Learning From Other Traders

New traders at SMB can learn from themselves, their mentor and their peers. Here at SMB we have many guys that are obsessed with trading. Every chance we get, we talk about different plays, how we traded them, how much size we thought was reasonable, and how we could have traded that play differently. I want to highlight the importance of talking trading with your peers whether they are new to trading or have done this for a while.

A new trader will find that a well executed play by a peer on their class is easily remembered compared to hearing about it from an experienced guy. Seriously, imagine watching a guy who just started with you explain how they chopped it up on a trade talking in detail what they saw. An explanation of their play can be much simpler than that of an experienced trader, the experienced guy may just have way too many if/then statements. I have tried to explain to a new trader how I buy into a pullback and I can just see their confused faces. But I have seen a new trader explain to another one what an unusual hold looks like and they remember this stuff.

However, I do think it is important for new guys to speak with experienced guys. Sometimes a new trader just needs to hear what goes on through our heads. They must understand that a support play has at times 5-10 different variations. It is not that we try to complicate things for them, but they have to, at some point, start considering all the different scenarios that an experienced trader thinks about. Take for example the variations for a support play: 1. Buyer at level and it goes up; 2. Buyer by a seller penny apart, buyer wins and stock goes up; 3. Buyer drops goes down two cents then stock trades up; 4. Buyer drops, seller comes lower, seller lifts and then stock trades higher; 5. Buyer wins, stock cannot trade higher, buyer drops and then stock goes much higher; etc. A new guy may only consider version #1 of this trade, lose because the stock trades as in version #5 and then conclude that he/she cannot trade a support play.

An experienced trader can also learn from their peers. Take for example what happened last Friday after the close. Some of us went to Metro Hotel’s rooftop for a couple of beers. The discussion quickly turned into how we all trade FAZ. The three of us have very different styles with our own strengths and weaknesses. There were plenty of arguments as to when to trade it with size on momentum and when to trade it as a trade to hold. After listening to them I realized that I could be much more aggressive on certain momentum plays. They also realized that in some plays it is okay to take pain buying into a pullback or shorting into strength to play the direction of the market, rather than trying to pay/hit the new high/low or fade every dopey move. It was a very productive conversation over beers that will make me and them better traders.

If you’re a relatively new trader, do take the time to speak with others around you about your trading. Learning is all about asking questions. Trying to explain to someone how you trade a set up helps you solidify and believe on your system. Do not make it a habit of doing it over too many beers though, at least not on weekdays! Happy trading.

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