One good trade. Mike Bellafiore

Introduction
In the fall of 2008, the US financial system was on the verge of collapse, and one of my acquaintances, a 23-year-old trader, pocketed thirty thousand dollars a day. The situation of 1998 was repeated, when youngsters who had barely reached the age of majority - prop traders (prop traders) rejected by large banks - took 10-25 thousand dollars from the market every day, doing without charts, news feeds, expert comments on the CNBC channel, and even without air conditioning systems. However, after 1998, much has changed: the boom of the Internet and the development of technical means of communication caused a frenzied leap in the development of private trading (proprietary trading), about which not a single book has been written so far. This book is the first of its kind.

For the past four years, I have been working with my childhood friend Steve Spencer in the process of becoming a private trading company. We started from scratch, we didn't even have a phone. Today, our company SMB Capital employs more than 60 traders. The One Good Trade book includes all the important lessons that the market has taught me over the past 12 years, during which I have been involved in private trading in one way or another. I will share my experience with you, for this I will introduce you to many traders. Some of them had a taste of success, but most had a very hard time.

We'll start with traders to look up to, like Moneymaker in Chapter 1, a former professional golfer who was taught the art of concentration by the sport and now uses that skill to take his share of the market every day.. You will enter the closed world of private trading and find out who and why are hired here (Joe Biden's story is attached), how we trade (depending on market conditions), how we select stocks for our transactions (you are only as good as stocks arewhat you trade), what are the foundations of our approach to trading (One good trade), and the outstanding skills required to trade (That's called trading!). You will get an idea of ​​what qualities you need to have in order to become a successful prop trader.

Success in trading is impossible without discipline and continuous development of skills. Unfortunately, many people assume that a trader's job is to generate forecasts, take positions, and bravely hold them to the last drop of blood (you'll meet Crabbie, who predicted an oil boom and didn't make a dime from it). Being a consistently earning trader means taking care of a thousand things every day, such as proper preparation, for example, influencing account balance. As a partner of a private trading firm, I had to spend a lot of time training new traders. I am still actively trading, but I am already something of a player-coach. I will share with you all that I teach my students and that, in turn, I learn from them. We're talking about the adaptability that was completely lacking in the experienced Clicker trader, who now sells insurance policies in New Jersey.

The light that I will cast on the world of private trading will highlight both my own mistakes and the mistakes of other 'traders'. Any good trader is, by definition, an elite performer. And elite performers tend to strive for perfectionism, not a single trading session is wasted for them, they are constantly concerned with the issue of honing their professional skills. Every day provides us with an opportunity to learn something from the market. My mistakes and the mistakes of other prop traders are the lessons learned from the market that gave us the chance to become better traders. We will share our experience with you.

The example of the operation of a private trading company in this book is my company SMB capital. Our company and its traders feature in the Wall Street Warriors documentary series on CNBC, and we've been featured on StockTwits TV four times. SMB Capital is a fun place! Much of what is in this book I would never have known had I not been a partner at SMB capital.

There are too many traders in the world who do not know the art of selecting stocks and we will tell you how to find active stocks. Too many novice traders have no idea how not being able to read the tape affects their results. We will discuss with you all the intricacies of these skills that allow SMB traders to have a consistently positive profit trend. and losses.

Since I am often harassed with questions about the financial value of private trading companies, I decided to devote an entire chapter to this issue. I will debunk the myth that a novice trader needs to be close to a super trader in order to learn anything. Many young traders can greatly improve their P/L and trade statistics by helping them understand how to break the bank, the importance of limiting losses, and how to get out of a losing streak.

The position of a trader in a private trading firm is the ultimate dream for many young people, but once in it, they are often lost, not having a clear idea of ​​​​the path to success. Bloomberg, CNBC, Fox and other channels feed their viewers with countless interviews with pompous market professionals. I know a lot of novice traders who are overloaded with information to the eyeballs, whose problem is the lack of their own ideas. In Chapter 4 (The Pyramid of Success), we'll bring to your attention an old and trusted training technique from John Wooden, coach of the UCLA basketball team.

Throughout the time I have devoted to trading and teaching traders, the fundamental concepts of trading have been ruthlessly hammered into me by none other than my boss, His Majesty the Market. A trader who does not possess this knowledge resembles a time bomb. Вот почему каждый трейд для нас - One good trade. "Next draw!" - Duke University coach Krzyszewski shouts to his basketball players. В SMB Capital мы совершаем Один хороший трейд, затем Один хороший трейд, и еще раз - One good trade. Каждый трейд мы оцениваем по степени соответствия семи фундаментальным критериям, отвечать которым должен One good trade.

For the last 12 years I have had to constantly adapt to many different markets. I will tell you about the trading formations that are best suited for a particular trading period. More importantly, I will introduce you to the principle that allowed me to generate profits in so many different markets - I was able to adapt to them.

Welcome to the world of trading, where you can make decisions on your own, but the next day to change them, where there is no ceiling on profitability, where you will have a lot of funny personalities next to you. Simply put, there is no better job in this world for me than private trading.

Traders who are in the process of becoming, have not yet reached the maximum of opportunities, as well as people who are just about to get into trading - this book is written for you. The market has taught me a thousand little tricks to turn myself into a successful trader. The degree of usefulness of many of them is clearly underestimated by people. Welcome behind the scenes of the private trading world. A world where fierce competition reigns. A cheerful, breathtaking and imaginative place of application of the forces of elite performers who tirelessly improve their high art under the vigilant and cruel eye of the stern Master - His Majesty the Market.

List of actors
In the pages of this book, you will get up close and personal with many traders. It just so happened that in the trading floors traders use short nicknames for communication, our office is no exception in this regard.

Mike Bellafiore, Белла (Mike Bellafiore, Bella),

Steve Spencer;

G-Man (GMan);

Jay-Thoma (JToma);

Roy Davis;

Alexander James;

Mordovorot (The Enforcer);

Franchise;

Doctor Impulse (Dr. Momentum);

Moneymaker (MoneyMaker);

Yappo-hippie (The Yipster);

Zet-Mash (ZMush, Z$);

A piece-bucks (G is short for grand, a thousand dollars).

In addition to these people's stories, in the Traders Ask section, you'll find stories from readers just like you. Some private trading questions are asked over and over again by email or posted on the SMB Capital blog, and I take the opportunity to answer them through this book.

Mike Bellafiore,

June 2010

Part 1. Behind the scenes of a private trading company

Chapter 1. These guys are the best in the business
I belong to the most interesting group of Wall Streeters who, until quite recently, no one paid much attention to. However, things have changed recently.

I am one of the founders of a private (proprietary) trading firm, which, despite the fact that many of the basic principles her work is similar to the methods adopted in banks, brokerage houses or hedge funds, not at all similar to all these structures.

Between 50 and 70 percent of Wall Street's daily trading volumes of corporate securities are private trading companies. Yes, your eyesight did not deceive you: 50-70 percent. Month after month, brokers earn hundreds of millions of dollars in commissions from companies like ours. These cash flows relentlessly fill the bins of clearing firms who, at absolutely no risk, skim the cream off the hard work of our traders. The government does not yawn either, raking in hundreds of millions every year under the guise of taxes and securities (I'm not complaining, I'm just stating facts).

It is no accident that the boom in the private trading business coincided with the Internet boom. In the early days of my career in the late 90s, there weren't many companies that