Do you ever feel like if I you could just take my best trades, we say A+ trades, my results would be a lot better? I am talking a lot better. You are probably right. Let me share a recent anecdote about this from the desk and offer 4 simple solutions.
A few traders on the desk had been missing some of their A+ trades in a joint account. Both are seeking breakout trading years. You might even say they need to have a breakout year this year.
They are doing a lot right, but still need to stop missing some of their best ideas. They exchange trade ideas and then when both agree they put the trade on in their joint account. But again they were missing some of their best trades. They were frustrated. I asked CBry, who runs the trading floor in NYC, to set up a call with both of these traders. I asked for the traders to fix the problem and then join us for a call.
Obviously if you are not taking all of your A+ trades your PnL will suffer. But it actually suffers more than most think. There is a side effect that happens to traders missing their A+ and this makes things so much worse.
What is that side effect?
That side effect happened to these two traders ready for a breakout year executing on their joint account. Not only were they not capturing the PnL from some of their favorite trades but but but because they were not in all of their best trades, they had periods of time where they were doing nothing. Missing some of their best trades meant there was time where they had no trades on at all. And when a trader has no trades on that can always cause trading trouble.
What kind of trading trouble?
Instead of being in their favorite trades and managing those names, they went trade surfing. They went trade surfing for trades to be in. And with this trade surfing they started trading outside of their PlayBook. Yikes! And this trade surfing caused this side effect of additional trading trouble.
So now not only were they missing some of their A+ trades but they were taking trades they should not have been taking. Their PnL now did not include some of their A+ trades, but it also included trades they should have skipped. So their PnL was not buff enough from A+ trades missed but it also was emasculated with losses from trades outside their PlayBook.
Their results were not representing their true trading ability. In fact, their PnL was much worse than what they were capable of. To put this into PnL estimates, this was potentially the difference from treading water to posting 6-figure months.
I was on the phone with a very successful trader this week, who never needs to make another dime. He now coaches some traders and we were discussing some work he might help us with. He said something that sums up the tragedy of missing some of your best trades. He said, “It is one thing for traders to fail because they lack ability. But I hate seeing traders fail who shouldn’t.” You deserve to experience the success of your best trades.
Okay so now we sought some simple solutions with these two traders. If you struggle from this very issue, perhaps the ideas below will help you as well.
4 Simple Solutions:
- A DRC, Daily Report Card, on whether you took all of their A+ trades. Intensively work to fix the issue of missing some of their A+ trades. This technique was taught to us by Dr. Steenbarger and has been adopted by many in the trading universe.
- Scrub your communication with each other so as not to miss your best trades.
- Clarify your execution system between each other so as not to miss your top trades.
- Brainstorm on technology alerts so you capture your favorite ideas.
Once again, and give this some time to sink in, you deserve to experience the success of your best trades. Now go do it!
Mike Bellafiore is the Co-Founder of SMB Capital, a proprietary trading desk, and SMB Training, which provides trading education in stocks, options, and futures. Bella, @MikeBellafiore, is the author of One Good Trade and The PlayBook. He welcomes your trading questions at [email protected].