When you have to start making real money as a trader (now!)

BellaBella Daily Update


It is not uncommon for a trader to have to start making real money.  Perhaps the trader is running out of money.  Or if he at a firm, where he is being paid like SMB Capital, and the firm needs to see him start to make progress.

The trader has his back up against the wall.  The trader needs to stop underperforming.  The trader needs to show himself and/or a firm that he can do this.

One trader at our firm is in this position.  He has stated he needs to start showing that he can do better.  And he does.

This period of time doesn’t feel great as a trader.  It is very difficult.  You feel terrible.  You fear failure and perhaps mistakenly feel like one.  You fear having to drop something you love for something else.  You are so disappointed in yourself and your unacceptable underperformance.  This all just sucks.

But it happens.  And it has happened to traders who have gone on to do great things as traders.  To traders who have gone on to be wildly successful.  It certainly has happened at our prop firm.

Being up against this wall doesn’t mean you are going to fail.  It means you need to do better.  It means you need to perform better now.  Right now.  Today.  And then tomorrow.

Well… how is this possible you may ask?  If a trader is underperforming, how the heck are they just gonna turn this around?  Some do.  Being up against the wall can be the very thing a trader needs to start performing.

To this one trader at our firm, I asked a trader who was in the same position years ago to offer some advice.  Here is that advice from a now successful trader, who was just like that trader who has his back up against the wall.  This advice is nothing short of trading gold…

That advice from a successful trader on starting to perform to a firm trader

Just spoke with (XXX) on the phone and I would like to share these words with you guys in regards to helping (XXX) turn things around and sticking with it.

I told him I was in the exact same situation he is in right now. To be honest, Its not a good feeling at all and it can be extremely emotionally draining. I wanted nothing more than to be a great trader, but I just couldn’t seem to figure it out.  Nothing seemed  to work, I had very little self confidence in what I was doing and at times it felt very hopeless. HOWEVER,  this is nothing that you or anyone CAN’T overcome. I was in the same seat as you are in right now and I couldn’t be happier that I never gave up.

Persistence is something that every good trader needs in addition to being a valuable life skill. Nothing ever comes easy, but if you refuse to quit then failure doesn’t seem all that intimidating. If you really want this trading thing to be it, you need to figure out a way to make it work. For me, quitting was never really an option because the risk of quitting far outweighed the risk of becoming really good at this.

And I am by no means a great trader YET. That’s what excites me and that is what should excite you. The hardest part is always the beginning and this is especially true for trading. We only have a limited time window to figure out where we fit in before the risk of unemployment becomes real.  I know that I will be so much better a year from now, 3 years from now, 5 years from now and so will you. I think this is true for anyone that has passion for growth and studying the markets. It should be fun growing and getting better not only in trading but outside of trading. Trading is not only rewarding from a financial standpoint, but it can teach you skills and lessons that you can apply to your everyday life.

Discipline is one that has stuck out to me in particular. I wanted to be so good at trading everything and loved the idea of being a well-rounded trader that could shift seamlessly during different market regimes. This was one of the main reasons why I struggled so much during the beginning of my career. I wanted to do so much so early and it just wasn’t feasible. This is still one of my goals, but this is something that takes time. This takes seeing different market environments and I was not disciplined enough or experienced enough to be trading everything.

What you want may be great but you need steps in order to get there. No-one ever just jumped from beginner to great in one step. It takes time, patience and discipline. Some of which, I had very little of early on.  So my advice to you would be to try to put things into perspective. I know this can be very hard where you are now and I totally understand that.  I knew that I was struggling and having a very hard time figuring out what I was good at. That is FINE. Everyone progresses at a different rate and it is important that you don’t compare yourself to others.

This is especially true now where there is a lot of talent at the firm. Rather than comparing yourself to them, you should be grateful that so many new guys are doing well. This was not the case for many in the past.  This is a wonderful resource for anyone here and you should be using them. The one thought that I continued to tell myself when I was really struggling is that this is all just a drop in the bucket. The struggles I am having now will fuel the growth for the future. The struggles I am having now will make me more resilient moving forward. The struggles I am having now will make me more mentally tough than others that did not suffer as much. I am going to be so much better years from now that I won’t even recognize who I was before. And the better I get, the more thankful I will be that I persevered and didn’t QUIT. 

I did not figure anything out right away and that is ok because I enjoyed the challenge and continue to enjoy the challenge of getting better every day. You are the worst you will ever be and if you want to grow the only one holding yourself back is you. That being said, you need to take one step in the right direction, narrow your focus and compete.  I listed below 3 things that really helped me gain consistency in my trading and hopefully you can take something away that will help improve your trading moving forward. We both agreed that these were good areas to focus on moving forward for (XXX). They are as follows:

1.) Cut the fat in your trading– Now is not the time to be experimenting and trying new things. Get into your stats and find the ONE or two things that you do well. What trade do you make money on? What is the setup, characteristics, market dynamics, etc. Only take these trades. You can experiment and expand your playbook later but now is the time to show yourself that you can make just one good trade decision per day.

– Less is more –  There was a point where I was at most taking one trade a day and just seeing the ball go in the basket can do a lot for your morale and confidence. Just focusing on making one good trade a day and let things compound – you’d be surprised as to how fast things can add up

2.) Practice discipline and patience– These are something that I had issues with earlier one that I have worked on improving over time. I never wanted to be a one trick pony and only trade one setup in one market environment because I knew this wasn’t a sustainable way to build a career in trading. I wanted to trade everything, but the truth is that was not possible at the beginning. You can expand once you’re consistent in one thing and that consistency is key to giving you the confidence to try new ideas. Discipline and patience are extremely important in order to achieve consistency. I was trading many setups in too many names and as a result my stats were extremely scattered. It’s not that I couldn’t make money in one thing, it was more so the fact that I wanted to make money in multiple things. Again and again and again I would waste my time trading subpar setups in names that offered no historical edge. The only thing that stopped me from doing this was the threat of being fired.

3.) Focus on your process– Focus on what makes you trade at your best. For me, this is in the form of a checklist. I don’t think about P/L. I have done a lot of work in my trading so that I can remove the emotional aspect of P/L so that I can solely focus on making sound decisions. My process is like a checklist that keeps me out of trouble and keeps my head in the right place. The things I think about are entirely not related to P/L and I do this so that as I continue to scale, my trading is not impacted by emotional side effects. My focus is on the following:

  • Risk management– number one job. In every trade I enter, I just assume that I am wrong and that allows me to realize a loss in my head as expected rather than a surprise. It’s important to compete and want to win but it’s even more important to realize when you are wrong and what that might look like. This allows me to see the trade for what it is and not get too biased on an idea and say this has to happen etc…
  • Execution– what type of trade is this? Is it a scalp? Is it a swing? Is it a market related play? How will my sizing be impacted by the type of trade this is, etc…?
  • Position management-  Similar thoughts. What am I looking for in this trade? Where are my targets and why? What do I want to see to stay in the position( can be as simple as a hold of VWAP if long)
  • Market environment- Is the current market environment conducive to this type of trade? Why? Why not?
  • Mindset- How was my mindset throughout this trade? Was I on tilt? Was I not aggressive enough? And ask why and how to address fix moving forward

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 is the author of One Good Trade and The PlayBook. He welcomes your trading questions at [email protected].