One Thing I Can't Understand About Traders That Work For Others
I am curious, If you are a profitable trader, why not to put your own money to trade and work for yourself?? What is the point of splitting profits with someone else? Assuming you make $500K+ a year (that's what I consider as a minimum for a good trader). I am sure that there is a logic :)
Can you please share your opinion?
access to more capital, no personal risk, etc
It's very hard to risk meaningful money of your own when you need it for living expenses. Lets say a trader trades for 5 years and builds up a bank account of $500k after taxes and living expenses. At a prop shop he's worked his way up to an 80/20 split and has an account of $5M to trade with, plus great software he doesn't have to pay for. So what's better, 80% of the annualized expected returns on $5M or 100% of the annualized expected returns on $500k?
All of the above. Also, the firm handles clearing/settlements, most lawsuits, and upgrades the technology for you. When there's a legal issue, provided you didn't do somthing really stupid, they can march out an army of expensive lawyers. More capital, more risk management, more research, more heads to bounce ideas off of, more powerful trading platform, just more of everything is available at a good company. Added bonuses are that people in industry are more likely to talk to you if you reach out and grad schools look more favorably upon brand name firms than they do self employment (I have no idea why). The split with the firm is buying you a lot.
That one thing is simple and it's called "economies of scale".
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