A prop day trader typically works as a contractor to a prop trading firm rather than as an employee. Prop traders are not usually paid an hourly wage or salary and do not receive benefits such as health care. They are typically only paid when they generate a profit, which can take months.
The capital that's traded in a prop trading account is usually that of a brokerage firm or hedge fund. Trades made through this account are typically speculative in nature. Products traded are usually derivatives or other complex investment vehicles. Trading activity is usually limited by a risk manager and by the amount of money a firm has.
Prop traders work with equities, currencies, options contracts, or futures on major global exchanges, with the express purpose of producing a profit through their trades. A prop day trader has no clients except for the company by which they are contracted. They do not engage in phone sales or cold calls with prospective customers. A prop trader is not a stockbroker or financial adviser and they do not care where a stock will be next week or next year. Their focus is on immediate trading trends.
The types of proprietary day traders vary. Some only trade a few times a day for bigger gains. Other proprietary day traders make hundreds of small trades a day, jumping in and out of the market. Some trade the entire day, while others only trade certain hours of the day.
Proprietary day traders may work out of an office, where they are initially trained, or some firms allow the trader to work from home. Day traders who are allowed to work from home are typically experienced and have a history of success with the firm, or are hired as experienced traders with a proven track record.
