Traders want to become Steve Cohen TODAY!
This can lead to starting too fast for all levels of traders at all different stages of their careers.
My advise based on experience working with pro traders in NYC? Slow down!
At our firm we hire experienced discretionary and quant traders with a track record. We fully back the traders taking all of the downside risk. Before a trader starts we give him/her loss limits for the day and a “number”.
The “number” is when we will fire them. Everyone understands upfront what we are willing to risk on their trading. We hired an experienced trader a few months ago with an outstanding track record and he hit his number in one month. Was this an issue of him being a poor trader or did he under-appreciate the adjustment challenge of newness?
Think of all the new things for this experienced trader:
- a new platform
- new traders around him
- different sounds and visuals
- a new commute to work
- new places to find to eat lunch and breakfast and snacks
- new loss limits
- different book to trade
- firm culture
This experienced trader, heck former star trader, had all of this newness to overcome. This was too much for him.
A former SMB trader, who started a hedge fund, folded it (not for failure but for other reasons), and returned to trade recently. He lost way too much in his first two weeks. We slowed him down and asked him to focus on consistency. He has. But if we left him alone he could have hit his number in a month as well just adapting to the newness.
Our recent training class has just went live. We have them trade one trade at a time. I caught one trader making a trade that he was not permissioned to make and ordered him to exit the position. We want him starting slowly because adapting to newness is a challenge.
There are countless examples of arcade traders blowing up their accounts in week one.
There are too many tales of retail traders blowing up their savings in one quarter.
Respect the challenge of newness. Slowly, slowly, slowly build trading success.
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“You can be better tomorrow than you are today!”
Mike Bellafiore is the Co-Founder of SMB Capital and SMBU, which provides trading education in stocks, options, forex and futures. Bella is the author of One Good Trade and The PlayBook. He welcomes your trading questions at [email protected].
no relevant positions
3 Comments on “Slow Down! The Challenge of Newness to Trading”
Dear Mike and crew:
I can’t believe how helpful the trading community is with information. This is a new world for me I’m almost jumping out of my chair sometimes because I want to go live. So Thank you and all the traders who warn the new traders to trade small, do your research, get the emotions out of it. I’ve been setting up my own daily working plan for the last two weeks and will be make my first live trades next week. I will work extremely hard to be the turtle…slow and steady gets it done. And I will live to trade another day!
Thanks again for all of your videos.
Gr8 idea! Plz let us know how you are doing along the way. Happy to answer questions mbellafiore at smbcap dot com
I think it’s important every trader identifies what slump means to him/her, for example if you are trading well and not making money, because market is not paying, is that slump for you? or your making money but not trading well, e.g not following your rules and plan, is that slump for you? Alot of people including myself sometimes confuse ‘bad trading’ slump with ‘not making money’ slump, however there is a way out, simply go and speak to a trader or mentor whose been through the process (for me it’s guys at SMB), they will highlight what kind of slump your in and what medication you need. Just don’t try and fix a broken leg with paracetmol, or else the pain will return.