Proprietary Trading Career: A Detailed Guide

Proprietary TradingProprietary Trading Careers:

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 involvement of foreign currency.

In this article, we will be covering about making a career in Proprietary Trading 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, the traders earn or lose on trade values and do not work on commission basis. The entire trade is done in firms own name which means there is more exposure to risk and as a result, more risk brings along more profit/loss.

For example:


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:

  1. Dividends or profit distributed by XYZ Ltd., which would be in proportion to his investment, i.e., proportionate to the number of shares invested in.
  2. Profit in terms of price appreciation. Let’s say after a month’s time XYZ Ltd shares are trading at $150 per share. So by selling the same in the market for $150, the proprietary trading firm will get a benefit of $50 per share which is equivalent to $50,000 profit in one month, which is equal to 50% growth and after deducting the brokerage and other allied cost related to this trade, the proprietary firm can have a growth of around 20-25%.

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. 

How do proprietary trading firms earn money?

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 future 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 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 the 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 survey on that particular stock.

What is the difference between broker trading and proprietary trading?

In broker trading, the firm’s primary income is the commission income that is earned by trading on behalf of the clients.

The main trading is done in the name of the clients with their money and commission is earned on a buy as well as a sell trading.

The risk associated with the prices of the financial instruments traded is of the client and not of the broker.

The main job of the broker is to assist his clients in getting the right financial instrument at the best price by doing market research and predicting the prices of the shares based on the research.

The more the clients trade in the market, the higher will be the earnings of the broker trader.

The major differences between the two are shown below:

Proprietary Trading Broker Trading

Best Proprietary Trading Firms in India and the US

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:

  1. Spot Trading
  2. Jump Trading
  3. DRW Trading
  4. Optiver
  5. TransMarket Group
  6. Peak6 Investments
  7. Chicago Trading Company
  8. Infinium Capital Management
  9. Wolverine Trading
  10. Tower Hill Trading

Source: wallstreetoasis.com

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:

  1. Futures First Info Services Pvt. Ltd.
  2. TransMarket Group L.L.C
  3. Jaypee Capital Services Ltd.
  4. Edelweiss Capital
  5. IDBI Capital Market Services Ltd
  6. Kredent Trading
  7. SMC Global
  8. Adroit Financial Services
  9. Mansukh Securities & Finance Ltd
  10. Kumar Share Brokers Limited

Source: quantlabs.net

How can one start working in a Proprietary Trading Job? (Eligibility, Skills required and Job Description)

Proprietary Trading firms, while hiring people for this job, generally look forward for 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 about 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.

Proprietary Trader Salary (US and India)

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 times, the salary is linked with profit percentage. In case of no profit, you get nothing.

And the most important thing is you don’t get salary every month. Since it is linked with profits, it takes some time for the payment being made to you.

Exit Opportunities (Which other areas he can work in after leaving the job as a proprietary trading)

Once you decide to quit your job as a proprietary trader you can have the following career options available:

1) You could become an Investment Advisor to various clients providing tips and calculations on the probable profit they can earn by investing in stocks you have recommended. Generally, mutual fund companies provide commission to agents for selling their financial instruments, which can be a handful of income.

2) You can join any Mutual fund company as a fund manager, where you would be responsible to manage the entire portfolio and earn a profit so that the investor can gain out of it. Usually, fund managers earn a hefty salary from Mutual funds companies in the return of their services.

3) You can join any Insurance company as a finance manager, so that the amount received by the company from general public for insurance could be invested in proper stock and financial instruments so that the interest of the Investor is safeguarded, and the insurance company also earns some amount for itself from the investment.

4) Last but not the least, since you have a world of knowledge about stock markets and its products you can enter in any field that is related to this market either directly or indirectly. Also, if you have any additional degrees with you, then that will be an added advantage for getting into standalone industries as a Finance Head or Assistant Finance Manage where you would be offered a lucrative package.

There are many aspects of proprietary trading, and only the basics of it have been discussed here. Here, we 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.

Proprietary Trading Career: A Detailed Guide 1
Proprietary Trading Career: A Detailed Guide 2
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6 thoughts on “Proprietary Trading Career: A Detailed Guide”

  1. I’m a full time independent day trader. I’ve been trading my own account since last 5 years. I’ve been consistently profitable since last 2 years.I generate almost 20-30% return /month irrespective of the market conditions .
    My trades are based on pure price action & are very subjective in nature.Hence cannot be coded .I’ve to keep watching the charts throughout the day to place trades.
    I want to work for a prop. trading firm in India. The reason i want to work for a prop.firm is because my capital is very limited and it would take me years to earn an amount which i could easily make in months on a prop.trading desk on profit sharing basis.
    I’m ready to work for free for a month or two at any prop. Trading desk to prove my metal.I can also produce my last 5 years trading statement to support my claim.
    By qualification i’m an engineer with a mba in Ib but i’ve no corporate experience .
    How can i approach a prop.trading desk in India?? Do they even care to hire people like me. Any guidance will be highly appreciated .
    Thanks!!

    • Hi Sam,

      Glad to see your performance. 🙂

      Have you approached the prop trading desks in India? I suggest you start doing it.

      Use LinkedIn for networking.

  2. Dear sir

    I have proprietry trading experience for more than 1 year. I am an mba. I am finding the firm who allow me to work for same. Can you suggest best organization for the proprietary trading in India.

  3. Dear sir ,

    I am working in a financial company as a sales (MBA 2013 batch) and now further i want to enhance my skills in investment banking for that which will be best CFP or CFA.

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