Is This Fishy?
Hey all,
I just completed my second round of interviews with a prop trading firm. After asking questions and talking to some traders, both junior and senior traders, I found out that the firm offers a 70% P&L take home with no salary. The leverage of cash outlay is about 20:1 outlay vs. trading capital. Personally, I think the 70% should set off some red flags to someone because that seems rather high. However, it could be right because they offer no base salary and do have rather high trade commission rates. Compared to other prop shops, does this 70% P&L take home seem almost "too high" and seem fishy?
Thanks.
Most of that industry seems pretty fishy to me. Honestly, what edge can you possibly have to generate consistent profits (assuming you're some random college kid)? It seems to me that they're primarily there to generate commissions off of you, which would be significant. Presumably, you eat all the first losses and they run tight risk controls, so they're probably not risking all that much by offering you leverage, so 70% sharing of gains does not seem that high in that regard, when you're responsible for 100% of the losses.
Yeah I get what you are saying. I am a random college kid but def want to go into trading. I know the whole industry is fishy and realize the risks I take by going into prop trading, but I just wanted to get others opinions on the payout this firm offered. Thanks man for the input. Appreciate it man.
dont trade at these firms if you're putting up capital, if you have never had any exposure to trading on your own with your own money. There are a small handful of these shops that are legit, but i've heard stories o some shops running off with peoples money as they're unregistered with the SEC. but 70% payout is ridiculous. most firms are 90-100%.
Dont be discouraged or afraid if your a college student, this has nothing to do with whether or not you will make money or lose money.
but make sure you know what your doing. Make sure you test your strategy across a wide range of markets over a long period of time, and if it looks good then learn to automate it with their api, and watch.
This sounds like the arcade model where you bring your own initial capital and thye make their money from commissions on each trade. I know a guy who's doing pretty well at such a place, but he's the exception, as these places offer minimal training. I'm not in trading so I don't even know what standard salaries are, but commission only doesn't sound like this company is really going to put any real effort into training you so you are successful.
What's the name of the company?
im not a fan of these chop shops either, but keep in mind, they're more of a broker than anything else.
It works if you've been trading for a long time and have experience, and need very low day trading commissions. even IB which is .005 per share would be considered very high compared to what some of these firms offer. .0005 or less in some cases.
but then again if you have been trading for a while and your good then you shouldn't need these firms. and if you have not been trading for a while and are inexperienced then you certainly should not be using 20:1 leverage.
OP, what company is this?
Everyone, thanks for the comments, very helpful and I appreciate the insight. The firm name is T3 Trading Group LLC. They are a member of the SEC and are a part of the CBOE. With the 20:1 leveraging, I believe the firm allows junior traders to have a maximum of $100,000 of trading capital, so a $5,000 outlay is needed to start. Being honest, I am an inexperienced trader when it comes to day trading and building my own strategies. About 6 months ago I started using TD Ameritrade "Thinkorswim" platform to virtually trade with this amount of capital, being that my personal account doesn't have the volume to day trade. I agree with everyone that being an inexperienced trader, I should look at firms that do not require leveraging money. This was the first firm I interviewed with and hopefully will still continue to interview with more firms.
i had a hunch it was t3. like i said 70% is pretty bad. I know a whole bunch of shops that do 90-100.
You admit your inexperienced. As tempting as it is to join, it is very very likely that you will lose all your money on that kind of leverage. you will likely hit your daily loss limit, day after day. I know for a fact that some of these places have nearly 90% or more of their traders losing everything in the first six weeks. not necessarily bc they are bad traders btw. but bc of the various fees, and the fact that the drawdown is small given the leverage. So your drawdown keeps getting hit.
I would highly recommend being patient and trading on your own, for a long while. at least a few more years. I know it not what you want to hear.
Given your inexperience, you should wait until you develop a system that is robust against unlikely events and is tested across a wide variety of markets that can be automated with their api. this way you're idea/strategy is rooted in reality and is proven rather than, some baseless nonsense about not buying below the moving average. and obviously you need to take into account your drawdown, and commissions when you test.
but thats just my opinion.
have you considered FX? you dont need 25k to day trade and you dont have to pay for data fees either, and most retail brokers will give you 30x-60x leverage although the moves in FX are obviously less than in stocks.
The only thing I know about T3 is that they'll take practically anyone.
as wit almost any of these companies, as they're more a broker. They're not risking anything, because they auto stop you before they're capital is put on the line.
I do plan on being patient with this stuff and really testing my emotions and success with phantom money before using real money to trade. I am a rising junior so I have about 2 years to play around with the markets and develop a strategy that can show me some consistency in the green rather than showing continual losses.
Freshman year I opened up a TD Ameritrade "bullshit" account where I have about 5-7k just to mess around with but the positions I have in the account are held longer than intraday due to the $9.99 per trade commission fee TD has. I have heard people mention FX and wanted to look into it, so that is def a possibility.
Would you be able to mention some of the firms that do pay out 90-100% P&L? I appreciate it.
Like I said, I am only going into junior year, so I do have some time to get a significant amount of trading under my belt to really decide how I like it and how I can work with the market to show continual profits. I started a trading club at my school freshman year and we all use the schools platforms to trade virtual money day in and day out so just like anything, the more you practice, the more potential you have to becoming successful in whatever you do.
when I say testing im not referring to emotions btw, Im refering, to you finding a strategy or system, that has statistically proven itself,over years of intraday historical data, across several different assets. Make sure you are using a computer to test it btw, as you will likely be biased.
It would be even better if you can program, so you can automate it.
this way your coming to the table with something that works and is proven.
their training is not worth anything. If it were worth anything they would not need to charge anything for it, and would not need you to put up capital.
Can you get into a place that doesn't require initial capital and has formal training?
Although this firm does require the $5,000 cash outlay, before trading with the leveraged money, that money includes formal training (a 3 week program that teaches soon to be junior traders various analytical techniques and senior traders work with the junior traders teaching them their strategies they use). While you are in this program, you can only trade on their demo program and test your stargegy. They do charge you $400 for series 56 liscence and the books you need.
There are very few prop shops worth joining out of college, like Jane Street, Getco (now KCG), Five Rings, DRW, Peak 6, etc. They do not require you put up capital and put you through a trading assistant program before they give you real money.
Honestly it's likely easier to first go to a hedge fund (DE Shaw, Citadel, AQR, BB quant AM, or smaller) and move into prop as an experienced lateral.
whoah, its far harder to get a spot at those funds you mentioned than those prop shops.
My two cents on difficulty of getting into these places:
DE Shaw > Jane Street = Five Rings > AQR = Citadel = KCG > DRW > Peak 6
Quisquam aut quo et eveniet facilis aut molestiae sit. Aut dignissimos qui quo. Ut reprehenderit necessitatibus voluptatem quia alias in quo. Cumque perferendis est voluptatem et esse id.
Dolores neque mollitia quibusdam unde ad quod. Corrupti esse tempore dolore.
Ipsam dolore officiis quo corrupti est. Voluptates nobis ut repudiandae dolor recusandae molestiae. Enim architecto fuga cupiditate pariatur ea. Aut ea animi facilis amet doloremque est. Vero voluptas qui aut eum aliquid placeat.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...