In this video, learn one trading myth that can actually make you a better trader. A firm prop trader shares what has helped him significantly improve as a trader that most are told never to do.
View Video Transcriptin this video learn one trading myth
that can actually
make you a better trader hi i’m mike
bellafiore co-founder of SMB capital
and we’re a proprietary trading firm
located in midtown manhattan and i’m
also the author of the trading classic
one good trade
and the playbook in this video a firm
prop trader
shares what has helped him significantly
improve as a trader
that most are told never to do let’s get
to work on dispelling this trading myth
so you don’t make the mistake many
others have
[Music]
my name is justin and i’ve been trading
at smb
for about three years um and
before that i interned for a couple
months
uh during my senior year in college um
i recently started mentoring
new traders and developing traders
and we’re doing this presentation today
to just talk
about what i learned from mentoring how
it has benefited my trading
and how it has led to an increase in
trading profits for me
first i think it’s important to talk
about
if you should look for a mentor or not a
mentor
is not there to answer generic trading
questions so what does that mean exactly
um well if you don’t understand simple
terminology
such as a core position
hitting the bids uh scaling
risking to x stock is squeezing
um then it’s not something that you
should look into
you need to do more research and use the
internet to increase your knowledge
so even if your account balance doesn’t
really show it you should feel like an
intermediate trader in terms of
knowledge and to put in another way you
just must be able to talk to talk
you should have some understanding of
popular
intraday trading patterns um
what they mean you should know the
significance of a higher low
a lower high etc in your
studying and in your research you’ll
inevitably
hit a brick wall or the pace at what
you’re learning
relative to the amount of time and
effort you’re putting into your studies
is plateauing so you’re putting in work
um and
the information you’re learning it’s
just not taking you anywhere else
a mentor is also someone who’s at a
stage in their career
that you want to get to of course
everyone wants to be
a seven-figure trader but that doesn’t
mean that
when you’re looking for a mentor you
should ask someone who is making seven
figures
eight figures a year when i was looking
for
a mentor when i first started and i was
making
a couple hundred dollars a day um i
reached out to someone who was making
a few thousand dollars a day that was
the next step that i wanted to get to
um and if you’re
someone who is making a couple hundred
dollars a day
and you look for a mentor he’s making a
million dollars you know
their knowledge and experiences it’s
just going to be
too far beyond what you could process
and
understand um it’s a it’s a step-by-step
process
so you’re making a couple hundred
dollars a day you look for someone
uh to mentor you who’s making a couple
thousand you’re making a couple thousand
dollars a day you want to get to that
five
figure a day
place you look for someone that’s doing
that and then so on and so forth
um and the potential mentor needs to see
that you’re committed and you’ve already
put in the time
and effort you’re basically asking
someone to take the time out of their
trading day
to spend their mental capital on you so
you need to be
serious about it you need to show
examples of the work you’ve been doing
you need to tell this person
i do xyz in the morning and i scan for
stocks and i look for stocks that are
doing this
after the close this is the work i’m
doing
and i can send you a couple of my
journal entries i can send you a couple
of my playbooks
and you know most importantly mentoring
is a brain to pick an ear to listen to
and a push in the right direction um
just to go a little bit further into
that
i once was matched with
a trainee who really just wanted to ask
me what do you think of xyz stock loan
what do you think of xyz stock short can
you get on a voice call
and talk about what you’re trading and
your executions in real time
um that is just not the point of it um
that information will only take you so
far
you need to learn the concepts behind
the trades and entries
so on and so forth if you want to learn
three more real world setups that our
traders use
including the simple setup that we teach
all of our new traders
and the setup that turned one of our
traders into a seven figure
big money earner check out the free
webinar that we’re currently running
just go ahead
and click the link that should be
appearing now at the top
right hand corner of your screen that
will open up the free registration page
in a new window so don’t worry
you won’t lose this video you can also
visit
tradingworkshop.com to register for this
free intensive workshop
you’re going to learn more in a couple
of hours from this trading workshop
than from years of online education
so what does a structured
mentorship look like this is something
that i will send
to new mentees and this is something
that i expect them to follow
i give them suggestions on homework
and it’s like a college course you know
you’re either going to
do the work um
and that way the professor is going to
see that you’re
taking it seriously and that way once he
sees that you’re doing the work
or she sees that you’re doing the work
um they’re gonna put more effort into
teaching you um
and you’re gonna get much more out of it
and really
what the homework is is
work that the mentor has done to get
where he’s at
so a few examples mentees are expected
to upload and tag their trades at the
end
of each day into trader view that way
they could get
a detailed look at the statistics of
each trade
each trader is to write a journal entry
to just highlight observations on how
they traded
any errors that they made emotions
related to the trading day
it’s pretty much a daily report card
um mentees are also asked to create a
playbook
which is something all of us at smb do
and each week i choose on
a mentee to share the playbook via zoom
screen share
and what that does is it gives them
the chance to talk about a trade that
they took out loud
you could do a little bit of bar by bar
analysis
um for the trade management
and it forces a conversation between the
mentor the mentee
talk about what you could have done
better well you got stopped
out there what could you do differently
next time so on and so forth
and here’s kind of what the schedule
looks like so
i’ll share my ideas the mentee will
share their ideas
and we can discuss those a little bit
uh 9 30 of course the bell till about 12
we’ll be trading 12 to 2
during the afternoon hours when stocks
are kind of in a lull
um then we expect to chat a little bit
talk about what’s setting up for the
close maybe discuss some of the trades
they took
in the morning what trades they’re still
in
and two to four volume begins to pick up
again
um and we’re focused on trading
now throughout the week you can see it
changes a little bit
and after the close um the mentees will
present a playbook
what we just discussed um and on friday
after the close i will typically do
a zoom meeting and we’ll do a screen
share
i’ll go over to some of my top trades
for the week
and we’ll do an analysis of each trade
just go
very into detail about why i took the
trade all the checks in favor we’ll take
a look at multiple time frames
um mentees will ask questions and really
that’ll strike up
some really great conversation and
learning opportunities
and that’s what has really actually
helped me and my process going over
specific trades from the week and
talking out loud and having the mentees
ask questions um
and what that forces me to do is explain
the trades in detail and simplify
some of the concepts and we’ll talk
about that a little more
shortly so a little bit about how i
started mentoring
uh once i became consistently profitable
i was offered the opportunity to mentor
developing traders
um and i was worried that this would cut
into my time
and take my focus away from from my
trading
process
and that was not the case at all what
really happened was
i was teaching lessons
to these new developing traders
and what that was doing for me was just
reminding me
constantly of
my rules and trading beliefs
and as a junior trader on the desk i
always like to lend a helping hand
to new traders and teach them concepts
and risk management techniques
that i wish someone taught me when i put
on my first trade about
five years ago and
from just a firm perspective i thought
that this could
really benefit the desk as a whole so
little did i know that what this would
do is give a boost
to my overall equity curve from a firm
perspective
or even just a trading group perspective
if you’re in a discord chat
uh it really promotes a learning culture
and eventually it evolves into everyone
sharing ideas and
sharing what they’ve learned um
throughout their training career
this is something i see all the time why
become a mentor
when someone thinks about a training
mentor
a lot of people ask the question well
why would a successful trader take the
time out of their
day to do this if they’re making money
consistently and
just a really simple answer is
you’re paying it forward so every
successful trader
knows how difficult it is in the
beginning you’re passionate about
trading you’re very into it you spend
hours researching studying
ripping through charts journaling making
these playbooks reviewing trades
and your p l is either let’s face it
it’s going down
or it’s it’s going nowhere you’re not
making money you’re not losing money
um and that could be very disheartening
uh and if we see that you’re putting in
the work
i think that most established
consistently profitable traders are
happy
to pass on their wisdom uh to someone
else that they see has potential
um and how do we see how you have
potential you
are showing us the work that you’re
doing i remember
when i was a developing trader on the
desk
i saw that there was a trader and he was
trading at a level that i wanted to get
to
so i reached out to that trader and
this this junior trader had no idea who
i was i don’t think he’s ever seen my
face before
um and i’ll never forget that
he was nice enough to lend a helping
hand to me
he spoke to me on the phone
multiple times a week for about a half
hour
to an hour just talking about
what got him from where i was to where
he was
and really that made all the difference
to me
um and i think when that happens to
a trader they’re very likely to do the
same for someone else
the second reason is when a trader is
forced to communicate their approach to
the market
and vocalize their thought process
their trades in a simple way less
experienced or newer traders can
understand
it really crystallizes those concepts
for
the mentor um so
a simple example of this is
talking about a a stop loss where you’re
putting your stop for a trade
uh so maybe there
is for example news and a stock and it’s
positive news
and the stock was previously trading
below v web for that news
and all of a sudden you get a huge
volume breakout through vwap
and the stock is trading above v-app now
so a mentee or developing trader says
okay
i’m going to put my stop just below v
web
and you say well that’s not a good stop
well
why isn’t that a good stop and maybe the
new trader
he doesn’t really understand exactly why
it’s not a good stop
um and then you have to explain what
vwap really
is it’s not really an exact price that
we use
it’s just an area and you have to
explain that a little more in detail
and you have to then explain where a
good stop is
and then you could say well a good stop
will be
under the price where that news hit and
that volume broke out through vouf you
want to put your stop
under that volume uh candle that high
volume candle
so really it forces you to simplify
concepts
um and
when you do that over and over and over
it really just crystallizes those
so uh moreover i found that most
successful traders are energetic and
just passionate about trading
they’re passionate about the trades that
they take their playbook trades their
setup
and uh they love to take the opportunity
to discuss their trading
so i’ll tell you that say you
see someone that’s more senior to you um
they made a ton of money and you’re just
really wow i would love to make that
much one day
uh let me look at his trade let me ask
him about it and maybe
you know you’re new on the desk or you
don’t really know this person so
you’re a little nervous to approach them
bother them
it might be during the trading day uh i
think that you’ll find that
successful traders they love
to talk about their trades i know i do
i know that any time uh a new developing
trader
or you know just someone that
is brand new on the desk comes up to me
and asks me about a trade
i’m more than happy to take the time to
go over it and talk about it
and i saw another nice quote online um
no one learns more about a subject than
someone who operates in the field
and teaches it and i think that is um
very true and here’s a look at the penal
curve
from my starting date when i first
started mentoring which was around this
time last year and until now
um and you could just see that
it has been very consistent um of course
there has been some great trading
opportunities along the way
but i don’t think that
it would be
as nice as it is if i wasn’t doing the
mentoring
and taking the time out of my day to
teach new traders or even just
less experienced traders um my
methodologies
and explaining them in detail so now i
just want to talk a little bit about
the benefits of a mentorship uh
program at a pro firm or even a trading
group such as
a skype group or a discord group
um really what it does is it creates a
learning culture so
internally promoting a mentoring program
fosters
business culture that promotes learning
and growth
when a developing traders are partnered
with a
mentor who can help direct their growth
they know that their future is being
invested in
and that could really make all the
difference
uh furthermore a mentoring program
promotes a shared learning atmosphere in
which traders are encouraged to learn
from one another
something that
dr steen barter likes to say is each one
teach one
everyone is an instructor and
a student and there are many things that
i’ve learned
from mentees
that where if i hadn’t taken them on
i’d be less off i’ve learned some really
great things from these people
such as different
ways of scaling in front side
and using options so i’m currently
mentoring someone who is really an
options geek
and i have little experience with
options i do have an options account and
i know all the basics
and the basic trades but when we’re
talking about
you know shorting the front side of a
move and you think a blow-off is coming
and the stock
is going to shortly be on its backside
there’s a way to
scale into calls while you’re short
stock that
reduces your risk greatly um
and i was slightly aware of this
but my mentee actually took the time
to create a presentation for me
um and show me how i could do that
and it was great another example is
i was mentoring a
older gentleman who was a higher time
frame trader a very successful higher
time frame trader but
um he wanted to learn tape reading and
he wanted to learn momentum and price
action
and that was something he was interested
in um so i went ahead and i worked with
this guy
for two months three months and
in return he taught me about something
that i didn’t know existed which was
called the wyckoff method
um and that is basically
accumulation and distribution patterns
within a higher time frame structure
um and this is something i may have
never
learned about or come across if it
wasn’t for that
and i was able to use what i learned
from that when i was trading uh intraday
ranges next it really encourages
personal
and professional growth so i found that
traders learn best when they’re in a
comfortable environment
when they’re paired with a mentor who
they know is guiding them in the right
direction
in return mentees are confident and
comfortable with taking risks
and making mistakes because they
recognize the importance of learning
from those mistakes
the role of a mentor is not only to
talk about profitable straight trading
strategies and talk about
their winning trades it’s also to talk
about
the mistakes that they’ve made and what
they’ve learned from those mistakes
and i think what that does is it makes
the mentee
more comfortable taking taking those
taking those trades and making those
mistakes and getting stopped out
uh for example a new trader
could have a short idea and the short
idea
could be perfect but what they need to
do is they need to
also execute properly
intraday and i find that a lot of new
traders will
say okay this is a really good short
idea from a higher time frame
perspective
um it’s below this very important
support level
on the daily and i think it’s going to
go lower
so what they do is they
wait for the stock to trade um they wait
for an opening range to set up
and then they’re shorting lows and
that’s something that i used to do
but you know you realize you can’t be
hitting lows
because that’s where the stock is most
likely to bounce what you want to do is
short pops you want to short a lower
high and risk against the previous
lower high you want to short a failure
into v web
you want to wait for a consolidation
under v web
um and when you talk about
the fact that hey i know you made this
mistake today and i used to do that
all the time um here’s what i learned
from that and here’s
what i do now and what fixed that
mistake
sometimes that’s really all a trader
needs to hear
and they realize that okay well this
trader made the same mistakes that i did
and now he trades this setup um
almost perfectly and it’s one of his
best setups and he makes
uh a lot of his p l on that setup now
and really it just comes full circle so
when a new trader is appointed a mentor
and benefits from the partnership
the mentee is more likely to volunteer
to do the same for the new
traders joining that group or desk
and this can dramatically reduce the
learning curve and
increase p l um across the board
so i know that a lot of the senior guys
run teams on smb
and the juniors learn from the senior
traders and now
a lot of the junior traders on the desk
are being matched with
developing traders second year traders
and now those new developing and second
year traders
um they’re gonna have an obligation
to teach the new guys when they become
junior traders and it’s a trickle-down
effect and overall
um this could just greatly
increase morale and p l across the board
i saw that bella had posted this on his
twitter
he wrote said by one firm trader during
his monthly review
mentoring traders helped me improve my
trading um
i’m gonna go ahead and take a wild guess
that that was me
uh and then he writes what if it is just
not accurate
that you should keep your profitable
trading track strategy to yourself
um what if that misbelief is holding you
back
from becoming your best trader and
my thoughts on that are yeah well not
every um consistently profitable trader
is going to want to share with you um
and that’s okay but what i have to say
to that is
most traders are trading very
scalable strategies we’re trading stocks
in play
that are typically trading tens of
million shares
a day um they’re doing
arvol unusual volume sometimes these
setups that we’re trading are trading
hundreds of million shares a day
why not pass on a trading strategy
that is extremely scalable
to a new trader it’s not going to take
away
your edge it’s not going to take away
what you could get out of a certain move
and also you could teach a new trader
your strategy but does that mean that
they’re going to be able to
implement that as good as you can
well no because they also need to have
proper risk management they need to have
an
understanding of how the trade works
so i just don’t think
it is necessarily correct
to to keep your strategies to yourself
if they’re
very scalable and it’s it’s not
going to um take your edge away so
i was looking through some of the
replies on twitter and i found some
interesting ones
uh zakir writes a profitable strategy is
one third of the story
being able to adhere to its explicit and
implicit
rules day in and day out is the real
differentiator
good strategies are like good business
ideas a dime a dozen
execution on the other hand yeah
um i completely agree with this and
that’s kind of what i just just spoke
about
you need to adhere to the rules of the
strategy
um or else it’s not going to work
chris writes i always tell my employees
i would never ask them to do something i
would do
and i do the actual task in front of
them initially for training which keeps
me from being rusty
plus over time you’re able to simplify
the strategy as much as possible by
training
um great point and we went over that a
little bit in the presentation
once you’re simplifying a strategy it
really crystallizes it for you
and constantly reminding yourself
is a great way to follow your rules
intraday day in and day out the trading
network writes
this is certainly true in my experience
um the more we talk about our mistakes
and make them known the more comfortable
we become with addressing them
from an analytical analytical
perspective and furthermore improving
them
i couldn’t agree more with that when we
talk about our mistakes
it makes the mentee and the new trader
feel more comfortable making those
mistakes as we discussed
and it reminds us not to make those
mistakes again in our trading
and sometimes it’s all we need from
keeping us away from a big loss
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