie not the best, but not the worst) how lucrative can it be? I am not shy of hard work and don't think of it as being "get rich quick" I just want to be able to pay my bills in the long run! Any advice welcome.
Cheers

 

[pboyles]

The chances of you making money are extremely low. Somebody here was at a well established prop firm and they said only 2 or 3 people out of an intake of 30 get kept on and most of them are gone within a year as they can't make enough to pay their costs.

So to answer your question it's not lucrative at all for 95% of people. In fact it could cost you a small fortune in fees and lost earnings. I don't think success depends on intelligence or the amount of effort you put in.

 

[Great white shark]

So what do you think success depends on?

 

[pboyles]

So what do you think success depends on?

I don't think anybody knows to be honest, it certainly cant be taught. If you worked at it for a couple of years you might be profitable but even that's far from guaranteed. Plenty of people here will tell you it took them 4 or 5 years to be able to make moderate amounts of money and plenty more have been at it just as long and cant make a cent.

For someone like you with a profession I'd say it was a terrible option.

 

[Great white shark]

I hear what you are saying. Very interesting.....

 

[pboyles]

I hear what you are saying. Very interesting.....

The guy that was posting was called Tim Young, if you search for his posts you'll get a good insight. He was at a well established firm, not one of the many dodgy operators that have sprung up lately.

 

[Great white shark]

G.O.A.T - a few people I know have gone down the "prop training firm" route, paying fees to be trained and then hiring a desk on the trading floor after they have been "backed". These firms charge high rates, and people are paying them and singing the prop firms praises and their new careers....just wanted other people's opinions on this type of trading....and to find out whether you can make a real income out of it or not...

 

[Great white shark]

Pboyles - thanks. I will look him up.

 

[pboyles]

G.O.A.T - a few people I know have gone down the "prop training firm" route, paying fees to be trained and then hiring a desk on the trading floor after they have been "backed". These firms charge high rates, and people are paying them and singing the prop firms praises and their new careers....just wanted other people's opinions on this type of trading....and to find out whether you can make a real income out of it or not...

Is there any proof they are actually making money? Plenty of people get fooled into thinking they can make it 'soon' but in reality they never do. If they are paying for training its a bad sign.

 

[Great white shark]

Pboyles - exactly. I have no proof, only what they tell me, and being the cynical sort that I am, I wanted to hear from other people whether there was any possibility of truth in it.

 

[pboyles]

Pboyles - exactly. I have no proof, only what they tell me, and being the cynical sort that I am, I wanted to hear from other people whether there was any possibility of truth in it.

Its highly unlikely, though I suppose not totally impossible that one of them might be making money but the chances that they all are is about zero. They may just be putting a brave face on it.

 

[new_trader]

I don't think success depends on intelligence or the amount of effort you put in.

Speak for yourself.

 

[DT]

Depends what you mean by 'prop firm' - If you're thinking of joining a firm to trade futures by clicking on a ladder with your mouse then, these days, your chance of success is very very slim. There is much less free money about and also less firms backing people to do this in the first place. I certainly wouldn't hand over any money to someone for 'training' though I guess there is no harm in playing around with a sim yourself in your spare time.

Perhpas look at options market making firms or, as you're an accountant, maybe try and get a product control role at a bank/fund and attempt to move across to a trading position.

 

[Great white shark]

DT- yes, this would be an ideal move for me I agree. However, as you can probably imagine, jobs are quite scarce at the moment, and I was made redundant. It's easier to get a job when you already have one...that is not to say that I won't keep looking. Thanks for the advice

 

[tommog]

As someone that has been a prop trader for over 5 years I can assure you it can be taught. And there are plenty of people making good money consistently.

Unfortunately for a new person your success depends almost entirely on which firm you start with. Never join a firm that ask you to pay to learn. You need to get in to a company that understand it takes AT LEAST a year before you get profitable and also they would be willing to let you join teams of established traders that will let you learn from them.

Unfortunately most places 'training scheme' is to make you read Market Wizards sim trade for 3 months. Go live for 3 months. Then sack you. And really makes me angry because it's a fantastic career.

Anyone can learn to be break even in 6 months (if they are mentally strong - lots of ppl claim to have mental discipline when in reality they don't). As for whether you make money and how much that is a question of spending 10+ hours a day staring at the screen giving it everything you have. In time ideas and trades emerge. It's a matter of how long you can survive living on no income before you figure it out

 

[Great white shark]

Hey Tommog
Thanks for the info. I am used to staring at the screen for 10+ hours a day - I used to work in banking as an Accountant and pulled long days for most of my career - although I wasn't trading.
Did you have any trading experience before becoming a prop trader? I presume the fact you have been doing it for 5+ years means that you are at least making enough to live off it? do you trade from home or do you rent a desk....sorry for all the questions!

 

[VielGeld]

So what do you think success depends on?

There isn't just one thing since trading is not something defined. It's mostly about identifying opportunities and capitalizing on them, and to do that you have to be able to "read" the market while properly sizing your bets.

Reading the market is a skill that you develop watching the screen. Research, experimentation, lots of practice, and calculating probabilities are an on-going thing at all times. Having a fundamental understanding of the buyer/seller interaction is also must even if you're a position trader, imo.

As for the prop firm thing, look up a couple local firms. Don't pay for training, and be sure to check how they charge for fees. Some charge a % of profit, but offer coaching. Others charge fees off your trading, but don't offer much beyond training in the method they want you to use. Still others will charge fees for letting you use your strategy you developed, but you get to trade the firm's capital. They all have different styles. Beware the scams, too! Those are everywhere.

It all depends... It seems like you're not rushing into this like most newbies, which is a good thing. Start by finding out what you like in terms of market/instrument/style, then get on with the chart (or however you view the market) watching. The market is king!

 

[tommog]

Hey Tommog
Thanks for the info. I am used to staring at the screen for 10+ hours a day - I used to work in banking as an Accountant and pulled long days for most of my career - although I wasn't trading.
Did you have any trading experience before becoming a prop trader? I presume the fact you have been doing it for 5+ years means that you are at least making enough to live off it? do you trade from home or do you rent a desk....sorry for all the questions!

Great White,

Happy to help, ask away.

I started trading prop when i was about 23, i had been a broker before and traded private accounts from home (pretty poorly) before, i think the fact I knew about the markets and had a keen interest is the reason I was taken on. A passion for trading is character trait #1 you must have.

Yes I make my living from trading and I rent a desk.

But it hasnt been smooth sailing, ive had some good years and some bad years but every time around my bad years are less bad and my good years are bigger its a consant evolution, some people hit the ground running have 2 great years then blow up and you never see them again, other people take longer there is no "i am now a successful trader" moment, you are constantly having to tweak what you are doing and find new ways to make money. Every day you have to go in and prove to yourself all over again that you can trade. Ive had periods where ive gone months where i have only had a handful of down days and ive had months when i feel like im never going to make money again. Its very competitve in that sense and its down to you to have the discipline to make the bad times inexpensive and the good times as rewarding as possible. But theres nothing else id rather be doing.

Success is very achievable. But it doesnt come easy.

PS i agree with what VielGeld says

 

[Great white shark]

Vielgeld - thanks for the advice - it's all very relevant and you have flagged a few things that I have thought about already, so it's given it more credence. I am not going to rush into it - I know you can be eaten up and spat out, and I want to be successful at what I do - so I want to make sure I am armed with as much ammunition as I can.
Tommog - also thanks for the advice. Again what you have said is very relevant. I don't think it will be easy and definitely not a "get rich quick" type fo career, but it does motivate me and I hear you when you say that there is nothing else you would rather be doing. I do wonder though, do you ever feel like working for a firm or are you happy doing it for yourself? Do you get more or a sense of achievement working on your own? Thanks

 

[tommog]

Great White,
Regarding would i like to work for a firm, it depends. If my trading wasnt going very well and someone was willing to pay good money to trade then sure. But to be honest if trading is going well you can earn far more being independent, then add the fact you chose your own hours, have no office politics, no boss to please, can do it anywhere in the world, to me that is career heaven!

But maybe things will change in the future, im 28 now, if in 5-6 years time i look to start a family and need to know i have to bring in money to support those around me it does become more appealing. But to be honest it would be a massive lifestyle change on my part and i think potential employers would realise that too and i may find it hard to get back into the world of the employee.