One of our newest trainees (5 days live) had been trying to get a hold of me for a few days to answer some trading questions. I had been especially busy lately but finally was able to squeeze in a quick conversation with him before heading to the airport to visit some trading friends in Texas.
His first comment/question related to how he viewed his trading tendencies at the start of his young career. He felt that his natural “style” was to hold stocks for a longer period of time and it would be great if he was mentored by a trader with a similar sensibility. I said great. Holding winners longer generally is a good strategy 🙂 He indicated that the main problem he was dealing with right now was holding on to losers for two long. I recommended visualization exercises and making sure he came up with hard stops and then visualized himself getting flat his positions that traded to that stop. Also to think about how he would re-enter.
We then moved on to what I wanted to talk about. Before meeting with JG I had reviewed his trading numbers from his first week. The two days where he made large chops were days that he got into stocks we had discussed during the AM Meeting. He did a nice job of holding those positions for bigger moves. I complemented him on the skill of holding his winners but also said that during his first few months of live trading he should defer to the stock selection ability of myself and other experienced traders on the desk.
Stock selection is a skill that one needs to develop. No different than learning to hit out of losers quickly or learning to judge the strength or weakness of a stock from reading the Tape. I suggested that each morning he should be picking stocks from the SMB Scanner in the pre-market and formulate trading plans but should not trade those ideas live until he had developed his “stock selection” skill. He would do this would be by identifying key levels in his stocks and developing trading plans and then after he finished trading the Open he would evaluate his selections. Once the majority of his ideas started to pan out I suggested he could then bring his own selections into the mix for the market Open.
Steven Spencer is the co-founder of SMB Capital and SMB Training and has traded professionally for 16 years. His email is [email protected].
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One Comment on “A Quick Conversation”
I think trainees should be paid based upon the information they get, not if they make money. Holding losers is so common and so much easier than holding winners. either trade how it gets there or trade where its going, but not both.