Definition of Prop Trader
What is a "prop trader"? What is the definition of the term "prop trader"?
Before we define what a prop trader is, let's define "prop trading".
A "prop trading" firm is a firm that puts its own capital to work in the markets. For instance, a prop trading firm may have $5 million in total capital that is traded by a number of traders.
In some cases, a "prop trading" firm will require a "prop trader" to put up some of their own money in order to trade with the firm's capital. The advantages for the trader? Access to an increased amount of capital to trade with, which could result in exponentially larger profits (rather than just trading with his/her own money).
Note: a prop trading firm is different from a hedge fund in that a hedge fund trades the money of its clients, while a "prop trading" firm (or division) is trading its own capital. A prop trader is a person who trades for the prop trading firm.
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