There are hundreds of options if you’re looking for a career in finance. But if you want to put the power of your trading skills on the line, prop trading may be right up your alley.
And while prop trading is mostly done by people who don’t have much experience in finance, there are plenty of opportunities for those with some knowledge or experience. You can choose whether or not to focus on investing vs. trading—or even combine them into one career path!
In this article, we’ll take a closer look at prop trading and help you decide if it’s the right path for you.
What is prop trading?
First, we need to mention that prop trading is not illegal. It is not a scam and is not designed to take advantage of anyone. The primary purpose of this type of trading is to make a profit trading on behalf of a firm. You can do this with stocks, bonds, commodities, currencies, and even derivatives like futures contracts.
It’s a little different from traditional trading, where you use your money to make trades. With prop trading, you’re working as a bank or prop firm trader. You’re still taking risks but doing it with the firms’ money.
What are the pros and cons of prop trading?
When you want to start your career as a trader, you must consider all the available options. There are several types of trading, but one of the most popular is proprietary trading. The advantages and disadvantages of that option are:
- As a proprietary trader, you have access to market data and other information to help you make better investment decisions.
- It’s easy to start prop trading because you don’t need to be an expert trader or have a lot of money. You can start by purchasing a few small positions and work up from there.
- You can make money while you sleep, so to speak. You can start with $10 and make a few thousand dollars in a short time, which isn’t all that uncommon for people just getting started with prop trading.
- The commissions are low for buying and selling contracts on the market. In many cases, commissions are only $5 or less per transaction! This means you can easily earn thousands of dollars in a short period without having to pay hundreds or thousands of dollars in fees every month like you would if you were investing with other types of assets on your own.
- You’ll also have access to higher leverage. If you’re an inexperienced trader, this may be a good option because it will allow you to enter positions with more capital than if you were a self-funded trader.
- If you don’t know what you’re doing when it comes to making trades in the markets, then it’s possible that your losses could outweigh your gains over time because most traders tend to lose money.
- It takes time to learn how to trade successfully (this will take some effort).
What skills are necessary for prop trading?
Do you have what it takes to be a successful prop trader?
It’s not all about having a solid math background. While that’s undoubtedly a key component, you need a few other skills to succeed in this line of work.
First and foremost, you need to be able to think on your feet. This is a fast-paced industry, and if you can’t keep up, you’ll quickly find yourself out of a job.
Second, you need to be able to take risks. This is a high-stakes business; if you’re not comfortable risking your money, you won’t last long in the prop trading world.
Finally, it’s crucial to be able to stay calm under pressure. Markets can move quickly, and if you aren’t able to keep your head in times of turmoil, you’ll risk making bad decisions.
What are the hours like for prop trading?
So what are the hours like for prop trading? Well, that depends on the firm you work for and your specific role. But in general, you can expect to work long hours, especially when markets are open.
You might be required to be at your desk at the crack of dawn or stay up late at night. And on top of that, you’ll also need to put in time outside the office to analyze data and prepare for the next trading day.
The good news is that you’ll have a lot of flexibility when working from home or taking time off. But it’s important to note that prop trading is a highly demanding career, and if you’re not willing to put in the effort, then this probably isn’t the right path for you.
What is the pay like for prop trading?
Do you want to know what the pay is like for prop traders? It can vary a lot, depending on your experience and how successful you are. But generally speaking, you can expect to make a good salary.
In most cases, prop traders are paid a percentage of their profits. So if you’re churning out a lot of orders and making a lot of money, your pay will reflect that. And if the market turns worse, you won’t be penalized too harshly.
In the first pay model, a firm takes a cut of your profits, anywhere from 20 to 50 percent. In addition to this, paying for training or an initial deposit may be required. In contrast with this model, other firms take little to no of your profits and pay 90 to 100% of your earnings. In either model, the trader puts up little or no capital and makes most of their money by way of their profit margin.
Some prop trading firms also offer bonuses and other incentives, which can be a great way to boost your income. And remember, you also get to keep the profits from any deals you make—so there’s potential for some serious earnings if you’re successful.
If you’re looking for a career path that will allow you to make money and grow your skills, prop trading might be the perfect fit.
Traders worldwide can work from home for hours a day once they establish a proven track record in trading firm capital. By offering trading capital, training, and an environment of successful traders, prop firms can be an excellent path for some traders.
But, if you’re considering entering this world without experience or guidance, you may not have what it takes to make it on your own as an individual trader. This is where we come in! We offer a full range of services designed specifically for new traders starting in this exciting field of finance.