Trading Arcades: Alternative to Home-based Day Trading Office - dummies

Trading Arcades: Alternative to Home-based Day Trading Office

Don’t want to set up your own office in order to get started at day trading? Not ready to commit to two Internet lines, three PCs, and four monitors? Worried you’ll be bored and lonely working alone at home? Consider trying a trading arcade.

Trading arcades are offices where day traders rent desk space to trade. Along with the real estate, some provide additional services, such as training, coaching, and even loans of trading capital. Some charge a flat weekly or monthly fee, some offer services on an a la carte basis, and others take a share of your trading profits.

Although physical trading arcades are less popular than they were a decade ago, they still exist in many major cities. To find them, do an Internet search: Enter trading arcade or trading room and your town’s name into your search engine. You are more likely to find one if you live near a city with major exchanges that are phasing out floor trading — namely, New York City and Chicago.

Some trading rooms are virtual. They are online spaces where traders get together from wherever they happen to be to follow the advice of a trading coach, spot patterns, and share ideas. Many new traders really appreciate the camaraderie and support, and having a place to sign in every day can help a trader build discipline.

When you’re thinking about a trading arcade, one key consideration is who has custody of your money. With many trading rooms, especially the online ones, you have your own account at whatever broker you like.

Some have you work with a correspondent broker, a firm that the arcade operators have contracted with to offer accounts to their customers. These may be legitimate firms or fly-by-night operations, so check them out on your own.

And some arcade operators are registered broker-dealers themselves — but you still need to check them out with FINRA or the National Futures Association.

A handful of trading rooms are set up as partnerships. You don’t open an account so much as buy into the business. The advantage is that your profits and losses become business income reported on Form 1099, which will simplify your life at tax time.

However, you may not be able to withdraw your money unless the partnership dissolves — a pretty big disadvantage. Depending on their structure, these partnerships may not have to register with the SEC or the CFTC, which may limit your ability to get problems resolved.