Life Of A Prop Trader: The Talent, Tools And Sacrifices Required For A Career In Proprietary Trading


What is it like to have a prop trading career? Gone are the days of boiler rooms, stale coffee and secrecy. While some trading firms like Renaissance Technologies still have a secret sauce, many prop strategies, such as trend following, mean reversion and algorithmic trading, are well-known. 

But you'll need more than a few trading ideas to make it as a prop trader. Success as a prop trader requires planning and execution, long hours and the temerity to rise above peers and produce outsized returns in competitive environments.

Proprietary trading has many appealing aspects over a traditional money management career. Autonomy is one of the biggest reasons traders seek out prop firms. Prop traders can operate under their own rules-based system using the fund's capital, not money from outside investors. Prop traders also get to keep a large portion of their profits, which brings up the next primary perk: compensation. Prop traders often get a base salary, a cut of the profits and performance bonuses. Six- or seven-figure incomes aren't rare in prop trading.

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So, what does it take to become a top prop trader? Everyone has different areas of market expertise, but prop traders must also have the right mentality and problem-solving skills. Here are three characteristics often found in strong prop traders:

  1. Discipline: First, prop traders need to control their emotions and enter or exit positions dispassionately. A strict rules-based system is crucial, and traders must quickly recover from losses.
  1. Market adaptability: Does your favorite strategy only work in bull markets? If so, you'll likely disappoint the higher-ups at major prop trading firms. Prop traders must adapt to changing market conditions and have diverse skills to trade successfully in any market or economic situation.
  1. Technological fluency: You'll be trading against some of the most sophisticated players in the game, using complex algorithms and automated systems that get entry and exit points down to fractions of a penny. The technical prowess to understand computer-assisted trading is necessary; you'll never be fast or accurate enough to enter your positions into a typical brokerage app manually.

Prop trading isn't all pomp and glamour either. It's a competitive, high-stress field with drawbacks like any other career. It's also awash with less-than-reputable firms that offer zero base pay, limited profit sharing and often make new hires pay for training and tech. Avoid these types of firms as they're a ticket to plenty of risk with minimal reward.

Additionally, prop trading is difficult. You must produce consistent results against top-notch traders to keep your spot. Unlike traditional wealth management positions, there are limited exit opportunities to jump into new roles if prop trading isn't a fit. And if your performance results are unimpressive, you might face the double whammy of losing your prop trading job and having difficulty getting another position in the field. Prop trading can be a path to immense riches, but it tends to cut the wheat from the chaff quickly.

If prop trading still sounds like a career you'd like to pursue, you can test your abilities through firms like SurgeTrader, which provides training and a trading audition where you can trade with your system and style for a small fee. Traders who pass the audition get a funded account and can keep up to 90% of their profits.

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