Proprietary Trading – Pros and Cons: A Personal Experience and Insights into Prop Trading Strategies

Proprietary trading – pros and cons – advantages and disadvantages

There are both pros and cons to being a proprietary trader. Proprietary trading might not be so different than retail trading and you can mostly trade proprietary trading strategies as a retail client. The biggest advantage of being a proprietary trader is leverage.

I was a proprietary trader from 2001 until 2018 in three different companies. How was it, and how does proprietary trading work? What are the advantages and disadvantages of proprietary trading?

Below you find out what a prop firm is, the pros and cons of proprietary trading, which proprietary trading strategies I traded, how it works, and which firms I used.

First, a disclaimer: I am by no means an expert in the business of proprietary trading but hopefully, I can provide some “insights” into the proprietary trading business via my trading. This article is personal and based on almost two decades of proprietary trading experience – not any summary made by someone with no trading experience.

What is proprietary trading?

The most basic definition of proprietary trading is trading to make a profit rather than earning a commission or trading on behalf of clients. Proprietary traders can be hedge funds, banks, brokerage firms, or many other types of institutions. The firms use their capital to engage in trading to make a profit.

In this article, we refer to proprietary trading as a firm that facilitates remote or on-site trading for small individual traders.

Worldwide, many proprietary firms welcome small and undercapitalized traders. These firms offer trading in a wide range of assets, like forex, stocks, commodities, or any other form of financial assets.

In this article, we only focus on prop firms offering stock trading, but in principle, it should apply to all types of firms, no matter their products.

Is prop trading illegal or dead?

For most of the world’s population, no, but for US citizens and residents, you need to be careful. The reason is simple: this is strictly r