Bad trader habits that you must fix

in this video we share the bad habits we see holding traders back if you have these bad habits and do not fix them then you will fail as a trader we identify these P&L stifling bad habits and offer solutions to fix them in this video so if you're wondering why you're underperforming as a trader perhaps it's because of some of these bad habits maybe you didn't even know these bad habits we're holding you back as a trader and perhaps we can help you with the solution or solutions that we suggest to our prompt traders in New York City that will help you grow your trading account [Music] hi I'm Mike bellifiore managing partner of SMB Capital proprietary trading firm located in midtown Manhattan and I'm also the author of the trading classic one go trade and the play book click our subscribe button so you don't miss any of the trading videos that we're producing for the trading community in this video you're gonna learn the bad habits holding traders back you're also gonna learn how to combat trading while over convicted how to improve your over trading how to adapt to changing markets how to focus on the process over piano for those of you who want to learn how to improve your trading by eliminating the bad habits holding you back as a trader we hope this video helps if you want to learn 3 real-world setups that our traders use including the simple setup that we teach all of our new traders and the setup that turned one of our traders into a seven-figure big money earner check out the free webinar that we're currently running just go ahead and click the link that should be appearing right now at the top right hand corner of your screen that's gonna open up the free registration page in a new window so don't worry you're not gonna lose this video go ahead and check it out right now before you forget what we're hearing from people who are reaching out to us is that you're gonna learn more in a couple of hours from this trading workshop then from years of online education bad trader habits in 2018 again this is stuff that we're seeing on our desk or from the really big seven-figure traders and I'm working with outside the desk convicted overly convicted bad habit in 2018 over trading bad habit in 2018 failure adapt to market changes bad habit in 2018 really big challenge for traders across products with the increased volatility that we saw last year how do you adapt when volatility goes from historically low and historically low for a long period of time to really periods where VIX was even above 20 for sustained periods of time totally different markets totally different attacks for how you express your ideas in markets and you have to adapt focus on P&L bad habit in 2018 so specifically let's talk about the danger of being overly convicted so on our desk we have guys who get really good they become seven-figure traders over time the particular trader who I'm going to talk about Netta four million dollars last year and trading profits metaphore million dollars net and trading profits in one year that's not how much he's made in his entire career that is what did it last year and this trader is still getting better his goals are much higher than net four million plus in yearly PL but and as Seth mentioned what is different about a P&L desk like ours and what is clear when you walk the halls of SMB capital where it is we're always trying to get better our best guys are always trying to get better we're the rats not good enough and this particular trader is tremendous I mean that is tremendous performance to put up that type of P&L as an active intraday trader tremendous now you're talking about one of the truly vast active intraday traders on the street but this particular trader gets overly convicted in ideas now one of his strengths is his conviction in certain ideas one of his strengths is lots of confidence that how he sees a particular set up is correct so you don't want to take that away from the particular trader you don't want to take away what somebody's doing really well and change it too much but you do also want to help the trader understand when his strengths become his weaknesses and this is really true of big traders don't think about big traders they're putting huge amounts of capital to risk at very definitive points in time if you're an active really large multi-million dollar plus intraday active trader and you're putting your money to work at the wrong time or you're entering a little bit too early that timing can be the difference between losing a lot of money and being that really outstanding outperforming sustaining elite active trader just just that timing and and it doesn't have to be by a lot you can be a half a day off in your timing and the results can go from getting crushed taking a big rip to really catching a huge profitable trade and so this trader needs to work on how to keep a strengths but minimize his particular weaknesses and so you know one of the things that he's working on because you recognize this needs to get better is a solution a very specific solution to how he's gonna get better we don't just sit around and say oh I wanna have a little bit more willpower during the real time when I'm trading oh you know I I just want to be a little bit more disciplined in real time while I'm trading oh I just want to eliminate the trades that aren't so good for me oh I just want to save my fire power when I'm really right in a trade as somebody who runs a prior to her trading firm in New York City I have no idea what that means okay and and neither should you I have no idea what that means those types of statements are statements that are made by people who do not sustain as professional traders in fact they're made by people that never really become elite active short-term professional traders or professional traders and anything for that man it's not specific enough it's not specific enough it is a type of language that is made by people who don't make it it's not good enough but what we do here even for somebody who is at that elite level and I'm sure everybody listening to this broadcast right now does not make the type of money that this trader makes I am positive of it talk about a good risk reward trade I'll take that trade that none of you listening to this are at that level I'm sure there's gonna be one person I'll hedge a little bit maybe there's one person okay and and if you're that person please reach out to me I'd like to talk to you because there's that you're remarkable but what he does and this comes from his yearly review we're sitting in a room like this he is surrounded by his team members and he's laying out in full transparency the solution so that how he can make more than four million dollars net this year and for him that means to rate a self-talk each day so during the day he talks to himself about the traits that he's in am I too early in the trait a my overly convicted in the trait is this showing me that my thesis is actually starting to work is the tape starting to confirm that the trade is about to happen is the chart setup confirming that my thesis is correct is the price action confirming that my thesis is correct it's not just relying on your thesis and so that's easy to do when you're a very successful trader over many years you're used to being right you're used to winning you're used to being a champion trader and so just sticking your neck out there thinking I know best is gonna get yourself in a little in a lot of trouble so you need to talk to yourself during the day you need to check yourself am I in a good trade is this one good trade is this setting up is this is this an a-plus trade in my playbook am I getting out in front of this too early okay and you create you create this self-talk into a habit so we talked about it then at the beginning effect the best practices turned into habit they compound will drive your performance in 2019 this trader if he wants to get better even at the level that he's at has to has to get that self-talk to become a habit if he's going to improve in 2019 over trading we all do it we all mutter under our breath shouldn't taken those trades trade too much only I could eliminate some of the lesser trades that I make only I could put more risk on for the trades that are my eight plus setups and you know there are a lot of independent and retail traders out there who really have a lot of good in their trading they don't make money but they have a lot of good in their trading what I mean by that is they do have trades where they do make money if they were to tag and measure certain trades those trades would have edge but they mix them in with too many of the lesser trades they mix them in with too many of the lesser trades too often and that completely disrupts the results it changes the results it changes the type of trader that they are and so this is something that they have to overcome but you can't just sit around a trading desk and say I wish I didn't over trade this is the year then I'm gonna will myself to over trade will power is completely overrated there's a lot of science that has been written of late on this principle don't rely on willpower it is going to disappoint you I'm just gonna trade with more discipline during the day I'm just gonna trade those setups that I really like the best again sorry for my expletive deleted in the last passage same response I don't know what that means that's not actually how you get over this issue what you need are solutions to overcome this bad habit build a playbook it just so happens that the person here listening to wrote his second book with the title the playbook you might want to go actually read that and figure out how to build a playbook if you don't already check out our blog type in the playbook it'll show you how to do them the playbook helps you build your trading business it's all the setups you should be taking it's an exercise that you do so that you're internalizing the trades that you should be making it's a way of crafting your business to build from your strengths to keep the P&L from your good trades and minimize the negative trades that they come with your lesser trades you sort out here are the trades I should be taking and here are the variables for those trades and when I see it now I'm an executor and I'm observer oh that's a gap ago trade I'm very good at gap and go trades I should put some risk on because I've measured that I have edge in those trades and I play booked it and I know exactly what to do oh that's an opening drive play I like opening drive plays I have edge when I trade them oh that's a backside trade look at that here are all the variables that are lining up in this particular trade for a backside trade let me make that trade okay as opposed to and this is all too common there's one trader who works at a big bank who I am coaching right now inside the firm who was disappointed in a recent trading opportunity that he felt like he missed and we went through his work and I suggested hey was it that in real time that you missed the trade that you wussed out I'm putting on enough risk or was it that you didn't game plan prior to that what you wanted to do for this particular set up if you were to have game plans in more detail would you have done differently and any would've and that's a great that's a great best practice to turn to have it but the idea is you're trading this play book your observer your an executor daily report card on over trading again if you don't daily report card is so one of the things that we do is we pick one goal we work on it intensively in detail and give yourself a grade on the things that are important to us and so if you want to get better at over trading create a daily report card where you're judging yourself on this new bad habit that you got to get rid of in your trading over trading self-talk just like the trader before us talk to yourself during that is this one good trade is this something that's outside my playbook is this something in my playbook accountability from a team member so we trade in teams we share with other team members what our strengths and weaknesses are and they can chime in and say hey Mike remember you're supposed to be limiting your over trading that's a trade I know that you don't like so much and then you you you talk back and forth okay and so look sometimes the traders in a little bit of a bad mood and might tell you hey buzz off mind your own business but on good trades good teams that are coached well you you appreciate the fact that there's somebody else looking out for you to do better set max trades for the day open mid day close so lots of Lee traders that I work with have maximum amounts of trades they're gonna do in each session they divide the trading day into three sessions there's the open the midday and the closed and they even even they are even though they are really highly profitable traders there's a max amount of trades that they can take for each session that's a solution setting that max is a solution and mindfulness training so I've been saying this for the last 18 months montanus trading is an essential best practice that people need to turn into habit this is something we expose our traders to on our desk spend at least 10 minutes working on mindfulness training each day so that you are more open-minded during the trading day so that you intake data at a more proficient level so that you are more of an observer and you take trading less personally so there's a there's a really good app that we recommend people go to called headspace to get started on this particular training I think when I was young nobody used to work out it was rare for people to go to the gym or Ron you were ahead of your time today it's pretty much universal that she ought to work out regularly in short order doing mindfulness training is going to be as accepted as one of those things you should do every day for your health as exercise is today so start now you'll be ahead of the curve failure to adapt to market conditions so markets change last year we were challenged with a different market before that we had this very regular period of historic low volatility certain strategies work well in certain regimes I can tell you in our desk one of the things that we do is we teach traders to gravitate towards stocks and play and what that means is find the stocks that are most active that are receiving the most attention a good measure of that is our ball to go find things with elevated our Bo elevated relative volume that is showing you that on this particular day there's much more volume being done in the stock then there is unnormal days therefore it's confirming that lots of people think you're am preparation that this is going to be something really in play is in fact in play so we we create a whole strategy towards trading these very particular stocks we don't generally trade market stocks we don't generally trade spy or Q or IWM or volatility products like UV x y or VX x we normally stick to stocks that have a news catalyst and are really in play and we have a whole curriculum based on this and takes a lot of time to put together that curriculum and then you know lo and behold and we put this together and shaped it for essentially 6 years of a marketplace to trade it in a certain way we want our guys to do well in the press environment if we were to have our guys as equity traders going ahead and trading spy and UV x y and VX x every day they would certainly lose money that would not be the way as a short-term active trader to best trade in a low volatility market and then we shifted the market shifted and what do we do here we completely changed what we taught and we spent a tremendous amount of time teaching our guys how to trade marketplace how to trade spy how to trade volatility products how to trade queues how to trade IWM and for long periods of time we would trade just those products we scrapped trading the stocks in play you know it's almost like we we took our training program and we put it aside and we say well dust that off when volatility gets low or not and for us when volatility gets above 15 when VIX is above 15 we start to look at marketplace when volatility is about 20 we stop looking and we start immersing ourselves in marketplace that's all we trade because then the market overall becomes in play because then that that volatility that movement in markets is where we want to be and so you know adapting to markets what's the timeframe that's winning in the market you're trading when VIX is elevated we're trading marketplace what concerns the big-money traders you know if low floats are working in low-volatility environments but not when volatility Rises will adapt ok if you're shorting VIX during this thing if you had been shorting VIX during that extended period of time and now it's not working well okay you you're gonna you're gonna be challenged to either do less of what you were doing prior pick your spots better - when you're shorting volatility overall or you don't add some new things but that's a very common thing that traders are challenged with all right focus on piano bad habit that people gravitated towards in 2018 and so to me PL is an arbitrary number we've had guys who used to make consistently four to $8,000 a month who wouldn't get out of bed for that kind of money they would if you told them you were only gonna make eight thousand dollars in a particular month they literally wouldn't show up they are interested in making hundreds of thousands of dollars a month and if they can't you're not interesting now and so but but they used to make these small amounts of numbers and we're ecstatic about that and when you start that would be terrific you know if you made four or five thousand dollars a month when you started that would just be awesome but those numbers will go up if you keep working at it I see and what we see are traders who are focusing on the process to achieve their goals having the most success and I want to make this really important point and so now one of the things that we do here is we challenge our guys to put together their yearly goals and we say make your own we give them a template for how to attack their yearly goals and I will challenge guys who I coach outside of the firm to do this as well and something that I've been observing which is just so striking to me is that pretty much and I wasn't I didn't think this was gonna be so drastic I didn't think this is gonna be so stark when we started to suggest for people to do this but there's such a correlation with a couple of Accession of exceptions but I think this is true of a large majority of traders there's such a correlation between the quality of work that people are willing to do and things like their yearly review and things like their monthly review our last guy to be to be a seven-figure trader his yearly goals are 38 pages he sends it in a PDF file I don't know why since in the PDF file maybe doesn't anybody else to see it the the level of detail in his work is not I want to combat my over trading there is the Luminess statistical record-keeping of what he's done well and how he's going to do more of it and more of it bigger there is tremendous thought and detail about strategies that he's going to add to improve his business there is there there are very clear solutions to how he's gonna eliminate some of his weaknesses and then you know I'll sort of be in a room like this and then you'll see the guy was struggling and tells you he wants to do better talks a good game and then you look at his yearly goals and it's one page of dribble it's one page of well-intentioned platitudes about how this is gonna be a great year for him I mean no it's not I mean it's not and and I know almost on the spot based on the comparison between the guy who's a seven-figure trader who sets goals to be a two and a half million dollar a year trader over the next two years and the work that he's gonna do to do that and the guy who isn't making money and has been here such that he's getting to the point where he may not make it and he's rolling out his goals and and we love these guys we love all them and you know they they they are personally very nice people but that she's not gonna get done and so we will say to people hey here's the work from one of the guys in the firm who made seven figures and wants to make two-and-a-half million over the next couple of years let me share this with you here is his yearly goals compare them to your yearly goals and and I I think they get the point we don't need to yell and scream at them I mean this is this is the work of somebody who does really well here's your work compare here's the standard live up to it and so you know think about that I was actually there's a there's a video that I did a while ago which I was watching back today we're brushing up a particular training program called the winning trader and one of the first videos in it is called win and it's a it's an impromptu video that we shot with one of the new classes where I think you can tell I'm a little disappointed with their effort and I'm a little disappointed with the standards that they feel they need to live up to that are below the standards that I know they need to live up to and so I sort of bring them in this room and I talked to them about win the day be the guy who wins doing the best am meeting be the guy who wins doing the best playbook trade be the guy who wins keeping the best trading stats be the guy who wins in terms of talking to other guys about trading be the guy who wins in doing back testing be the guy who wins and building filters when the day when every segment of the day that relates to you improving as a trader for you when the win the race of effective best practices turned into habit the compound that will drive your performance and improvement in 2019 win that battle and win it every day pays to go ahead and click our subscribe button so you don't miss any of the trading videos that we're producing for the trading community and please add your feedback in the comment section for what videos you like for us to produce next and what you found helpful from this video from all of us at SMB train and trade well

Channel: SMB Capital

Views: 71,976

Rating: 4.8976622 out of 5

Keywords: stock market, day trading, smb capital, trading, investing, markets, wall street, stock trading, options trading, options income, economics, finance, Bad trader habits that you must fix

Id: nOdlMX4b3UU

Length: 27min 32sec (1652 seconds)

Published: Wed Feb 06 2019