Proprietary trading, or “prop trading” for short, is when a firm uses its own capital to trade the markets and attempt to extract a profit. Prop traders are the people who do this job. They are allocated capital by the firm to trade a specific market or strategy that they specialize in. Prop traders don’t have clients like a stockbroker; instead their only job is to trade the firm’s capital and make money out of money. Proprietary trading is done by big banks–which trade hundreds of millions of dollars in assets each day, and mostly hire experienced traders– as well as small boutique firms, which hire experienced and inexperienced traders, train them and then provide capital to trade with.
