A sad anecdote of a failed trader

BellaGeneral Comments, Mike Bellafiore's (Bella's) Blogs8 Comments

I received this email from a trader this week:

Hey Mike,

We talked awhile ago, about how your book “One Good Trade” has helped me and my 5 friends on the trading desk at our prop trading firm($$$$ Capital).  I have been trading for about 12 months total and about 6 months live.  I have found that your website blogs and tweets during the day have really helped me excel my trading curve.  My prop trading firm is more of a “Do it yourself” type of firm, and I feel in trading to succeed you need a mentor to guide you through all the ups and downs of the market. Therefore, I came to realized that you, your blog, and SMB capital have been more of a mentor then my firm in general. I don’t think that is right at all. If I want to be successful, I have to find the place, environment, and people that are going to help me achieve that.   I would be grateful if you took a look at my attached resume, because I have conviction that your firm has the resources I need to become a successful intraday trader.

I responded:

Please send me your trading runs for the past 4 months.
Thxs for the interest.

Mike

His sent results were: 1k down days, almost no positive days, and never even a hint of progress in four months of data.

I was reading Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere where Tadas Viskanta tackles the issue of the failure rate of a professional trader.  Barry Rithlotz is sited and compared the difficulty of becoming a professional trader with that of a professional athlete, clarifying it was easier to be a pro trader but still very challenging.  The trader above should not be considered in the failure statistics.

1) He was not a professional trader.  He was a guy who sat in front of a computer at an arcade offering a rental service.  You rent my space and my computers for commissions on your trades.  It is like a bunch of buddies getting together and renting the basketball floor at Madison Square Garden for a few hours of pick up.  That does not make them professional basketball players.

2) How exactly do you lose $1k in a trading day when you have not shown and ability to make money?  That is irresponsibly, unprofessional and unacceptable.   Who the hell was allowing this Newb to rip it up like this?  To whomever was managing/monitoring this Newb: please get out of business. This trader’s intraday loss limit should have never risen to above $150 given his results.

3) What was gained from this experience?  The gentleman still does not know how to trade.  He learned almost nothing from this experience.  This is sad.

4) I have read most of the overly negative trading forums complain that training is not worth the cost.  Stick this anecdote in those forum posts please you snarky know-nothings.  Your forums poor advice contributed to the useless trading start of the Newb above.  This gentlemen really wanted to be a trader.  He just wasted a year and well over 25k failing at his passion while having no chance to succeed.

To become great at anything requires coaching.  That is why Phil Mickelson has three coaches just on his golf game.

There is too much data in the marketplace for a Newb to know where to start without guidance.  In this market you have virtually no chance without a wonderful support system helping you improve everyday as a Newb.

5) There will be traders who are trained well and fail.  There will in fact be a lot.  Not everyone can do it.  Just like millions play golf, pay for lessons, and never make the PGA Tour.  Just like hundreds of millions play soccer when they are young and do not play for Manchester United.

But if trading is your passion why not give yourself the best chance to succeed?  Why not really learn how to trade?   Why not learn the work you must do daily to improve?  Why not learn how good you can be as a trader?  Why not surround yourself with other pro traders who can offer mentorship?  Do you really want to be like the Newb above?  And if you give your passion your best effort, are trained well and fail, well then that was an experience worth having.

Bella

One Good Trade

8 Comments on “A sad anecdote of a failed trader”

  1. Great post. Very rarely do we we ever get to see the worse case scenario for a trader; trading without learning. The money can always come and go, but you cannot get that time back. Any trading session where you have not learned something about you or your system is a session wasted. 

  2. Wisdom in EVERY work Mike, thank you!  The $150 loss limit in itself is a rule all wanna be traders could implement.  If you would or could share, would love to see a blog post on how SMB brings traders along using daily limits.  Thanks again!

  3. send me a longer email with more specifics and I will think about writing a post about..   Thxs for the note.  

  4. Wow. It sounds like this person was swinging for the fences here. I think everybody starts out like a trading rockstar only to end up a used groupie. Hope they get through it.

  5. maybe it is because the trader learns from that ooh la hore guy,
    nice bike, mate!

    vroom vroom, wallstreet race to trading hell.

  6. It’s so sad that the unfortunate reality is that most aspiring traders will fail. I always say that if trading were easy, everyone would be doing it!

    It seems like in this instance, both the firm and the trader are at fault. I agree with you that the firm should never be letting new traders burn money by letting them drop four figures in a day. That’s insanity, and is a sure way to traumatize newer traders.

    With that said, aspiring traders often have unrealistic expectations when it comes to what exactly training entails. Too many beginners think that trading is about being certain, when in reality trading is all about being uncertain and yet acting in the face of that uncertainty. 

    The first rule I always give to my trainees is to keep your losses small and get out of losers quickly. Despite these simple instructions, many can’t follow this simple guidance. If you’re given correct training and choose not to follow the advice of your mentors, you can’t complain  of your insufficient training when you fail! 

  7. Matt,

    We manage those who do not listen out of the firm.  Harms morale.  No hard feelings just some end up not being a good fit to learn with us.  If they have a better way….awesome for them.  But I only know how to train people who work hard and work on their game everyday.  So those who do not buy in are not a good fit for our mentorship.  

    Bella

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