How does Prop Firms gain recruiting Prop Traders

Hi,

Anyone knows how Prop Firm benefit from their recruitment of Traders? There are risk when these Prop Traders take up positions, why would the Prop firms want to share 50-50% profit with the traders and the prop firms bearing all the losses? They must be making money from taking in these traders...the question is How?

ben chio said:

Hi,

Anyone knows how Prop Firm benefit from their recruitment of Traders? There are risk when these Prop Traders take up positions, why would the Prop firms want to share 50-50% profit with the traders and the prop firms bearing all the losses? They must be making money from taking in these traders...the question is How?

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Because for every twenty that fail, one will make you all their losses back and more. (Obviously these are not precise numbers) but think about it...

If you get 20 traders and each of them drop an average of 5k that has cost you 100k.

If one of those guys manages to make 200k, you are at breakeven.

I've seen a few guys make well over the cool £1,000,000 figure.

Just one of them could pay for 200 losers...

It's just like a trade with a terrible win/loss ratio and an incredibly high R.

That's not including the fact that the prop firms get rebates from the exchanges for the liquidity you provide AND the fact that once you are profitable, you pay desk fees which they also make a profit on.

trader_dante said:

That's not including the fact that the prop firms get rebates from the exchanges for the liquidity you provide

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Er... reputable ones pass those on

But yes, they still make money per round trip. Easily enough in fact.