You Are Trading Better Than You Think

I was reviewing the PlayBook trade of a junior trader, when an important trading principle needed to be shared.  Better said, this might also be an important life principle.

The trader was reviewing a Multi-Day Swing Trade in GameStop and reviewing his performance.  From my seat, the trader had done so many things right.  He chose the right stock.  He found a trading setup with edge.  That setup was in his PlayBook.  His entry was spectacular.  He didn’t oversize the position, leaving room in a volatile stock to maneuver.  He took profits into dips.  He re-entered keeping the Big Picture of the trade in mind.  There was so much good.  It was really solid trading.

But in listening to the trader, he was over-focusing on what he did poorly in the trade.  Yes there were some things to fix.  And we would certainly get to that.  But the headline for this trade was: An Example of Good Trading.  From my seat, it sounded to me like his headline was: I messed this trade up.

Recognizing, highlighting, and archiving what you have done well in your trading is essential for you to become your best trader.  Missing the goodness in your trading is a fundamental trading mistake.  You cannot build on the goodness in your trading if you are not recognizing it.  If you are skipping over the things you are doing well and hyper-focusing on the negatives, you miss an opportunity to do more of your best trading.

Think about 6 months of lost opportunity to recognize, highlight, and archive the best of your trading.  6 months of trading goodness to build upon.  Where would you be as a trader if you failed to recognize the good in your trading over an extended period of time?  You would be lost.

I thought of my son, and a recent baseball game in which he pitched, during this review.  He entered the game so excited to do well.  Over-amped he was unusually wild.  He walked a bunch of batters and then they advanced on wild pitches.  With no outs and runners in scoring position, the batter hit a tapper back to the mound, which he fielded and fired home to nab the runner at the plate.  One out.  Then he threw a wild pitch to the backstop. The runner from third sped home. But the catcher found the ball, scurried to home plate, and just nipped the runner.  Two outs.  Then then then my son found a rhythm and started throwing strikes.  Strike out.  Three outs.

Now what if during our car ride home I focused or let him focus on his poor mechanics that lead to him being wild, instead of complimenting his resilience to find a way out of the inning?  I could have spent 30 minutes explaining that a relief pitcher cannot come into the game and not throw strikes.  That he was dropping his elbow.  That he was stepping towards third base.  There would be time to review this in our next side session, but the big picture was a young player who figured things out when he was lost on the mound.  He found a way to find his rhythm, settle down, get out of inning one and mow down the hitters the next inning.  This was a story of resilience and fortitude.

And what if I spent our entire relationship beating him up and/or letting him beat himself up about the things he did poorly and not recognizing, highlighting, and archiving what he did well?  Do you do this with your trading?  What impact is that having on your trading performance?

You are trading better than you think.  Your focus should be on what you are doing well.  While finding some quiet time to fix some of your weaknesses that will inevitably challenge you.  Building from your trading goodness will lead you to the trader you deserve to be.

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]