What is proprietary trading and how it is beneficial?

Hello, dear readers! I am becoming a fan of your blog, I do not know whether it is good ... weekend and I'm writing a post. But I do not regret it! Today, cool theme, will be interesting both to beginners and more experienced. What benefits can bring proprietary trading, and whether it is really as good as it seems at first sight? I try to understand all the bones and estimate the various options.

What is proprietary trading?
Proprietary trading (proprietary - English proprietary.) - A form of cooperation between companies and private traders. It is this cooperation that the trader makes a certain deposit on a brokerage account, and the company adds to the expense of their own funds, several times superior trader tools. If a trader is losing money, then at their own expense as soon as they come to an end, the company locks and takes account of their own money. If the trader is trading profitably, the profits obtained in several times more than you would on your money, but you have to give part of the profits of the company. In fact, prop your company becomes an investor, but no risk (loss - at the expense of the collateral deposit of the trader, the profit - then you have to share).
Who can become a prop trader?
Almost any. Importantly, do not get tired of repeating it, desire! Basically there are two types of proposals traders. If you are experienced - then you need to provide proof of your skills. Report over the long term, a certified broker. Or other means to confirm that vyuspeshny trader.
If you can not show off your results, then you will approach another suggestion. Many companies are willing to teach you how to trade profitably (probably paid), and then give you the money to trade. If you're willing to take a chance - try. Regarding the quality of education can not say anything, I have not worked with the prop companies. The article is just a theme, read, if you decide to study, can you handle: even though this is not quite true to prop companies "! 5 Reasons uselessness of learning forex trading (and other markets)."
Can I work with companies prop remotely? Yes, you can, in Russia they are becoming more and more!
proprietary trading
What are the conditions prop companies?
Terms and conditions are acceptable, do not panic! Give 99% of the profits you will not have to. Money can get a year or two or more, it is necessary to look at a specific company. As can be stably operate such times, if you do not violate the terms of the contract (is now), and your slump is less than the size of the security deposit. Get the money is absolutely real. Companies are willing to contribute to the 5, even 10 times higher than the trader's deposit! Most companies profit shares 50/50. Many expect this figure alone, ready to meet stable traders.
Is it profitable to engage in proprietary trading and for whom?
Do you think, the more money you have, the better? This question is not as simple as it seems! Let him look at the examples given that the trader can lose only the size of the security deposit, that is, it means that he has made. If the drawdown is more, the company prop block score and break the contract, it absolutely can not be allowed!
Example 1. Assume that you have tested your TC since 2005. During this time, the maximum drawdown with your MM reached 40%. Profit is divided 50/50 with all the money in the account. Does it make sense to take money from prop company? If your drawdown was 40%, it could happen again. It is necessary to count with a stock drawdown, for example 50%. Suppose that you have entered into an agreement and joined a brokerage account with $ 1,000. The company added at the expense of more $ 1,000. The result was $ 2,000. Profit in this case will be doubled, but exactly half of the company will have to pay for the funds provided. What is the meaning of proprietary trading? Under these conditions, no.
Example 2. The conditions are the same as in Example 1. But the company added $ 3,000, the total money of $ 4,000. Knowing that you can only lose your $ 1000, you should not allow more than 25% drawdown. In this case, you would have to reduce the risk by half, to reduce the maximum drawdown of 50% to 25%. The potential profit is also reduced by half, and will be the same as in Example 1. Therefore, under these conditions, meaning either.
proptreyding
Example 3: Profit shares as of 50/50. Your maximum drawdown was 25%, with a margin of 33% will be considered. You put $ 1000, the company donated $ 2,000, the total capital of $ 3000. Now, your profit will increase three-fold. But half of that income will have to pay, so your net income increased only 1.5 times. Increase funds does not make sense, because you have to reduce the volume of trade.
Example 4. Profit sharing 50/50. The maximum drawdown of 15%, with a margin of 20% is obtained. You pay $ 1,000, prop company contributes another $ 4,000. Total funds of $ 5,000. In this case, the profit will increase by five times, your net profit increased 2.5 times. This is not bad!
The conclusion suggests itself - the smaller drawdown in your TA, the better. You can take a lot of money, more than you can earn proprietary trading. For trade to work with large drawdowns prop companies do not make sense. Therefore, before entering into the contract, calculated all the details! Test your TS and see whether it makes sense to take money? There are other ways to increase the deposit, read "How to take credit for forex trading?"
All the examples are conventional. You can look for companies with better conditions, maybe someone is willing to give 80% of the profits to the trader, or work with a transactions% paid by the broker. Who seeks will always find! Type in a search engine query "proprietary trading" or "prop company", you will find more.
There is a very interesting way of capital management, in which the trade profitability is not significantly reduced, but it is possible to significantly reduce drawdown, to make sure that your money has never dipped below a set level. For proprietary trading simply irreplaceable thing! About this method will write separately, follow new articles, subscribe to updates in the mail, do not miss.