In this video, learn how to solve for your idiotic trading (caused by not making enough money in your smartest trade idea). See how a junior trader creates an AntiPlayBook Trade to help eliminate his bad trading and bad trades that are holding him back from being the trader he can become.
View Video Transcriptin this video learn how to solve for
your idiotic trading pause by not making
enough money in your smartest trade idea
hi I’m Mike bellafiore co-founder of SMB
capital and we’re a proprietary trading
firm located in midtown Manhattan and
I’m also the author of the trading
classic one go trade and the playbook
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for you in the trading community see how
a junior trader creates an anti playbook
trade help eliminate his bad trading and
bad trades that are holding them back
from being the trader he can become
let’s get to work this is my anti
playbook consisting of the midday
breakout trade so looking at the bigger
picture on this day read approaching
this $300 area inspire Pauling’s been
decreasing throughout the bonds from the
lows so volatility has been decreasing
but so generally elevated and there’s
been thoughts that the markets been
overbought but we haven’t seen that
second leg lower like many were
anticipating places are beginning to
open up as state home orders are
starting to be lifted the trade idea so
the way I kind of break this down is I
walk through my process of how it ended
up taking the portrayed that I need to
cut from my playbook and it all stems
from not making feeling like nah I
haven’t made enough on one of my 8 plus
setups so my trade idea coming into this
morning was I was looking at video we
were gapping down below yesterday’s
range we’ve also started to see a small
rotation out of tech in the
semiconductor space over the past day
and on this particular day we ended up
having an opening drive lower indicating
possibility of continuation sector
outflows and so my idea was to look to
get short on a low volume of tradesmen
into V walk wants the offers begin
holding lower risking a hold above vo op
and anticipating a trend lower for the
day if the market in sector were also
participating in the same direction for
me this trade ideal was a trade to hold
for longer intraday move and so that was
my game plan coming into this day so
walking through the psychology that
you’re highlighting there that leads to
you trading poorly you mentioned you
didn’t make enough help me to understand
that yeah so it was in my poor execution
of the trade when
I took the trade when I actually
executed on the trade I was too zoomed
in on every single tick that the tape
was showing and ended up cutting most of
my size
before my exit rule said I should have
since this was a trade to hold this
wasn’t a momentum scale and so what I
realized that I cut most my size and got
flat and then didn’t riad that got me
into a poor mental state where I felt
like mentally I was down in the trade
even though like my P&L wise I was up in
the trade so I feel like by
underutilizing in that trade that put me
in a poor mindset that got me to taking
in trades that I know don’t have edge in
the current market environment such as
midday breakouts so you put on a trade
to hold but then you cut you trade to
hold before your exit rules suggest you
should correct and then you got back in
no I didn’t follow my re-entry rules
that was you found a really good trade
he cut it too early and the trade
continued to work and you got I had a
kilt there because you saw you couldn’t
make more is that what happened correct
okay and you were focusing on hey I
should have I should either still be in
this trade or I should have made more in
this trade I should be up more and that
mindset led to you doing some stuff
that’s not in your self-interest is that
we’re talking about here correct
absolutely so why did you cut you
mentioned you were in a trade to hold so
why didn’t you cut too early you if you
have rules let’s sort of understand that
so if you have rules as to when you’re
going to exit and that hasn’t come yet
why are you cutting
I don’t mean to in any way make it seem
like trading is not easy because it’s
not I want to just understand what’s
going on in your mind
is there some way in your exits in your
rules to exit where you say if I see the
tape starting to change that I’m gonna
cut it and you started to think you saw
that but you didn’t really see it is
that we’re talking about it was more I
started to know this or see this trend
when I began tried to size up and so I
think in the back of my head I was
starting to think about the PNL and when
I start to think about the P&L I get to
zoomed into the tape in times where I
shouldn’t and which causes me to take
trig decisions when no trade decision
should have been made yeah I mean one of
the things that happens a lot one of the
things that people do is they cover up
their pl a lot of things that people do
is they write down what their exits are
keep that in front of them for their
trades to hold it helps remind you this
is the real exit so those are those are
just a couple of quick ideas what are
you thinking about in terms of helping
yourself hold for the real move for the
move that you intended but the reason
why you’re in the trade notice this
after taking public for Mende breakouts
and I kind of like work backwards to try
to see like why I was taking this race
in the first place some of the rules
that I’ve started to implement are by
reinforcing like why I’m in the trade in
the first place what my bigger picture
idea is and just kind of continuously
reinforcing myself like why I’m in the
trade what my rules are and having that
positive self-talk to keep me in the
trade and prevent me from taking making
trade decisions when I shouldn’t
otherwise be taking trade decisions so
it’s a combination of having my rules in
front of me and then constantly telling
myself like I’m right in the trade you
know I don’t have a reason to exit yes I
shouldn’t be exiting were you engaging
in self-talk while
you were in the street on this
particular trade I don’t believe I was
which was one of the reasons why I think
I cut it too early yeah I mean that’s a
another excellent way to overcome this
you say to yourself hey is it a reason
to exit is the reason to exit I do think
though being clear about exactly what
your reasons to exit are for these
trades and keeping that in front of you
is a good way for you to think about
getting better with these with these
traits to hold is that something you’ve
ever done before yes I could I
continuously go back through and kind of
like reevaluate my it’s a rules and AD
rules based on like based on the trade
itself I definitely think one of the
things that I could do a better job of
is being as specific as possible
especially when it comes to my exit
rules that I generally have like an
outline but I think by being more
specific that would that would help me
to hold my trades for the real moves
yeah I think that’s right
I also think keeping in front of you I’m
like literally putting it next to your
keyboard when you’re in one of these
trades
it’s write down I’m not gonna get out of
this until XYZ one two three and I’ll
and I love the idea of self talk that’s
terrific you a hundred percent I love
that love that thought as well I think
the combination of those three won’t be
particularly helpful self talk writing
down doing a better going back and be
more specific about your exit rules and
then keeping that in front of you those
three things strike me as a powerful
combination to get a little bit better
at holding these trades to hold if you
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education so in this particular day
there wasn’t a news catalyst he caused
semiconductors to fall this was more of
just like a sector play we were seeing a
little bit rotation out of like semi is
in tech and kind of morning to you like
financials for instance so they ate ER
for a video on this day it was about 15
average a daily volume is over 15
million elevated our ball no real short
float 71% institutional ownership and so
now looking at this trade for NVIDIA we
were starting to get outside of
yesterday’s range had the opening push
lower and a nice low volume retracement
and to be WAP which was what I wanted to
see to get involved in this trade on
this day and I’ve outlined some of my
rules for like adding back into the
stock and exiting well I knew like
coming into today like what my exit
rules were like what I was gonna be
wrong if the setup came through I didn’t
have these rules in front of me and I
wasn’t continuously reinforcing them
while I was getting her while I was in
the trade which is why you see me cover
the positions so quickly
I wasn’t sticking to the exit rules that
I outlined that worked for this
particular setup that got me into a poor
mindset realizing a stock had another 15
20 points lower and that I should have
done my job of getting back in where I
could have risk being the appropriate on
my own and the fact that I didn’t got me
into the poor mindset that led me into
taking setups I had previously cuffed my
playbook but setups that I found myself
taking recently as a result of being in
this mindset here I just outlined some
of the variables I had a significant
number of variables for me know we were
outside of yesterday’s reign we a strong
opening drive lowered elevated our wall
we spent almost no time above Viwa time
of day was still in my favor it was
still early enough then David stock the
trend
I had the marketing sector acting as it
he’ll win by also showing weakness and
we also hadn’t even moved a full ATR
so I had a lot of checks in my favor and
so when I
realize this and I realize that I didn’t
get in I didn’t follow my rules I knew I
had made a serious mistake that led me
to get him into a poor mindset to take
the following portraits I’ll show I just
want to go back to that he did a really
good job of laying out variable
assistance of it’s a great trade is it
trade I want to take one thing that I
wonder about in this market is how
you’re thinking about the overall
strength of the market the overall
strength of the sector and how that’s
playing into your exit rules yeah so I
know that the semiconductor ain’t like
the tech industry itself has been
generally strong during this bounce in
the market they’ve been a relatively
strong sector so should we call it
strong or something else it’s really
strong super strong this strongest I
think it was the strongest sector on the
way up we’ll call it super strong yeah
and so I hadn’t necessarily consider
that as a factor in my exit rules for me
if when I was taking this trade I really
wanted to make sure that I had market
and sector support so if I saw that the
sector and other names in the sector and
the market was also bouncing that
what have also impacted how I would have
taken sighs off I didn’t out like that
in my previous slide but mentally if I
saw the market and the sector also
balancing that would have all the reason
I bring that up is because for this
trade to get your attention going
forward you would want to see on the
daily chart and overextension and this
particular name and maybe even an over
extension relative to its peers why do
you want to short a really really strong
stock you want a stronger shorter really
wrong strong stock because it’s just too
parabolic and and even better it’s just
to power bulk relative to its peers I
don’t know that I want to be making the
short in the middle of a range I don’t
know that I want to be making this this
trade on the short side that had
recently made a new 52 week high or a
new important high in a strong market
with the strong sector really probably
only taking this trade if it’s just way
overextended we’re looking at our
Bollinger Bands for lack of a better
indicator and it’s just too too extended
away away from the top of the Bollinger
Bands we’re looking at that that’s
something that gets missed and these can
be really good trades and fine for you
looking at that but that’s why it’s a
question about the daily chart I think
that’s got to go into your variables for
this trade to work and overextend
because it’s so strong and overextended
move on the daily chart does that make
sense yeah I think in video 2 I don’t
have it written on here and but it was
also making all-time highs at this time
so that also contributed to the fact
that I kind of did think that they were
starting to get Overson that I don’t
include those variables and here I do
think that 100% valid though in video
was one of the strongest semiconductors
in the space so I think the fact that it
was showing clear weakness was kind of a
change in character it’s something that
I should have included in this slide ok
yeah I mean I think there’s I’m I see
two trades it will work for something
like this in a strong market a strong
sector and overextension and a clear
rotation out of the sector that you can
spot across all the other appears in its
sector I see those two trades worth and
forth exploration these were two
instances in which I had taken midday
breakout shelves as a result of having
that feeling like I didn’t make enough
in my 8 plus set up in Nvidia as a
result this led me to taking a break out
in a tap here as you can see I outlined
this in a future slide a tap was in the
middle of a range it was mid
it was about 11:45 time of day was not
in favor of taking a momentum scope
given the fact that volumes right out
volatilities generally tried up and the
fact that algos are generally playing
games on the tape
so you can see things on the tape that
aren’t usually there another trait that
I took that same day was a breakout
trade and tilray
tilde had already moved about 380 hours
at this point you were up at high a day
and I ended up getting long for breakout
given that we had had this because
Shindo of all I’m just looking for a
momentum scope and given the fact that
we are about 11:30 hitting momentum it’s
generally not a good strategy for me in
the current market environment when
volatility was much more elevated these
trades were generally working but now
that volatility has been coming down
these are traits that I’ve kind of
shelved so the fact that I was taking
these was alerting me to something that
I needed to change in my process in my
mindset are you sensing that you’re
agitated because you to make it often a
good idea that you planned for you
sensing that yes ok yeah once I noticed
this I mean notice that I also needed to
make pools so I can better adapt how I
respond when I have that feeling yeah I
mean so a quick cheap procedure a quick
G technique is to take five centering
breaths we think better when we’re calm
we think worse when we’re agitated I
think you can you almost can’t think
well when you’re in an agitated state
it’s not you it’s just the way
we’re all wired so you’ve got to get
back to that sense of calm and so if you
can just take five deep breaths in and
out and center yourself calm down get
your heart rate down you want to get
your heart rate down that’s that’s the
key and you practice that over time you
should get pretty good at being able to
pretty quickly get your heart rate down
and get your your better thinking going
or until that point it’s fine to just
get up and go take a walk and think
about it now there are strategies also
that keep checking this so good to have
scheduled breaks throughout the day so
you are getting away and giving yourself
more chances to reset recharge and catch
yourself from getting too agitated now
there are rules that you can come up
with if I make three sloppy one bad
trades in a row I have a rule that I’m
going to get up and walk away that will
keep you from getting yourself into too
much harm so three anti PlayBook trades
in a row I’m up I’m walking away I’m
going to get a drink I’m gonna get
myself a ten minute reset and I’m gonna
come back visualization is great to
visualize yourself in these situations
you talked about in the past but yeah
you you you shouldn’t be trading you’re
not gonna be trading at your best when
you’re in this educated state and you
have to get yourself out of it you have
to have techniques to get yourself out
of it
even if you were trading setups with
that she’d probably mess them up if
you’re in that agitated state you need
to have the edge and you also have to
bring your best self to the market place
to trade things while some techniques
you’ve been thinking about to help you
when you’re in this agitated state that
might work for you yeah so I definitely
a big proponent for visualization so
something that I’ve never seen doing is
visualizing myself getting into that
mindset and then visualizing calming
myself down I don’t necessarily do like
breathing exercises but I go through the
mentally ways to calm myself down and
then I also have physical inside do so
when I realized that I was taking these
trades that was a forced timeout for me
trading get up go take a walk that’s me
taking my walks every day that’s
something that I find keeps me very
centered so now I would normally just
take walks either like midday or like
after the clothes now I’ve made a rule
to wear if I feel like I’m in that
mindset I need to just get up and take a
walk right then and there to prevent me
from taking in trades like these so it’s
a combination of both of them good
excellent and look you’re not gonna be
perfect don’t try and be perfect try and
be better so here I just go through I
talk about the different trade variables
for these two setups kind of just
outlined like why they were bad and why
I should be eliminating them from my
playbook so for a DAP which was the
first chart that I showed we had made
new 52-week highs with a really strong
catalyst and had elevated our of all
those were checks in my favor but the
things that were against me over the
fact that we’re mid day so momentum
plays are less likely to work now goes
around control we’re also in the middle
of range so it’s not like we have clear
room ahead of us and we’d also also
already moved several 80 ARS so it
already expended a lot of energy so the
question then becomes you know how much
how much off-site is there really for me
to be taking some one of these trades
and as I outline why
why I took this trade is because of
feeling like I didn’t make enough and
one of my previous setups didn’t follow
my rules and then feeling like I’m
mentally down piano and I’ll go through
and I believe like two or three slides
kind of how I’m making the changes to
prevent these and then I also do this
till ready so the check marks that work
for me we’re getting the bus some recent
highs on the higher time frames elevated
are vol sympathy names we’re also moving
we also had a news catalyst but again
the things that were against me over the
fact that we’re midday or at hive day
we’ve already moved 80 hour and a half
so that a lot of our energies are
already been expected and did it and
when I compare when I compare the trade
variables from till rang a tap to that
of Nvidia it makes no sense to be taking
trades like these when I have so many
checks are for and against when I have
setups that are having many more checks
in my favor that are for like Nvidia
those are the traits that I should be
taken I shouldn’t be making exceptions
for me to be taking these poor setups
that I have checks for and against and
so looking through the lessons and rules
one of the things that as we’ve already
mentioned is going back to the concept
of just being patient and centering
yourself so for me one of the things
that I’m doing is I’m getting off the
desk anytime I feel like I have to make
back Pinel that I left on the table and
one of my eight plus subs I’m also
cleaning my head you know waiting for a
worthwhile trait to come to me after
I’ve taken my walk and I’m forcing a
trade before it develops I think having
that seeing that and mentally replaying
that in my head it will help me prevent
will help prevent me it’s just another
little thing that will help prevent me
from taking these poor trades if trade
hasn’t fully developed what the ideas
not better well the check marks aren’t
all lining up then I shouldn’t be taking
it especially midday when momentum is
dried up and in terms of opportunity
just taking a little bit of a bigger
step back there’s no reason to be
forcing a trade or trading in a mindset
like we’ve outlined earlier given that
volatility is still elevated there’s
still likely to be other opportunities
throughout the day so there’s no
reason to feel the need to take one of
these trades or to take a trade that’s
less than a plus and going back to
opportunity again not at stood in on my
original plan is one mistake but
following that up by taking a subpar
trade or in this case to because of not
being in the right mindset is another
mistake and so this goes back to the
concept of having more proactive self
talk to stay in my best trades until I’m
proven wrong to alleviate that feeling
of feeling the need to make back piano
so a combination of all of these will
help me to eliminate this these two anti
playbooks from my repertoire really good
review really terrific interns who just
started new guys who we just hired who
just started
pay special attention to the clarity of
solution gets right to it pay special
attention to the meaningful variables
that go into good and bad traits pay
special attention to the combination of
best practices that can help with a
solution
really terrific analysis appreciate it
really well done very impressed really
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