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Types of Proprietary Trading Firms

There are three main types of prop trading firms:

  1. Churn and Burn – At these firms, you pay thousands of dollars for “training” and the privilege of trading a small amount of capital. You get no base salary, but you keep a huge percentage of your profits (well over 50%). This one is for day traders who want to “go pro,” which means you should avoid it at all costs.
  2. Slightly More Legitimate – These firms will give you a bit more in real training but also charge you a monthly fee to access their data and trade. The monthly fee is often thousands of dollars, so you start each month “in the hole.” You still keep a huge percentage of your profits and still earn no base salary.
  3. Legitimate Prop Trading Firms – These companies pay you a base salary and benefits, give you training, and place you in a team that lets you grow and develop. They recruit directly from universities, and they poach experienced traders from other firms. Employees keep a much smaller percentage of the profits at these firms (~10-30%), but it’s also a sustainable career that isn’t designed to exploit you.

We’ll focus on the third category of companies – Legitimate Prop Trading Firms – in this article.

By pooling resources, these firms give traders far more capital to use. Collectively, they also generate a much higher volume of trades, which can result in better rates with exchanges.

Traders at these firms also have access to much better technology infrastructure, algorithms, and data than ones who work independently.

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