Thursday, October 08, 2009

More Advice Regarding Prop Trading Scams

They seem to be coming out of the woodwork: So-called proprietary (prop) trading firms that charge steep fees for training/education and then allocate X thousands of dollars in "buying power" to traders who pay commissions and other fees. The amount of capital actually allocated is a small percentage of the buying power, and it is a modest percentage of the tuition charged for training. Once commissions and fees (and/or losses) eat up the small capital base, the trader's prop career is finished and the prop firm (which never intended to make money from the traders' trading) pockets the fees.

Use due diligence and common sense when such firms show a ready willingness to make you "an offer." Whatever this model is, it is *not* proprietary trading as practiced by respected firms. If a firm offers solid education for a fee, that may be a wise investment. But don't let (thin) promises of prop trading talk you into tuition payments you wouldn't be making otherwise.

For more on this topic, check out this post on Prop Firms, Arcades, and Scams