What is a Prop Trader?
Proprietary traders, or prop traders, invest capital from their employers - usually brokerage firms, investment banks or other financial institutions and boutique firms - to earn direct profits for the employer. This is in contrast to other types of traders, who process trades on behalf of clients.
Prop traders conduct trades electronically and/or on the floor of a broker market. Other daily duties generally include monitoring stock market conditions, identifying and managing risk in trade portfolios, strategizing with brokers and other traders for optimal trading, and analyzing trades to improve overall performance.
|Educational Requirements||Bachelor's degree in finance or a related field|
|Job Skills||Self-motivation, oral and written communication skills, knowledge of financial markets, analytical skills, ability to work at a face pace, ability to work in a team|
|Median Salary (2020)*||$81,084|
|Job Outlook (2018-2028)**||4% (for securities, commodities and financial services sales agents)|
Sources: *PayScale.com, **U.S. Bureau of Labor Statistics
Prop traders often hold a bachelor's degree in finance or a related field, such as economics or mathematics. Employers look for prop traders with various levels of experience, ranging from no experience for entry-level traders to three years of experience or more for advanced positions. For those new to the field, many employers of prop traders, particularly smaller firms, offer training and/or mentorship programs.
Prop traders must be self-motivated to plan and initiate trades on behalf of their employers. They need strong written and verbal communication skills to be able to communicate their investment strategies, as well as the knowledge and analytical skills to back up their plans. Prop traders also must be able to work at a fast pace, making quick decisions based on market changes. Additionally, they need to be team players since they're likely to work with other traders and brokers.
Career Outlook and Salary
Prop traders are classified under the broader U.S. Bureau of Labor Statistics (BLS) category of securities, commodities and financial services sales agents. The BLS projected that this group should see 4% growth in employment opportunities between 2018 and 2028. This was about as fast as average growth based on all U.S. occupations.
As of May 2020, prop traders earned median pay of $81,084 annually, according to PayScale.com. However, it's important to note that most prop traders at smaller firms - and some at larger financial institutions - aren't salaried employees. Instead, they're paid a percentage of the profits that they earn for their employers, so their income can vary greatly.
Those interested in work as prop traders also might want to learn more about these related careers: