Back Against the Wall Trading

12/15/2015 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 a recent interaction he had with a trader of his firm whose back was against the wall to illustrate the importance of traders identifying the pre-market preparation and thought processes that worked one day and then doing the same thing every day.

I get a lot of emails from prop, hedge fund, and retail traders confiding: I have to make money now! Their back is against the wall. Your first reaction may be that they are in this position because they did not seek help earlier. But that would miss the point of this post and the lessons we can learn from those trading with their back against the wall.

These traders are about to get fired or run out of money.

One such trader sits on the floor of our proprietary trading firm. I love the guy. He is someone you would root for. We have communicated that he needs to start making money.

He knocked on my office Friday, let out a deep exhale and bellowed, “I did it! I had to have my best day and I did.”

Now comes the important part.

Next he went into detail about all the things he did before this trading session for him to succeed.  It was extensive, dare I say…impressive.  And he caught a technical trade that made sense for him in BABA through superior preparation and aforethought.

I listened and watched him and waited for him to make the next logical connection about this trading day for his trading going forward. I really didn’t want to get in the way of that huge grin of accomplishment wiped across his face. It didn’t come.

So I said, “Why not do exactly what you did before today everyday?”

Ever-likable he replied, “Yeah, that is a really good idea.” 

If your back was against the wall and you had to make money for the day/week/month/quarter/year (depending on how you trade), what are all the things you would have to do to succeed?  Doesn’t that tell you exactly what you need to do as a trader daily?

*no relevant positions

By Mike Bellafiore of SMB Capital

Related Articles on STRATEGIES