In this video, Mike Bellafiore shares how and why traders at SMB Capital, have become elite traders.
When Covid hit, SMB transitioned all of its in-house traders to remote trading, yet still had its most successful year ever. Find out how SMB traders succeeded despite the setbacks of covid.
View Video Transcriptin late february 2020 i pulled yet
another
senior trader aside i asked him to stand
six feet away while he wore a look of
confusion
on his face and told him the health and
safety
of the traders and you comes first we’re
shutting down the new york city office
and moving to remote trading we were
moving
our in-house new york city prop firm
filled
with advantages from being in-house
completely
to remote trading our ability to adapt
was about
to be tested there were four key
coveted challenges there was a
technology challenge
there was a communications challenge
there was a management challenge
and there was a training challenge the
technology challenge
was we would have to invest quickly in a
new infrastructure
for remote trading it would be a
significant investment we’d have to
migrate traders to this new technology
and do so gracefully traders would have
to trade on a potentially slower
and less reliable technology compared to
our in-house technology
we don’t trade on a third-party
commercial
trading platform that goes down or as
slow
ever in fact a new trader
during a chat with me asked is anyone
else experiencing problems with their
platform
is there a problem with the platform and
i shot back no
it’s your connection our platform
doesn’t go down
we don’t trade on each right here our
platform
cannot go down august 24th 2015
saw a huge gap down in u.s markets there
was a flash crash on the open many
products were mispriced
we were one of the few firms who could
trade actually
entering orders the firm platform
ensured
one of our best days in firm history we
cannot miss the opportunity on the
biggest days we’re a p
l proprietary trading firm that only
makes money if our traders do
we say we make more on the best days
there was a communication challenge we’d
have to talk to our traders about why
they needed to trade
remotely some traders said
i’ll take the risk a change of
environment can be hard
for traders we’d have to find
third-party technology solutions
for chat and audio our
mantra at smb
is talk to each other share ideas
collaborate
so this was a real communication
challenge
there was a management challenge
creating bonds and connections
are much harder when traders are remote
monthly virtual happy hours were
instituted
to bridge that connection normal review
meetings that we were having in person
we continued to have we just did it over
zoom
we doubled down on our communication on
risk limits
with our traders and you can see from
the shot right here i moved my family to
a shore
town on the ocean and we were doing all
of this management
90 miles from the city training is
vital to smb training new traders
for our firm from new traders to elite
traders
is our lifeblood we can’t grow
and sustain without training new traders
how are we going to do this remotely
we utilize the infrastructure of our
sister firm
smb training that’s our education arm
for
our prop desk asking smb capital all of
the in-person training was now going to
be held
online our internships were moved online
we introduced updated online versions of
our core training programs smb dna and
the winning trader
and as a note our best traders are smb
trained
so we have the ability to hire and we do
experienced traders from all over new
york city and the surrounding areas and
the thought is some of the biggest
traders in the world are looking for
capital right here in new york city
and we actively recruit and hire them
but since we’ve been doing this since
the inception of smb
our best traders are smb trained
there are homegrown traders it’s not
even close
the experienced traders we hire on the
street can’t hold the candle to the guys
we bring
from college into consistently
profitable
and then elite we needed to make sure
the development of the new traders
was going to be successful if you want
to learn three more
real world setups that our traders use
including the simple setup that we teach
all of our new traders and the setup
that turned one of our traders into a
seven
figure big money earner check out the
free webinar that we’re currently
running
just go ahead and click the link that
should be appearing now
at the top right hand corner of your
screen that will open up the free
registration page in a new window so
don’t worry
you won’t lose this video you can also
visit
tradingworkshop.com to register for this
free intensive workshop
you’re going to learn more in a couple
of hours from this trading workshop
than from years of online education
there’s a great book
chop wood carry water that you might
check out
and there’s a passage in it that
succinctly summarizes the culture that
that we instill on our training and this
was something that was shared to me by
somebody that i actually coached outside
of the firm
that he thought that i would
particularly enjoy
and you know the passage is about
a particularly young person who wants to
become
a samurai archer you can
replace samurai archer for consistently
profitable trader
the passage is akira sensei i’m getting
better and better each week
how long will it take for me to become a
samurai archer now
akira smiled and told them it would take
10 years
john was furious 10 years maybe if i
didn’t have to spend so much time
chopping wood and carrying water
then i’d be able to reach my goal much
faster
akira replied if you don’t chop water
if you don’t chop wood and carry water
then it will take you 20 years to become
a samurai archer
then he turned and walked away
patience all of the
chats with traders review sessions with
traders
talks with traders daily work with
traders
all of that adds up and compounds upon
each
upon itself to help these traders grow
into consistently profitable and in some
cases elite traders
sgx is visionary i visited singapore
three times i’ve been very impressed
with xgx’s educational resources for
traders and investors i wish
that nasdaq and the new york stock
exchange change invested in trader
education like sgx
how important is trader education to our
firm
let me put it this way we would never
allow
a new trader to trade firm capital
ever ever ever ever
without first taking our world
class training which is smb dna
and the winning trader we would not give
them access to firm capital
without first being properly trained and
being properly trained
in the way that we train traders what
were our communication results
well we built unique channels for
different clusters of traders to
communicate
traders have different styles and
strategies so you don’t want to just
have
one channel where people could chat and
and
share their audio surprisingly
traders created more channels than just
what we created they created their best
channels the
unique channels of communication some
very different than
what we had expected for example three
traders wound up communicating together
that we never would have guessed
would have and they’ve thrived we
encouraged
and green led joint accounts which i’m
going to talk about a little bit later
and overall our communication improved
our trading results this was a big
challenge
well so we we went remote
in the beginning of march of 2020
and we were a little bit anxious about
how this was all going to work out
and so how did it turn out well
in march of 2020
we had our best trading month ever in
november
in 2020 we had our second best trading
month
ever and 2020 we had our best
trading year ever we’ve been in business
since 2005.
in january of 2021 we made a new
best personal best for our trading month
to be the top three trader at our firm
in 2020 you had to clear
18 million dollars net in trading
profits
january 2021 was our best month in firm
history
we couldn’t be happier for many of our
traders i tweeted
we’re grateful to work with our traders
but having had the success i leave you
with one endearing
lesson there is not one trader or
partner
who cannot do better
what were the keys to our success
in conquering this enormous challenge
okay number one the s b trading system
trading the stocks in play we trade
stocks with a catalyst
they either have a technical catalyst
for example something severely
overbought
or oversold or they have a breakout or
breakdown or they have a news catalyst
and let me give you a couple examples of
that
so one example of a technical setup
that hits our stock selection radar is
something that
is way overbought on our daily charts
you can see right here
this particular stock was 17 and a half
dollars a couple of days ago and now
it’s trading at 53.5
that’s going to get on our radar let’s
take a look at another example
here’s a stock in a really hot sector
the electric vehicle sector the tesla
sector that’s getting ready to break out
above a long-term resistance level and
does
that gets on our radar or we see
something that has a news catalyst in
this case
square beat on earnings beats on revenue
it has an earnings report that’s going
to be on our radar
so we want to focus
we need to focus on the stocks that are
in play
but that’s not enough we also
add arvol we confirm we confirm
our stock selection with arvol
arvel is relative volume relative volume
compares the
current volume to normal volume for the
same day
and it’s displayed as a ratio so for
example a stock trading five and a half
times its normal volume
would have a relative volume display of
five and a half
elevated arbol or we do not
trade the stock here’s an example of
how one trader adopted this principle
and had
much better results so i mentor slayer
who’s an elite
australian equities trader he wanted to
improve his breakout trades and we
started working on this
and i said hey why don’t we add arvol to
your breakup
break out trade variables and see how
you do and so he started
not taking breakout trades unless
there was elevated arvol significantly
improved his breakout trading
the second key to conquering
this huge challenge was stress free
trading focusing on stress
free trading what i’m going to tell you
is going to surprise i’m sure a lot of
you
myth elite active traders have to learn
to draw down more
to make more myth you have to feel
pain to make a ton truth
elite active traders worked consistently
of late and intentionally of late on
drawing down less
and made more and you can do that
if you improve your selectivity and your
entries
stress-free trading this allows you to
save your risk
for your best trades psychologically
it’s more sustainable
it’s very hard to lose or draw down a
ton before you win
even even even for top
proprietary traders
so shark is one of our fabulous elite
active traders at a firm one of the best
in the business in his space
we taught him from scratch into
the the elite trader that he’s become we
created
a template for our traders to help them
trade at their best we noticed by
studying them when they were trading at
their best and so we put together a
pretty
cool formula for them to be thinking
about and that’s thesis
plus setup in your playbook plus
confirmation plus fight for price equals
one good trade this is when they were
trading
at their best this is when consistently
across
markets across firms traders active
elite traders were trading at their best
and for shark
he needed to focus on making sure there
was confirmation
before he put on a lot of risk making
sure
he didn’t just trade his thesis i think
something should go up a ton or i think
something should go down a ton
he waited for that confirmation from the
price action
and that reduced his stress with his
trading and then improved his results
also we noticed with shark again an
elite trader
even the elite traders see coaching and
mentoring
to trade at their best we noticed that
when he was psychologically doing
certain things trading
what we call in a convicted state
certain
that his ideas were right he traded very
poorly
but when he was in his optimal
psychological state he traded
like an elite trader and so we put
together a neat formula
for what it looks like for you for
traders to trade at this elite
psychological state and it’s excited
about the opportunity com
open-minded focused
and then pounce like a lion when you see
your trade and for shark
when he was convicted when he lacked
open-mindedness
he was an underperforming trader
and so reminding him of this getting him
to work
on being open-minded really helped
his results let me tell you a little bit
about another trader
who is outside of our firm who i work
closely with
let’s call him legend he deserves that
nickname
based on his p l and his trading prowess
his goal is to make as much as he can
while maximizing his enjoyment in life
he’s his goal is not to make every last
dollar
to go from two to five million dollars a
year in p
l to beyond which is
what he wanted to do when we started
working together he intentionally worked
to reduce his trading stress
to reduce his trading stress he
doubled down on his reliance on reading
the tape he’s a great tape reader
great price action trader as the
indicator
that would lead to his best trades and
in doing this
he reduced his stress and he took a huge
next leap in his trading clearing eight
figures a year
clearing 15 million dollars net and
trading p l for a year
and achieving the goals that he set out
for himself to be a trader so we
achieved his goals
and he reduced his stress so this is
swang this is swang is one of our
elite active traders so
you trade the stocks that are in play
you look for arvol to confirm your
trades
you make sure you’re in the right frame
of mind but you also
then have to focus on your best trades
we call them
our a plus trades so key number three
for us doing as well as as we did
was to focus on our best trades our a
plus trades
now i want to be clear about something
we measure
all of our trades we have in-depth
trading stats
on what we trade best this is
individualized by trader
each of our traders can tell you the
name and the statistics
for each of the trades that they make
and they measure this on a day by day
week by week monthly basis
and swang who was one of the most
consistent traders that we had and you
can see him here getting a black
shirt which you get when you make two
million dollars net
entry in in p l for the year this is a
few years ago
and very happy to to do that and he was
working on trying to become an eight
figure a year trader
but at the end of last year
the end of 2019 he
started to struggle he went from most
consistent trader that we’ve actually
ever trained
the losing trader was actually negative
for the month and during a monthly
review we sit in a conference room
and guys bring in their trading stats
and he shows us
these negative results and is looking
for answers
our in-house trading coach dr brett
steenbarger who’s
the best trading coach in the world and
we’re just so lucky to have worked with
our traders and
our partners looked at his results and
again
these are trading stats that we’re
looking at
and he noticed a problem that needed to
be fixed
and he leaned forward and he said to
swang don’t let your swing trading
get in the way of your swang trading
swang was not trading his best setups
and was getting off track
and so all of our guys focusing on what
they do best on their a plus trades
was key joint accounts so this is
something that we do
that i don’t think a lot of people do in
the trading world
and it’s it’s an idea that has really
catapulted our performance
so what we do is we go to certain
traders
who have edge and we let them
team with other traders on the desk who
also have edge
maybe another trader or even two other
traders or even three other traders
and so we take one trader who has edge
and who
comes up with the trade idea and then
asks
another trader what he thinks about that
trade
and when the two of them independently
think something is a good trade
it’s way better of a trade than if one
singular trader
thinks something is a good trade the
return on investment
is significantly better when these two
people or these three people are
independently
coming up with the trade idea these
three people independently have trading
edge
make money trading and they’re all
agreeing on
entry and exit on how to actually
approach a particular trade
and when they do we let them create a
separate account a join account
where they can risk a bunch of money on
the separate trade
they can trade it also in their
individual trading account but they
create these
joint books these joint accounts the
performance of the joint books
was off the charts and many of those
traders made six figures
on the month outside of their normal
trading that’s a quote from our trading
coach
dr brett steenbarker when they all
agreed
the roi was amazing
swing the bat hard when you spot an
a-plus set up
placing too little risk in your a plus
trades
is too risky now it may seem
contradictory to suggest you reduce your
stress while trading but then trade
bigger for elite performance
but it’s not the answer is to improve
your timing a challenge when somebody
has a great day on our desk
is perpetually for me to ask them how
could you have made more
within your trading system
specifically where would you enter where
would you exit what would your stop be
specific specific specific
getting those entries and the timing
right helps you to swing the bat harder
helps you be aggressive in your best
trades the better your timing
the bigger you can trade key
number six for us smashing this
challenge
always trade with stops we had our best
year ever
we had best months but we did it always
within our guardrails within our risk
limits within our stops
please write this down on your notes
always trade
with stops i was asked recently
let me take a half a step back we have
stops per trade
daily stop limits weekly stop limits
monthly stop limits and an overall stop
limit
for all of our traders and we do this
before anyone actually makes a trade
i was asked recently about the game
stock madness that we saw in the states
one of these stocks that just exploded
to the upside was way overbought
and some firms had gotten beaten up
trying to short it
and it raised a vital issue for retail
independent and professional traders
like us
and i said always trade with stops
referencing melvin capital who
got hurt pretty badly if you don’t
respect your loss limits you can blow up
as a firm
no matter how previously successful the
arrogance
of not covering positions so out of the
money is hard for me to understand
as a professional active trader
real traders use stops
i want to leave you with a final thought
to be thinking about for your investing
and for your trading i know many of you
are not full-time traders but
maybe do this part-time or thinking
about doing this
or thinking about supplementing your
income and
trading’s hard for sure and
the fastest path to elite trader is
patient progress as we say often on our
desk
but the way the economy is right now
i i’ve been thinking about something
quite a bit
and i think it’s important to share this
with you there’s never been a better
time
to trade there’s never been a better
time to be an
independent or retail trader
there’s never been a time perhaps like
now
where you need to be trading well or you
might get left behind
is there too much market opportunity not
to participate and so
not saying trading is easy but it might
be the time
where more of us start thinking about
whether or not we need to be adding this
to our economic engine
and so there’s a fun thing we do on our
desk when a new trader
has one of his best trades ever and it
doesn’t have to be a lot of money
it can be he made his first thousand
dollars in a trade
and so we make the trader feel good we
point them out
we highlight their their success and
i’ll say to them
why not you and what i mean by that
why not you what i mean by that to the
trader is why can’t you become the next
great trader on the desk why can’t you
become a consistently profitable trader
and beyond
why not you and so
if you’re having a little bit of success
with your trading and you’re finding
you do well in certain trades i’ll share
with you what we
do on our desk why not you why not you
today
so i’m often asked hey how do you become
a great trader
i put together this pretty fun equation
that i’ll leave you with
and you can think about so i think the
equation
to becoming a seven figure trader an
elite trader or your best trader
is to have a growth mindset have a
passion for trading
to get a solid foundation where you
learn everything you need about
you learn everything you need to know
about trading
and then you also experiment with
different setups
with edge you try different types of
trading you don’t just try one
and then from those different types of
trading that you have exposure to
you build a niche you focus on a niche
what you do best
and then you find trading edge for
yourself
and then you need some talent to do this
job well
you need to use technology we call it
being bionic
to help you find your best setups and
and
do more of what you do well and you need
patience
and need perseverance that’s a fun
equation
to becoming a seven figure trader for
you guys to think about hey go ahead and
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video from all of us at smb
train and trade well
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