The 3 Trading Problems You NEED to Solve (And Their Solutions)

SMB holds team monthly reviews to help Traders grow their trading business during these team monthly reviews Traders inevitably share trading problems that they are facing real Traders run into real struggles that require real solutions and we discuss these real solutions with them today Lance and I will discuss three of the trading problems that arose during this month's monthly team meetings on our desk at SME capital and then most importantly the solutions for these common trading challenges I'm Mike bellefiore and we're one of the top proprietary trading firms located in New York City and proud to develop numerous seven and even eight-figure per year Traders we hope this video gives you real solutions to make real progress with your Trading [Music] let's discuss three important issues that came up during our team monthly meetings this month and offer you guys some solutions so we're sitting in our conference room Lance and myself and the teams and the Traders and they're presenting how they did for the month and inevitably they're going to go over what they did well and what they did poorly and Lance and I uh as well as other support at the firm are going to help them help them with some solutions talk through some solutions and get them thinking about this so they improve next month so you know one of the things that happens at a prop desk is Traders start to try and add a new strategy to their business and there are real growing pains when they're starting to learn a new strategy and there is one particular strategy that a couple of the Traders on the desk are trying to learn and they've been deploying them over the last quarter and unfortunately for a couple of the these Traders this month they expressed that they lost too much money deploying these new strategies and anyone who's done this you feel like a dope you know you know you should not have lost as much money as you did you know you should stick to what you do best and it's particularly painful when you lose too much in a strategy that's working out and you're also really excited that you've learned this new strategy and you're excited about the potential that this new strategy can have for your p l and you're excited about branching out as a Trader and you're excited about increasing your bandwidth as a Trader and you can just visualize yourself as it's bigger better in the in terms of making more p l that this bigger broader stronger better Trader uh and that's your mindset and then you start making some trades and you lose too much money that can be pretty frustrating I'm sure this has never happened to anybody watching I'm sure this is never having to let it just definitely happened to Lance and myself and it's just so unnecessary the the unnecessary part being losing too much there are growing pains you're gonna make mistakes you're going to take a step forward a half a step back that's part of actually burning in the new strategy so it's laudable that these Traders were expanding their playbook AMC this month was their Nemesis on the new trade that they were burning into their playbook they didn't know admittedly as much as they thought they knew there there needs to be a process for growing out a new strategy and we don't want this to happen to you the trader presented some solutions and then we added some other solutions to you whenever there's a problem in your Trading you want to identify it that's the first that's the first part but then but then but then but then but then what has to happen next to be a professional Trader is you have to come up with a solution and you have to come up with an effective solution it's not good enough to just identify a problem it's not good enough also just to come up with a solution you have to come up with an effective solution and that is not just good enough to do that you actually have to be measuring how effective the solution is for you so working with this Trader on The Growing Pains of a new strategy we identified these ideas as a solution build a business plan for your new strategy anticipated taking longer than you think to add p l you need risk limits for your new strategy that makes sense plan to increase your risk From Success tag and measure your trades keeping detailed stats have an easy money review have an easy money monthly review on the best trades in the strategy each month Lance I know I know damn well that these are things we've dealt with in our trading career thoughts on solutions for The Growing Pains of a new strategy yep so first of all I agree with you where it is totally laudable to expand your playbook 100 to want to grow your Edge to learn and take advantage of more opportunities but I think what so commonly happens is especially if you're a more experienced Trader you have this wonderful thing called ego and if you're used to trading 10 000 shares on a strategy and risking tens of thousands of dollars it seems laughably silly to risk one dollar or trade with one chair but the reality is we have that risk allocation for strategies where we have real proven Edge and we have built a business over months and years that's so different when we're developing strategy and so even though it's so emotionally hard to follow the first thing I recommend Traders do is trade with the smallest size possible we are not here to make money in strategies we're building out initially we are here to Simply collect data it is not until you have that data and that proven track record and that you've hashed out the different nuances you've hashed out the different things that can go wrong you've dealt with things like borrow cost you've dealt with things like buy-ins you've dealt with fat tail events and what the true risk is until you do that I recommend the minimal size possible and what you do eventually from there is you build up that track record and you grow slowly because the number one thing that you don't want to happen is you're putting in all this effort and you take a big rip and that demotivates you or that leads you to wrongfully conclude that you do not have Edge in the strategy you're building out it's too early to say right and so you don't want to prematurely end that exploration until you've truly collected data and gone through the pains you need to on the smallest size possible to stay with it what we'd love for you guys to do for all those people watching is in the comments section if you have best practices that have really worked for you that we haven't mentioned that have helped you grow out a new trading strategy share that with us share that with our community let's move to trading problem number two that arose from our team monthly meetings and this is increased sizing ruined my month this is a problem that one of our developing Traders ran into this month he's somebody we love on the desk hard to find somebody who works harder than this particular young Trader somebody that Lance I know you ran an office for a significant period of time like this is the type of Trader you really root for you root really hard for and this is somebody who ironically had his best month ever the prior month best month ever Lobby's the risk manager for more size he gets it he's so excited to be deploying this larger size the next month in the marketplace and you may be able to guess what happened next the old story of Daedalus Flying Too Close to the sun we have all been there and I've seen it happen so many times when I was running an office come on this has never happened to anybody in the in the trading Community who posts on Twitter yeah of course yeah make more money well only in the real world yeah so this certainly happened to me and and this has happened to you um and this Trader's on one of the best teams at our firm somebody who if I got to hire 10 people a year and I could hire 10 people like this person I'd be super I'd be super excited and so it gets his new size eager excited passionate ready to go down two stops for the month and for those of you who don't follow how we think about our results that's not good bound two stops of the month bad certainly uh that's not good and it turns out it was all because of his sizing he thought betrayeds were a trades too many of the B and C trades were sized like a trades he sized too small he rushed some trades to put on this new size and this this is these are very common things that happen when you get additional risk and so he had to come up with Solutions for sizing identified the problem now he's got to come up with Solutions he's got to come up with effective Solutions and those solutions that he came up with and then we assisted and supplemented on are refine your playbook accountability he was going to share all of his sizing on all of his trades with his teammates he was going to ask for feedback on his trades in real time to gain a different perspective maybe some of those be trades that he thought were a trades maybe somebody on his team could have helped him see that they weren't as good as he thought build better rules for your trades so some of the trades he was taking too many times some of the some of the trades he needed much much clearer see it moments before he entered update your watch list this is actually I haven't heard this during a monthly review in a really long time and I thought this was quite innovative update your watch list throughout the day so we all have watch lists before the open and this Trader surmised that if he updated his watch lists throughout the day that this would actually help him get into better trades it's a it's a clever idea patient with those entries fight for price a daily report card on your sizing Improvement we've got this issue we've got to be intensive and singular in our Focus about getting better with this issue we've gotta we've got to get this right this month the way you do that is by focusing on it so his Daily report card was not going to focus on his trading or his stock selection it was going to be it was going to focus on one thing sizing and one thing I asked them to do and for him to start visualizing and to think about is to commit to commit to success by next month that he was going to come back during our next team monthly review and he was going to have made Improvement honestizing and share that with all of us Lance thoughts on some of these Solutions yeah well so having referenced Greek mythology I think I now need to reference the great Mike Tyson which is everybody has a plan until they get hit in the face and I think so so often when Traders get these size increases and these risk limit increases exactly what played out here tends to happen and it's frustrating right and so I think the number one step you can take to start things off is anticipate there being Road bumps don't go so wild with your size increase that if you do end up with the loss or a string of losses that it ends up just debilitating and demotivating and then the opposite happens right gradual and slow and intentional is so important you want to set those guard rails and those expectations beforehand are you actually in a position where if you have a couple trades that don't work out it's not going to affect your psychology so that's first of all do so prudently and with with the guardrails now the other thing I like to point out is you really want to increase your size on your Easy Money trades that's something I stress a lot here and your Easy Money trades are the high probability layups for you they are the little free throw shots you take they're replicable they're common and you know you can pull these off when you need to and so if you have a trade that's kind of like a home run trade where it's a five or ten percent chance of winning what are you gonna do if you end up losing the first six or seven times in a row on increased size what's gonna happen is you're gonna end up taking that loss then you just start scaling back and going smaller so focus on sizing your easiest layups first and do it gradually and then build on that and so often that's the little trick to help people size up that really gets them going rather than biting off more than you can chew in some of the home run plays find your easiest plays and very systematically and gradually increase it throughout the month you know I was thinking of you recently while I was practicing with my son so we went out to shoot around with my son and my daughter uh and and helping them get a little bit better at their game and I was working with my daughter on one REM and my son was shooting by himself on on the further rim and he was getting discouraged and he came over and he wanted to stop and he's like I can't make any shots I want to I want to go in the car and wait in the car and I said to him and I left I left my daughter and I walked over with him to back over to his hoop and I said look let's make things easier I was watching him out of the corner of my eye and guess what he was doing you know and anyone who has kids who are learning to play basketball you know what I'm going to say you know out of the corner of my eye I see him like hoisting up Steph Curry three-pointers which he can barely barely reach the rim at the age he's tap and he can barely reach the rim of course he's not making any shots and so we went over to the rim and if you've played basketball before there's a way to start when you're shooting which is you take the ball with one hand and you sit right under the basket and you just shoot the ball and you just get your your form down right in front of the basket and you you go through that exercise for a couple of minutes and then you make some laps and then you move back and back and back but you start with the easiest shots so this does not just apply to trading but it also applies to coaching your kids playing basketball which is why I might be the next Coach K yes heard it here first let's go to the third trading problem that arose this month which is you win or lose the game before it's played game planning so Microsoft had breaking news certainly a significant news Catalyst by announcing that it had AI products to sell to its customers they had price tags on them there were three different levels the their corporate leaders went on TV and were selling the the growth of this potential idea this one particular Trader had recognized that and then he also recognized a little bit later that there was this similar opportunity or so we thought an apple and the stock had moved quite a bit and he didn't make as much in that particular trade and he said we said to him did you game plan after the Microsoft breaking news a potential similar trade in other stocks like Apple and he said he said no and we said well look you know I think actually you said this pretty well Lance maybe I should just let you well what did you say to him yep and so I think probably my biggest theme this month for the desk has been really training with a sense of urgency where you can't afford to see an opportunity and not immediately master that opportunity in case the next one comes the very next day you know what can I can I ask our our prodigious Video Editor to actually splice in right now the video that you did on this very topic and then come back to you look guys sometimes trading is very hard sometimes it's easy we never know when the easy setups or markets will come that's why we need to be training with a sense of urgency if a hot Market arrives tomorrow is your playbook your sizing your prep where it needs to be when the market gives us a layup have you relentlessly studied it so that in the next one we can really push our size or if you missed that opportunity have you built systems to catch the very next one if not we need that sense of urgency what fired me up so much is muln was a layup trade last week that I dissected to death in a 30 minute video literally a few days later these same exact long and short setup occurs in Nikola too many Traders missed that layup the truth is the trading game is a race it is a Race Against Time to become consistently profitable people forget that there is only so long you will stick to this game without seeing progress if you're going to pursue this you need to pursue this game with a sense of urgency you can't afford to not push every single day we cannot afford to miss layups even at the very beginning of this month we saw a trade in muln I dissected this whole trade up over the weekend posted a video for free for everybody to to enjoy and learn from luck will have it a couple days later Nikola did the same exact pattern it was almost just textbook similar to all the concepts I discussed and that's how the month kicked off and that was a theme all throughout the month where you had these trades that would almost come in pairs so you got the Microsoft AI headline and there's Traders out there that were um busy with other stuff or or or studying other things building up other playbooks but guess what this is a job where every day counts you cannot wait a week or a month to learn that play you cannot wait a month to study muln you cannot wait a month to study Nikola and you couldn't even wait one day to study the Microsoft because the very next day we got that Apple AI headline it wasn't quite as big it wasn't quite as strong of a headline an article but nevertheless it just goes to show that you cannot rest on your laurels at this job you never know when that amazing Market opportunity is coming when that amazing active opportunistic Market is coming when will the next 2020 and 2021 be if it's in a couple years will you be ready will you have the risk limits and the account that you want to fully capitalize on some of these unique markets I don't know about you but every single time there's a big opportunity I do not even want to wait a day and take that risk you need to make hay while the sun is shining and part of that means as soon as possible learning the lessons and extracting them from the market so you can immediately incorporate them for that next opportunity not the third fourth or fifth you know it's interesting about that so one of the things that we added a couple years ago as a major part of our internship program was the ability for people to compete throughout the day they can compete on their best am idea they can compete during the 11 o'clock meeting they can compete during the reading the tape sessions there's there's all these things they get a chance to compete at throughout the day beat all of their other colleagues and we just actually sat and was going over whether or not we were going to move somebody from one step to the next in terms of our internship so we there's a junior internship then a senior internship and then a decision to be hired so when you're a junior internship we decide whether or not you should be a senior internship when you're a senior we should decide whether we're going to hire you and I can tell you that I was asked about one particular person and what I thought of that person as we're making decisions about whether or not we're going to move this person along and I said I think person's pretty smart I see something there you know what Jeff said Jeff said he's not hungry enough I don't see the hunger I don't I don't I don't recommend we pass them to the next stage and that person is not going to be coming back I I think he has the ability intellectually to do it I actually liked him very much I was impressed with them but he he just didn't have the hunger according to Jeff who works with these these Traders much more closely it's it's important and I think so often that hunger and that urgency also comes through in the depth of your Solutions so one other thing that happened this week is one of the SMB Traders is really working on expanding his Playbook into a new area and I asked him whether he caught uh an opportunity in that Playbook and he said no I didn't see the ticker early enough okay great that's fine we can accept that but I pushed further how are you going to spot the next one what did you learn from that opportunity and his response was okay I'm going to make a scanner using some of the SMB technology to find and see that opportunity more proactively but I kept on pushing him okay like you're gonna make that scanner but that's not enough how are you gonna make sure that you see that scanner and that you're you're reading it and checking it throughout the day and his response was I'm going to then put calendar alerts midday to remind me to keep on checking the watch list on my scanners and I said great but let's say it's an active day and you get busy what's another step we can do further to further Safeguard not missing a single opportunity in that new playbook and his idea then was I'm going to share that Scanner with other people as part of my trading pod so that they can help me catch these opportunities so we can all win together and that's what the truly great Traders do when they miss an opportunity or when they could have done better they dissect every aspect of that they learn every lesson there is and they don't just put one safeguard to catch it they put in layers upon layers of safeguards to make sure that they catch the opportunity that their size for the opportunity that they're taking full advantage of every single day those are the traders that are trading with that sense of urgency so you're an active Trader not doing as well as you want not doing as well as you deserve and you just can't figure out why you can't become profitable no matter how hard you try well let me show you why this is your competition the traders in this room this room right here is full of elite Traders some of them are making seven and even eight figures a year in fact our top guys have made nearly 20 million each in net trading profits in a single year let's head to my office so I can share more so you're probably used to seeing videos of lavish Trader Lifestyles trading gurus trading off of a laptop for an hour a day heck maybe even 15 minutes a day and then them relaxing on some secluded beach for the rest of the day well all I can tell you is that our Traders train like pro athletes they live and breathe the markets and are continually working on their trading skills because at our firm that's what we found it really takes to make it in this game I'm Mike bellafuri co-founder and managing partner of SMB Capital One of the world's top proprietary trading firms located in Midtown Manhattan and we're always looking for trading talent to hire and develop and not just to trade in-house on our desks but also to trade from their own home entirely using our firm's capital and we have numerous Traders doing just that allowing them to make upwards of seven figures trading the firm's Capital without risking their own money but to even get a shot at something like that you need to have the right training that's why we're doing a new free online presentation in which we share how you can get an interview with SMB to become an in-house a remote Trader trading firm Capital without risking yours and gaining access to to all of our firms coaching and resources and the best part you don't have to be a profitable Trader yet in fact we prefer to mold profitable Traders with our methods and our techniques that's why we have just three simple criteria that can earn anyone an interview we're looking for highly ambitious and determined traders who fit our culture first and foremost so if you believe that could be you sign up for the free one hour online presentation by clicking the link that's in your top right corner of your screen now

Channel: SMB Capital

Views: 31,385

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

Id: e6iceQyCzKA

Length: 27min 8sec (1628 seconds)

Published: Wed Aug 09 2023