Proprietary trading firms typically have two model types or a slight variation on them:
The firm takes a cut of your profits, anywhere from 20 to 50 percent. The trader puts up little or no capital, although paying for training may be required. Firms may also require a deposit to offset any losses a trader incurs. Adequate trading capital is provided by the firm based on experience and skill. With this model, trader profits are the main source of income for the firm. Commissions are typically low, as the firm makes little or nothing off commissions, allowing traders to generate more income. The firm may also charge a seat rental or software fee. This model is popular in Canada and other parts of the world.
The firm takes little or none of your profits, paying 90 to 100 percent of your gains. Firms leverage your capital, meaning you typically need to have several thousand dollars or more to get started. You get more capital than you would by trading on your own, but the firm is going to make money off of training fees, higher commissions, seat fees, and software fees. This model is prevalent in the United States.
A trader may also be offered a salary plus possible bonuses and then trained or hired as an employee. This is more common with financial and commodity companies that also have a trading floor. In this case, you are being hired by a company to work on their trading floor, a division that trades company money. Hours for this job are typically long, from eight to 12 hours per day. Comparatively, prop traders typically work less than eight hours, and traders at home may work for less than three hours.