Trade Confidently with Mike Bellafiore

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Mr Bellafiore, who has been trading professionally for over 15 years, appeared in various financial publications and programmes, will be in Singapore to share some of his techniques and market insights on 18th February. In this interview with him, Phillip CFD and ShareInvestor Singapore got in touch with ‘Bella’ to find out more about this trading techniques and get a preview into the seminar.

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What makes a good trader and how can one succeed as one? According to Mike Bellafiore, renown proprietary trader, co-founder of proprietary trading firm SMB Capital in New York and author of “One Good Trade: Inside the Highly Competitive World of Proprietary Trading”, one can be perfectly confident with sufficient preparation and understanding.

Mr Bellafiore, who has been trading professionally for over 15 years, appeared in various financial publications and programmes, will be in Singapore to share some of his techniques and market insights on 18th February. In this interview with him, Phillip CFD and ShareInvestor Singapore got in touch with ‘Bella’ to find out more about this trading techniques and get a preview into the seminar.

What are the top three things you’ve learnt in your 15-year trading career?

Prepare. The legendary John Wooden, former UCLA basketball coach, said, “Failing to prepare is preparing to fail.” The market will eliminate those who do not properly prepare.

On 2 February, the stock PPO went from US$54 to US$37 intraday. I heard an anecdote from a risk manager about a trader who was down US$3,000 but added to his position at $47. As a result, the risk manager closed out this trader’s position. The trader responded with a nasty email. PPO traded down another 10 points and would have blown up this trader’s account. Interestingly enough that trader did not send a follow up thank you email.

Defense. Live to play another day. The British economist, John Maynard Keynes, said, “The markets can remain irrational longer than you can remain solvent.” With every trade your downside should be 1 with an upside of 5. You should determine your exit if a stock trades against you before you enter every trade. If you are sitting on my trading desk, an exercise I like to practice is to tap you on your shoulder and ask where you plan to exit. If you cannot respond instantly, then you are kicked off the desk for a period of time. Defense first.

Adapt. I have changed my trading style over six times in my trading career. There is nothing to get as a trader. There is never going to be a time when you have mastered the markets. Trading is like golf in that you always strive to improve a facet of your trading game. There is just the opportunity to improve and adapt so you can thrive in the next new market that rewards new patterns.

How can new traders work towards these three things?

Trading is not about making money. It is about learning to be your best. Trading is a game of elite performance and shines a bright light on your personal weaknesses. And to succeed you must improve as an individual.

I sat in my NYC office talking to an ambitious, bright and passionate new trader who was underperforming simply because he was not patient with his trading. When he was in a big position, he was so amped that he would actually stand and bob his head up and down with the movement of the stock. Once, he stood up so quickly that he choked himself on his headset. So, I asked this trader how he might improve his impatience and he responded, “Go for long walks in Central Park.” It seems strange but yes, this was a great step for him as a trader.

Becoming an elite trader requires you to embrace the principles of elite performance and there is a code to becoming a successful trader:
a)    Domain Knowledge
Read everything you can about this game called trading.
b)    Mindset
Work at your craft each day with an emphasis on learning and improvement.
c)    Coaching
There are few examples of anyone becoming great at anything without great coaching.
d)    Purposeful Practice
Turn one trading day into ten so that you develop the trading skill of a professional trader.

For traders in Asia, what’s a good way of capitalising on the US market?

Technology offers the ability to trade the US markets even from Asia. For example, we have trained numerous traders from Singapore to trade the markets. The best worldwide traders in the future will develop a Play Book (my next book is ‘The PlayBook’ with FT Press) and then look to trade these patterns across all markets.

There are several opportunities for traders in Asia to participate in the US markets. Firstly, options trading, which has become increasingly opportunistic. Spread options traders can sleep through the night and still control their risk. There are also developing trading systems, which is the hottest growth area in US trading.

At SMB Capital, we focus on what we call ‘Stocks In Play’ which are stocks that have fresh news. Each morning, we hold a meeting to discuss the stocks most ‘In Play’ and trading these stocks allow us:
1) more intraday opportunities
2) to be most efficient with our capital
3) to find stocks that are more liquid
4) to size up responsibly

The event is titled “Trade with Confidence” – how can traders build confidence, and avoid the pitfalls that might come with it?

SMB’s trading psychologist, Steven Spencer, defines confidence as resilience in the face of disappointment. We have a trader education company, SMB Training, which teaches new and developing traders how to trade US equities, Options, Forex and Futures. And we teach traders how to develop trading models/systems. We mentor our students to make One Good Trade and then One Good Trade and then One Good Trade.

For too many new traders, trading is about making money while for an experienced trader, trading is about controlling one’s risk. Trading is not about being right. So we teach our students that as long as 7 fundamentals are present in each trade then that is One Good Trade and the trader has done his or her job. Those 7 fundamentals are:
1) Proper Preparation
2) Hard Work
3) Patience
4) A detailed plan
5) Discipline or executing your plan
6) Communication
7) Review

So if you are focused on the process as a trader, this helps avoid the disappointment that can come with results. You cannot control what a stock will do. Your job is to place good risk/reward trades. Your job is to make One Good Trade.

If you are interested to attend this seminar, please proceed to goto.phillipcfd.com/bellafiore or call +65 6227 2683 to register.

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Melissa Fann
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