100% commission based compensation for a junior trader?

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TA05

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There is this US equities shop that is recruiting for traders. I’ve never done trading before, but is this type of compensation structure common for a junior trader? How would this type of experience pay off in the long run?
 
I don’t know … I just heard about them today at our university’s career fair. I scheduled a five hour on site visit next Monday.
 
From other posts I’ve seen on prop trading, beware firms that demand a ‘capital contribution’ or the like up front.
 
They’re not asking for a capital contribution: the capital is provided by them, but they share in the profits.
 
Do they pay you a base salary? It sounds like you need a bit more information.
 
Never any type of trading? You might as well get started with a paper based account to get a feel for the market.
 
why on earth would you start a paper based account when you can go trade at that firm with their capital and get the real feeling of what it is like
this is a very common pay structure for prop trading firms, most won’t pay base salary for entry level position, you’re lucky if they do but it will be extremly low
if you live with parents, or have other source of income to get you by, go ahead and try it for several months
for most people it takes more than 6 months to become good and actually start making decent money out of it (after firm takes their cut)
 
Prop trading = Goldman Sachs
Daytrading = what everyone else who sits in front of a computer scalping for pennies does while pretending to call themselves “prop traders”
 
A wise man once told me that when you start in trading, make sure you are risking other people’s (company) money. If you ever get any good, you could always go on your own afterwards.
 
kblade Wrote:
——————————————————-
> why on earth would you start a paper based account
> when you can go trade at that firm with their
> capital and get the real feeling of what it is
> like
>
> this is a very common pay structure for prop
> trading firms, most won’t pay base salary for
> entry level position, you’re lucky if they do but
> it will be extremly low
>
> if you live with parents, or have other source of
> income to get you by, go ahead and try it for
> several months
>
> for most people it takes more than 6 months to
> become good and actually start making decent money
> out of it (after firm takes their cut)
Even after going through a training program you’ll spend a few weeks running a paper/virtual account before they let you loose. In the interim, you might as well dip a toe into the market and immerse yourself in this volatility. You’re guaranteed to learn something.
 
I worked for Title and there they will let you trade on your 1st or 2nd day just to get a feel. they keep you to lots of 100 and ensure that you show discipline before you can up your size. it was incredibly tough getting by for the first few months as you make nothing but i ended up becoming profitable but then accepted a job working for a PM as the salary was much more appealing than being extremely ghetto. have AT LEAST 6 months worth of cash or else you won’t make it. it was the #1 reason why I got the job I have today working for the best, largest, non-subprime inflicted company out of the US in the industry.
 
What is the rationale for 100% commission… my guess (based on random thinking on how their business model works)
a) They give you 100% commission for X amount of time. This enables you to get by and really be motivated to make money. Also, it enables them to give you a smaller amount of money to trade with for you to get by (with life’s expenses), as it is 100% commission - also minimizing their loss with the risk that you go negative.
b) They bring down the commission % as you get better, as your chance of losing money for them decreases, but they up the amount that you can trade/risk as well, so you don’t necessarily make more money for yourself but you make more money for them.
They boot you if you can’t get past (a), losing as little money as possible.
Sounds interesting/cool - esp. MattLikesAnalysis - - - I am intrigued to try this out at some point . . seems fun
 
Umm I belive it is more like this:
your compensation is based 100% on comission meaning no base salary but what you take home is only from profits you make on trades
now the profits on trades are split with the firm, when you first start out it might be something like 50/50, if you get better perhaps you can re-negotiate with them to be able to take bigger cut for yourself, say 60/40
at the same time if you get better, you can ask to increase the base amount of cash you can work with (the size of trades you can work with)
you won’t get paid every day, losses from one day will carry over to next day so you have to make up for poor performance but I’m sure if you’ll be consistenly week after week in the negative, they’ll boot your ass because you are losing their money not your own
 
Can we stop calling it commission and say ‘100% from P/L’ or ‘paid only from profit’?
Philip - It was my understanding he gets paid 100% from the profits (I.e. 30% of profits) and not paid 100% of the profits. Maybe MattLikesAnalysis can comment on the payout scales?
If you are getting paid 100% of the profits, then good for you (maybe).
 
if he’s going to take home 100% of the profits, what is the firm going to get out of this? How is the firm going to pay for the trading platform, office rent, etc.
 
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