An Interview With Mike Bellafiore of SMB Capital - Proprietary Trading Firm

[Music] it would just blow the minds of some underperforming retail traders do you have a routine that you're going through on a daily basis that's gonna help you get better but do more of what you do well and do a bigger we're not here to help you when you're breaking very elementary rules if I can lose less when I'm at my worst I can take home a lot more money hello everyone my name is andrew aziz from verbal traders and today we have the honor to interview mr. Mike Bellavia from SMB capital and with me here is VM Hathaway and you're really happy to do this interview with mr. bellifiore mr. Peller fury I got you know one of the reasons that I got interested in day trading was after reading Mike's book 1gu trade and playbook and you know I do those two it's really got me interested because especially in one good trade Mike was talking about what's the life of pro traders and how amazing the trading life can be so we reached out to Mike and because we know Mike at the SMB capital they do a lot of contribution to the education for traders they have SMB university and they have a youtube channel that their daily and actively publishing occasional videos for trader so they are really contributing to the world of trading especially it's very important for us retail traders because we don't have access to all of them knowledge and information that is you know used to be only limited to Wall Street traders so having said that I just wanted to introduce Mike and welcome you to our chat and please Mike please feel welcome to introduce yourself and SMP capital sure I'm Mike bellifiore so I'm the co-founder of SMB capital and we're a proprietary trading firm located in midtown Manhattan I'm coming to you from my office in midtown Manhattan we trade equities we trade a little bit of futures we trade a lot of options we do some automated trading mostly our P&L comes from discretionary trading and so lots of people always ask what's proprietary trading how's it different from retail trading so at our firm traders are funded by the firm so we don't allow anyone to put up any capital we don't take any capital from any of the traders it's purely risk capital from partners and we provide all the technology the technology is proprietary you have to be at the firm to use our technology and certainly all the downside risk is taken by the firm so not that this is advisable if you rip up a couple hundred thousand dollars like some people do in a retail account or you rip up $50,000 as some people do as independent retail traders that's actually not your loss that's the that's the firm's loss it's just a drawdown in the crop trading space and so that that that's an advantage and so prop traders are trying to use firm capital and the resources here to be really big traders we we've specialized in training traders from zero to consistently profitable to the best being seven-figure traders we've been around since 2005 still still growing which is unique most prop firms are shrinking so so we've been fortunate enough to work with some really good people and that's not the case with us but happy to chat with you guys and share with the trading community anything we can to help them get a little bit better today and I like what you said before and this is important to us which is it's important for us to give back to the trading community for lots of different reasons and so good to be talking to the two of you and try and make a little bit more that happen yeah thank you so much and I want everyone to know you know we at verbal traders are retail traders Mike Bailey Sheree at SMB they are prop trader so we are not competitors at all and so we can't share information and have these chats and and Mike the the point that I reached out to you is that I know you guys are very successful through all my research and I followed some of your traders and you and that's just not the case in the retail world as much and so I wanted to hopefully MIT pick at your brain and through your experience of what retail traders can learn from proper traders and maybe go really deep into that because it's a whole different world is that an okay idea that we could try to talk about sounds great yeah so so that's the big one what I mean you just explained what crop trading is and many people and retail traders they don't really understand it but you gave a perfect explanation so what can US retail traders learn and uses best practices from crop-dust like yourself yeah so I was in London recently and we'll start there and I was at a I was at a public event and I was asked what would you go back and tell your younger self she's really a great question it's a great question I love it particularly since I'm not as young as they used to be and so I started trading in the late 90s we started S&B in 2005 so we've seen a couple of things and I said what I said to my younger self what I answered about what I would say to my younger self is I wish I'd been more professional and so one of the things that is different for some independent retail traders then professional prop traders is that most professional prop traders are more professional not all and we have some traders here who we'd like to be more professional we have some traders here who are just so diligent and works so hard it would just blow the minds of some underperforming retail traders and so I I would start there do you have a routine that you're going through on a daily basis that's gonna help you get better that's gonna help you understand what your edge is better it's gonna help you eliminate what you don't do well or quickly so that we're tapping into your true unique talents so I'd start there the second thing that is perhaps one of the things holding back independent retail traders is they don't get exposure to lots of different types of edges sometimes I don't get exposed to any edges at all and that's that's a whole nother show but you know the last well let me take a step back and tell it in the story so on our desk if you make one million dollars net in trading P&L for the year you get what we call a green shirt and so people clamor to one day be able to get a green shirt it's something that people aspire to I've made 1 million dollars net and trading profits in a year and a black shirt is two million dollars net and trading profits for the year and so the last trader to earn a green shirt on her desk the the latest trader to be hired and come up the curve and get to that level he started trading and focused on certain types of setups with edge that were not best for his unique talents incredibly talented person one of the most talented traders on her desk credibly bright very hard-working and yet honestly at the beginning of his career he was floundering and he was a fledgling trader and he wasn't doing as well as he wanted to he was frustrated and one of the things that he needed to do and we needed to help him with was get him exposure to different types of edges with two different types of strategies with edge that fit his unique personality and cognitive strengths so what I see with some retail guys is that you know maybe they go and find a mentor who has a strategy that is profitable and they try and learn that particular strategy and it doesn't work for them and then they conclude well I'm not a good trader or cynically they might conclude well that strategy doesn't work well it might be that the trader the student his talents weren't best suited for that type of strategy and so there's a really great book that I'm reading right now called range by David Epstein a former New York Times writer former Sports Illustrated writer wrote the sports gene another great book and he spends his time in this book debunking this idea that specialization is the key to success so lots of parents like myself are inundated with the thoughts that if you want your kids to be a Division one athlete or a pro athlete you got to get them into one sport and specialize early and you hear stories about Tiger Woods playing golf when he was two and on and on or great chess champions learning from the age of four and being grandmasters at such early ages and their commitment and practice practice and this book sort of exposes the flaws with that type of conclusion and introduces a really important concept that I've been thinking a lot about at our firm which is the importance of sampling you might say the importance of experimenting and I'm disheartened when I meet independent retail traders who try that one strategy and then give up because that isn't the way that we do it here on our firm the first course you go through is a foundational course we call it SMB DNA everybody takes it and then the second part and a very important part of our training is called the winning trader inside that are 19 independent strategies that are all very different that traders sample experiment with for a week during mmm their initial training process and by the end of that process we're not interested in them being profitable we're interested in them merely identifying the types of trades a niche that they want to focus on for the next stage of training that's it just get exposure to it just try the trades just create PlayBook trades around those particular set up seas which ones you like see which ones you don't see which ones that your talents see which ones don't and then they moved to stage three which is you interview to be on a team that tends to focus on certain types of trading and then we put that person on a team and then and only then are they really digging deeper into a very specific type of trading working with senior traders with their edges and only then do we really expect them to start being consistently profitable and that's that's well into the process and so that that's that those are a couple of things I see with independent retail traders which I'd love for them to think about differently well that's that's that's very very interesting Mike you mentioned that because when I started early in my career trading career I also try to learn different strategies from different people and you know we have a scalpers we have the people who trade for a longer time for you you hope you have the people who trade the pena stocks and you have the people who trade more higher floats and stocks and I had a lot of bad losses trying and sampling all these strategies but I eventually I found my niche in a mid-cap and higher float stocks because you know it just fits my personality really well and then we had this discussion with dr. bread /t market as well a few weeks ago when he said people have different personality and they have to find their own a strategy that fits their personality for example I myself I'm a very impatient person so I'm more toward the scalping in the shorter period of time I just don't have the patience in me to really hold the trade for a longer time period I know it most in this advantage for me but it's just my personality and you know after this sampling that you mentioned I found my niche in the market so you can set yourself to be more of a scalper yes I you know I take a little bit of a bigger size but I'd get out of my trades more quickly just because I'm very impatient and most of the time if I hold to my position it goes into a more you know profit for me but I just it's just my personality that I really want finish my training sooner than later so let me contribute two thoughts to what he just said so one dr. Brett Steen Barger is the very best trading coach in the world we are fortunate that he's actually in the office for me right now great straightening out some traders on our desk and we're very fortunate to have him work with our traders and and with us and you know I am constantly bouncing ideas off of him about training and about recruiting and about development and you can't have a better resource in the world mm-hmm then somebody like him be and that's something that retail traders don't have access to you you imagine if you could you could go talk to the very best trading coach in the world after a period of drawdown or after a period of success where you really want to ramp things up and somebody who can give you strategies and techniques to help you make more from your your best setups and push your overall abilities further and longer and and harder and get you to understand what you perhaps don't do as well and what's interesting is that dr. Stein Barger's trained is a psychologist and I think a lot of people assume that most of the work that he does with traders at our firm and hedge fund traders and institutional traders for whom he works with is to hear their minds hear what's wrong with them and he doesn't do very very much of that at all he works with traders on our desk a lot with edge let's figure out where your edge is let's figure out how you can refine it a little bit better let's understand when you're trading at your best it's not a lot about trading on tilt or not hitting out of losses you know or being upset about your girlfriend there's some of that but but but not a lot and then the second thing is so one of the things that frustrates me when I go on to Twitter and start reading stuff about trading and everybody has an opinion about what it's like to be a good trader and if you have a Twitter account you know apparently you can be one of the leading coaches in the world and just view your opinion about what's going on and not have to have worked with traders for a long period of time or been a successful trader or you can just give your opinion which is good and bad and one of the things I think's bad is when people say things like you can't make real money if you're scalping mmm the only way to make a lot of money is to hold for the real move that has not been our personal experience at our firm there are black shirt traders guys who make two million dollars net for the year who focus on scalping the very best intraday trader that I know in the u.s. is a scalper he doesn't work at our firm unfortunately he's a he's an independent scalper and you know there are and particularly in this market with volatility so high man there's there's quite a bit of opportunity to be had scalping and and I'd say one of the other traders I work with outside of our firm who's a huge trader is somebody who really watches price action he's not holding for longer-term swing trades isn't even holding for intraday longer-term trades he's he's in and he's out he's very big he's knows what he's looking for when he sees it he trades with massive size he's very aggressive there are times when I read his daily report card when I just am amazed at how wonderfully aggressive he can get it at the right moment nice ability to put on sighs is just extraordinary hmm but he's not he's not buying Apple and holding it for 10% and so you can have a really long sustaining large profitable career being a scalper yeah I agree with you and I'm doing it a lot of people asking me to change my strategy to more tell you know intraday longer timeframe but it's just you know as you mentioned edge it's working for me I'm profitable on that and I really don't want to mess around with that with something that is working for me at this moment I really appreciate the comments really yeah and like I want to go back to the first thing you said about professionalism because now we've said a lot of things that traders can't do on the retail side the process to like and I'm guessing if a trader walked into your office and their underwear all groggy and just started hitting hotkeys right you would not let them do that but retail traders they do those type of things so what are some things that retail traders can actually instill that you do at crop firms okay so we can't have dr. Brett right next to us watching over I trade coaching that's right so what are some tactical things that people who are watching this can actually execute that that a successful prop trader would recommend like yourself yeah so let me just go back to something that Andrew said and then answer that and so we actually had somebody reach out to one of our top traders who was a scalper and suggest to that trader to consider not trading as much and holding some trades on a longer time frame and when I found out about this when dr. steam Berger found out about this we had a very blunt conversation with the person who gave this advice which was don't ever talk to our trader again like this that is terrible advice for this trader let him do more of what he's doing well mmm stay away and so yeah when whatever edge you have it's not that you shouldn't be trying to expand your PlayBook and the breadth of your trades you should I like to say maybe spend 10 percent of your time sampling other trades that you can work into your PlayBook but do more of what you do well and do a bigger let's answer a dog let's answer your question specifically okay if I call you that please do I love it so if I can answer your question specifically so one of the things that independent retail traders struggle with is they don't hit losing positions or they lose too much in bad trades and I will just say to you that on our desk you have an intraday loss limit you have a per trade loss limit you have oftentimes when you're developing a weekly and a monthly loss limit and those limits are set between yourself and the risk manager at the firm and those loss limits are written down and you sign a document that's that that makes sure that you're on the same page that these are going to be your risk limits and then when they're bumped up you revisit the document and you get on the same page again risk with the risk manager and if you are not adhering to your intraday stop-loss you know what do you think the risk manager is gonna do to you position you you're you're going to be you're going to be penalized and so you know the first time you do it you're not going to be able to trade for a couple of days you're gonna be on the demo we're we don't care if you got slipped you know I I don't care what the reason is you have an intraday stop-loss that's what it is think about all of the bad things that can happen before you sized into it you're responsible for not losing more than that dollar amount the firm has entrusted in you the right to lose up to that amount on an intraday basis it is not entrusted in you the right to lose one penny more you have given your word that you're gonna stay within those guardrails and so if you go over that for the most part you're gonna be on suspension you're not going to trade for a couple days you do it a bunch of times you're gonna be fired I think that's one of the you know main advantages the problem props Raiders have is their discipline is also enforced externally but austrie tail traders discipline has to be internally because you know there is no risk management if you do anything get stupid there's no one that monitoring our account and coming to us and you know tapping in our shoulder and I think that's one of the huge advantages that proper trainers have that the external risk management and enforcing their risk management and so I've talked about this recently my advice to retail traders and a dog yes for something specific I would if I were a retail independent trader I would empower somebody to be my risk manager I would empower them to hit me out of positions if I want to went over my intraday loss limit or my trade limit I would write up specifically what all those loss limits were I would empower a friend to trading friends who was acting as a risk manager to suspend me or penalize me if I went over that and I would mimic what's done at the professional level these are not these are not trading issues that you can have there there are certain things that the traders do where we just don't really spend any time on like their fireable offenses we're here to help you work on your edge that's hard enough we're here to help you with technology to make more help we're here to help you get more capital to do things we're not here to help you when you're breaking very elementary rules hmm and so coz coz there's just too much to do and there's too much opportunity out there can't be can't be spending time on on nonsense like this so hey Dawg that's that's my suggestion figure out who you're going to empower to be that person for yourself and I think if you give it some thought you can set yourself up in a situation like that yeah in addition to trading buddy that you mentioned also the villian has worked a lot on the mechanical risk management for retail traders the platform that we are using that's trader they have a risk control parameter so if you hit that max loss they can actually block your account so you're not able to trade anymore during that day and William has actually been a big advocate of that mechanical risk management so for people who are watching this we recommend that if you don't have anyone to externally enforce that for you maybe you can talk to your broker or to a trading platform for why they're that put this risk manager management in your account so if you hit that max dose you're not able to trade on to the next day or whatever that you want to have that so yeah on that note I I gotta tell Mike this really short story because Mike just told the world like this is one of the most important things but it's such a simple thing also that we can't deal with and so Mike when I was dealing with this issue and going past max loss and needing to figure out how to stop myself I researched das and they have risk control so I put in the risk controls just like you said but then I can simply go in and change the risk controls after I hit max loss I could change it in three minutes later I could trade again okay this was many years ago so then I was thinking through what can I do and I emailed them and called them and I asked him if I could lock women until a specific date that no matter what I could not change my risk controls and they did it for me and then on top of that they said they could incorporate a buddy system where they only can change it if a buddy calls and tells them from my account yeah it's changeable at this point so these are things that we can actually do we can actually mimic this what he's saying that the prop firms do automatically we have systematic ways in our in our trading software to do this that's great that's great and I would recommend you guest start doing that and look oftentimes experienced traders at other firms this isn't the case today at our firm think of a risk manager somebody who's getting in the way of their ability to put on risk this is somebody that's hindering yeah their freedom to make decisions and trade a good risk manager who develops a relationship with with the trader is there to help the trader to grow it it's he's there to protect them when the trader is not thinking at their best he's there to protect them from those just crazy moves that are gonna happen in stocks don't make any sense and last longer than you think but if you have a stop-loss then it's just a big loss and you get to live to play another day that's a huge benefit for the trader if you can and I'll say this to you so one of the traders that I work with outside of the firm it came to me and he's just a big-time trader north of four million dollars a year and and P&L which is pretty big for prop trading and the number one thing he wanted to work on was risk management and his thesis was if I can lose less when I'm at my worst I can take home a lot more money and that's so true you want to save your risk for your eight-plus trades you don't want to be putting on a lot of risk and those moves that are just irrational that are putting your month and your quarter in jeopardy all that hard work you've done in jeopardy for some irrational move so that risk manager is not there to get in the way that risk managers there to help you grow and when you get bigger and when your intraday loss is 150 to 200 thousand dollars a day there's a fine line between stopping out and just taking a large loss and ruining your month well that's a great point yeah I always considered it as my best friend that helps protect me against myself that's how I well thank you so much Mike we want to go into now a little different section of this and review some trades number one we will love to see a trade setup that you have and before that I want to ask can I share with you one of my trades that a lot of our community members kind of have learned and try to incorporate it into their style so we get a completely different perspective on this let's do it I dug awesome so just like you're calling me by my a dog name that I got from your books about having nicknames I also named my trade specific names because of your other because of your book as well so this is called the harmonious chart setup okay and I'm gonna share my screen let me get this going here all right can you see that I can't okay let me do one quick thing okay so this is my home oh nice try I would you talk about your traders we wouldn't believe what kind of discipline they have and what they do to be successful I would step for hours and hours my eyes would be bloodshot I'd be 3 a.m. and I'd be looking at these moving averages trying to find out my edge from the moving averages and with another trader I found that when all of the moving averages are on one side of the price action after some sort of big gap up or big gap down off of a news catalyst all of there is resistance in support where traders would be putting their cells where people wouldn't want to go into or where people just be leaving the market because it might be in a choppy spot all of those traders were gone and my edge was set everything every chart was pointing one direction so this was a specific trade on HD from just a couple days ago it had you know the big news I'm sure you're familiar with that ad the news of the earnings so had the gap up waited for the oops waited for the pullback to come back down to my moving averages in view app waited for the first one minute candle that was slightly bullish and on the timing sales I was seeing a lot of green hitting the ask as soon as that happened I had my harmonious chart where the nine moving average to 20 the 50 in the 200 were all below the price on every single time frame which means that there was not going to be any overhead resistance so I went long played a risk to reward of stop under this little part right here risk to reward four to one and then like a five and six to one or so and I got out near that what ended up being the top of the day which I didn't know I don't care about hitting tops or bottoms but I do care about hitting my risk to reward on my a one set ups um so my question is just feedback on that to you if you have any thoughts about that type of setup and what I explained so anything you got on that would be amazing for us okay so one of the things that we don't want to gloss over for the context of our trade is the news catalyst and you know when I wrote the PlayBook I talked about seeing your trades by putting together certain variables and so one of the variables that we want to cover is a news catalyst so we'd want to know how good were the earnings how good was the news how good is the core of the business what is the guidance for the full year go for word how much they beat by what's the short interest in the stock what's the arvo on this particular day but but but those are things that give us some color as to how good the news catalyst is and the reason why we think that that's important is because that can bring out lots of big-money buyers we're making trades we want to find stocks that are going to get bought up for the day they can finish high up day and for swing traders and Beyond for the really Bass news catalysts you can have consistent buy orders that come in for multiple days from big money traders and so I'm starting there I'm looking for something that's gonna capture the attention of a big-money trader and so we call this catalyst trading in this case you can you can have a news catalyst that starts it but you can also just have a technical setup that isn't of itself a catalyst overall but it's getting these big-money traders to be interested in the stock so that's number one the second thing is we always want to take a look at the big picture for the overall market so you know if we want to get long Home Depot how is the overall market doing how are the spies doing are we in a strong market overall in this case we are we're in an uptrend that's going to dictate how order flow comes in are we in a shorter term strong or weak market overall where are we in the context of the entire market in terms of strength or weakness so if the overall market is strong it's gonna make our Long's more likely to go up we're trading in 2007 and 2008 these buys probably not going to work okay and so we want to we want to start those things and then so one of the things that I really like what you did is we start to after we have the big picture and after we have the news catalyst as we start to get into our technicals now for somebody like myself I'm gonna want to know where this sits on a longer-term chart again to give it context are we had a 52-week high if so that's gonna make it more likely to go up are we overbought and far away from our Bollinger Bands a couple of standard deviations away from that that's going to give me pause that perhaps we're not at a good price are we oversold and now we're getting a positive news catalyst that's gonna make it more likely for this to go up and so I want to see that you know here you're doing a terrific job of that next step which is what are our intraday fund what our intraday technicals doing now in this case you're saying I feel like I have edge when the moving average is aligned in a way that makes sense ends we start to see some strength okay so if I were grading this trade I would say a plus yes on your Enschede technicals very good and then what I really liked what you did as well is you pointed out the strengths that you were seeing from the tape no you wouldn't you were recognizing a bullish pattern from the tape and that's another one of the variables that we want to put into our trade so I would say a plus trade or a plus job on on reading the tape yes sir reading the tape is a very important indicator for active short-term traders and we actually right now are putting together a new educational program based off of the trading of our top trader and it's a swing trading course and so what's really interesting about his trading is that he also uses the tape for entries and for sizing when he's making swing trades so a lot of times people get exposed to reading the tape it takes some time to learn it they don't get it so they dismiss it or it's too hard from the beginning so they dismiss it or they feel like they're trading on a longer time frame so they don't need it I haven't found that to be the case neither one of them it does take some time to get it so I like what you do there another variable that we talk about is intuition as you get more experienced as a trader and you are watching that pull in does it feel like it should go up to you and and going from there and so yeah this is how you this is how you build out a career is you put together playbook trades that make sense to you and you build upon them I'll just say specifically about your moving averages hmm please so we don't use moving averages the way that you do we use something called view ah hmm so we are going to want to get long Home Depot when it's reclaiming view up after a pullin and a strong opening drive that's gonna be an indicator that is important to us we are going to want to see that bwaah is trending up and what's interesting here about all of your moving averages is that they're trending up they're not flat more descending which is a bear sign for technicals and what what what's going on here overall is is you're seeing that strength and the blue line here is you app andrew is a heavy view app trader and we teach it a lot and that's another thing I say moving averages and I includes you up in there incorrectly but that is the blue line okay Mike you have a question about the comments that you mentioned so when this talk is gapping up in the pre-market based on good news do you have a direction bias in the pre-market like going long or going short because we a lot of times we see stock is gapping up in the pre market but they really sell off at the open how do you how do you do you get any by a directional bias so I do I don't know if that's right now because I do have a lot of traders that they have a general rule of thumb that they don't short stock that is gapping up for good news or good earnings or they don't go along when the stock is getting down really just the root of Tom I just wanted to know your opinion and how you trade definitely there is no wrong the right so there's certain trades I'm going to take depending on how a stock is opening up so if a stock is is gapping up a bunch and I feel it's it's it's just overextended you know today like maybe like Target huge opening huge opening gap I may want to let that settle before if I feel it's opened up too much and it's maybe in a sector that isn't having a good run maybe I want to let that pull in a little bit settle and then get into it if I'm gonna play it for high a day there could be news like Macy's the other day where I noticed that a lot of the retail stocks are bouncing even at 52 we close so I'm gonna make sure that I'm I'm noticing that I may notice with stocks like BBY that on the second day after they get below day one lows that they just go to die I'm factoring that in I may notice in a strong market high beta names 10th bounce when they sell off too much I may notice in a really strong market 52-week highs get bought up there are gonna be patterns that come to market that that I'm gonna use and I do sit there on the open and I say my thesis is this should go up my thesis is this should go dis you go down but I don't trade just off of my thesis I then overlay a very specific set up in my playbook to attack that thesis that is something that is different yeah from pro traders and beat-up see you guys at the beginning well what's it between pro traders and retail traders so a big scalable retail trader a big scalable pro trader is putting money to work after the set up is is fitting their thesis and just one last question do you trade in the pre-market or no usually we do a little bit I can't tell you that we make a tremendous amount of our profits in the pre-market it's a very very very small slice we do look at levels my partner Steve Spencer is particularly good at observing important pre market levels there's a lot of volume done at a price if a level is tested multiple times in the pre market and stubborn and then finally gets above there that's going to be important pre market level for us but it but it needs to be tested many times there needs to be volume in the pre-market at that level and it's just worth mentioning that the SMB capital in SMB university they're actually sharing your morning sessions that your co-founder steve spencer is running them and i think i'm not sure if it's free or it has to be part of the program but I watched couple of them for the previous days and they're really really useful and I learn a lot from Steve when he goes through the morning and morning show yes he was really terrific if you're not following him on Twitter I invite you to do so he in my opinion and I believe this will be fact one day he gives really tremendous I always say he gives the best active consistent commentary on price action than anybody else I'm seeing on Twitter but I reserve the right for somebody to surpass him at at one point why second that I second that you know I've been following his Steven to eat here and also in YouTube and I'm watching that and he's a great trader is really understanding the price action very well so I second death well thank you so much Mike for looking at that trade but I know what people are gonna want to see one of your favorite setups from your PlayBook that you teach so let's get into that now thank you I just want to make I just want think one more comment about this so please PLEASE an indicator that and you might have you might have included this in your analysis and just we didn't get a chance to bring it up but our ball is an indicator that's very important and so if there's elevated our ball I'm gonna be we're likely and interested to get long if our ball is going to be under 1 or 0.8 or something like that to me that's indicating the stock isn't in play and it's gonna be harder for me to get long totally understand yep and in this specific top is trade I don't think I noted the are ball and that's something I can definitely remember now so now we're gonna see I asked Mike to bring one of his favorite playbook trades one of his favorite steps for heated firm to teach to all of us retail traders that will be actionable and executable once we learn it it does not mean trade this the second you see it it means study it learn more about it practice it in a simulator trading and then do it with small size and try to see if it fits your personality and trading style so don't just jump right into it right away alright so let's talk about a changing fundamentals trade so this is a picture of one of our traders who earned a black shirt at our end of the year company retreat nice and so I'd like to start with a question when do elite traders trader at their best when are these elite prop traders who are at our firm or people like coach outside the firm when are they trading at their best they're trading at their best when they're developing a thesis plus they're finding a setup like a dog did in their playbook plus they're seeing it like a dog did by observing the tape plus fight for price that's equaling a good trade when I see elite traders trading at their worst I see them trading their ideas I see them trading their bias and we have to correct that oftentimes when one of these elite trader sends me a daily report card and they're underperforming drawing down they say I'm just trading with an opinion it is time after time this this comes up so I point that out if you are a retail independent trader and you read something on Bloomberg comm and you decide Apple should go up today because they just rolled out a news release that they're gonna be offering more programming on Apple TV I'm gonna get long that isn't how elite active traders well that makes a lot of sense that isn't the way lead active traders are trading at their best commonly we see traders underperforming in the retail independent space who are just just just just making a technical trade just just just just making a fundamental trade just just just just looking for a set up it isn't enough to just trade a set up to find it elite trading you need to be in the right stocks or the right products that's so key you've got to be in the stocks that have that most opportunity on an intraday and swing basis you can be putting the same setup on in the wrong product or stock and be underperforming you can be in your stock selection and product selection can be so much better and your results will get a lot better I think that's something that is not talked enough about in trading that that's something that I think retail traders independent raters don't understand enough is what their trading is as important if not more in some cases as the setups that they're trading so how do I build a trading business and so I want to provide some context to to this trade when I'm sitting in our training room working with our guys helping them go from scratch to consistently profitable and then better I'm getting them to think about them building a trading business I'm getting them to think about trades that they put into their training business as a dog said playbooks that they can trade trades that are scalable trades that are repeatable trades that are identifiable trades where you can control your risk trades what you can put on substantial size we're not here to make a couple of bucks we're trying to build seven-figure plus traders trades with real risk I want to save my risk for my a plus setups are you doing that I notice when the elite traders are trading at their best they are trading less doing less saving their risk saving their emotional intellectual psychological energy for their a plus setups and then striking so we talked about the playbook I like to think about it with these variables what's the big picture and a particular set up how's the overall market doing what's the news catalyst what are the longer-term technicals doing what are the short-term technicals doing what about reading the tape what information does that have for us what about intuition intuition we're gonna put together multiple variables to make an A plus trade the difference between a pro trader and an underperforming retail independent trader are is we are putting together more variables in our trades to make a higher quality trade let's take a look at WB weibo recently and so big picture for the overall market were strong we've bounced that's the context of this trade we bow is beaten down on the daily chart and is consolidating at a three-year low before today's earnings report you can see on the weekly chart that it's sold off from 140 now hovering around the forties area it broke down from a really tight consolidation area hovering towards really beaten down intraday fundamentals or news catalyst Weibo is a Chinese micro blogging websites one of the biggest social media platforms in China reported sixty-eight cents on revenue of 531 point eight million Wall Street expected 59 cents on four twenty nine point two million so they beaten they'd be none revenue they'd beaten on the bottom line q3 Weibo estimates revenue to increase six to nine percent above Wall Street estimates increasing now here is the news catalyst that gets my attention here's a nudist catalyst that we teach to get the attention of guys that we're backing monthly active users were four hundred eighty six million in June a net addition of approximately fifty five million users year-over-year they are growing the core of their business is growing monthly active users is the most important metric for a company like this how is that metric playing out it is increasing it is doing better we talked about Big Money traders before those are the types of measurements that get big money traders to be interested and putting a play on a stock like this alright and so that's getting our attention we talked about our ball in this case our bells five point five I think this is in play Spencer thinks this is in play our junior traders think this is in play our ball is confirming that it's in play it's doing five point five times the normal volume on this day undeniably this stock is really implied it's as important to trade stocks that are in play that give you opportunity as it is setups this is telling us this is one of those stocks short interest 66.7% what does that mean lots of artificial buying will come into the marketplace as shorts have to cover hmm all right a TR one point six gives us a sense how much the stock can move float seventeen point seventeen million you guys mentioned hey do we look at the pre-market well here's an example of how we do very prescient of you 40 50 is a key pre market level as we shape out here on our two-minute chart lots of hitting and failing hitting and failing going above and failing 40 fifties the key level in pre-market trading all right so how do we attack this we are attacking this thesis of I want to get long with specific trades in our playbook and they have different names and there's different ways to attack each and every one of them so there are multiple trades inside of one bigger trade the first one we're gonna get along tier 1 when WB makes a higher low and reclaims view up we talked about technical indicators that's one we're looking at we're reclaiming view up mm-hmm got two green candles in a row okay and we now have risk on for tier one when we're doing that and so this is a Poland trade okay set up number one from our playbook is a Poland trade strong opening drive pullback on light volume reclaims Viwa boom second trade we're long tier two after WB test pre market and holds view up a third time risk previous higher low so the risk is below here we can now see the wedge forming on multiple timeframes so the second tier two trade is multiple timeframes support trade we're in alright that's what we call that particular trade I don't have time to teach that specific trade but that's what this tier 3 all right the wedge breaks to the upside the holds of pre market high and consolidates so we're going to add t3 risking to view ah so we're getting above an important technical level that we've identified in the pre-market we're gonna add risk here for WB breaks above the high day or breaking an opening range an opening range break is another trade in our playbook that have bear that have variables that we trade I had another fine a lot you're now in a good position to strength you can see W beyond our multiple time frame one five 15-minute trade it's breaking out alright so for our last trade that we talked about we're getting that breakout on multiple timeframes trade management all right the stock fails 42 and retests we're gonna take some profits sell tier one into 42 price actions getting a little bit softer WB fails into 40 to 50 and makes a lower high we're gonna sell tier two we're getting a little bit more softness WB fails to get over ninety cents and tests 43 we're gonna sell t3 Tier three and hold the remainder into the clothes and swing the rest of that into the clothes but we're taking profits when we're starting to see reasons to sell so what about that in the playbook reasons to sell get us out of positions and we're still holding our core position the key about this trade and how it compares to some of the underperformance that comes across my desk from retail independent traders are the variables that we're putting into this trade the variables in our favour the multiple variables that in our favor I mean isn't that a type of trade that you want to put some money into if you give me a trade like that and you have a trader that's putting on risk at our firm with the trade like that I am totally fine with the results have at it we want that guy building from those particular trades and putting more and more risk as they earn it the variables in our favor are beaten down stock news catalyst hi shorty interest elevated árbol holding above you up consolidating above you up breaks out of the bullish wedge pattern high a day news catalyst pattern that's very different then I've found an off-the-shelf technical indicator that somebody famous who has nice hair and goes on TV has told me works and I'm I'm now gonna try it okay that's that's that's very that's a very different type of trading that that some of those people are doing then this this is professional edge trading Angie do you wanna you want to end this for thank you Mike again and thank you very much for watching us my name is andrew aziz from bamboo traders medium hideaway or you know his nickname is a dark michael a fury and if you guys want to know more about mike and steal the spencer trading at SMB you can check their website SMB university an SMB capital and they have an excellent youtube channel as well that you can learn a lot from jay training mike again i just wanted to thank you for your time really appreciate that and I highly recommend your books to traders out there one good trade and the playbook very useful for retail traders I really thank you that if there's any any you know con you know concluding remarks please feel free I appreciate you saying that appreciate the time and look at the concluding remark that that I leave with you guys is how I finish the playbook I have seen lots of guys struggle who had become consistently profitable traders and then great traders one of the black shirt traders at our firm used to make $4,000 a month and now is a black shirt trader and still getting better his goal now is to become an eight figures a year trader and he's gonna get there in time I conclude the playbook with you can be better tomorrow than you are today and so if you are not doing as well as you think you deserve to be doing and trading you're not there yet if you're not trading as profitably as you want to be you're not there yet if you are not capturing the opportunities that you know you have edge with you're not there yet it's it's just not yet but if you keep working at it and you create a routine to help you get better and you develop really good habits and you make a lot make a big deal about those trades that you have with edge and don't let anyone give you any Andrew about the way that you're attacking markets because it's awesome any kind of edge is awesome you can build from that and you can get bigger and and bolder and express those edges in different ways and they can open the door to things that you're not potentially seeing yet but you will be able to so it's a process you're not there yet I keep keep at it and you can get there perfect yeah that's the level of resilience that you need for trading baby steps eventually you'll get there if you really wanted that well thank you very much Mike William over to you yeah no thank you Mike no thank you so much for your time we really appreciate it

Channel: SMB Capital

Views: 18,419

Keywords: stock market, day trading, smb capital, trading, investing, markets, wall street, stock trading, options trading, options income, economics, finance

Id: CWQB1vE_qfM

Length: 61min 36sec (3696 seconds)

Published: Thu Sep 05 2019