Life As A Proprietary Trader

  • September 30, 2014
  • Blog

Firstly for those of you that don’t know, a proprietary trader is a trader that trades purely speculatively on his or her own account and they are usually facilitated by a much larger clearing firm which give them extra margin to trade with.

This is what I have been doing my whole career. Proprietary traders are at the cutting edge of the financial trading world because they live and die by their trading accounts. They have no base salary; our income is entirely derived by what we take out of the market.

Proprietary traders usually work on a trading floor with tens of, if not hundreds of other traders doing the same. Each of you has to rent a desk to trade from. This desk will provide you with cutting edge equipment including trading software (usually Trading Technologies, Stellar Trading Systems or CQG), screens (usually a minimum of 4), high spec trading computers and a charting package. Although these days trading software has charts which are perfectly suitable for day trading, as I have highlighted in other posts, technical analysis is overrated and we focus most of our attention on order flow in the Depth of Market (or Level 2 as stock traders refer to it).

Included in your desk rent or “desk fees” is also IT support and news services. The cost of desk fees varies depending on what software/hardware you require and also which firm you are at. I have paid as “little” as £1800 a month to as much as £3500 a month.

Each trader has their own trading account. When you first start at a firm as a trainee they will back you financially. They absorb all of your trading losses and costs (which will be reflected as a negative account until you start making money). When you have made back all your incurred expenses/losses during the learning period you will usually start on a 50% split of all the profit you make.

As you develop as a trader and build your trading capital this profit split will increase. Some places go as high as 90% in the trader’s favour. But by this point you will be expected to be pretty much self backed, i.e you assume all financial risk and you typically will need over £100,000 in your trading account to reach this level. If you have over £50,000 in your trading account you can usually get 70% profit split. Anything under £10,000 and you are looking at remaining on a 50% profit split.

Life at the start is very hard, it took me about 6-7 months before I started earning any money and was having to support myself in London that whole time, but for the people that do “make it” it is the best job in the world. Within a year I was earning okay money, working for myself whatever hours I want, taking holidays when I want and knowing I was in an environment of lots of other young guys, some earning 6 figures a month! And knew all that was for the taking. As my career progressed my earnings increased and I got to travel and trade spending a brief period of time trading in Spain as well.

However, it takes real time and commitment. When I wasn’t on holiday or enjoying the fruits of my labour I was putting in the hours, working 12+ hours a day. Constantly studying the markets, learning new techniques, talking to experienced people around me and making sure I was at the front of the pack at all times.

There are dark times too. There is a lot of pressure obviously because if you don’t make money one month you don’t get paid, then add on top of that the expense of desk fees (which, I may add don’t come out your personal bank account like your mortgage but out of your trading account) and you know there are always people out there competing with you and you need to constantly be adapting and changing.

I would recommend the life to anyone that is really keen to get involved in the financial markets and has the commitment and drive to be the best.

After, over a decade of trading in proprietary firms I needed a break and now trade from home and teach others the techniques we use as professionals and it is quite possible to do all this from home as a futures trader. The commission costs aren’t quite as competitive but they are manageable, and you don’t get the buzz of being on a trading floor with other traders. But that is the only real difference.

Please get in touch or look around the site to learn more. You can get access to my E-book containing professional trading strategies I use, worksheets, insider information for just $45 here you wont regret it!