The Cheetah and the Trader

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I had an interesting conversation with a young trader from another firm today. This young trader pops into my office from time to time and talks trading. He is a very bright and competitive young man. And he is struggling. He killed it in October. But over the past two months he has dug himself a huge P&L hole. I have been hearing a lot of stories like this lately.

A trading friend of SMB told us that one of the best ten traders we know gave back his whole year last month. While I was getting breakfast today a few nervous young traders stopped me to ask how our guys were doing lately. They relayed that many in their firm were quite negative. I heard that a few Tier I day trading firms recently restricted trader losses going forward. I was at a holiday party recently and one of the best traders on the Street was practically crying to me about how badly he has been trading. I spoke with two energy traders this week at the gym who offered that they were probably going to be fired by their firms because of their losses. I know that for SMB, last month presented a challenge to some of our traders.

Personally, I don’t have a bad month. I have traded through enough markets that I have created a trading system for myself that allows me to profit no matter what the market. Last month I was positive. And I will share what I did with that young trader who was worried. You need more experience. You need to see some more markets. You need to make some adjustments. You need to go back to the basics.

One of our bright new traders who has been struggling made a list of plays that he will focus on this month. Great work here. But there were a few plays on his list that I didn’t even understand. They were technical plays that I did not use. And I will share what I told him. Trading is about finding weak stocks and getting short at levels that offer an excellent risk/reward. Trading is about finding strong stocks and getting long at levels that offer an excellent risk/reward. Do not make things so complicated.

We produced a new video which we will share soon. The video tracks one of our traders for a day. It is called “A Day on the Street,” and produced by Maureen Holohan from “$Game.” On this video you can hear me share, “The market offers you so much data to doubt yourself. And you must believe in yourself.” And that is so true. The market provides you so much data that can convince you that you do not belong. But you must find a way.

There will be good runs and bad. Many traders had a nice run in October and November. And from what I hear December was an awful month on the Street for almost every trader. The good traders make the adjustments necessary and enjoy a long and prosperous career. And these adjustments are often minor. And those that don’t find work elsewhere. That is the game.

It always amazes me how difficult new traders make trading. And during times like the above the answers are simple. Go back to the basics. What trades work best for you? Make a list. Just make those trades for the next week. Make these trades with small size. What stocks are best for you? For SMB traders it is the Stocks in Play. So make sure you are in these stocks. JToma sent me a great quote today on this subject: “The cheetah, while the fastest animal on the African plain and can outrun any of the prey it feasts upon, always chooses to go for the young, weak or sick. Once identified, he/she attacks with laser guided focus and effectiveness. It is only then that the kill is most likely. That is the epitome of a professional trader.” Be the Cheetah.

Having a slump is all part of the learning process. It is not supposed to be easy. Did you ever wonder why so few get to trade for a living? It is like joining this fancy golf club. They don’t let everyone in. And to stay in you must follow all of the rules. Well right now those who are underperforming are not following all the rules. And the club doesn’t like that. So they have imposed a substantial fine on your membership. And now you need to pay it back. Follow the rules and you will be back in good standing. Don’t follow the rules and they will terminate your membership.

So if you are underperforming do not panic. The best part about this job is that the past is the past. And starting tomorrow you can be positive every single day for the rest of the month. And have a great month. And then you can parlay that positive energy into an excellent quarter. And you are off to a great year.Along the way figure out the skills you need to better develop. Work on them everyday. And the next time you underperform and need to go back to the basics that list of plays will be longer.

When I first started my account was negative 36k after six months. Eleven years later I am still trading. How? I am Cheetah.

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