Market News

Regulatory specifics of Security Tokens

: George Solotarov; 14 November 2022; Hits: 278

Write comment (0 Comments)

How does a trading company work? (Proprietary Trading Examples)

: George Solotarov; 09 November 2022; Hits: 303

A trading firm is usually a large financial institution that is a direct participant in the stock and financial markets. Prop trading occurs when employees in the trading department at a financial institution enter into transactions to buy and sell investment assets using the firm's resources and accounts. These transactions are often speculative in nature and are executed using derivatives or other sophisticated investment instruments.

The participants in the transactions are not the firm as a whole, but rather the trading specialists, the proprietary traders. A prop trader enters into an agreement with a company as an independent trader, not as an employee or client. The main activity of such a specialist is aimed at carrying out speculative deals during the trading day. The transactions involve the company's monetary resources and the movement of funds is carried out through a corporate account.

To occupy the position of a prop trader, you must first deposit an amount of money, commonly referred to as a risk deposit. The risk contribution determines how much leverage the company gives you. The funds deposited are used to compensate you for possible losses caused by the employee's activities.

For Example:

The risk contribution serves as a guarantee that the trader is looking after the interests of the company, and does not use an unreasonably high level of risk in his strategies. It is the company that is a party to every stock transaction, and therefore it is the company that bears the possible losses in any transaction.

You deposit a certain amount, such as $5,000, as a risk deposit into a financial institution's account. The company gives you access to trade with significantly higher leverage than the PDT protocol. The more money you deposit as a security deposit, the greater the available leverage.

Keep in mind that with this format, the trader must compensate 100% of all losses incurred during the trade. When you make trades, such as buying profitable stocks through company accounts and then selling them at a higher price, the commission is low, and you receive a significant share of the profit (about 85-90%).

Also, if you want to use all available trading tools to increase your capital as soon as possible - follow this link below, or contact us via live chat. Our experts will help you to choose the best strategy for success.

Write comment (0 Comments)

USDJPY heads for a weekly loss of near 900 pips

: George Solotarov; 11 November 2022; Hits: 259

Write comment (0 Comments)

GBPUSD with a bearish intraday bias, Pound to strengthen above 1.1550

: George Solotarov; 08 November 2022; Hits: 225

Write comment (0 Comments)

What is a Security Token? Do you need to invest in it?

: George Solotarov; 11 November 2022; Hits: 295

Write comment (0 Comments)

Details on the disadvantages of proprietary trading

: George Solotarov; 08 November 2022; Hits: 278

Every method has both advantages and disadvantages. Here we will consider the main disadvantages of cooperation with prop-trading organizations.

1. The lack of legal regulation of the activity of prop-trading companies
Unlike the popular international brokers, the activity of most of the proprietary trading firms providing remote trading is practically unregulated at the legislative level. The lack of centralized control by regulatory committees reduces operating costs but increases the risk of losing clients' trading deposits in case of unfair practices. If you are planning to cooperate with a proprietary trading company, you should conduct a background check on the company and managers beforehand and study customer reviews. If you find problems with transactions or the movement of funds in trading accounts, it is better to refuse cooperation.

2. There is a risk of losing money
When placing funds on a deposit opened with a proprietary trading company, there is a risk of losing money as a result of fraud. This is due to the lack or minimal level of regulation by the state that issues licenses for financial services. Deposit only as much money as you can afford to lose. In large brokerage companies, client funds are usually insured, which is included in the list of requirements for obtaining a license. But the use of leverage and margin trading allows you to make tens of percent profit per month even from trading with an own small deposit.

3. High proprietary trading fees
Most trading companies charge customers for software, especially if you trade remotely. The monthly software fees can be as high as $200 or more. This is many times higher than the client fees of well-known brokerage firms.

4. Prop-trading is mainly day trading
Although prop trading offers high leverage, this usually applies only to intraday trading. Clients usually cannot apply leverage when moving positions to the next day. Moreover, most prop firms only support day trading strategies.

5. Private firms can steal your intellectual property
For professional traders with excellent trading strategies, there is a risk of back-office employees deciphering strategies and using the intellectual product for their purposes. Firms have been known to use clients' strategies and transfer them to computers using artificial intelligence.

Stay tuned for updates!