CNNMoney came to visit us this week to do a spot on our desk’s NEW technology edge. I am the guy showing off the balding back of my head. You may have read recently about our JV with KTG in Midtown NYC of late that breeds this new technology edge. I wanted to explain in more detail the importance of this technology edge during this most opportunistic era of discretionary proprietary trading. It will make all the difference for your trading.

I keep hearing that many in proprietary trading are struggling. A good example of this is Tier 1 prop shop firing many of their traders recently. There will be markets where we should struggle as traders (2002). This should not be one of them! From my seat there are three reasons for this:

1) a lack of methodology for experienced traders (See The PlayBook)

2) no discernible technology edge to find more of your best setups

3) algorithmic trading making the trading game more difficult for all (F****** HFTs)

In this blog post, I will limit my comments to no discernible technology edge.

Experienced, new and developing traders MUST become more bionic. This is not optional. Every day traders must be spending a portion of their day learning how to use trading technology to improve their trading results. If you are trading on a no-edge platform or with inferior filtering software or limited functionality you are at an irresponsible disadvantage. I moved my firm, SMB Capital, and all of our legacy traders into a new JV, after 18 months of negotiation, because of this recognition. I almost want to apologize everyday to my guys for not being able to finish this deal sooner.

What does it mean to be more bionic? We all have our best patterns. As one experienced trading veteran said to Steve and me on a call, “Gents, today, in this market, we cannot miss our favorite setups. Our margin of error is too small.” Let me give you a best practice of one experienced, seven-figure trader who has embraced the power of being more bionic. Steve Austin (my nickname for him: 6 Million Dollar Man) has determined the variables of his favorite trades. First he wrote them out by hand as detailed and as best he could, without a coding background. What happened next was the difference maker. Then he sat in front of white board and talked through these trades with a quant, adding more succinct variables to his setups. After months of tweaking and work with a quant he configured his trade scans near exactly to his most profitable setups. Steve Austin is powered by individualistic trade scans scrubbed by a quant.

What happens next is really cool! When these opportunities strike, a trade execution box and chart pop up. He does not just have filters that signal a setup and then is left to type up a symbol and chart. The trade execution box and chart of the stock automatically fire awaiting his trade decision. Steve Austin glances at the trading opportunity and decides. He spends his day making trade decisions only on his predetermined best setups. Further, and perhaps more importantly, proprietary execution tools enable him to handle more of his best positions and offer almost any conceivably exit option you could imagine. Steve Austin has a technology edge.

Many sit at their trading station, searching and wondering what next to trade. Too many force trades because of a need to “do something”. Without a technology edge some just pick the best trade available as found by their eyes but still not the best setup for them. If you have not taken the time to build individual trade scans with predetermined variables and with quant support, how do you know if you are trading your best setups? Your trade results of present do no reflect how good you can be as a trader.

Too many do not have the tools to communicate their favorite setups to them in real time. We talk a lot about trading our best setups and building from our strengths as traders. Steve Austin’s technology edge is what that looks like.

I will write more in the future about technology to empower a discretionary trader to build algorithmic trading models without the necessity to code. For those who have learned how to trade this is what I see: your days ahead are brighter than they have ever been. This is both the most challenging market environment we have ever seen and the most opportunistic. You just need to get your hands on the right tools. But as my wife could give birth to our first child at any moment now, I should sign off and save this more for later.

You can be better tomorrow than you are today!

Mike Bellafiore

The PlayBook

One Good Trade