Trading is one of the important sectors of the financial market.
Trading occurs in Stocks, Bonds, Currencies, Commodities, Derivatives - all of these mentioned items and other financial instruments.
The objective of trading being buying at a lower rate and selling at higher to earn a profit.
Sometimes trading is also done to hedge against any future loss when there is the involvement of foreign currency.
In this article, I will cover the list of prop trading firms in India and try to give an insight into all matters of the subject.
Let us first know what is Proprietary Trading!
The word proprietor means being the owner of something.
Therefore, when trading in financial instruments like stocks, bonds, etc. are done out of own funds and for oneself, it is known as Proprietary Trading.
In this type of trading, traders earn or lose on trade values and do not work on a commission basis.
The entire trade is done in the firm's own name which means there is more exposure to risk and as a result, more risk brings along more profit/loss.
If a proprietary trading firm buys stocks of XYZ Ltd trading in the market at $100/- per share, and the proprietary firm buys 1000 no. of the same, then his total buy value and risk would be equivalent to $100,000/-. The benefit that the proprietary firm will get from this investment is:
The example is hypothetical, and the profit can vary. There can even be another side of the story here.
There is also a huge risk of losing the same in the case of reverse happening, i.e., instead of prices surging, it gets lower.
Proprietary trading firms make money through trading activity in the market.
They buy and sell certain combinations of stocks and other financial instruments to earn a profit.
There are trading markets where these financial instruments are traded across all traders.
Prices are determined based on demand and supply and traders earn by speculating the price of these financial instruments.
Hedging is also done by buying or selling futures derivative contracts.
Thus, the main earning is because of the price fluctuation.
For example, if a proprietary trader believes that the price of a particular stock is going to go down during the day, he can sell the shares of that stock in the market and buy the same stock at the day end when the prices are down.
Thus, he is selling at a higher rate and buying at a lower rate.
This way the trader can earn huge differences in intraday trading since the margin requirement is lower and the trader can trade in huge quantity and can capitalize the price fluctuation in his favor without investing much in the market.
But it is not so easy as it may sound. This type of trading requires extensive market research and a survey on that particular stock.
Most of the proprietary trading firms in the US are located in Chicago. A list of few of the best proprietary trading firms in the US has been provided below:
Unlike in the US, in India, you won’t find many popular Proprietary Trading firms, since it is said that in India only 2% of the people are into trading activity.
Few of the firms that can be mentioned here are:
Proprietary Trading Firms, while hiring people for this job, generally look forward to people having good analytical skills, ability to study the market and the financials of the companies, and most importantly, having knowledge of the trading market.
As such, to enter into a Proprietary trading firm you should be having any financial degree like MBA in Finance or some certificate course on Trading in Securities.
One can also choose to complete CFA (Chartered Financial Analyst).
All these degrees will help in getting the desired skills to operate and perform in a trading job.
The job description for your work would be to analyze a particular stock or currency by looking into its past prices, studying its current performance and predicting its future prospects and after making extensive study one could make a decision whether to invest or not to invest.
The job profile would also include making or preparing a portfolio of stocks and deriving profit out of the same.
A proprietary trader salary is quite high, but it is also linked with the profit margin.
Usually in the US, the proprietary trader gives a salary of around $228,000 p.a. plus the target profit margin that can range from 20% to 50%.
In some cases, the annual salary package well surpasses the profit margin. As such if your experience, analytical skill, and research on the market are good you can earn hefty profits from this venture.
In comparison to the US, there is not much for a proprietary person’s job in India.
Most of the time, the salary is linked with profit percentage. In the case of no profit, you get nothing.
And the most important thing is you don’t get a salary every month. Since it is linked with profits, it takes some time for the payment to be made to you.
Once you decide to quit your job as a proprietary trader you can have the following career options available:
There are many aspects of proprietary trading, and only the basics of it have been discussed here.
Here, I have tried to establish the basic facts and attempted to provide an insight into the basic but important details that are necessary to know and understand before you decide of plunging into Proprietary Trading yourself.