You have to perform (honest talk to traders)

I wrote the tweet above recently.  Let me say this again, as someone who has hired and trained traders since 2005 at SMB Capital, our proprietary trading desk in NYC:

Trading is a performance sport.  At a certain point, you have to perform.

(What No One Tells You About How To Become An Elite Trader (surprisingly)

Not too long ago, SMB management sat around a conference table confused at the underperformance of one of our traders.  He reminded me of one of our great traders in his temperament.  His ability to control his emotions struck me as exceptional.  When we hired him, we all thought he was gonna be great.  After he started, we all thought he was gonna be great.  After impressive runs with his trading, we all became convinced he was gonna be great.

And you know what?  He wasn’t.  We were too far into his trading career, and he just wasn’t.

So we talked about what to do.  We had tried many things and poured in substantial firm resources over the now years to help.  And it just wasn’t clicking for him on a consistent basis.

(How to Become a Consistently Profitable Trader (like you deserve to be)

Finally, we agreed he needed The Talk.  During The Talk we put him on notice.  If he did not show improvement, significant improvement, in 90 days then we would transition him out of the firm.  That is the professional way of saying he would be fired.  I couldn’t believe it had come to this.  I felt terrible.  But it had.

Our floor manager gave him the talk.  He put him on notice.

Word got back to me that this trader took The Talk very hard.  He was very disappointed in himself that he had let himself down. And displaying a sign of very high character that he had let the firm down.  He was embarrassed by his performance.  It was hard to hear that this trader who we thought so much about took this so hard.

I decided to pull the trader aside as well and chat with hm.  I was frank.  It was time for him now to perform.  No excuses.  No better next time.  No missed lay up trades.  No more underperformance.  No more.  Enough.

But I also pointed out to this trader that this was not the first conversation I had ever had with a trader, who turned around his career after The Talk.  I shared that sometimes The Talk was exactly what a trader needed to start performing.  That back-up-against-the-wall reality fueled better trading for some.

And I have seen this.  Sometimes The Talk leads traders to focus solely on their best trades and stop stop stop making their crappy trades.  Those crappy trades that endanger a trading career.  Those crappy trades that are beneath you.  Those crappy trades which you owe it to yourself to eliminate.  Those crappy trades that are just not acceptable, when you up against it.

I left that trader with this:

  • Write down your best trades.
  • Just take them.
  • Let’s see what happens.

And you know what?  The trader did.  He limited his trading to his A+ trades.  He stopped taking those crappy trades.  And he literally turned his trading career around.

He performed.  And good performance led to more good performance, which led to a period where he traded as well as anyone in the firm (adjusting for experience).

The story doesn’t always end this way.  But it can.  And sometimes it comes after the realization:

You have to perform.

*no relevant positions

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]