This trader is “killing it” as a scalper

One scalper on our desk proudly wrote to Dr. Steenbarger and me about his progress recently:

Had 3 personal best this week:

1) Best day: 167K net

2) Best month: 601K net

3) Best year: 1.5M net

Cheers!

$ 601,000 in net profits is a sensational trading month!

A scalper is a trader who makes very short-term trades.  He is active.  He focuses mostly on price action and reading the tape. His skill is in placing bets on where the stock is to trade next.  And not where the stock or trading vehicle will be on a longer time frame.

This trader had developed goals with Dr. Steenbarger at the start of the year and hit them.  Mostly he has worked on trading his edge bigger.  That edge is scalping.  Where before he might have scalped 5-10k shares in a trade, he is now up to 50k shares in some names.

The firm does not upcharge for trading commissions.  We are a PnL firm.  So in the case of this trader, he executes at a base rate of 70 cents per thousand shares.  There are many prop firms who do mark up commissions, some to as much as $ 7 per thousand and some even more.  This trader is able to recognize enormous net profits because of the firm’s commission structure.

What can we learn from this trader?

You can make real money scalping.  I am puzzled at times with statements made in and at the trading community that you cannot.  I have read things like: Scalpers earn “crumbs”, while swing traders make real money.  You can make real money as a swing trader.  Here is a recent post about a firm trader we would describe as more of a swing trader: Why this trader is “crushing it”.  Also, and this trader above shows, you can make real money as a scalper.

Play to your strengths.  When this trader takes his check to the bank for deposit, they will accept it.  They are not going to sit him down and ask him how he made his money.  They are not going to refuse the check because his profits were not from fundamentals analysis, trend trading, global macro plays, or swing trading.  They are going to accept these “crumbs” at their bank, gladly.  He is a great scalper.  A winning day trader.  So he continues to scalp with larger and larger size.

Embrace Team trading. This trader has also embraced Team Trading.  Building a Team where junior traders help him express his edge in markets.  Junior traders, who have built technology for this trader, so he can make more of and on his best trades.  And with Junior traders who get to learn from a great trader to improve their chances of becoming a successful trader.

Work intensively and purposely on your trading game.  Year 2 of his trading career, this trader was consistently a 4-8k a month trader.  His results were very consistent as a scalper.  Today he remains just as consistent as a trader.  But he has worked intensively and purposely to increase his size consistently, with his trading edge.  He shows the trading community that if you get to a point in your trading where you can consistently bank 4k a month in trading profits, you can grow a career from there.

Be one of the good guys in the trading community.  We are often inspired to work harder for our trader because of his gratitude:

Keep raising the bar for the goals you wish to achieve.  We will meet with this trader and his Team this month to discuss goals for 2018.  Both for his trading personally and his Team.  With opportunity, they will expect to do even better, trade even bigger, and hit their new goals.

For those who have an edge in markets, but feel they should be making more or feel they are never going to make enough, perhaps this trader will inspire you to continue forward and achieve your goals.

As always, your comments/feedback are welcome.

*no relevant positions

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SMB Training Blog

Why this trader is “crushing it”

It is important to study the traders who are succeeding and learn from them.

In his Daily Report Card, that this top trader shares with Dr. Steenbarger and myself, you can see he is “crushing it”:

entry quality 9/10

+ 75k

Great finish to a great month – think I netted around 775k for the month.  Pretty staggering considering my best month was 350k just last month.  I did a great job of using my momentum and my profits to scale up as the opportunity was there and I had great focus and consistency throughout.

What is even better perhaps, is this month really pushed me past some bigger goals I had – making a million dollars of income on a year from trading, being the top guy at the firm (not sure but I think I am there).   These goals didn’t seem attainable even after last month but sticking to the process got me there in the end.

Yes these results are staggering.

What we can learn most from this trader is: “sticking to the process got me there in the end”.  This trader was working on sizing intensively, middle of the year.  He was not breaking out to new highs in PnL.  We could see his improvement, but the PnL was not skyrocketing relative to his improvement.

He kept working on sizing.  Specifically being patient AND aggressive.  This is a tough thing to do as a trader.  You want to trade bigger and it’s hard to wait.  Getting in early causes sloppy trades that can find your stops.

He was close.  We could see it was coming.  But he needed to stick to the process.

And then heightened opportunity visited.  He was ready.  His trading muscles had been developed during those months were he was improving, but the PnL was not cooperating.

It all came together in October with a personal best.

And then last month, with even more opportunity, he made a new personal best for the month as you can see above.

Bitcoin, other cryptocurriences, and blockchain are offering multiples of opportunity in the market.  Opportunity met preparation for this trader.

One developing trader on our desk has found inspiration from watching traders like him “crush” the markets.  That trader wrote:

Was really cool watching some of the guys have monster days today. Really was quite inspiring and motivational. It gives hope that someday that will be me. The more important aspect of today was the lessons I learned from these traders and the takeaways from why they were so successful today. I need to study what they did to understand why they had such fantastic days.

Perhaps this trader will inspire you as well.

Just four years ago he was a 10k a month trader.  Last year he was a 7-figure trader.  This year he is even better.  In four years?  Who knows?  Expect that he will be much better.

I end The PlayBook with, “You can be better tomorrow than you are today.”  This trader above is Exhibit A.

As always your feedback/questions are welcome- mbellafiore@smbcap.com.

*no relevant positions


SMB Training Blog

Should I quit as a trader?

It is not uncommon for developing traders to stare at this decision: should I quit?  This is true for even traders who go on to become successful, even 7-figure traders.

I share this because I know that there are readers facing this question.  And many wonder whether they can make it, if they start poorly.  You can.

Let me share a recent anecdote from our trading desk.

Recently, a developing trader at our firm, asked to speak with me about whether he should continue.  He was coming near the end of his personal funds.  He wanted to know if the firm would help him financially if necessary.  More importantly, he asked me whether I thought he should continue.

I was a bit startled by the question as I never sensed this trader had doubts.  If he has them, so many more must.

This developing trader had asked his mentor whether he should continue.  His mentor shared that he showed more promise than all of his past junior traders.  But then mentor suggested this developing trader ask me.  That I would be honest with trader and would be a good resource given my experience watching traders develop.

Thxs mentor!  Put all the pressure on me.

I reviewed the developing trader’s results and they had been mostly flat overall.  You could see internal pressure to make money infecting certain months and causing progress to wane.  Importantly, you could clearly see growth prior to these periods and then the waning.  He contributed importantly to his team.  He loved trading.  He fit in well with the firm culture.  He was well positioned to improve with an outstanding trading mentor.

More for form than substance, I discussed this trader with the partners for agreement to approve firm resources for trader.  The partners quickly and unanimously agreed.  We assured the trader that he would have financial support from the firm and mapped out a plan for the next 6 months.

Financial stress is a very real issue that developing traders face.  Backstopping from a firm can often make all the difference between success or failure for a trader’s career.  And it is not just the financial support to pay the bills, but it is the relief to trader that they can now just concentrate on their trading.  Full focus breeds their best results.

Fast forward to this month, and trader is having his best month to date.  A month, in fact, that clearly shows he has the ability to succeed and sustain as a professional trader.

These are the very real discussions that occur at a professional prop firm.  These are the very real challenges that developing traders face.  Many do find solutions and go on to have lasting and rewarding trading careers.

So if you are like this trader above, and wondering whether you ought to quit.  Do not feel inadequate solely for facing this issue.  We face it here as well.  And some come through on the other side to become winning traders.

Happy Thanksgiving to all!

I welcome your feedback/questions- mbellafiore@smbcap.com.

Bella

*no relevant positons

 


SMB Training Blog

First comes…..next comes…..then comes……for the developing trader

Getting your priorities correct really helps shape the trading day for optimal progress.

One trader with, with whom we are working, is coming along nicely.  Firm is happy with his progress.  Our sense is he has a real chance to become good.

Our job is to help him set priorities.  Is that to make money?  Or is that something else?

In a recent review trader honestly wrote:

There are two issues with this that really grind my gears..

1.) the issue of missing the trade in the first place. This alone usually drives me crazy and often times leads to tilt and bad trading. Missing a trade for me can happen for a number of reasons (not focusign on it, forget to set alerts, bad mindset, ect…) in this particular example, the trade I missed today was XNET. This was one of my main watches today as it has been very parabolic on the daily chart. Chinese cloud computing company up on no news. It faield hard on the open and offered a great opportunity when it retraced to VWAP and went sideways. For me, this was a high conviction trade that I need to be FULL SIZE in. I did take the trade, but I was way too small in this. Short from 11 and it came off all the way to 8.25. I did take the trade, but the lack of size was even more frustrating because it was such a great swetup. I essentially missed this trade because i was not big enough and in my eyes, a blown opportunity.

2.) lack of size in good trade + oversize in lesser trade – Because I lacked the size in my best idea, I went chasing size in lesser ideas. This led to a grind type of a day where I would go down in one trade and simply just try to make it back in the next. Essentially trading P/L. I knew in the back of my head that I should have traded that much larger. That lack of size in my higher conviction idea led to a subpar mindset.

This is an opportunity to pull a trader aside and get his priorities straight.

I like the idea of trader working on sizing.

I like the expectations trader has about performance.

What needs focus is what we are trying to accomplish at this stage of his career.  And massive PnL is not that.

A first step at our firm is to find the setups that are worth study.  What trades make the most sense to you?  Build your PlayBook of trades that will be your trading business.

Next is to become consistent trading these setups.

Notice that massive PnL and trading huge size are not first nor second goals.  That comes after building your PlayBook and then consistency.

My observation working with traders is that skipping to sizing and massive PnL interrupts the natural sequence of trader development.  And that if you get the sequence wrong that just might mess up everything for a developing trader.

As always, your comments/questions are appreciated- mbellafiore@smbcap.com.

*no relevant positions


SMB Training Blog

SMBU’s Options Tribe Webinar: SMB Options Desk Trader John Locke: The M21 Options Trading System—Playing Chess with the Market

November 14th, 2017

This week, John Locke returns to the Options Tribe to present the M21 options trading System which synthesizes many of his signature trading strategies, technical analysis, and trade planning.

Options Tribe meetings are generally free to the public and are held every Tuesday at 4:30PM ET. If you wish to register to this meeting, please click here.

We look forward to seeing you at the meeting!

Seth Freudberg
Director, SMB Options Training Program

The SMB Options Training Program is an eight-month program designed for novice and intermediate level options traders who are seeking an intensive training process to learn how to trade options spreads for monthly income. For more information on this program contact Seth Freudberg: sfreudberg@smbcap.com.

No relevant positions
Risk Disclaimer
Futures Risk Disclaimer

Options
Learn options spread
strategies for monthly
income from experienced
options pros


SMB Training Blog

SMBU’s Options Tribe Webinar: SMB Options Desk Trader John Locke: Transform Your Trading With The Rock Options Trading Strategy

October 17th, 2017

This week, SMB Options Desk Trader John Locke will be discussing his popular Rock Options Trading Strategy which has provided the best long-term returns of all of John’s rules-based options strategies.

Options Tribe meetings are generally free to the public and are held every Tuesday at 4:30PM ET. If you wish to register to this meeting, please click here.

We look forward to seeing you at the meeting!

Seth Freudberg
Director, SMB Options Training Program

The SMB Options Training Program is an eight-month program designed for novice and intermediate level options traders who are seeking an intensive training process to learn how to trade options spreads for monthly income. For more information on this program contact Seth Freudberg: sfreudberg@smbcap.com.

No relevant positions
Risk Disclaimer
Futures Risk Disclaimer

Options
Learn options spread
strategies for monthly
income from experienced
options pros


SMB Training Blog

SMBU’s Options Tribe Webinar: SMB Options Desk Trader Andrew Falde: The Netzero Options Portfolio

October 10th, 2017

This week, Andrew Falde will present the latest in his Netzero trading strategies which includes shorter terms spreads, momentum trades, commodity options, and the results of a 2008 study. Come learn how Andrew is expanding this powerful trading concept into a diversified portfolio of high-performance options trading strategies.

Options Tribe meetings are generally free to the public and are held every Tuesday at 4:30PM ET. If you wish to register to this meeting, please click here.

We look forward to seeing you at the meeting!

Seth Freudberg
Director, SMB Options Training Program

The SMB Options Training Program is an eight-month program designed for novice and intermediate level options traders who are seeking an intensive training process to learn how to trade options spreads for monthly income. For more information on this program contact Seth Freudberg: sfreudberg@smbcap.com.

No relevant positions
Risk Disclaimer
Futures Risk Disclaimer

Options
Learn options spread
strategies for monthly
income from experienced
options pros


SMB Training Blog

This trader was tested with size and became stronger

Dr. Steenbarger wrote an illuminating post about improving your trading confidence and sizing through being tested.

We saw this yesterday on our trading desk, powered by KTG, with a top trader.  He sure was tested and won.

Trader wrote of this trading session in his daily review:

Today, I had one of my largest swings going from down almost 45k to up 55k at one point.  Reflecting on the day, there are some good and bad points.

Overall, really happy stepping up my game in my A+ situations.  Things can always be better but you learn each time and you add it to the experience bank.

Notice how trader appreciates being tested and the overall trading experience so he is better in the future.

Notice how trader is happy to have added size when the moment is right for him.  Trader is not just trading bigger to trade bigger.  A common mistake of developing traders.

Notice how ending the day with PnL above 45k contains good and bad to this trader.

The real prize for this trading session to this 7-figure trader is the experience of being tested with larger size, feeling what that is like, struggling at times, facing fear, being uncomfortable in real-time, and learning.  As a result, his sizing, drawdown, upside will all be larger in the future, allowing trader to grow his PnL.

I might note, tangentially, that this is a real trading example of the value of trading at a Tier 1 prop firm.  When trader was down 40k he asked our risk manager for more room on his intraday stop limit.  The risk manager reached out to the partners in NYC, who checked in on the trader’s temperature (was he on tilt?), and approved the bump in risk.

How many other firms would have just shut down this trader for the trading session, with trader missing the opportunity to end up 45k?  How many independent traders can bankroll a 50k intraday loss?  How many of those traders can bankroll such a loss with their own capital AND not have that interfere with future trading?  Being marked down 50k at a Tier 1 prop firm with deep pockets, that believes in you, focuses on building very large traders, trusts your ability to make decisions when stressed, made for a 90k difference in this trading session for this trader.

Trading bigger requires you to step outside of your comfort zone, placing risk that makes you feel uncomfortable, and learning from the experience.  This is an example of one trader going through that process and becoming stronger as a result.

As always, I welcome your feedback at mbellafiore@smbcap.com.

*no relevant positions


SMB Training Blog

SMB Webinar: How our most recent hire went from Home Depot to desk trader

I wrote about the guest of our next trading webinar this Thursday, 9/28, at 4:15PM EST here.

He was the winner of The Winning Trader, a course we developed to give our trading community a chance to experiment with trading setups with edge from our desk.  His consistent effort, program-leading PlayBook trades, conscientiousness, perfect attendance at daily trading mentoring sessions, passion, active questions, creation of a chat room just for program students separated this student from other outstanding students.

First, he won The Winning Trader and trained for free on our desk.  Now he has been hired on our desk to trade with us and earned a fully funded trading account!

The home run for everything we do at SMB Training is to find serious trading students, train them, and hire them for our desk.  And if they want to continue trading independently, but at a much higher level, that is fantastic as well.

We will shine a light on this former self-directed and independent trader because he is an inspiration for all who want to trade professionally.  He was in a job that was not his true passion.  He wanted to find a path to becoming a professional trader at a prop trading firm.  And he has!

Rob will share his trading and training journey with you.

Merritt and I will ask him questions about his experience from Home Depot manager to prop trading desk.

You will have an opportunity to ask Rob questions about his training and trading.

If your goal is to trade professionally or just better independently, learn from someone who has figured this all out.  Someone like Rob.

We hope to see you this Thursday.

*no relevant positions


SMB Training Blog

SMB Webinar: Interview with Prop Firm Trader

Attend a live web meeting where Mike Bellafiore and Merritt Black will have a conversation with a trader from our firm. Learn about his path to becoming a trader at our firm and take away lessons to help get you to the next level in your trading.

Register to attend this free live webinar, Thursday, September 21, 2017 at 4:15 PM Eastern.

 

>> Register Now <<


SMB Training Blog

How to improve your discipline as a trader

A new trader wrote this to me:

Noob (trader here).  Two months in with maybe a total of 3 days where I consistently followed my rules.  Down about 2k thus far.  I am questioning my ability to do this.  Mainly because of my lack of discipline in following my rules.

There is the old parable about the frog that asks the snake for a ride across the pond.  The snake warns the frog that he may bite him but then, after much pleading from the frog, finally promises the frog he wont bite him. When the dying frog asks the snake why he bit him, the snake replies “I can’t help it, it’s in my nature”.  I sometimes feel like the snake when it comes to having the discipline to follow my rules.

I have particular trouble when I am down on the day and am having no luck and then get the “what heck” attitude and trade bigger than I should or don’t keep a tight stop and start hoping.  I swear that the next day will be different, but I find myself breaking my rules yet again.  I have traded on my own in the past unsuccessfully and this was my main issue back then.

My question is, have you seen other traders with this much trouble following their rules go on to be consistently profitable.  I know all traders have to work on maintaining discipline but I am feeling like I may be at the high end of the lack of discipline scale and getting ready to bite that frog again.

@MikeBellafiore

I am not a big advocate of labeling behavior as disciplined or not.  I am a big fan of developing habits that help your trading.  And then trading with good habits developed.

Also, at our firm we have seen success with traders focusing on one goal at a time and building daily report cards around this one goal.  Dr. Steenbarger encourages many of our traders to adopt this technique to improve their trading performance.

So in this case we have a trader who doesn’t keep their stops.  This is a fast track to trading yourself towards another career.  To improve we need to consider a best practice to develop into a habit so trader stops breaking this rule.

A best practice for this trader to consider is creating trading rules for keeping your stops.  For example, a new rule created might be: if trader fails to keep their stop on a trade, they automatically cease trading for the trading session.

At the end of each trading session, trader creates a daily report card grading their day on how well they kept their stops.  They actively and intensely work on following this new rule and solutions to improve following this new rule.

Trader focuses on one goal at a time until his behavior becomes habit.  Then trader is not exercising discipline to keep their stops, they are merely exercising a habit.

As always, I welcome your feedback/questions at mbellafiore@smbcap.com.

*no relevant positions

 


SMB Training Blog

An anecdote from a developing trader on the prop desk- sizing

One of our developing traders is consistently profitable.  Undeniably, he trades with edge.

This is a great position to be in.  But for some traders it is not sufficient.  They are making money, but they are not making enough.  And when you are sitting next to and behind 7-figure traders it is not enough.

So this trader sought to trade bigger.  He has edge.  He is not making as much as he should nor wants. So the solution for this trader logically was just to trade bigger.

That did not go well last month.

Why?

This trader made a common mistake of developing traders in how he sought to increase his size.  He was too big in too many trades.  He was not just getting bigger when in his best traders, but all trades. Trading bigger then was not the path to making more.

We had a nice chat about his monthly review and attacking this trading issue.  This trader was armed with answers.  They might provide a blueprint for you to improve your sizing:

  1. Trader will outline his A+ setups.
  2. Trader will focus on adding size in these A+ setups.
  3. Trade will not size up in other traders.
  4. Trader will share a report card with his Team Leader, Dr. Steenbarger and me on sizing daily.

One goal at a time given hyper focus is a best practice for trader improvement.  For this trader, at this time, on this month, that will be sizing, with feedback from market veterans.

As always, your feedback/questions are welcome at mbellafiore@smbcap.com.

*no relevant positions


SMB Training Blog

A statistical edge found by this trader

Hope all is well with you and the SMB team and hope you guys are trading well. Mike, you know since I came up there I had to do a lot of soul searching to really find my trading edge as well as take care of some other pressing business matters.

I was running some numbers on my trade performance, looking at both longs and shorts and I found something really interesting. If I simply trade one side of the market, either long or short, I found my performance really going up above 50%, I stay disciplined and I actually have a statistical edge and a psychological edge as well.

I am wondering have you seen the same thing in your own personal trading and in others on the desk. I am a stats guy and I know numbers can reveal alot.
@MikeBellafiore

  1. I love how you are recording your trading stats.
  2. I love how you have found a very clear edge in your trading.
  3. The best traders do more of what they do well and bigger.
  4. We find that our traders do best when they remove expectation about direction of long and short from their trading.  They remove their expectation about whether a stock will go up or down.  They remove their expectation about how much they can make in a position.  And then they wait for confirmation that a stock is most likely to move in a direction and then pounce aggressively.

You have found a very significant statistical edge in your trading.  Build from that.

I hope that helps.

As always, I welcome your questions/feedback at mbellafiore@smbcap.com.

 


SMB Training Blog