MJ: Question for Don - Propriety Trading (non-BJ)

[MJ]

Don, a while back I asked you about trading in the pit and you said it was exhaustive and extremely stressful.

Well now I would like to know your thoughts on commodity trading. I am a complete newbie currently in the fact finding stage. From what little I know, prop trading shops do NOT require traders to put up their own capital which makes it seems quite enticing. If I understand this, you get to trade with the firm's money! Of course their are limits on losses, and if you do not make them money then they fire you.

From what I read on various boards, it seems like some of these prop shops charge an arm and a leg for training and then throw you out on the floor where you either sink or swim. I also understand some of the places are unethical in that they take advantage of newbs and inoculate them with false hopes, charge hidden fees, give unfair payouts, etc. Also from what I read it is common to go for months and even a year earning no money as a trader. Some traders need second jobs to support themselves.

On the positive side, I hear for those traders that are good they can make a LOT of money and go on to work in hedge funds. It sounds sort of like BJ in that there is money management, strategy, excitement, and lots of knowledge required to do well. Even better, if you are good they cannot bar you from trading plus you can work from a remote location if you desire which means no commute! Do you think prop trading is something that is worth looking into?

I found this list of prop trading firms. See the link below. Do you know of any reputable firms in the NJ/NYC area?

Thanks for any insight.
MJ

Trading firms

[Don Schlesinger]

> Don, a while back I asked you about trading in the pit
> and you said it was exhaustive and extremely
> stressful.

Yup.

> Well now I would like to know your thoughts on
> commodity trading.

Even harder than equities.

> I am a complete newbie currently in
> the fact finding stage. From what little I know, prop
> trading shops do NOT require traders to put up their
> own capital which makes it seems quite enticing. If I
> understand this, you get to trade with the firm's
> money! Of course their [there] are limits on losses, and
> if you do not make them money then they fire you.

That's about right.

> From what I read on various boards, it seems like some
> of these prop shops charge an arm and a leg for
> training and then throw you out on the floor where you
> either sink or swim.

95% sink.

> I also understand some of the
> places are unethical in that they take advantage of
> newbs and inoculate them with false hopes, charge
> hidden fees, give unfair payouts, etc. Also from what
> I read it is common to go for months and even a year
> earning no money as a trader.

Steep learning curve. You can imagine what it's like to walk into the pit the first time. The pros eat you alive.

> On the positive side, I hear for those traders that
> are good they can make a LOT of money and go on to
> work in hedge funds.

Like saying to a star on his high school basketball team that maybe one day he'll play in the NBA.

> It sounds sort of like BJ in that
> there is money management, strategy, excitement, and
> lots of knowledge required to do well. Even better, if
> you are good they cannot bar you from trading plus you
> can work from a remote location if you desire which
> means no commute! Do you think prop trading is
> something that is worth looking into?

It would be silly for me to say yes or no. if you have a desire and inclination to do this, then go for it. But understand that it isn't easy, or else everyone would do it. And, standing in the pits all day is murder physically.

> I found this list of prop trading firms. See the link
> below. Do you know of any reputable firms in the
> NJ/NYC area?

I've been away from this for quite a while, but three of the biggest are Chicago Trading, GETCO, and Refco. Surprised not to see Susquehanna on the list.

Don

[MJ]

Thanks for the info. I already looked up the firms you suggested.

MJ