Creating a Road Map Helped this Trader

07/18/2014 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 emphasizes the importance of research and the creation of a trading road map prior to the open.

I noticed one of our new traders had a day of out-performance.  I assumed this was his best trading day because of his PnL but it turned out it was his second best.  Still, he was near the top of the leaderboard with a very substantial intraday PnL for a new trader-heck for all traders.

I asked him what he thought of his trading day in my office.

He said he was pretty happy.

I asked if there was anything he had done that was particularly instrumental in this outstanding trading day.  There was something.  It is a best practice for you to consider.

The trader developed a road map before the open.  He wrote down stocks, levels, and great long and short entries on a template sheet of paper before the open.  The trader created the template.  He mapped out great intraday trades in specific stocks for his trading style.  The trader felt this prepared him to succeed in these trades.  In the past, he just wrote down levels and stocks.  This was not preparing him for success, shared this trader.

A road map feels like an athlete's warm up to me.  Imagine if I told you LeBron didn't warm up before a game.  You should find that ridiculous.  Do you warm up as a trader?  Do you prepare your mind to execute on trades in real time?  Is it enough for you to just write down stocks and levels or do you need to think through specific setups and variables most opportunistic to you?

"I want to trade (KORS) on the short side" is not the same as visualizing shorting KORS on the shortside at 83 if it shows weakness on the tape for an Opening Drive Play.  Maybe you miss that Opening Drive play because you are not doing this mental warmup-developing a road map.

This is a best practice that has helped a trader on our desk.  Perhaps it is something you might consider to help you improve your trading game.

By Mike Bellafiore of SMB Capital

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