Proprietary trading firm

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A proprietary trading group is a group of traders that trades the capital of the firm. The firm puts up the trading capital and provides risk management, computer (IT) support, office space, and brokerage arrangements. This is in contrast with a trading arcade, which provides office space, computer support, and brokerage, but does not provide trading capital. It is a group environment for trading your own money. ^[1]

The firm derives its profits from the market rather than from commissions. Firms that engage in proprietary trading believe that they have a competitive advantage that will enable them to earn excess returns.^[2]

Characteristics of Proprietary traders

Discipline is the single most critical factor to success. It is also the most emphasised trait in training new traders.

History of Success or a strong history of success in life challenges that have nothing to do with trading, but more to do with a demonstration that "this person can make it happen”. It’s one of the paradoxes that traders strive not to become overly emotional in the act of the trade. Trading is inherently competitive and emotionally absorbing. It requires pro-activity and constant inquiry.

Trading Experience: the many traders that are hired each year, many fail. They fail to adapt to new styles. Old ways are not necessarily bad ways, but success in previous modes can lead to traders holding on to outdated beliefs and practises.

Numbers Guy - are needed since traders will often focus on a set of numbers or relationships from 7 AM to 7 PM without so much as a break for coffee. Concentration is mentally and physically exhausting. The sums are not complicated. But innate quantitative interest and numeric ability are critical. There is plenty of room in trading for quants and non quants, but all trader’s have to be comfortable with numbers. It’s a life immersed in numbers.

Entrepreneurial Spirit is required for traders with a personality that is always seeking value. Trading, at its core, is about being willing to accept risk. There is nobody here telling you what to do and when to do it, so an having an innate drive is vital. ^[3]