Insider Insights: Lessons from One Good Trade

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Marko Gränitz a German trader wrote a book review on One Good Trade by Mike Bellafiore.

Below is Marko’s review translated from German to English.


The best trading book: One Good Trade

One Good Trade was one of the books that I devoured in no time. A book that absolutely belongs on the shelf. And if you ask me, it even has the potential to become a classic of trading literature.

The book is divided into 4 sections with a total of 13 chapters. I’m going to summarize each chapter. This does not mean that you no longer need to read the book. But on the contrary, in most chapters so many details are discussed, that it is impossible to cover all that.

Section 1: Inside a Prop Trading Firm

Chapter 1: These Guys are Good

Traders at a proprietary trading firm earn a certain percentage of their PnL. And the better the trader, the higher their pay. After all, the best traders are the real assets of a prop firm.

The first chapter introduces various traders at SMB Capital and shows attributes that characterize these people and make them successful. One of the traders even evolved out of “I give up” to the Head Trader.

The author describes that every trader has these thoughts about giving up. The idea of ​​being at the end. That he never can make money on the markets again. That the market is just too hard.

But the really good traders find a way to survive. Do you remember your positive self-talk on past successes? You gather up again and keep fighting. And they accept that self-criticism is something that they need to take repeatedly in order to improve. This makes trading a hard job.

“You must be willing to do the work necessary so you can identify excellent risk/reward setups and then put on risk.” (P.15)

Chapter 2: One Good Trade

Profitable traders just always try to do the right thing – and not to make money. They are looking for the best risk/reward situations and use them. Their focus is to make a good trade after another.

Sometimes the results do not reflect the back. Traders can lose temporarily, although they have done everything right. This can not be avoided. In the long term, it pays off to always do the right thing strategically and implement it on the basis of a clear process every day. A long line of “Good Trades” will almost certainly lead to gains.

Professional traders look for things such as pre-trade courses, technical level and prepare mentally for the trading day prior. Before they make “One Good Trade”, they are able to summarize the trade-idea in one sentence (mentally). After each trade, they reflect on what has happened and play through the whole thing again in their head. Only after this review of the Trade is ticked.

When not trading well for a long time, think about what exactly is the cause. The stock selection? The spawn? The psychology? It must be as specific as possible, because that is the only way to work.

“You must be a disciplined person to be a disciplined trader.” (P.47)

Chapter 3: A Good Fit

This chapter discusses what kind of person fits in at a Prop Trading firm. These are people who especially love trading. People who are clever, love the competition and are mentally strong. Dutiful types who work hard and work at the same time in a team and adapt to the ways of the team. And last but not least, people who are simply achievers and have already proven in other areas.

At the end of the chapter Mike Bellafiore provides a good tip: If trading is really your passion, then make a trading account and trade with small positions. That makes a big difference to an application, because it shows that you mean it seriously.

“We use the same risk / reward concepts in making human resources decisions as we do with our trades.” (P.57)

Section 2: Tools of Success

Chapter 4: Pyramid of Success

The first level of the pyramid is to master the simplest trading setups. Trades in which you act on the basis of statistical advantages.

The good thing about trading as a newbie is that you will probably never be as bad again as in the beginning – if you focus on learning, you will improve. As with all things, we are not born as a master, but must evolve towards one. And, as simple as it may seem, do more of what works and less of what does not work.

When faced with setbacks, traders are usually very good at belittling themselves. But that’s not the solution. The solution is to learn from the situation. The best traders have a particularly great advantage: They are extremely mentally and emotionally resistant. You come back the next day and expect the best.

In addition, good traders always respect the market. They open up small positions and add to them when the trade runs in their favor. They never increase their positions when the trade is not working. And they think continuously in an “if-then” pattern. If this happens, then I do it. So they adapt to what the market dictates.

“Traders who trade well, just like athletes who play well, are paid more than they deserve.” (P.97)

Chapter 5: Why Traders Fail

Traders who lose most in the market do not listen and hold stubbornly to their opinion. They do not use their major advantage over institutions – which is being able to close out losing trades immediately, or adjust positions.

Others fail because they do not really love trading. Take a look at any records of their trading and it does not reflect their setups, or have never recorded trades into their trading journal.

Some also fail because they can not implement or manage their trades. Good trades usually run immediately into profit, while bad trades sometimes to himself bob before they are really bad, here is when decisions need to be made and implemented. You have to say goodbye to them.

Many wonder: Why is this happening to me? The answer is in the book: You can learn to become a profitable trader in any market, from anywhere, for the rest of life. A license to print money.

At the same time it could also be the most difficult task in life, to become a consistently profitable trader.

“There are too many failed prop traders and individual […] Who Could have made it. If only They found a way to persevere. “(P.140)

Chapter 6: Live to Play Another Day

The ultimate goal must be to survive in the marketplace and to never give up. If you find one way to survive, then the good times will come. Even if one of the market again missed a bloody nose. That is the message of this chapter.

The market does not care what we think. It makes no sense to create great predictions. On the contrary, they usually cause damage.

Much more important than to believe in any prediction is to believe in yourself and the fact that you will make it. One has to be able to see themselves as successful traders. Even if you trade well, your lack of self-confidence will cost your trading career if you give up prematurely and without reason.

It is also not good to have too much self-confidence and to act too quickly in the beginning. This is often the case with beginners, for example when a trader has absolutely no idea what he/she is talking about when speaking about trading.

But professional investors can take over. So for example, for years Bill Miller was a great trader. But apparently part of his trading methodology did not work to reduce his positions. He did this with the shares of Freddie Mac – and was destroyed by the market.

It is no disgrace to fail as a trader. The real shame is to have never seriously tried to find out whether trading is a passion.

“If you are passionate about trading and you never give it a run, then you will live your life wondering what could have been.” (P 162)

Section 3: Getting Technical

Chapter 7: Stocks in Play

The basic philosophy of trading at SMB Capital is looking for “Stocks in Play”. These are stocks that have fresh news, forming large gaps that have unusually high volume or otherwise somehow in focus.

In short, look for good movements and attractive risk vs reward setups. Make it possible to act whenever you see a good setup. There are almost always enough trading opportunities – even though many things are going on in the market. In addition, stocks that are in play have high order flow, which reduces the influence of algo traders and HFT programs.

Especially during earnings season, there are many stocks in play. In order to not lose track, traders should choose the best 2 or 3 stocks in play to focus on. No one can trade all stocks in play.

Of interest in this chapter is the statement that successful intraday traders trade profitably on approximately 85-90% of all days. That’s pretty high. But Mike Bellafiore should know. And he gives reasons why this is so:

● they have developed the skill to efficiently get in and out of trades

● they are excellent in pattern recognition and in Estimating CRVs

● they act on the right stocks – Stocks in Play

“A good intraday trader has access to $ 800k in buying power.” (P.172)

Chapter 8: Reading the Tape

In this chapter, many examples are shown on how to “read” the tape. That is how to interpret price action – particularly at prominent technical levels.

When Tape Reading, the trader tries to find out if there are more buyers or sellers at a certain price. One observes the order flow accurately. Traders looking for bids and asks to be kept, which constitutes an indication of an intact technical level.

While charts are a lagging indicator, Tape Reading is a leading indicator. It can be a great advantage when you have mastered this art. For other traders, better entries and exits are possible.

It is worthwhile to read this exciting chapter because there are specific tactics and insights into the thinking of trades.

“All the best traders on our desk have learned how to Read the Tape.” (P 220)

Chapter 9: Maximizing Your Profits with scoring

This is about different time frames in daily trading. For example, you should set a daily limit, which can be half of the average earnings of a good day. In addition, the time of day is important because there aren’t as many opportunities to find good trade setups. At noon it is often quiet and trend-less while the open and just before the close have stronger movements and better trade setups.

In addition, it comes to choosing the right position size – starting as low as possible and slowly increase (!). Ideally, you will be getting better, without noticing it. Make one good trade after another, be mentally focused, confident, and flexible. As you get stopped out the Trade restarts and provides a clear new opportunity, you should re-evaluate and try again.

The best trades often work very quickly. A relatively large position can be opened, it will be immediately cut back again (Load the Boat concept) – if it is not quickly profitable. Again, be absolutely clear what is in what scenario, do (if-then statements). Because the only truly devastating risk there is, is if you do not know as a trader what you’re doing.

A good tactic to gain a foothold again after difficulty trading is to have a few positions. In addition, one should focus on acting only the best setups. A trading crisis is often survived quickly and without causing major damage, and takes the pressure off. And – as I said – you always have to believe that you will make it. Even if we miss a move in the market from time to time, there will always be other opportunities.

“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. “(P.247)

Section 4: The Traders Brain

Chapter 10: Trader Education

One of the best techniques to improve permanently, is visualization. Imagine how we trade in particular trading situations. This gives us better control over our emotions and helps to work on individual weaknesses.

Often traders simply need someone who encourages them, after taking a big loss market and is unsure what to do next. Also mentors are valuable. You can discover talents that itself does not perceive a trader, or of which he/she has to be convinced.

The chapter also mentions the advantages of traders if they work at a proprietary trading firm: Higher capital base, better transaction costs, and the benefits of a dynamic community. Last but not least certain rules and limits that protect the trader from self damage.

“Sometimes you just need to be told that you can do it.” (P.263)

Chapter 11: The Best Teacher

The best teachers are not always the best traders. This also applies in other areas such as professional sports. The best coach must not have been the best athlete himself.

Quite the opposite – often the worst traders would be given the best coach in a particular area. This is because it takes a certain talent and enthusiasm to teach others something and motivate them properly. One has to believe they can improve. Remember that you will make it.

“Every day is new. There is no ‘system’ to learn. It is about developing trading skills and then making adjustments Continually “(p. 291)

Chapter 12: Adapt to the Markets

Most of the money in a correction can be earned, according to the author, if one waits the moment when the market suddenly stops for a slightly higher sales. For this purpose it is necessary to closely monitor and reset your own thoughts and expectations as the market changes. Under no circumstances should you try to buy first. For it is only when the market allows it, you can earn money as a trader. And if this movement is in your favor, you have to be willing to keep the trade long enough.

Support and resistance are intact often only when the market psychology is still the same. Otherwise the level may prove to be completely worthless.

Also the large market phases will change again in the long term. As a trader, you have to be prepared for it. This may mean, for example, to make more long or short trades, or to act more pro-cyclical or counter-cyclical. Often the transition is for traders is difficult when the market behavior changes – also applies to always keep this in mind.

But also important: as long as things go well, you have to pick out everything that the market offers. To take a break in a good phase is not the self-image of a professional trader.

“I have seen prop traders makeover $ 400k in a bounce. They did not load up at the bottom. “(P 308)

Chapter 13: The Successful Trader

The last chapter looks again briefly from the meta-level on the content of the book. The trader at SMB Capital is looking for intraday levels in stocks “in play” which have high volume emerging, and where the big fights between bulls and bears are playing out. The basic idea: Long, when it comes to the level, and short below.

The way out of a trading crisis for the author is always the same: smaller losses, only trade the best setups, and focus on the patterns that just work best.

If you manage to become a profitable trader, the journey is far from over. You have to re-adapt your systems and strategies again and again to the markets, as they are constantly changing. That is part of the life of a trader and every rough patch will make you an even better trader.

“What does not blow up your account will make you better.” (P 337)

So much for the book review of “One Good Trade”. As I said, in order to understand all the content right, you really have to read the book itself. But I hope that you get a detailed insight!

Finally, a note: Meanwhile, a new, extended book by Mike Bellafiore has appeared: “The Playbook”. [2] I have not read it yet, but it seems the main features are similar. Where the new book includes about 100 pages longer and perhaps even stronger seeks what is going on in the head of a trader.


[1] Bellafiore, M (2010), One Good Trade, Inside the Highly competitive World of Proprietary Trading, Wiley.

[2] Bellafiore, M (2013) The Playbook: An Inside Look at How to Think Like a Professional Trader, FT Press.


* no relevant positions

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