If homemade chocolate chip cookies are made and I eat one, there is a 100 percent chance that I will eat many, many more.\u00a0 If I fade a strong stock, there is a 70 percent chance that this trade\u00a0will result in a loss.\u00a0 Last nite we were visiting friends and our host made some chocolate chip cookies.\u00a0 I ate one and then sat on the couch.\u00a0 Quickly I rose from the coach and said to myself, “who are you kidding?”\u00a0 I grabbed a plate, some milk,\u00a0piled on a bunch of chocolate chip cookies and headed back for the couch.\u00a0 Delicious!<\/p>\n
This weekend is a great opportunity for you to better understand the importance of statistics and your trading.\u00a0 At our prop trading desk in New York, our day trading desk, we teach our new traders play that are statistically favorable.\u00a0 They are instructed to start their trading careers with only those plays.\u00a0 And this works.\u00a0<\/p>\n
I get a ton of emails from new traders looking for advice.\u00a0 And I start with these questions.\u00a0 Do you know the statistics for each of your trades?\u00a0 Do you restrict your trading to only those plays or trades that are statistically favorable?\u00a0 If not sit down and think about the trades that work for you.\u00a0 Give them names.\u00a0 For example our prop trading desk will only trade: consolidation, support, resistance, uptrend, downtrend, breakout, momentum, higher lows, lower highs, etc…..\u00a0 If we spend the month making only these trades we will do well.<\/p>\n
I had a great talk with one of our excellent experienced traders yesterday.\u00a0 He has been struggling more than he should have of late.\u00a0 And let me be clear- this guy can really trade and has made millions of\u00a0dollars trading.\u00a0 I have been peaking in on his trading lately.\u00a0 And I noticed that he was too often fading strong stocks.\u00a0 This is not a play that is statistically favorable.\u00a0 He needs to eliminate this play from his playbook.\u00a0 The data\u00a0from his trading of late\u00a0is meaningless.\u00a0 It includes trades that must be eliminated.\u00a0 I suggested to rid this play from his playbook and then take a look at his numbers.\u00a0<\/p>\n
Today\u00a0I am heading to a\u00a0holiday picnic.\u00a0 There are going to be homemade\u00a0chocolate chip cookies.\u00a0 If I eat one, I will then eat way too many.\u00a0 I will let you know how that goes.<\/p>\n
Mike Bellafiore<\/p>\n
Partner<\/p>\n
SMB Capital<\/p>\n
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