A note from the prop desk

This African Proverb above presently sits on our whiteboard, just outside the trading bullpen, on our trading desk. It encapsulates the advantage of trading at a proprietary trading firm, and helps us raise questions about what we want to be as a trader.

Let me offer five examples from the desk this week to illustrate this point.

1. Trader A, Young Gun, finds CLRB, a low float opportunity that fits his PlayBook. He captures 8k of profit in the opportunity. Trader B, Heavy Hitter, hears Young Gun chirping about this name, and finds a setup that fits his trading eye. Heavy Hitter banks 20k (before giving back some), a 20k he would not have made, save if he was trading on the desk with Young Gun.

2. Trader A finds CLRB and is putting up one of his better days. The managing partner notices an area where Trader A had a trade decision to take off risk in the trade. The managing partner does not tell Trader A how to trade the setup. The managing partner gives Trader A ideas to consider to make his trading more consistent and control his risk better. It’s up to Trader A to make trade decisions, with this added perspective from the managing partner.

3. Top Trader locates 30k shares of MGT to short this Wednesday. His trading teammates sitting next to and behind him have their shorts taken away as they located them from a different broker. Top Trader transfers 2/3 of his shorts to his trading teammates so they can participate bigger in the MGT opportunity. The stock drops from 5.30 to 2.25 intraday. #WeAreAllInThisTogether!

4. Hardest Working Trader has a strategy that is capital intensive, but that has edge. He needs some more capital right before a close to capture the most in an opportunity. The firm increases his capital near another $5 million. Hardest Working Trader executes the trade for an even larger profit.

5. Floor Manager notices FOMO has an overnight position of 7500 shares that is too risky. He sits with FOMO and makes his case to cut the position. Floor Manager lets FOMO make the final decision. FOMO decides to cuts his short position completely. That position opens up 20 percent higher than the close, saving FOMO in excess of 10k. FOMO is kidded he owes Floor Manager lunch. FOMO is happy to oblige.

This week I was asked by a trader in our community about an opportunity at a trading firm, for which he was skeptical. He wrote (edited):

Hi Mike,
I recently signed to enter a remote trading
program with a company called (XXX) Trading Services. Upon applying and
without providing any trading records, they told me I could enter the
trial program trading a live account with (very limited capital) BP. No deposit with these
guys but I pay for data fees but they only provide level 1 data, and
charts. No level 2, no Time and Sales – they won’t let you pay more to
get that either. Also there is a small list of about 90 stocks(FB,
BABA, APPL type stuff) they will only allow you to trade. Can enter the
market only with limit orders, nothing liquidity removing whatsoever
except exiting. They require you to trade a min of 25 trades/day, they
also say they do not want you holding trades for more than 5 minutes,
although they give some exceptions. There is no order routing, only
their smart route. Does
this sound like a legit trial program or a scam
of some sort? Maybe making money off marked up level 1 data? Also when
you call them, they never say the company name, but they only answer
“trading.”Website says they are also an HFT, are they just being
secretive because of this? Would be very appreciative of your opinion on
this.
Thanks Mike!

To answer this trader, or to answer questions like this for you, you must first ask: What are your trading goals?

Do you want to push yourself daily, with substantial firm resources in technology, training and capital, to learn how good you can be?
Do you just want to get your foot in the door anyway you can, like at the shop above?
Do you want to keep as much of your trading profits as you can doing things alone?

That answer is up to you. What I have observed from my seat in markets is summed up with that African Proverb, with which we started this post: