How to Handle Those Miserable Trading Slumps and Large Losses (Top Senior Prop Trader Teaches You)

you're in a trading slump and taking loss after loss you wonder what can I do to end this miserable trading slump or you take a large loss that is massively painful and you wonder what can I do to make this pain go away well in this video a top senior prop trader from our desk teaches you what he does so you're armed with ideas to turn around you're trading hi I'm Mike Bell if you're a co-founder of SMB capital and we're a proprietary trading firm located in midtown Manhattan and I'm also the author of the trading classic one good trade and the playbook you are in for a special treat in this video shark perhaps the best trader at our prop firm shares how he handles those painful but inevitable trading slumps and large losses [Music] I wanted to talk a little bit more in detail here about dealing with a large loss or a slump it's something that I've had to do numerous times and it's something that it stinks but it's also something that leads to your growth and development and your resilience as a trader and everyone's gonna go through it you know if you if you're going on Twitter and you're seeing everyone make money every day it's unrealistic it's not the truth and you know everyone goes through tough times so in general I like to have this saying it's an easy thing it rhymes and and you know when you're in doubt just get out you know you can always get back in if you find yourself frozen ever the best thing to do is just to get the heck out of your position and reassess the situation you would be so surprised just a one minute walk around the office or outside and breath of fresh air you can make such a better decision just removing yourself and and not being attached to the trade by being involved you know you have to take a personal inventory every one's gonna be different sometimes you have a large loss because it's a really good set up and you you decided to risk a little bit more and and it didn't work out other times it's because you're just not seeing things well the markets not conducive to your style it's very important to keep a journal and to take an inventory of why things are happening you know you make you make sure you have a little introspection and the best thing to do is to then trade smaller a lot of times people want to trade bigger make their money back right away it's a natural thing I still do that sometimes and it takes me two or three large losses to trade smaller a lot of the time but the best thing to do after a large loss is just as a book a Green Day book a couple green days and you'd be so surprised how quickly things will just naturally turn around and then a setup will slap you in the face and and all of a sudden your account will be positive again from where you are write down your plans it's especially as a new trader that can be a very good very good tools just to write things down and get out of your head into the paper and it will make it a little bit more accountable to you you know you keep a journal not just of your trading plans and if things worked out but how you're feeling why you made a trade to do come off a few losers so doing that every day you're gonna learn your triggers a little bit more it's gonna be a little bit easier to catch up on on things when you're when you're not doing well and another good thing is to have a buddy system now not everyone's trading in a firm but if you are you can have the risk manager or even I am you know a fellow trader that is like-minded a lot of times someone that's not involved in in your day to day your executions and and just you're staring at the screen you can be so attached and impulsive sometimes and not even realize it but if you kind of give that if you empower a friend or risk manager to kind of overlook your trading a little bit they're gonna have a much easier time detecting when you're tilting when you're in a slump when you should scale things back and you know a beauty thing a beautiful thing about being at a firm is you'll have the risk man or scale you scale you back on matically when you're not trading well and it doesn't feel good when that happens but it's for for everyone's own own benefit now you can also learn from those that have more experience people that have been trading for five or ten years they've gone through these periods where they've had a slump you know I've had many months where I've had losing months and it's it's part of the game and it's it's the career you sign up for but you know as you deal with those times more and more it's a lot easier to come back you know you've been through it before I remember in the past I'd lost $300,000 on KBI oh and one day and that felt like the absolute worst worst day of all time and you know and then when I got my account green in a few months I was like oh that's not so bad and and that just made me a lot stronger to trade a lot bigger and to take kind of the next step as a trader and so the times when they are tough can you know they can be a good thing in the end as well you know take a break it's okay to take a couple days off if you're not seeing things well go do something that you happy go on a hike go spend time with your family spend time with your friends trading it will always be there it's so underrated to take care of your personal life as much as you do your trading life to have friends and family and a support system and to be able to kind of zoom out and realize we're just very grateful to be able to do this for a living you know it's it's you look around and there's people that are in much worse shape sand have much worse careers and and it's it's really a privilege to be able to trade and just putting things in perspective can be super significant you know that's part of zooming out as I wrote down here and just maybe you look at yourself a little bit from an exterior perspective meaning maybe you kind of picture yourself as someone looking down at what you're doing and what you have going on in your life and just again putting things in perspective and lastly and probably the most important thing is to make sure you're learning losses you can look at as you know I got unlucky you could blame the market or you can have some self accountability you can blame yourself you can think about what we're not wrong you can learn from it and then the next time you're gonna come back a lot stronger and you're not going to have those down times as often and every loss you want to view as more tuition to the market a learning experience it sucks losing sucks no one likes to lose but there's always lessons and I think if you look at any successful person throughout any career they'll tell you learning from the mistakes is is you know one of the most important things everyone makes mistakes it's good to make mistakes but it's bad to let them happen over and over again without learning from them this would help you having a risk manager to watch over your signs I'm certainly you know you got to keep yourself that kind of goes back to the buddy system I was talking about you have to have people that are there that are aware of your trading and aware of how you trade and and being able to kind of keep you in check in just a simple conversation sometimes can mean so much and a lot of times when you're dealing with a large loss you can kind of get sucked in you can have a a hard time getting out of position that's not working because because you want to make your money back or you don't want to give up on the trade and having a risk manager or buddy that can kind of just say you know this isn't really working you can you can always get back in those sort of things can be tremendously helpful and one follow up so oftentimes when you're not trading at your best your best you talk about be more of a sniper yeah why is that important to you and what does that mean to you yeah so something I probably should have mentioned is when you are not trading well a lot of times that's a function of the market environment changing or just the market environment not being conducive to your style and so I like to every day make sure I'm meticulously reviewing kind of the setups that I'm taking and if they're working and why and why not and then if I do find myself struggling I just want to eliminate anything that's a C or B trade that I might have been working for a few weeks but it stopped or anything that might get me a little bit frustrated a little bit quicker if I'm more likely to take a loss and just really focus on getting in the money right away and and having really tight stops and just printing a green day you know just doesn't matter if it's one dollar $100 thousand whatever you're you know if you're used to making a hundred dollars make ten dollars that day you know if you're used to making ten thousand dollars make $1,000 that day and and be a sniper and and just cut your losses and just get in the habit of trading well basically I think that's it so yeah if you guys have any questions about this topic or anything in general I'm happy to I'm happy to chat if you want to learn three-wheel 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 or 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 this free registration page in the new window so don't worry you're not gonna lose this video you're gonna learn more in a couple of hours from this trading workshop then from years of online education advice for dealing with the firm as you get more experience you get access to so I think the number one thing you want to do is ask yourself if it's still good setup if the reason you're in the trade makes sense and then from there you probably want to write down your plan instead of just be too reactive maybe you zoom out you don't focus too much on a short timeframe if you are not in your risk boundaries you know you'd okay to just get the heck out and then if you know say it's a short position and starts hitting lows maybe you get back in a little bit so it really depends a little bit situation by situation but in general it's usually best to just cut your loss as a general rule and and then just reevaluate your situation and move on from there how do you balance you mention KPI oh and you have a large kind of single variable yeah it dominates the rest your positions you got eight or ten great position on there working well you know it it gets a lot easier as you get more experience but if you have a position on there's a reason and there's a plan involved and as hard as it is you know a lot of times when people have losers they want to sell their winter to kind of finance their losers but you want to take every decision in trading as much in a vacuum as you can and so you know sometimes I get to the point where I'm so frustrated I just get flat everything and just start over take a break but if I'm dealing with one large loss and you know that happens and I have six other good trades on you know I want to trade them how I would always trade them and if that's difficult for you to do maybe you want to take a break maybe you just want to put stops in where they were supposed to be instead of acting too impulsively it's not an easy thing when you have less experience but as you go through it more and more it just becomes kind of second nature and in general everyday especially when you're when you're growing up as a trader you want to just build those habits of making the right decisions no matter if it's a good day or a bad day you can have a bad trading day that's a good trading day if it's I should say a losing trading day that's a good trading day and then you can praise yourself as the decisions you make and you do that every day and those habits develop that was the top right yeah yeah yes I was I was able to hold it all the way to 80 so it worked out and what you do so you have the gap up on that that news catalyst yep which pretty much after that gap of the stock did nothing but trade down after that gap up right what did you do on the gap of that morning to your overall position of anything I just added a hedge so that I could cut my loss if the worst case scenario played out and then other than that I just held it you know I would have loved to say that I could have added a lot I think I did add some longer-term puts that day but you know when you're dealing with that sort of situation and you know you're down past your stop it's better for me to just have that day get through it luckily I was able to work out a little bit and then you know from there on out I think I added to it a few times over the next couple days but just staying with it was a win instead of panicking out and and giving up that good position basically any other questions you spoke about cutting out B and C trades when when you're testing out a new setup when you're trying a new setup how long are you testing and how many times are you trying to set up before you abandoned the idea where you say this is a good so I don't know that I have a predetermined system for that but I basically will try things on small size until I have some sort of statistical proof that they're working and then I'll just try to get as big as I can without messing up my execution or at this point if the liquidity if there's a little quiddity constraint but when will I give up on it you know it depends I'd like to learn setups from mine from other people that I know that they work right there are definitely things I want to be creative with but if you find yourself distracted or taking setups that are lowering your bandwidth and you're not finding success then yeah it's it's good but I don't that's good eliminate them I should say but I don't really have a predetermined set amount of time for that I guess I think that's kind of a personal thing as you find yourself and find your style basically so there are traitors that reverse the mattock with their trading yeah and then there are traders that that trade with more discretion particularly on examples like this so a systematic trader when something gaps up like this we'll know before how they're gonna handle this and the discretionary trader will threaten more of a feel for it do you gravitate towards a particular style and and if so why yeah I've always been more of a discretionary trader and I don't know if there's necessarily much of a why other than it it suits my personality a little bit more and when I've tried to be more systematic in the past it just has hurt my results and I like part of what I like about trading is the challenge of playing the game and you know being able to assess when an opportunity is so large or not and and make the adjustments and and just strategize in that in that respect so for me I'm more of a discretion discretionary person I don't I don't even really use price targets that much I like to be really fluid with my trading but there's no right or wrong answer other people are gonna be a lot more systematic and they're gonna have just as much success so just in general things are about finding your niche and finding your personality and matching them to your setups and style so going off of that like having the feeling the discretion do you feel like you're oftentimes sizing your decisions based off those worst-case scenarios or do you only really gain that out and you think the risk reward is so large that you need to be aware of what the worst possible case scenario could be I think you want to size any trade with the worst case scenario mine and I always have my worst drawdowns not always but typically when I lose that and I'm thinking about the gain first or the potential and something and then a whole slew of problems probably come from that and rushing things are over sizing or over sizing your initial entries stuff like that in general the number one focus you should have as a trader is to manage your risk it's cliche it's the truth there's so many traders that have calm and and left because of one or two stocks that blew them up I've had situations where that's happened to me I'm lucky enough to be able to affirm where I could be capitalized to come back from that if I was trading individually and might not have so through all those experiences I will tell you firsthand that having worst case scenario in mind is always the number one job that's not gonna come the other time but what would you look for if you want to try to make something like this in the future well you know they usually there's like one of these a year I would say and and so I think from studying them in the past and you know being involved with them in the past you learn and you learn to hold a little bit better and you learn to stick with things if these sort of situations arise so you know a I would say I would study the ones from the past like tilray and and this and some of the other runners like dries and other things that have run you know from five dollars to a hundred I mean they're a little bit different because those are low float stocks and this isn't but kind of what were the mechanics with the share size with the short interest how did it top out what was the catalyst that got it to kind of top out what did it look like when it was going down and you know have some rules to be able to kind of stick with it so it's it's just about studying I think and and also some people aren't gonna be longer term traders they're not gonna hold things for a month it's just not in their personality so you've got to learn that about yourself as well do you you were mentioning like the structure of the stocks that were running do you find like the structure of this job of the stock to be more important than the like overall catalyst their fundamentals behind it well in this case it was kind of a combination because the structure the share structure had gotten the fundamentals so out of whack that's kind of what contributed it so yes but I will I'll give you a perfect example you know this week and last week into this week I was long peloton which is not necessarily stock that I believe in but I was just noticing that the share structure there was like 30 million shares short or something and it was hitting highs and that was a setup that was based on the share structure other times you might do a setup that's purely based on the fundamentals I think you can kind of group those but what I like is when those share structure mechanics get a stock that's so obviously out of whack and then you can use your trading skills to wait for it to top and and execute it on the short side in a controlled manner you a fair amount about be honest I was listening to you to try but you said it fairly fundamentally informed you knew when the lock-up was coming a lot of things like that I'm both like a percentage in a profitability basis how much your P&L and trades are from something like that versus you know a breaking news trade or just you know an hour do you know it never that's a hard thing to quantify I mean this year that trade was like a third of my year was a really is my biggest trade of all time but that's not always gonna be the case and sometimes you could get in an amazing breaking news situation and just catch it just right if you're just on that day or you really see it right and you you know like I can name Q calm this year was a situation where you could have made half your year and even Disney last week was a situation where you could have made an outrageous amount and every now and then I'll catch one of those right but I like these trades these make a lot of sense to me but it's not about what makes sense to me it's you can learn from that and you can learn from other people that are making money but you need to make sure that you know some people are just naturally more bullish or bearish I don't even I don't know if it's hardwired or or stuff like that but you just gotta learn what what what is your best set up study it see the proof that you make money in it and then just hit it harder and harder every time it comes up basically now it's your turn which effective trading technique are you going to try to end the trading slump are you going to switch to sniper mode like shark or are you going to slow down and size down and just try and put together a positive day let us know by leaving a comment below right now

Channel: SMB Capital

Views: 44,871

Rating: 4.9559016 out of 5

Keywords: prop trader, prop trader interview, prop trader life, prop trader meaning, how to become a prop trader, senior prop trader, day trader, shark smb capital, smb capital, smb shark

Id: _2RuOqJul8M

Length: 22min 22sec (1342 seconds)

Published: Thu Nov 21 2019