Should you quit trading?

BellaGeneral CommentsLeave a Comment

Hey Mike,

How are you?  Everything at SMB going well?  Life outside of work is good?

If you have the time, I could use some advice.

I have now been trading about 10 months at (firm deleted) and learning from one of the best traders. For our style of trading, the firm as a whole finds this to be one of the most difficult markets in decades, yet some of the veteran traders are still putting up great numbers and even some of the new guys are able to scrape together a decent month. As for me, I’ve really been struggling and am probably towards the bottom of my class. My whole life I have succeeded and become the best at whatever I’ve put my mind to, whether through intelligence or sheer determination, yet for the first time ever I find myself at a total loss.

Every month I put in more effort and while I learn so much each month, it never translates into results. I feel as if I am always one month behind this market, where whenever I push my trading to the next level, the market gets harder and some of my best plays stop working and the market finds new weaknesses in my trading. After putting so much heart and effort into something and getting no positive feedback, the emotional aspect is really taking a toll on me. While this has been my dream job and I don’t know what else I would do, I’m starting to get pretty disenchanted with the whole thing. At what point should a trader give up?

Really appreciate any thoughts.

Bella Responds

First I want to start by offering some perspective.  I thought our desk was losing some of their perspective and I said as much to them yesterday after the close.  Then I sent them home early.  There was too much negative self talk, banging and cussing, huffiness, and underperformance.  Interestingly we see this happen most after periods of good trading causing increased expectations.  The desk was trying too hard and needed to head home early, go grab a few pints and get after it the next day.

We are not digging ditches on the highway in 105 degree heat, with four kids at home, a mortgage under-water and a sick kid sans health insurance.  We sit in an air-conditioned office, surrounded by people we like (mostly) and get to hit some buttons that can offer immediate reward.    Most are in their 20’s for which not making it as a trader at worst should pad their resume.  Having the guts to do something you love and failing as a professional prop trader so young is not a horrible experience.

I have been using these hypothetical numbers of late to set expectations for the new trader.  A firm screens ten qualified people for trader training out of thousands.  Three will be terrific.  Five will be terrible because trading is not their passion.  Two will be on the borderline.  One might not make it because they just don’t get it, but will work very hard.  The last is a flip of the coin, with the present market, a good fit for the product they are trading, the firm they chose, and some more variables determining the result.

Of the three terrific at the end of their First Year they ought to hit a run rate of 100k in gross PnL.  Then a run rate of 250 gross PnL in their 2nd Year.  In their 3rd Year they ought to expect to make the most progress as this is the time period prop data suggests traders explode.

I see very few traders go from losing money consistently to 20k a month.  This blog outlines the most likely path of the future consistently profitable trader.

So if this game is not for you, no matter.  I wasn’t good enough to play for the NY Yankees but my athletic journey helps me each day. I went to law school and never practiced but I use the thinking skills I developed there everyday.  Further as I get older I have learned that what I first determine as bad (Is bad really bad?) might force open a better new door.

You are at a good firm.  I congratulate you on working hard each day to improve on your trading game.  You should be proud of that effort.  You should be more proud of that effort than any good month of PnL.  Your mentors should applaud that daily work over any day of chops.  It is up to you whether you are making enough progress and if this is your game.

If you do move on remember this: you traded at one firm, using one trading style, during one market period, for ten months.  What can that really say about you as a trader?  And most importantly, you gave something important to you your best effort.  How can that possibly be a failure?

Two suggestions that help our developing traders:

1) Send a detailed trading review to your mentor for his feedback at the end of each trading session.

2) Archive the best setup from each trading day that makes the most sense to you in your Playbook.  We do this with our guys in SMB Template form.  I will talk in more detail about this with my next book, due out in the Fall, The PlayBook.


One Good Trade

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