The Average Salary of a Proprietary Commodity Trader

If you are looking to become a proprietary commodities trader, it is important to understand the payment structure that is used at a proprietary trading firm. A proprietary commodities trader uses the firm's funds as opposed to those of its customers. In other words, the only way that a proprietary trading firm earns money is by putting up its own funds and using that capital to earn additional funds. In order to become a proprietary commodities trader, an individual must be adept in numerous trading strategies.

Initial Deposit

When you work at a proprietary commodity trading firm, you are asked to include an initial deposit of your own funds before you are allowed to trade with the firm's capital. This deposit gives you a sense of accountability of the firm's money and also ensures that you will always work in the best interest of the firm. If you lose the amount of your initial deposit early on, it will be difficult to receive more funds from the firm for trading.

Available Funds

The amount of the firm's capital that you are allowed to trade with is directly related to your experience level and past results. When you are just starting, you are usually given a five-to-one or 10-to-one ratio of funds to your initial investment. For example, if your initial deposit is $5,000 and you receive a five-to-one capital ratio, you will be given $25,000 of the firm's money to trade with.

Progression of Available Funds

As you progress within the firm and have proven success using the organization's money to earn additional capital, you will gradually be given larger sums of cash to trade with. Subsequently, the larger amount of capital you are allowed to trade with also allows for you to earn more money on a daily basis. However, you must also manage risk using the trading strategies of the firm to ensure that you do not lose all of that money for the company.

Commission

The commission structure of your earnings is also directly related to your experience level. To begin with, you will likely be allowed to keep 50 percent of your profits, however this varies depending on the firm. Once you have proven that you are a successful commodities trader, your commission level will go up and you will earn more money for each successful trade.

References

• Investment Banking- Valuation, Leveraged Buyouts, and Mergers and Acquisitions; Josh Rosenbaum; 2009