Trading the Navy SEALS Way

06/02/2014 6:00 am EST

Focus: STRATEGIES

Michael Bellafiore

Author, One Good Trade: Inside the Highly Competitive World of Proprietary Trading

Veteran trader Mike Bellafiore of SMB Capital shares the lessons he’s learned from an elite military unit, which can be applied to trading.

I watched The Lone Survivor last night on my iPad about Navy SEALs caught in a vicious battle with the Taliban. Five takeaways to apply to our trading:

a) Think of surviving for your next breath. When a trade is going against you, instead of considering how to turn it into a winning position, live to make another trade. What is the best action you can take from here, to keep yourself in the trading game? Make it to that next trade.

Many accomplished athletes attempt to become SEALs and fail. Mastering a focus to survive for that next breath is what defines the successful SEAL and not superior physicality. Successful traders first defend their capital to trade for another trade and not one trading thesis.

b) It’s not enough to win; you must win with honor. Reading all these stories about insider trading from the hedge funds bothers me as a trader not so much because what they are doing is illegal, but because it misses the whole point of the game we are playing. Trading is an exercise in self-improvement. It’s about that challenge to be a better person.

Getting some insider information that makes you money is just so embarrassing that some would find this behavior necessary. Simply you are not one of us. No matter how fancy the hedge fund name and how much money you manage. It is not so much that you are a crook it is that you are a pathetic crook, bringing dishonor to the true mission of a trader.

c) Months of training go into days of battle. Elite warriors practice, rehearse, train for months for days of battle. They learn new technology to improve their attack. There is planning and back-up planning and more back-up planning. The battle is won in the prior planning and skill development.

d) Brotherhood! On a pro trading desk, you are there not just for yourself but as a part of team. That day you do not show up to trade NEWL is not just a day you didn’t make money but a session that you weren’t there for your trading teammates. They would have made more if you were there. You let your trading brothers down.

e) Anything less than excellence is not acceptable. Navy SEALs are inspiring at the most basic element because they sacrifice for the greater good. But while we will never do anything as important as them, at least we can prepare, persist, help, adapt, trade with honor, and seek excellence like them. If we are not trying to be your best trader, what exactly is the point?

By Mike Bellafiore, Co-Founder, SMB Capital

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