Prop Trading Salaries and Bonuses
The general hierarchy in prop trading goes like this:
- “Clerk” or Assistant Trader
- Junior Trader (you usually start at this level right out of undergrad)
- Senior Trader
If you’re working at a legitimate prop trading firm as a trader, then you should expect to start at between $100K and $200K USD in total compensation (as of 2020).
Base salaries are slightly over $100K, and bonuses are usually 50-100% of base salaries.
Some top firms might even offer total compensation north of $200K, but it depends on the market environment and your performance.
If you lose money, you receive no bonus and will eventually be fired if you keep underperforming.
Once you move beyond your first year, if you perform well, your compensation at a top firm could increase to the $200K – $500K range.
Senior Traders often earn between $500K and $1 million, and Partners can earn over $1 million per year.
Base salaries do not necessarily change that much as you move up, so most of these gains come from increased bonuses.
That also means there’s a huge difference between good years and bad years – your total compensation might be ~5x higher in a good year.
The big difference with seniority is that Partners earn a fixed percentage of the group’s P&L, so their bonuses are predictable.
But until you reach that level, your bonus is somewhat discretionary, and some groups are more generous than others.
Prop trading compensation may not seem that much higher than investment banking salaries, but it offers two distinct advantages:
- Progression can be much faster – You’re not going to earn $500K by your third year in IB, but it’s possible in prop trading if you are very good. Some traders make it to the Partner level in only a few years if their performance warrants it.
- Cash payments – There are no stock-based or deferred bonuses, so you earn everything in cash. That doesn’t matter at the entry level, but it makes a big impact as you become more senior.