The Healthy Happy Trader

BellaBella Daily Update

Justin spero

Justin spero

We noticed one of our developing traders on our proprietary trading desk in NYC looking crestfallen.  I asked to speak with him privately off the trading floor.

Why was this trader so dejected?

The trader had built signals that alerted him to a trade.  He misread the signals and took the trade short when the signals indicated long.  The trader was in disbelief that he had done this.  

His body language was how could I make such a stupid mistake.  

The trader was in pain.

Feeling pain after underperformance is an excellent sign.  It means you expect and care about doing well.  These are the feelings of many elite traders.

But I want to offer a healthier, more productive, and more sustainable way to handle your mistakes.

What is that way?  

Don’t judge yourself for your mistakes.  Observe your mistakes and then propose solutions to fix them.

You are not a bad trader because you misread a trading signal.  Certainly, this says nothing about the type of person you are.  Rather, you are a trader who misread a trading signal—just that.

Who are you really?  

You are a trader who did terrific work building these signals.  You did outstanding research to find the signals.  You showed fantastic preparation to create these signals.  You collaborated well to get them built.  

You are a trader doing terrific work for which you should be very proud.  

I pointed out to the trader all the things he had done well.  And brainstormed some potential safeguards so he wouldn’t misread a future signal.  From my seat, running a proprietary trading firm, I would take a hundred traders out of a hundred like this developing trader and be very excited about the firm’s future.

So if this happens to you, what should you do?  

The next time you make a trading mistake, try just observing your trading.  Make an observation about the trade.  No judgment, just make an observation.

That was a good trade because my risk/reward was excellent.

I shouldn’t have made that trade because it’s in the middle of a range.

I should take more trades like that last one because it felt right from the minute of entry.

Challenge yourself to make an observation after a trade.

Ask yourself: observation? 

Doing so will help you become the trader you deserve to be… The Healthy Happy Trader. 

Important disclosures

Mike Bellafiore is the Co-Founder of SMB Capital, a proprietary trading desk, and SMB Training, which provides trading education in stocks, options, and futures. Bella, @MikeBellafiore, is the author of One Good Trade and The PlayBook. He welcomes your trading questions at [email protected].