New traders at SMB have a very structured environment when they start their trading careers.  During their first five weeks every minute of each day is planned.  When they begin trading live in week six they are assigned a mentor who will review their work on a daily basis.   They begin by trading 100 shares at a time.  Their ability to trade larger positions is determined by objective performance criteria that they receive on day 25 of their initial training.

They are considered “trainees” during their first six months.  After six months if they have demonstrated consistent profitability we start to give them more autonomy.  If they are interested in trading with more size or having a larger daily loss limit they typically will send me an email.  When I am deciding whether to approve their requests I consider several factors.  One, has the trader demonstrated a level of consistent profitability with their current risk parameters.  Two, in the past how has the trader responded when given greater leeway.  And three, has the trader provided me with thoughtful analysis as to how they will use their new trading parameters.

The third factor is the most important in helping me make a decision.  We ask our traders when they first go live to develop a series of “If, Then” statements for each trading setup that they will be trading.  It is just one of the ways we help them form “good habits”, which eventually will lead to their trading success.  This habit of thoughtful analysis is essential for traders to advance in their trading careers.

I received three requests this week from those wishing to trade with greater size.  One request consisted of two sentences.  It said something like “I want to trade with more size to take advantage of good opportunities”.  Request denied.  The other two requests were more thoughtful.  One was excruciating clear in its level of detail.  Request approved.  The final request was fairly detailed but had an erroneous conclusion.  Partially approved.

As an aside.  The request that was denied was for a bump up from 600 shares to 1500.  The one that received full approval was for an increase from 2000 to 3000.  The request that was partially approved was for a request to increase from 2000 to 10000.  Approved for 4,000.