Paying a Prop Trading Shop for Training


Here’s  a trader question that came in over the weekend.

Hello John,

What do you think of these prop trading companies that say for a fee of about $5000, they can teach a novice trader to become profitable in about 4 months of supervised trading. I am tempted to sign up but it’s a lot of money to fork out.

Owen

I’ve got to say this may be my first question of this specific type that I’ve received – at least so far as I can remember. Prop shops and the like are not something I have any direct knowledge about. To that end, I’m going to refer Owen and anyone else interested in the subject to Brett Steenbarger, who has dealt with these types of operations and written fairly frequently about them in his blog. In particular, take a look at his Proprietary Trading Firms, Arcades, and Scams post.

Brett addresses the subject pretty well in that post, but I’ll add one further point.

Part of becoming a consistently successful trader is finding the trading approach and strategy which best suits you. A prop shop is probably going to teach you a specific way of trading. Think of it similarly to buying a trading system. It might end up being a very useful thing, but you really need to know exactly what you’re getting going in to know whether it’s going to be of real benefit to you going forward.

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About the Author
John Forman, author of this blog, has traded for more than 20 years, is a professional market analyst, and authored The Essentials of Trading. He is an active participant in trading forums, consults for trading related businesses, as published literally dozens of trading articles, and has been quoted in a number of books and in the media.
** See John’s full bio.

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  • Ikeal

    Prop firms just seem like a bunch of fees, fees, and more fees. My rec to someone coming out of college looking for a trading career is to not bank on becoming a prop trader. So many young graduates are enthralled about the idea of attaining the title as being a “trader.” Dont buy into it. Nothings for free and fees are a very sneaky and deceptive way of making seemingly little costs add up to a whole lot. Dont want to talk too much smack about prop firms, but I am just very weary of them (never traded with one but thought about going for an interview after being turned off by the recruiters evasiveness about the firms policies and capital contribution requirements. Look to be traders who are MARKET MAKERS, not “Proprietary.” Market making is where its at, taking orders from hedgefunds, matching buyers and sellers and YOU earn commission. These prop firms, with their splits, desk charges, commissions, fees, etc etc. on and on and on with nonstop fees. Lets face it, these prop jobs are not hard to get AT ALL, if you show one ounce of eagerness to throw down money for a prop firm you’ll be hired in a second. Also, working for some sketchy-ass firm named “chronic trading” certainly will not look fabulous on a resume either. Job security? NONE. God do u know how much pressure you would be under EVERY SINGLE DAY with NO salary and banking solely on commission to pay for rent and dinner?? That is way too much for a recent grad to handle and one not need to suffer such job-INSECURITY. You are merely paying prop firms to use their leverage. It’s a deal, not a job. Take the job at Citi as an operations analyst or a trading assistant ANYDAY over some BS prop trading position. Would look SO MUCH better on a resume as well. Just my 2 cents.