Proprietary trading firms leverage. As traders have had some experience trading a retail account like Etrade, Ameritrade etc. But the retail fee structures and platforms may not be conducive to high volume trading. A proprietary trading firms leverage, platform and support system provides the infrastructure for a trader to make the transition to trading for a living.
Proprietary trading firms leverage vs. retail
Retail firms are required by law to have a minimum capital deposit of $25K (soon to be $30K) in your account. You can only trade with funds above that $25K and you get leverage or buying power based on the capital in your account. One of the major benefits of trading with a proprietary trading firm leverage, platform and support is your minimum capital deposit can be reduced, as the prop firm uses its own capital to give you leverage and buying power in your account. You are not required to pay interest on the margin because your proprietary trading firms leverage is short term i.e. in most cases you will not be holding overnight positions.
The commission fee structure of a prop firm is also different from a retail account as you pay a rate per 1000 shares traded not per trade. For a high volume trader this fee structure adds up to significant reduced costs.
What is a reputable proprietary trading firm and proprietary trading firms leverage considerations?
A reputable proprietary trading firm will provide you with knowledge, support and a sound risk management strategy, which includes the increased buying power as your account grows to setting stop losses on your account. Proprietary trading firms leverage based model will monitor your trading activity and can provide mentoring, support and education on whats working and not working in virtually real time. The good ones do, that is.
The best prop firms will have access to a head trader who will be available either directly on the trading floor or remotely. The remote aspect is another huge advantage of trading with a proprietary trading firms leverage and platform and is a great option as many traders prefer trading from their homes. Traders can follow the senior traders in the group and watch how they trade the markets live. While the ultimate trading decision rests on you, you will be able to follow the leadership and guidance of the senior traders and begin to learn from those more successful.
A proprietary trading firms leverage model is required by law to keep a percentage of the profits you make. The percentage the trading firm keeps depends on several factors but you should seek those that payout 80% or more of your profits.
You should spend some time researching and understanding how prop firms work and differ from each other and retail firms. Support, education and capital are 3 essential factors.
Proprietary trading firms leverage can be a deal changer for you. It was for me.