Advantages and Disadvantages Of Proprietary Trading for Firms
Proprietary trading firms: Deploy their capital to traders and then share profits.
Advantages and Disadvantages of proprietary trading
- Exposure to more funds than you would have funded your own account
- Interaction with professional traders that will help a trader to be consistently successful
- You have more exposure to financial funds than you would have on your own.
- Reduced commissions.
- Reduced business expenses than working individually.
- Access to professional training which improves the traders educational growth and trading skill
- Automated Regulation. Usually the typical trader is not disciplined when it comes to following their risk management parameters .Prop firms solve this by automating risk measures that a trader cannot go beyond.
Disadvantages of Prop trading
- Profit splits are fixed no negotiations
- The percentage risk is too small mostly less than 1.5% which is too small for traders usually to risking nearly more than a 25% of their account.
- Reduced leverage , which results in slow growth of accounts.
- Other firms charge software access fees, marked-up commissions.
- A percentage of the profits may also be taken.
- Most people don’t succeed, so they pay the evaluation fees again and again
- Many restrictions which makes you trade funds way less than the amount in the account