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SMB Blog shares market stories and trading lessons from experienced, professional proprietary traders.  Here, we discuss trading setups, the psychology of trading, and trading fundamentals.  SMB Blog also offers coaching, market commentary, and interesting stories from successful active proprietary traders at SMB Capital.  We encourage you to learn more about our bloggers by clicking their biographies on the main page.  We also welcome your comments and questions about trading and invite you to learn more about SMB Capital by visiting our homepage at smbtraining.com

  • Steven

    Hi Mr. Bellafiore,

    I have been following your blog for a while and have certainly learned a lot about day trading.

    One question that I am curious about is how “money management” is handled for day traders. Since day trading demands a lot of attention, I assume each trader can probably only monitor at max 10~20 stocks and may have at max 10 positions on simultaneously. Please let me know if that assumption is not reasonable. So let’s say you have one million dollar in BP, how do you decide how much of it to allocate for each trade? Is there an objective way to determine the dollar amount per position or is it more subjective?

    Thanks in advance,

    Steven

  • jeff

    you should aim for consistent absolute dollar risk per trade. say you don’t want to risk no more than $1,000 per trade. if in the specific trade you’re entering you are 20 cents away from your stop, you should only put on 5,000 shares. If your stop is 50 cents away, you should only put on 2,000 shares max. This will keep your capital allocated such that you are within your risk tolerance when AIG is trading $7 intraday.

    risking a constant dollar amount per trade does not necessarily give you good reward/risk ratio, however, it will allow you be consistent with your capital allocation because it takes into account the volatility of the stock you are trading, which will hopefully help your consistency.

    i’ve know day-traders who’d load up 20-30 stocks intraday with $7M+ BP back in 2008. they are definitely struggling this year b/c it’s not the same trading environment. i agree with you that this quarter, the traders who have allocated their capital properly among the 2-4 stocks each day that are “in-play” are definitely doing well and that 10 positions is probably the max that one needs to have intraday in this environment.

    to answer your last question, i know traders with 1M buying power who swing between $1,000 to 6,000 per day so depending on your style, you should decide for yourself what your comfortable losing per day, and dividing that by how many trades you make per day will give you a better idea of how much you should risk on any single trade.

  • Matt

    Mike/SMB Traders,

    I was watching Bella on StocktwitsTV. He was talking about the “optimal trading day” and mentioned that he’s changed his trading style 6 times in 12 years. my question, two parts: 1) were those changes made during/because of slumps? and 2) how do you determine whether you are in a slump vs. when you need to change your trading style?

    ps. love the blog. been trading on my own for a year and getting better every day.

  • Rick Wickhurst

    G-Man

    1) Is it correct that you do several hundred trades a day?

    If so…could you share your avg % per trade

    Thanks

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6. Please note: Hypothetical computer simulated performance results are believed to be accurately presented. However, they are not guaranteed as to accuracy or completeness and are subject to change without any notice. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Since, also, the trades have not actually been executed; the results may have been under or over compensated for the impact, if any, of certain market factors such as liquidity, slippage and commissions. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any portfolio will, or is likely to achieve profits or losses similar to those shown. All investments and trades carry risks.

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