Ever think about investing in the stock market? Perhaps your head is full of the stereotype of champagne bars and upper-class strip clubs. Rubbing shoulders with the upper crust and generally enjoying the more expensive side of life. The reality is rather different. Many people see the glamour and glitz of it, but they don't see the ordinary side – that of going to work every day and having to perform in a highly pressurised environment.

“Anyone can drink the fine champagne. So how are they prepared for this every day side of it?” we hear you cry, because we at Proprietary Trading have excellent hearing. Well, it's simple – like many things these days, it all comes down to good old-fashioned education. Aspiring traders these days generally take a course at an accredited training organisation which specialises in the field, such as the London Academy of Trading. The training programmes provided boast internationally-recognised qualifications, and ensure that the graduates are prepared for the demanding challenges of trading financial markets. They often range in duration from 1 day to an entire year, and employ such techniques as practical simulations and advice from market experts in order to equip their students with the necessary knowledge.

It is important to ask a few questions when looking to join a prop trading firm. These questions can help you to determine if the firm is the right one for you, if it works in a way that you are comfortable with, and if you will be earning sufficient money to make it worth your time. With so many firms looking for new traders, it is important to know which will be the best for you. The following questions can help you determine if a firm is tailored to your requirements or not.

1. What is the firm name, and how long have you been operating? The companies that have been operating for many years are likely to have a high success rate as a result of the best trading policies, and you will want to work for a successful trading firm.

2. What fees are charged for trading? Every firm charges a number of fees, but you don't want the fees to be too high.

3. How are the firm's profits earned? High fees and commissions are great for the prop trading firm, but not good for the individual trader.

4. Is an investment required, or will the firm provide money? If your own money is required, find out the amount.

5. What is the buying power given to traders, and how can the trading sizes be increased?

6. Are there specific markets that can be traded, or will all markets be accessible to traders?

7. How is the payout arranged, and what is the share of the profits earned by the trader versus the trading firm?

8. Are there risk management parameters set in place? If so, what are they?

9. Is there a criteria determining the limit of losses?

A proprietary trading firm offers you a place to trade ‘under the umbrella' of a big organisation. You will also have the opportunity to work with experts and get lower commission, rather than if you were trading alone. Other benefits include the software and capital outlay that are controlled by a corporation.

However, if you are looking to join a proprietary trading firm, you may want to look at your options. There are three basic ways in which you can become part of a prop trading team.

You may be from college, or maybe you are not looking to be self-employed when trading, you can join a prop trading firm as an employee of the firm. This will come with a salary and benefits at the end of the month which you will be contracted to receive. These companies have a good capital base and they will be able to train and develop your skills as a trader. Also, the fact that prop trading firms have a bias towards financial graduates and people who have a background in financial engineering programs should be properly explained. Thus, it is better to have either a MBA in finance or a Master degree in financial engineering to stand a chance of being employed by a prop trading firm.

You can also join a proprietary trading firm as a customer. To do this, you need to have your own capital to start trading. The prop trading firm will only offer you the space and other support and equipment. You will be able to get economies of scale from dealing with the firm, such as lower commissions. When you work with the firm you are not one of their employees, thus you will not receive a salary or any other benefits. You will in turn share your trading profits with the trading firm, although receiving the larger percentage.

Preparing for an interview with a prop trading firm is important, as you want to be certain that you impress any potential employers. Coming across well in interviews can have a deciding input as to whether or not you get the job; it isn't all about CVs and exam results. In order to be certain that you can answer the questions and will be fully prepared for your interview at the prop trading firm, here are some key things to keep in mind:

Make sure to prepare for the interview before you attend, extensively researching the company that you are applying to. Find out exactly what they are, the markets they trade in, what their methods of trade are etc. Make sure that you understand the description of the job you will be doing. Study up on fixed income, LIFFE, Eurex, STIRS, and other exchanges and products that you will be inevitably be quizzed on in the interview.

Many firms will do the interview in large groups of people, and this will usually be the first interview round. You will stand up, introduce yourself, and give information on yourself. Make sure that the information you provide details why you like trading, what you are good at, and why their company is the right choice for you. The presentation should be tailored to the firm where you are presenting the interview.

There will be a part of the interview where you will need to answer:

• Questions regarding your experiences and skills.

• Open questions about your strengths, selection criteria, etc.

• Closed questions to obtain clarification on experiences or a demonstration of expertise.

• Hypothetical questions designed to test your ability to think on the spot and under pressure.

• Leading questions that require more complex answers, and will test your ability to challenge the interviewer's question.

Working as a prop trader is usually difficult at first, but experience is easy to come by. While mathematical ability is essential, that is only one of a number skills needed to become a successful trader. There are usually high requirements that must be met by those applying to join a trading firm, and it is important to be as prepared as possible if you are interested in working as a prop trader.

Step 1: It may not necessary to be a mathematical genius, but it is essential to be able to demonstrate trading ability with real money. Regardless of the amount of money made with the trading, it is important to demonstrate confidence and consistency in your trading, and many firms will be prepared to hire someone who may not be the strongest mathematician, but who is confident in his ability to trade and has the evidence to back him up.

Step 2: Start learning how to become a prop trader now by studying all of the materials you can get your hands on. There are many websites and courses that can teach you how to begin prop trading, and you can even open your own account and proceed by getting hands on training by trading with your own money.

Step 3: Read as many books as you can, both technical and theoretical. The more practical knowledge you have, the more you can apply that knowledge in your trading.

Step 4: Read the Financial Times and the Wall Street Journal to keep on top of everything related to the world of finance and business. The more you know about finance and business, the more likely you will be to impress in your interview, and not get caught out.

Selecting the right proprietary trading firm for you is important, as you want to be certain that you are finding a firm for which you are a good fit. Here are some questions to ask as you start the hunt for the right firm for you:

1. Are traders permitted to trade remotely?

2. Is a Series 56 required or a Series 7?

3. What are the rates of commission paid to each trader?

4. What is the split made on the payout?

5. Are exchange rebate fees passed back?

6. Are advanced order routing mechanisms offered by the firm? Will the company grant me access to dark pools and midnight routes?

7. Does the firm have a relationship with a specific floor broker or floor route? What is the rebate and fee structure?

8. Is there a requirement for capital contribution? If there are none, please describe the parameters set by the company for risk management, such as maximum drawdown per day.

8. Is there a requirement for capital contribution? If there are none, please describe the parameters set by the company for risk management, such as maximum drawdown per day.

9. Is there training offered, both initial and ongoing training? If so, is there a cost or is the training free?

10. What sort of buying power is provided by the firm to its traders? Please elaborate if this is dependent on any capital contribution.

11. Which trading platforms can traders access? Are there any platform fees charged for the use of these platforms?

12. What is the process of making payouts to the traders?

13. Are there any alternative fees required from the traders by the firm?

Proprietary (or Prop) trading is the name given to trades made by a trader using money belonging to their own firm or institution. As opposed to a hedge fund's reliance on other people's money, prop trading firms take fewer or no clients and prefer to trade their own money. They earn on their own investments, as they believe they can make higher profits in this way, rather than just by taking a commission of the profits earned on their clients' money.

Proprietary trading is an acceptable method of trading despite the risk it carries if a trade goes wrong and losses are incurred, which has greatly increased in likelihood since 2008's Crash. In America, through the so-called Volcker Rule, prop trading was banned to stop banks making, as Michael Lewis writes, “really stupid bets”. An interesting Bloomberg.com piece in October 2010 by Lewis, a renowned financial commentator and former banker, stated that major banks were continuing with the practice and “giving [prop trading] some other name”. The bill which contained the Rule defined the term as a bank “investing as a principal” in a variety of products, but there is a grey area in how to interpret this. In Europe, prop trading continues without plans to restrict it.

Traders are able to earn high commissions as a result of trades they make using their firm's money, and the resulting profits are used to make loans or increase profits even further. The conditions under which a trader works will depend on the firm. Many traders have limits set by the firms on the sizes of the trades they can make, to limit potential losses as well as gains. The better their trades are, the larger is the profit gained, and commission awarded, from the trades. This provides traders with an incentive to trade more wisely and perform better.