How you bring a better you to each trading session (to increase profits)

In this post, you will be challenged to bring a better you to each trading session to increase profits.  I will share one innovative idea a junior trader at our proprietary trading firm in NYC is using to drive his performance. And the nexus between his happiness and good trading.  Let’s dive in.

SMB Virtual Happy Hour on Happiness

Recently, we held a virtual happy hour at our firm to discuss what our traders were doing to achieve happiness.  Presently, all of our traders are trading remotely and from their homes or apartments, as we deal with Covid19.  I know what some of  your are thinking already.  How would that help me make more money as a trader?  You had a virtual happy hour to talk about happiness?  Oh come on Bella.  I just need trading strategies that work, deploy them, make money and then that will certainly make me happy. Yes! you do need trading strategies with edge to trade successfully.  In fact, that is why traders at our firm take SMB DNA and then The Winning Trader, before they trade firm capital, so they are armed with winning trading strategies.  And thinking positively or being happy, absent trading strategies with edge, will not make you money.

Yes! You Do Need Trading Edge

So let’s stipulate right up front that you need to learn or develop trading strategies with edge to consistently profit in the markets.  As I teach in this video, you cannot become a consistently profitable trader without learning trading setups with edge.

But it is also true that profitable trading strategies alone do not lead to trading greatness.  And that is what we are after on our trading desk.  Often I bark in our training room in NYC, “We are not here to develop traders who just make 100k a year.”  This is especially true for the active trader.  I discuss this point in more detail in a short video I did with Anthony Crudele Develop Your Edge. 

What Can Lead to Bad Trading and Destroy Trading Edge

Traders can show up for a trading session not at their best and destroy their trading edge.

They can be tired.

They can be distracted.

They can be overconfident.

They can be convicted.

They can be frustrated.

They can be angry.

They can be unhappy.

They can be anxious.

Does that ever sound like  you?

The optimal trading state is to be excited about trading opportunities while being calm, open-minded, alert, and focused.  (Side bar: Is this how you approach each trading session?)

Traders armed with strategies with edge, who are not at their best, can turn these opportunities into losing days.  Or they can leave significant money on the table not being at their best.  You need those strategies with edge, but for active traders you also need you at your best to trade at your best.

The Trade Review Process

One junior trader has developed an innovative process to hold himself accountable for his best trading.

  • After three consecutive losing days, he sends a review to his mentors and coaches.
  • After three consecutive winning days, he sends a review to his mentors and coaches.
  • After one outsized losing day, he sends a trading review to his coaches and mentors.

This trader is planning to be at his best each trading session.

The Trade Review Noting Happiness

Let me share an example from this junior trader below, and ask you to pay special attention to the nexus between his happiness and his performance.  It is our routines that we plan that lead to our happiness and increased performance.  We most actively plan, work at, and measure our adherence to our routines.

    • Three winning days in row for a total of $4197 gross. 
  • As mentioned in April review:  3 losing days in a row send a review, 3 winning days in a row send a review, 1 outsized losing day send a review. 
  • Great to see the win percentage > 50% these past 3 days.
  • Happy to see my winners more than double my losing trades which is exactly where they need to be to have a successful career. 
  • Largest gain 5x more than my largest loss. Fantastic. 

I will say that I found myself on many occasions throughout these three trading days saying things such as “Jesus, they never make this easy.” and multiple variations of that. So, even though I did well, I did find myself stressed. How did I combat the stress? Taking breaks during slow periods, going outside and reading (alerts set). Exercising outside each day after the close (biking,running,yoga) and spending time with my girlfriend. 

What made me so stressed if I was trading so well according to my stats? I should have made over $10k these 3 days. My P&L these three days came from the two big trades of the 12 trades I took that are circled below: 

In $VTIQ I drew down -$1.3k (slightly over half of what I could lose in a single ticker) before getting the trade right. Because of this, I was not able to get into the size I wanted. I was in 750 shares rather than 1500. In my mind, I should have printed $6k for this trade. What could I do next time to ensure this does not happen? Simple. Less size before confirmation considering I traded this perfectly once I had confirmation. 

Second trade, $CODX, I was long into negative news and lost. I was long because they held it over VWAP and I thought they would run it into earnings which were due after the close. I quickly realized how bad this news was and got ready to flip short. I thought this could be the backside in $CODX that a lot of traders have been waiting for. On the first bounce, I hit it short for ½ of my target size. It went against me slightly before I saw a perfect lower high/ reversal pattern and then got into the rest of my size. 

The trade began to work, but stalled out and slowed down drastically. I said out loud “Maybe someone knows something and they’re keeping this up here for a reason” I began to feel skeptical and hit out of half of my short position. Almost immediately, the stock dropped out 4 points. In a fit of rage, I was ready to aggressively short the next pop and in doing so I gave back all of what I made on the next move. Thankfully, my persistence and pattern recognition enabled me to get something out of this and Instead of making 4-6k I made 1.5k.

Outside of trading I could honestly say things are great. I’m keeping with the routines. I’m able to keep up with and creating new routines. I’m exercising more than I have these past two years. And I’m thankful for the people in my life and our health more than ever. It’s very easy to get mad that both of these trades were not the $6k trades. They should have been.  But I’m also putting up numbers that are above the expectations I had for myself when I was writing my 2020 goals last December. I’m in the right trades, with the right size, and that means I’m one step closer to nailing these.

Notice his words carefully: Outside of trading I could honestly say things are great.  Notice how he mentions this.  Notice how it is important to him to make this point.  Notice how he creates a routine that drives the statement “I could honestly say things are great”. 

How Do You Bring A Better You To Each Trading Day?

In a recent tweet, I teed up the thought experiment for traders of how to bring a better you to the market each trading session.  This was inspired by a call I had just had with a group of interns at our firm.  We scheduled a zoom call to dig into their daily review process, which they had developed jointly.  It was super impressive.  It was super detailed.  It showed tremendous effort.  I applauded their tremendous work.  And I left them with an idea to consider.  An idea to help their trading.

I shared it could make sense for them to develop a daily routine and keep track of how much they completed of their routine daily.  Give yourself a score each day.  They were doing very well reviewing their trading to develop edge. But these interns were not planning and keeping score of how to bring their best trader to each trading session.  You need both.

SMB Challenge

So I leave you with this challenge for your trading.

What will you daily to bring your best you to the markets each trading session?  How will you hold yourself accountable to bring your best self each trading session?

Without such planning, we will not find your best trading.

Mike Bellafiore is the Co-Founder of SMB Capital, a proprietary trading firm located in midtown Manhattan, and SMB Training- its trader education division.  SMB Training offers trading courses for stocks, options, and futures.  He is also the author of the trading classic One Good Trade and The PlayBook.

*no relevant positions