Tips for Successful Trading (Trading Psychology Every Trader Needs)

In this video, Dr. Steenbarger and Mike Bellafiore share tips for successful trading, focusing on the trading psychology every trader needs. Dr. Steenbarger and Mike are interviewed by Tradeciety on what is essential to become a successful trader. Let’s get to work on sharing these important trading lessons so you can grow your trading account.

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in this video dr steenberger and i share
tips for successful trading focusing on
the trading psychology
every trader needs 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
class at one good trade and the playbook
in this video dr steenbarger and i are
interviewed by trade siding
on what is essential to become a
successful trader let’s get to work
on sharing those important trading
lessons so you
can grow your trading account
[Music]
so hello everybody we are back on the
traders improve podcast
and today we have a very special episode
as you can see
i’m very honored to have mike bella fury
and dr brett steemager here with us
first of all thank you for making the
time it’s a it’s a huge honor
you’ve both been i’ve
followed you since i’ve started trading
so this is a very special episode for me
well thank you uh and first a few words
just so that people have a
have an understanding but i’m sure most
of you will know dr steenberger is a
psychologist
a trader and also an author of multiple
books such as
daily trading coach psychology of
trading trading psychology 2.0 and
radical renewal
and he also works as a coach
for smb and
that’s why we also have mike bellafiori
here who is the co-founder at s b
capital
which is a prop trading firm in new york
and also
an author of one good trade and the
playbook
so we have and this is a great
opportunity to pick your brains
i love trading psychology and mindset
and
i am very deep into spirituality which i
want to get into later as well
but um yeah so we reached out to our
audience and our community as well
what they would like to ask you and
there are just a mix of questions that i
find very interesting
so the first one to get into from your
own experience as a as a coach as a
mentor
what really stands up out about winning
traders and losing traders are there
specific
traits and habits what is the thing that
really stands out about
about those two groups of traders mike
you want to start
yeah i will start and uh we’re very
lucky to work with dr steen barker who
does coach our traders and and coaches
hedge fund traders throughout the world
um and very fortunate to
pick his brain on just about everything
and uh
good to talk with him and you guys today
great question
so i want to see guys who
are willing to get better every day i
want to see guys who
will grow
from the start of their career
throughout and so
you know one of the things that i find
particularly interesting since running a
proprietary trading firm is that we hire
two tranches of people we hire people
from
college or internship program
you apply for an internship
if you become an intern you become a
junior intern if you do really well
we invite you to become a senior intern
the best of the senior interns
are offered an invitation to trade in
our desk and trade firm capital
and tap into the enormous resources like
our technology our capital and
you know great coaches like dr
steenberger and be around
fantastic traders who are doing
exceptionally well in markets
and so we have that trancha people and
we are incredibly excited about that
tranche
our history shows we should be very
grateful for how
that tranche of traders have done they
many of them have gone on to become very
successful traders the best have gone on
to become seven figure
traders and even uh this year eight
figure traders
but not only have they become eight
figure traders but they do so in a way
where they
very much control their risk their risk
reward
their return on investment their
max excursion are just all off the
charts and dr sebarger
sees all their numbers and works with
them and and can speak to that
they’re not just making a lot of money
but they’re
making a money unusually
efficiently and and those are the
traders we’re sort of bringing up from
the beginning and and the one thing
that i think we do really well at our
firm is encourage people to continue
trying to be better
to build from their strengths to study
their strengths not just the trades
that they trade pretty well but the
routine that allows them
to trade at their best and then
how do they get better from there so it
wasn’t that long ago
i was in miami having a conversation
with
the highest p l trader at our firm from
the year before and we identified five
things that this trader could do
if he wanted to be an eight eight-figure
trader
and he was unusually receptive
to the things he needed to do he was
seeking out
the things he needed to do to get better
from me and i’m sure he’s having
conversations with other people but we
outlined these five things and that
trader did those things
and this year that trader has become an
eight figure trader
already in the middle and even yeah and
it’s we’re in the middle of the year
he’s an eight-figure trader i i think
he’s up north of 12 million dollars
and so and and you know he still
has room to get better and that’s true
of
the other top traders at the firm as
well they still have room to get better
from here
and uh that is so that’s what i want to
sort of see
you want guys who are talented you want
guys that are willing to get better
every day that will do the work not talk
the talk but actually
put their heads down in the quiet do the
review seek out the help tap into the
coaching
push themselves to get better make
themselves feel uncomfortable
building from their strengths um and
and then when i contrast that with some
of the experienced traders who apply to
the firm
that we’d love to sort of get better at
it’s very clear to us having a history
of working with
lots of experienced traders that
we need to make sure that they’re
adopting that growth mentality
as it is and not just allowing them to
come in and do what they sort of want to
do and if we do just let them come in
and do what they want to do they’re not
going to be as good as the guys
who are homegrown and you know maybe
worse
so as as a guy who runs a prop firm
that’s important to me right
that’s great that’s great mike um by the
way maurice and ralph uh i’m an
eight-figure trader also
but the first figure is a decimal point
just just just just saying you know
hey anyway so i you know i totally agree
with what mike says and obviously
mike and i work together with the
traders at smb so we’ve seen them grow
up together but i’m going to add
one dimension that mike didn’t go into
detail about
so and i’ll do that by asking mart ralph
ask you
the question how many people get to be
an olympic
champion in a sporting event
by training and learning totally on
their own
no one no one that’s the null set
is the mathematicians say that yeah they
always have
coaching they always have mentoring they
always
learn with others that is so
important it’s the teamwork
component which is there
with the smb traders and it’s the
willingness to learn with others and
from others and collaborate
so so so important that’s what makes
being an independent trader
so difficult because the independent
trader it’s easy to become an
isolated trader so we need
communities we need groups
that can learn together
and build in some of that teamwork
if you want to learn three 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 right now at the top
right hand corner of your screen
that’s going to open up this free
registration page in the new window
so don’t worry you’re not going to lose
this video you’re going to learn more
in a couple of hours from this trading
workshop than from
years of online education we saw this
recently when covet hit our firm
was a physical firm mostly traders came
into an office
we worked with them in person we
communicated with them
in person we had meetings with them in
person and then when kobet hit we had to
become like independent traders we we
had to do everything from a distance
and it was but it was an opportunity for
us
to improve the way that we communicated
and improved the way that we
communicated virtually
so we set up just like independent
traders can do
dr steenberger we set up a bunch of
specific rooms for the guys to audio
chat
and and then written chat communicate
and we
set up a bunch of video conferences
for our mentoring sessions where
everybody could be on camera
and communicate with each other
and we have actually found in some cases
being apart improved our ability to
communicate
together and so hey if we can
figure out how to communicate better all
virtually and i’m coming to you from
spring lake new jersey we picked up our
family from new york city and moved over
here to the jersey shore
and we’re running the firm from the
jersey shore
and dr steenberger is coming to you from
his house
uh in connecticut and that’s how we’re
all working
you know we’re all a bunch of
independent traders
inside a firm structure communicating
and helping each other
um i didn’t mean to cut you off there dr
steenberger but i thought that that
was point you’re making a great point
you know being separate
pushes us to work more together
and i think that’s what some of the
listeners today’s session
might want to take away where i teach at
a medical school in syracuse new york
you know the saying is
each one teach one
everyone’s a teacher everyone’s a
learner
the number in the research that i’ve
done
at several hedge funds the number one
predictor of success
in terms of traits
is ralph bartz what would you guess
teamwork i guess what’s that teamwork
that’s important
working team yeah probably
taking responsibility that’s very
important so that goes with a trait
called conscientiousness so that was
very important in the research
number one though is intellectual
curiosity
okay make sense the desire to learn
the drive to learn
that’s what you know even when the p l
is not there that’s what keeps us
growing because we’re just
so eager to learn and people who are
eager to learn
will share with each other and are eager
to share because that
feeds the curiosity
the people who just want p l for their
trading
they don’t have that curiosity as soon
as the p l is not there
what’s going to keep them motivated
right and they’re also going to trade
their p
l probably i’ve seen that before
we have one traitor who you and i know
very very well who
is probably just about the best person
um and somebody that you would just
think a lot of even if they weren’t a
really good trader and for years this
trader wasn’t a seven-figure trader
and every time i would see him of late i
would remind him that
he could be a seven-figure trader and
that he should expect himself
to be a seven figure trader he kept
working on a particular strategy
that he ran that had lots of efficiency
and uh this year became a seven-figure
trader
but this year even after
finally accomplishing that goal he is
working on broadening
what he does so he’s got this one area
of trading that is
expert and as good as anybody on the
street in that one area
hit his goal finally gets there and he’s
still curious he wants to add price
action trading
to his playbook which
selectively he can add and if
selectively he adds that
he’s going to add another huge revenue
line
to his type of trading right
the question that comes up always in
this context for me is um
how do you deal with the system hopping
in that sense many traders when you tell
them especially new traders you tell
them okay you need to stick to a
strategy and you need to make it work
nothing will work right from the start
and then the results are not great and
they are tempted to system hop
how do you how do you deal with that
that you make them or you encourage them
to stick to
to what they’re doing instead of just
chasing so many different areas
actually if you are part of a group like
a prop trading group where
some other people are already making
millions of dollars with the strategy
that
and you’re learning something different
and you think oh maybe i want to hop on
this train and then the next day another
trade i started
doing better and then you want to try
this strategy and so on i think it’s
also difficult right
i’ll just share the evolution of our
firms so i used to teach people
and steve my partner steve spencer my
partner i used to
teach people how we traded we were
mostly
momentum traders we did a lot of
scalping
and that’s how we traded people when we
first started smb in 2005.
and then that became a lot harder you
had to be even more selective with your
momentum trading
hfts forced traders to be even more
selective and even better at that
strategy
to the point where less people were
having success
than in the past and you know we
recognized that we were seeing talented
people
come into our firm who were not doing as
well as
as we thought they would do and
we we recognized that the way that we
were doing things
needed some rethinking and so
when we did that rethinking we we said
to ourselves
why don’t we instead expose our traders
to the different types of strategies
that the guys in our desk
are trading and having success with
put those in front of them let traders
let each trader try
those different types of strategies just
to sort of give you a number
1920 different strategies let’s expose
them to 19 or 20 different strategies
it’s a course that everybody takes
called the winning trader at our firm
people come in before you show up at s b
you take smb dna
then you take the winning trader if
you’re hired
at the desk and then you experiment with
those different types of strategies
as you’re experimenting with them you
yourself
decide which of the ones that make the
most sense to you
you yourself decide
which are going to be the best based on
your unique
skills your unique talents
what’s your personality best suited for
what’s your cognitive abilities
best suited for what type of trading is
is the the
best type of trading for you what types
of setups are the best types of setups
for you
so if you’re very fast thinking then
being a scalper
can make a lot of sense if you have the
personality
uh where you don’t like to give back a
lot of profits and scalping can be the
right personality for you if you’re very
analytical
then you know maybe you want to do some
m a trading or some more sophisticated
type of trading like
some one of our guys michael wilgus does
which is very different than
a lot of the trading that the guys on
our desks do i mean if we made somebody
like
uh you know our very analytical trader
scalp scalp scalp scalp scalp learn this
strategy that i use when i first started
trading that that really work for a long
period of time it works for
really good traders and maybe works for
somebody like swang
you know another eight figure trader on
our desk you’ve got to do this
if you don’t do this then we’re gonna
fire you
we would what would happen was a lot of
very talented people would be very
frustrated
we would be very frustrated they would
fail they would have to go do something
else
because we weren’t
providing the education and the training
that would develop them that would
develop their unique
talents and yeah this is very heavily
influenced on
the mentoring and teaching of dr steve
barker which is he’s encouraging people
continually
to read his blog and you listen to the
mentoring sessions he does with us
to be tapping into your unique talents
and he’ll counsel
what were you good at in the past
why were you good at that think about
that
and then can you find the type of
trading that
taps into those unique talents and so
we let guys develop a playbook around
the trades that best fit their talents
and help them develop those
that type of trading and those setups
from there
right so in the beginning it’s maybe
okay to do
a little bit of system hopping as long
well i guess it’s a fine line where when
do you stop until when do you stop to
look for
something that fits your psychology or
your mental makeup
yeah one of the great advantages of
working at a prop firm is we’re going to
give you a lot of time you know we’re
essentially going to give you
a year to show that you’ve made progress
as long as you’ve made progress
over the course of one year we’re okay
with that and we’re going to give you a
couple years
before we really expect for you to be
uh making some decent money so you have
the the time in the room and also
remember the people that we’re hiring on
the desk
are coming from our internship class so
you’ve interned
you’ve been in college you’ve got to try
some stuff
as you’re going through college you have
eyes wide open as to what this job is
all about and when you’re
when you’re starting you should be in a
pretty
good space to be able to
trade your niche trade your playbook
focus on consistency and then we’re
going to give you a couple of years for
the most part
um that’s
that’s going to give you the time to
experiment
i believe and and maybe other people
have a different philosophy
and and i’m sure there’s i’m just
sharing with you what’s worked well for
us
and and how we run things i’m not in any
way suggesting
this is the way to do things um
yeah the way you find out what sport
you’re good at is by playing many
different sports right
and so you have to be able to trade
different markets different strategies
and see what makes sense to you what
works for you what fits with your
strengths
and you have to do that in stimulation
mode
to begin with or else you’ll lose too
much money during your learning curve
in medical school the medical
students take three years before they
declare a possible specialty area
they they do rotations and they try out
the different
specialties they try out surgery they
try out
internal medicine they try out
psychiatry very different areas
and they figure out what they love what
plays to their skills
and then they start to specialize but
they need that time
as mike says to experiment i like that a
lot so because in the beginning
when i started trading out i had huge
problems with
finding my style coming from being a
poker player i wanted
the constant action all the time but
everyone on the
internet was saying scalping doesn’t
work never trade the one-minute chart
it’s for losers and idiots
so i didn’t even try it but at the end
it was for me personally
the best style so if if you find a style
that really fits your personality you
are not prone to system hopping
eventually
because you know this is i mean this is
who i am and this is what i do
right i can show you a few traders
and their p l uh who have deployed that
strategy of helping on one meta charts
and uh you can uh then bring it back to
the people that call
you an idiot for thinking that that
isn’t profitable
exactly it’s it can be very profitable
it can be challenging for lots of
different people but for the right
people
it’s enormously profitable yeah right so
i guess
in the beginning it’s okay to give
yourself maybe a year maybe two
without focusing necessarily on trying
to make a lot of money initially but
just
trying out different things see how they
relate how you relate to them
what makes sense and then you can make a
educated decision
because many people i see they are
trying to just
to just make the money right from the
start but they never take the time to
to really see what makes sense to them
it’s a great point roth
uh you know people are going into
trading they want to make money fast
and think about any activity any
performance activity think about being a
musician
think about being an actor or actress
think about
being an athlete it takes years to
develop
elite skill why would it be different in
financial markets
so we have to give ourselves that period
of learning experimenting and
training and have the patience if we
love
markets we can get through that learning
period
but if it’s just about making money we
won’t be able to tolerate the ups and
downs and the frustrations
and that’s why so many new traders end
up leaving right
yeah that’s a that’s a good point this
brings me to a question which was sent
in from uh
from one of our students and um
it’s a very specific question but i
think people can relate to that she’s in
a position or he or
where she has been trading for a while
she can trade quite well
but um she can’t afford to lose
money so this puts her in a position
where she feels like like
she has a lot of blockage inside and she
can execute the traits
and i think many people have similar
issues where
you just can’t afford especially during
those times when
money is not abundant anyway how do you
how do you get over
over this blockage i’ll i’ll tackle that
um
because i work so closely with risk
managers at uh
funds if you can’t afford to lose money
then you shouldn’t be trading period
i mean i work with some very very
talented traders
and at times they all draw down
you know if if you have a 60 win rate on
your trades
you can calculate the probability of
having
x number of losing trades in a row
everyone draws down
so there has to be some cushion
and that means for many people
starting by trading in simulation
not with risk and starting to trade very
small
and just learn the consistency of the
trading and then you can
grow the account if it’s possible
when you develop some of that
consistency
you can join a proprietary trading firm
like an smd and they will provide
capital for you so that
your money is not so much at risk
but it’s too much pressure on people
if they cannot afford to lose if you
need that money for your family
you know to feed your family that’s way
too much pressure there’s enough
pressure in markets as it is
you want to be able to lose money
and not have that freak you out
and i’ll add to that we have one trader
up eight figures this year
and last month he drew down
about a million dollars and
not only does dr schemer make a good
point about how if
your system eventually even if it’s a
good system
you you will draw down but really great
traders also
trade poorly at times even the best
traders
and so a combination of trading really
poorly
and making some big plays that didn’t
work out caused one of these traders to
draw down
a million dollars something that he
would not be able to withstand
if he was just trading his personal
account but
you know because he can risk many many
many multiples of dollars
at a prop firm the million dollar
drawdown
is an opportunity for him to get some
coaching and talk to dr steenberger
and to say you know which part of that
was some bad trading which part of that
was
good and keep doing that to get some
instruction from
some of the partners and the leaders of
the firm to say
remember how you trade well remember
what that looks like
uh and then that trader by the end of
the month
i think had made back almost all of it
um
and then you know is often running this
month as opposed to you know being an
independent trader who
has lost way too much of his personal
capital
and uh and and some trouble so even the
best traders
trade badly draw down and need some help
right and how do you make sure or what
are some practical tips
um for people who are finding themselves
in a losing streak or in a big drawdown
um besides focusing on on the processes
is there anything else that you find
very helpful
yeah stop making bad trades um
dr steenbarker you want to take that
yeah i get all my answers for my fred
this is
mia one of our four rescue cats
these were cats that were abandoned
neglected abused and we take them in
and they become part of our family cool
it’s very cool and we have five children
and six grandchildren and four rescue
cats
and it’s always important to have things
in your life that are more important to
you than p
l because when you have things in your
life that are more important than p
l you can weather the ups and downs
like mike said everyone has slumps
but the attitude i take
with the traders i work with is that
every drawdown is here to teach us
something
we always want a positive learning p
l even though we can’t always have a
positive monetary p
l we want a positive learning p l so
what can we
learn from this draw down how will it
make us
better what did we learn about the
market we’re trading
what did we learn about how we execute
trades how we size
positions what did we learn about
getting
larger or taking profits during trades
let’s have some takeaways then we can
feel good about that
but notice that that’s tapping in to
that
intellectual curiosity motivation
that by turning the losses into learning
experiences
we tap into a positive motivation that
keeps people going
even when they’re drawing down
um makes sense right this brings me
i always because i listen to uh for this
for preparation i listen to a recent
podcast of yours i’m not sure if it’s
recent but you talked about the
importance of of balance in your life
having things that are not only focusing
on trading
and i personally struggle with this
myself i
i tend to have tendencies of like a
workaholic
and when you look at those high
achievers
they usually they’re usually not the
ones that are great with uh having a
balanced life
so is there do you see that high
achievers
tend to be more on one side of the
spectrum or is it maybe a short-term
thing where you are out of balance or
yeah i i find that the high achievers i
work
with are very
oriented to working because they love
what they do
and because they love what they do they
pour themselves into it
but they also are pouring themselves
into
other activities that give them
energy and they provide them with a
sense of fulfillment
the traitors i work with
who have unhappy relationships
they don’t do well
[Laughter]
it affects their trading yeah so that
it’s not an either or
while they’re working they’re
workaholics they pour themselves into
their work
and that’s because of passion that
that’s not because of
you know forcing themselves to do things
but when they are doing
other things whether it’s taking a
vacation
or working out or being
with their partner or being with their
kids they’re fully absorbed in that also
and and that’s what i think makes for a
fulfilling life
being fully present no multitasking
fully present
and you know if if you’re investing
your funds let’s say you’re a successful
trader and you’ve saved all this money
you’re investing your funds you want a
level of diversification right
yeah and you’re not going to put all of
your money into one thing
unless it’s tesla stock but seriously
um 2020 hindsight um but no
you’ll put your uh funds in different
types of investments some real estate
some stocks and bonds and so forth
you want a diversified life you can’t
put all of your
emotional eggs in one basket that basket
won’t always be there
and you’ll end up being vulnerable and
that will ultimately hurt your
performance
yeah i think it’s it’s often uh what can
be an issue
with young people who are just starting
out who um
who see trading as a way out and then
they are just focusing all the energy on
one thing and then their life gets
really out of balance
right so it’s a yeah it’s a oh i see it
when i interview
uh young people you know they come to an
interview or they’re uh in a
zoom interview and what’s the first
thing they tell me
training is what i want to do with my
life and i have this passion for
training and it’s all i
do if my feedback is get a life
you know and no and i appreciate that
and you know i have a love of financial
markets also i’ve traded since the late
1970s
okay so i’m dating myself but
so i totally get that but you want to be
passionate about lots of things in your
life and have
lots of things giving you returns just
like in your
financial investments right what i find
is really helpful is that
when you when you pick up new skills
you’re back in this beginner mindset
where you’re curious
and then often you can connect different
things and and bring it back to trading
and this is
this is really wonderful i always try to
encourage uh people to just
try new things if it’s in your sport art
music whatever it’s
it’s so refreshing for your mind as well
exactly
and connecting to other trainers who are
doing unique things
and learning with them from them um
very stimulating and plus you end up
making some good friendships
right yes that’s yeah that’s very true
very good
i like that when when we
when i ask traders and when they ask me
um how do you improve your trading
psychology and then
always this phrase come up how can i
trade like a robot without
emotions is this i always think that
it’s
there’s like you do you deal with your
emotions or do you try to suppress them
what is
what’s your take what’s your take on
that oh i i think there’s a great
way to trade like a robot without
emotions
take your trading system and program it
into a computer
yeah and then you’ll trade and take
yourself out of the business
seriously and there are people who do
that right
quantitative traders and investors you
know
and that is how they take the
variability of performance due to
emotions and so forth they take that out
that that can be done but our
emotional reactions are part of what
makes us
successful as discretionary traders when
we talk about
a very good trader having a feel for the
market
that’s an emotional response
if we make someone a robot they’re not
going to have a feel for the market
we take away the best of them as well as
the problems
and so we want people to
use their emotions as information
not be controlled by their emotions
right yeah this brings me to a point i
i listened to a podcast from you and um
i heard about your your book which is
not new radical
renewal and i ever since i couldn’t stop
uh reading it and i put all the links
and all the books in the show notes
below that
and uh i i always used to be more
spiritual than you are the average
person
but two years ago i got very very deep
into all of those
things and you talked about the ego
and obviously in training it’s always
the phrase leave the ego at the door
what does it mean to to trade without
ego or to be egoless
and is there can we even achieve that
and would that even be desirable to be
ego
less the ego has a very important
function
and uh you wouldn’t want to get rid of
that
but again we don’t want to be dominated
by ego
so the distinction i make in the uh
the blog book on my
blog site trader feed there’s a link to
the book radical renewal
and it’s written in a blog so it’s free
people can read it
uh easily that way from anywhere
the distinction i make is between the
ego and the soul
so when we are following markets we want
to do that from the soul not from the
ego
the analogy i use is that as a
psychologist
i’m trying to help people i have
conversations with people
to learn about what they’re going
through and i have to listen to those
conversations
understand what people are going through
and then i can offer some help
now if i don’t check my ego at the door
and while this person i’m trying to help
while this person is talking i’m
thinking about how much money i’ll make
from this session and what a great
psychologist i am
and how this will make me famous you
know
i mean would you really want your
psychologist thinking about those things
you know would you want your surgeon
thinking about those things
i don’t think so so but yeah so what
does it mean to do it from the soul
it means you’re connecting to something
larger outside yourself
that’s what the soul is all about we
connect to a bigger purpose
we connect to a sense
of the infinite but even when we connect
to another human being
that’s a soul function
all of us as traitors
are engaged in conversations
with the markets we trade
this is a very important concept
markets are moving and we want to be
like that psychologist
we want to sit there and sit there
and sit there and listen and
follow and understand what the market is
doing
because once we have that understanding
we will know what to do if we’ve
practiced long enough
and that’s how a psychologist operates
that’s how a physician operates
and that’s how a traitor can operate the
ego is not there it’s
not about me it’s about understanding
the communications
from this market that i’m trading i love
that
amazing yeah um really fascinating i
really like
so and this brings us back actually to
the because you said
it always comes back and most of the
spiritual books it always comes back to
like
being really aware um developing your
level of awareness and being really
present as you said before
when you’re trading don’t be on your
phone don’t watch netflix and all of
those things
just really pay attention i i think
that’s uh
that can really make a difference yes
yes and that’s why in most
of the world’s spiritual traditions
there
is some there are some forms of
prayer meditation reflection
ways of becoming more mindful
when we’re mindful we’re more likely
to stand apart from things rather than
let them control us
and so mindfulness about our emotions
means that we notice our feelings
but we don’t give in to them they don’t
control us
in fact i’ve had times as a trader
where they’ll be selling and selling and
selling and i will feel
panicky and i will feel like
i want to sell my positions
and then i can step back and i say wait
a minute if i’m feeling this
lots of people are feeling this
and is that really the right thing to do
do i really want to follow the crowd
so i have the panicky emotion it’s not
that i’m a robot
but i have the mindfulness to be aware
of it step back
and maybe even use it as information i
could say perhaps this is a time of
opportunity if everyone is panicking
right and especially in these days it’s
even more in this context of what is
going on
um developing mindfulness
i think maybe stepping back from social
media from consuming news
and just focusing on your internal work
i think can make a big difference
i made this decision very early on in
corona i i felt that i was getting very
aroused
and then i made the decision to just
completely unplug
not follow the news anymore and i found
i’m staying away from social media i
find it makes a really big difference in
your the level of kindness that you have
and it translates
into training but it also translates
into how you interact with
the people in your life and that it all
feeds back to how you perform i think
that’s a great point ralph a great point
you know with social media there are
certain people worth
following right and there’s certain
people
worth tuning out you know and
um but the ones worth following are
really worth following
and uh if you can form your own
virtual community of the people you
follow and who follow you
that can be special right yeah social
media can be a blessing because now we
have the opportunity to
to not necessarily reach out but to
follow people that
like 20 years ago we wouldn’t even have
access to but these days you can follow
and see what they do and it can be a
very big inspiration
it’s amazing people all over the world
you know uh yeah
in real time you know in the past we
would have never had
that opportunity so i like social media
i don’t like anti-social media
that’s their story there’s a lot of
anti-social media out there
right um so let’s shift gears a little
bit i know we are short on time but
there’s a question that i would really
like to
um see how do you deal with huge amounts
of
money when your training account is
growing um
is there any exercises or any tips
anything practical
um that help your traders that you coach
for example
yeah and to add to that from mike also
um
your traders when they come into the
firm maybe you can give an example how
much money they get in the beginning
and how they grow their accounts how
will they
add to their funds when they have good
performance
yeah because i think this also relates
or translates to
like normal retail traders when they
grow their account there comes a point
when
you maybe want to add to your funds so i
think that’s really relevant
yeah yeah so
when we first start the focus is on
education and training and building
a really strong background and then that
that next
stage we think about is trying to figure
out what your niche is going to be and
focusing on that
trying to hone your niche and
the next stage is consistency
can you trade your niche uh consistently
well
and as we mentioned that that does take
some time
after you become consistent you want to
think about
sizing up in the trades
that you do well and we have
a way of doing that which is you know
essentially every 10 trading sessions
we’re active traders
but every 10 trading sessions you are
eligible
if you have traded consistently to
receive a bump
we’re going to start our guys very small
at the beginning of
your trading career that’s the worst
you’re ever going to be
and so it doesn’t make any sense to be
really risking a lot of money
when this is the worst you’re ever
going to be and then as you
prove and earn the right to
trade with more risk and with more
capital
then 100 we’re going to bump you up
we’re in the business of
splitting profits with traders and so
it’s in our interest
if somebody’s doing well to help them
make more but very systematically
traders should have have a way that
they’re going to increase
their risk and increase their buying
power
they should feel a little bit
uncomfortable
as they’re increasing their risk
but not so uncomfortable that if they
actually take a loss
that uh they’re not going to be able to
they’re going to go into some
spiral downward of drinking and
drugs and debauchery although maybe that
is a good idea
um and uh
and really get too distressed about that
you know
we want them to take that loss and be
like you know that’s
not great that’s not ideal would have
been better if that trade worked out but
i understood before i took this straight
that one of the things that could happen
is i could take a loss
and this is one of them and i’ll i’ll
keep moving and so
you know if you are continually pushing
yourself
to trade a little bigger and trade a
little bit better
over time they’re just numbers
a one thousand dollar day
becomes a three thousand dollar day and
you being satisfied with
three thousand dollar day uh gets
replaced for you being satisfied to make
five thousand dollars
which gets replaced for you being able
to make eight
and a good day maybe a year ago for the
best guys used to be 10
and now it’s 30.
and and you literally are just moving
the decimal point
so we have guys who when they first
started trading
were very consistent and made four to
eight thousand dollars
uh a a a month and
you know now making a couple hundred
thousand dollars on their best days
um and even more with with special
opportunities
they become used to because they’re just
continually working on their sizing and
their buying power and they’re doing it
from their strengths they’re and they’re
doing it after they’ve earned it
nobody’s sitting there saying uh oh
i’m not really doing that well this the
solution is i need to take on more risk
i’m i’m trading lousy so let me just put
on more risk that will be the solution
uh just a um observation here you’re
absolutely right working on the
consistency first and then growing
the uh sizing and the risk taking that’s
absolutely true and that’s worked very
well
for the smb traders well i think you
told me that
oh is that where it came from okay it
must have been one of the in during one
of those episodes of drinking and
debauchery
um i love when you compliment me
for espousing a theory which you taught
to us oh
okay well it’s because at my age my
memory is so poor i don’t even remember
that i said it
um so so anyway uh yeah
uh one thing that we do with the traders
mic is
we have them look at each trade and say
how much of my daily loss limit
am i willing to risk on this particular
trade
so if i have a five thousand 000
daily loss limit maybe i’m willing to
risk
20 of that limit on
a particular trade and so that will
determine the sizing of that trade
because i don’t want to lose more than a
thousand dollars in that particular
trade let’s say
now when they grow their trading when
they’ve been successful that five
thousand dollar
loss limit like mike said might go to
a 7 500
loss limit but i’m still going to size
my good trades at 20 percent
of the loss limit in this case now it’s
1500 right
and so by thinking in terms of fractions
of our loss limit we don’t get caught up
in the dollars and cents of it
it’s the same trade the same percentage
of our daily stock where it’s a little
bit different
for the independent trader is that you
have a fixed
dollar about in your account
and you ca and you need to grow your
trading as that account grows
if you keep growing your sizing of your
trades
and your account value is staying the
same
then you’re risking more and more and
more of that account and eventually
you get to the point of what’s called
risk of ruin
if you lose half the money in your
account you have to double the remaining
capital just to break even
so that’s cool i tell a story about one
of the traders that we work with
i think this illustrates a really
important point for independent so
we work with a traitor who i remember
recruiting him
thinking he was going to be spectacular
i remember when he started thinking he
was going to be
outstanding i remember after the first
year
wondering why he wasn’t
and after the second year more puzzled
why hadn’t been and it got to the point
where
he had been with us enough
that he really needed to start doing
much better
and that
calls for a tough conversation i mean
that calls for
me bringing you into a room and saying
look this is your last chance
i have all the confidence in the world
that you can do this
and let’s talk with dr steenberger about
specifically the things you need to do
to do better
and this trader had and then in this
case
uh this trader had some plays that he
was really good at
but really needed to stick to them
you know in all his lousy trading and
all his underperformance
over the course of years you know at a
at a
a great prop firm with traders around
him or as good as anybody on the street
um and him having access to and him just
being super talented all of us
recognizing it thinking of it
he just wasn’t doing it and
so we we had that conversation and said
look you you need to pick it up
or else we’re gonna have to transition
you help you
help you move on his back was firmly
against the wall
to this trader’s credit
he totally turned it around and the way
that he turned it around is he
was able to stick to his trades that
were his a-plus setups
and then and i mean it was the
difference
between us
just shockingly having to fire
this truck i mean we would put him at
the top of the recruiting class
in terms of expectations
you know we do that we sit around we’re
like i think these are the top guys and
you know they remind us of these
traitors on our desk and it’s just a
matter of time and they’re going to be
the next shark
the next swang um the next memo or wrath
for dan g
and and so
he he turned it around totally became
more disciplined in taking those eight
plus trades
and you know became actually
based on his experience his performance
was as good as anybody’s on the desk
relative to his expertise and then from
there
he really needed to get better from
there and started
very much focusing on risk for trade
so now he had gotten himself to take his
a plus trades
and done done spectacularly to get
better from there he needed to put on
more risk
put more of his risk budget into these
eight plus trades
uh than he had so gave them more risk
risks 20 per trade you know your
number’s higher
but as dr steenberg said it’s just it’s
just 20
um and he’s been doing that and and
continuing to do well
um i said look there are people that are
people that are out there that
have their backs against the wall and
really turn it around with their best
trades
and then really make even more progress
focusing on their their best trades by
adding risk
so basically mike if i could just jump
in super quick because i know we’re
getting on in time
but uh if i could jump it with that
trainer that you’re
talking about he was already super
successful
it was that he was doing a lot of other
that wasn’t successful
but that you know this is such an
important principle
the keys to your success
you can often find in your successful
trading
look at how you make money look at your
winning trades look at your winning
periods
and learn from what you do well and
that’s exactly what this
uh trader did mike he got with your
encouragement
and wearing a very threatening bed style
shirt you
won’t go there
but he had to focus on
him at his best what he did well and
that’s what
listeners to this podcast can learn your
the secrets to your success very often
are right there in front of you in your
best training right and i
don’t know how you feel about this but i
think this traitor’s gonna be remarkable
i think he’s gonna be a remarkable
traitor and
i mean he was he was you know that’s
what it took
yep so i know we are we aren’t uh we are
here at the end i just wanted to because
i love this point and there’s something
that is
like almost identical with edgewonk with
our trading journal we do like reviews
people send us their journals and we
review them
and there was a trader who was a losing
trader the equity count equity balance
was going down
and he sent me his journey said i’m
ready to give up what should i do
and because he tagged all his trades
very nicely every trade was really
recorded nicely
i was seeing that whenever he stuck to
his plan
he was consistently making money and the
account graph would have gone up
really really nicely and there are three
there
there’s one thing that he keep repeating
and repeating retreating
that ate up all his profits and then
some and i reached out to the trade and
said do you know that actually you are
quite close to profitable trading
but you just keep repeating this one
thing and he had no idea he was ready to
give up trading after
years and years of investment so yeah
focus on good trades
and recognize your progress this is
always what i tell my
uh our traders and just look at your
good trades and
see how you can make good trades that’s
what you said mike before
focus on quality i think that’s so true
yeah
can i add one thing to that because i
100
agree i’m sorry dr scene burgers you
want to say something
uh just super quick uh often people
can’t
cannot see their best trading unless
they
have statistics and a journaling system
like edgewonk
it opens their eyes we get so caught up
trade by trade that we don’t see the
bigger picture
and that’s where a tool like the
edgewalk becomes so
so so helpful yeah go ahead bye
yup and we use a tool like that as well
and
we use it during our monthly meetings
which we’re going to do tomorrow dr
steenberger
um that’s right with our guys
i would say that one of the things that
we found helpful
shameless plug for my second book i’m
not plugging this because my book it’s
just something we do at the firm
um we do something called a playbook and
so every time you find
it’s a great that really thank you every
time you
find a trade that makes a lot of sense
to you and that
you do well with you want to go back
and be constructed and
we call put it into a playbook and keep
that
and and review those playbook trades
so that it’s easier for you to remember
in real time this is what i do well oh i
made a playbook trade on that
and i need variables 1 2 3 abc and if i
don’t have variables one two three abc
i shouldn’t take that trade because
those are the other trades that i don’t
make money in
but when you go through that process in
real time it’s easier for you to say
hey this is an a plus trade i’ve written
it down in my playbook
it has a name i know how to trade it
i’ve made money in it i measured it
with my trading stats time for me
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