The Way to Quick, Confident Execution

01/31/2012 3:30 pm EST


Michael Bellafiore

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

By internalizing, or truly committing to trade set-ups, execution becomes quicker and more confident, explains Mike Bellafiore, and bottom-line results can improve as a result.

Joining me in the Video Network studio is Michael Bellafiore. Michael, you talk about “internalizing” trading; what do you mean by that?

I’ll give you a good example: About two weeks ago, my partner held what we call the SMB a.m. meeting, and during this meeting, we offer traders some stocks and some levels to really look at. On this particular day, there was a market level that was increasingly important. My partner said if the market gets below this level, we really want to short the market.

He said this, our traders listened to it, and they had a nice game plan that they could actually co-opt to then go on and trade for the day.

Sure enough, at 10:15 a.m., what my partner talked about actually happened, and we have this Admin where we can look at who was short at the time, and you would hope that a lot of the traders on the desk are really short.

Some of them were, and some of them weren’t, and some of them who weren’t had been struggling of late.

So, after the marketplace, as is my job, I went in and closed the door, and at a very high voice level, really got after some of our traders, and the reason I got after them is because they hadn’t internalized that trade.

They were given the information to short the market if we got below a particular level, but they hadn’t taken the time to then go back to their seat and in their minds, think through the trade that they were going to make when the market was live.

They needed to internalize that set-up so that they could make it live, and the thing that I had a problem with is they didn’t do the work. They were too lazy about it. All they had to do was go back and visualize the market getting below this level and shorting this stock, or shorting this market index.

Does ego play a part in that?

Yeah, it does. That’s a really terrific question, and this is something that confounds me as somebody who has taught a lot of traders.

Traders really want to come up with their own way to make money. I can share a pattern with them that is very profitable, but for a lot of people, that’s just not what they want.

They want to have found out for themselves their path towards making money, and you really shouldn’t stand in the way of that.

You should point and say “Hey, if you did this—which we talked about—you can make some money,” but you can’t force traders to really do that, and one of the most interesting things that I’ve learned from teaching traders is that you have to understand that there’s just this human nature about people that they want to find their own path.

So do you have a psychology course that’s offered along with how to trade?

We actually do…In fact, the best trader that I’ve trained, I have him work with an outside sports psychologist who pushes him to find out the things that he needs to do better and how to build from this person’s strength.

This is a very high-level coach, and this person, even though he was the best, is even getting better.

So there are some analogies between sports and trading?

Yes. The coach who works with our best trader is not really a trading psychologist. He is a sports psychologist and is really helping.

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