Proprietary trading firms, or prop firms, hire skilled people to trade with the company’s money. They look for people with a certain combination of skills, knowledge and temperament to handle the fast paced, high risk world of proprietary trading.
They usually look for people with an analytical background. Often they want people with finance, math or engineering experience who can make quick data driven decisions.
Trading at a prop firm is tough and requires a unique set of skills. Successful traders are disciplined, decisive and have great risk management. They are often good at high frequency trading and can adapt to changing markets quickly.
Since the goal of a prop trader is to make money, prop firms usually offer a performance based compensation structure that aligns the traders interests with the firms financial success.
Summary
- Prop firms hire people with an analytical background and experience in related fields.
- Successful prop traders are disciplined and good at risk management.
- Compensation at prop firms is performance based.
Trader Qualifications
To become a trader at a prop firm you need to have a strong educational background, relevant experience, technical skills and industry certifications. These are the building blocks of a successful prop trading career.
Education
Your journey starts with a bachelors degree in finance, economics, math or a related field. Prop firms usually look for people with a good understanding of financial markets and instruments.
Related Experience
Prior trading experience, especially in the same asset class or market, is highly desirable. This can be retail trading experience or a previous role where you managed risk and developed trading strategies.
Technical Skills
You should be able to do quantitative analysis and be familiar with trading software and platforms. This means being able to create and use complex financial models to assess risk and opportunity.
Industry Certifications
While not always required, having certifications like the Securities Industry Essentials (SIE) or the Series 57 – Securities Trader Qualification Exam shows your commitment and knowledge of the industry’s regulatory environment.
Job Description
In prop trading firms you will manage the firm’s capital through a combination of good risk management, innovative strategy and thorough market analysis.
Risk Management
Your main responsibility in risk management is to protect the firm’s capital from big losses. You will set and follow stop-loss and position limits. Your role in risk mitigation is key to the survival and stability of the firm’s trading business.
Strategy
In this role you will come up with profitable trading strategies. This means backtesting, simulating and fine tuning algorithms or manual trading systems. Your creativity and analytical skills are key to developing strategies that can beat the market.
Market Analysis
As a trader at a prop firm you will do deep dives into market data. You will use technical, fundamental or quantitative analysis to make trade decisions. Your expertise will allow the firm to exploit market trends and price inefficiencies.
Traits of a Successful Prop Trader
In the competitive world of prop trading specific traits will give you an edge. Prop firms look for these traits when hiring as they often correlate with a trader’s performance and potential.
Psychological Resilience
When you are a prop trader psychological resilience is key. Markets are unpredictable and losses are going to happen. Your ability to stay calm when things go wrong and persist with your trading strategy is essential. A resilient trader can absorb losses, learn from them and bounce back with a clear head.
Flexibility
Your success in prop trading is also dependent on flexibility. Markets change and strategies that worked yesterday may not work today. You need to be quick on your feet, able to detect changes in market conditions and adapt your approach. This flexibility can be the difference between making money or losing money.
Attention to Detail
Finally attention to detail is your biggest asset. Prop trading involves complex strategies and you need to keep an eye on many things that can impact your trades. Precision in your execution and ability to spot small opportunities that others miss is key. It’s often the little things done consistently that add up to big gains over time.
Application Process
To get a prop trading position you will have to go through a structured application process.
Initial Screening
During initial screening your resume and cover letter will be reviewed to make sure you meet the firm’s requirements. Typically a background in finance, economics or related fields is required and any relevant trading experience.
Interviews
If your application passes the initial screening you will move on to the interview phase. You will be asked about your education, trading experience and approach to risk management. You will need to show aptitude and the right personality for trading.
But also there are questions to ask before choosing the prop trading firm. Make sure they know who you are but also make sure you know the company.
Trading Simulations
Successful interviews will lead to trading simulations where you will manage a demo account to show your trading skills. Firms will look for you to make a profit, typically 10% within a certain timeframe, while sticking to the risk limits.
Offer and Onboarding
Once you pass the trading simulations with good results you will get a job offer. The onboarding process will then introduce you to the firm’s policies and trading platforms. It will be a mix of formal training and practical application of skills.
Exiting a Prop Firm
If more than one reason to leave then it’s time to go and look for another.