January 21, 2011 at 12:23 pm | | Comments 3

One Good Trade

one-good-tradeI was sent a copy of One Good Trade by the author, Mike Bellafiore, longer ago than I care to admit.  (In fact, Bella, please forgive me for taking so long to get around to reading it!)  I will say though, once I picked it up, I only wished I had started reading it sooner.

Mike’s been a trader for just a little longer than I, so a few of his earliest experiences were before I got into trading back in 1998.  From there, I really enjoyed his reflective tone regarding his trading career, experiences, mistakes, lessons, and successes.  His honesty was refreshing, and I enjoyed seeing how he adjusted his approach throughout the market changes over the years (as we all must) in order to survive.

But beyond the nostalgia, One Good Trade was also full of wisdom.  Mike’s personal trading experience was at the heart of the lessons he teaches in the book, but his experience and insights are compounded by those of the many traders at his prop firm.  I started out in a day trading office – a very similar environment where I was surrounded by dozens of other traders for my first few years.  I can tell you from my own experience, Mike still learns plenty from the other guys in his office.  And it shows in the lessons he relays from having trained others over the years.

I want to hit 8 highlights I found in this book in order to give you a glimpse of what’s inside.  Even though I’ve cherry-picked a few of my favorites to share with you, this is still a book you need to read if you’re an active trader (so go pick up a copy!).

1.  Trading – like sports – is performance based.  Athletes, like traders, understand that a little talent isn’t enough…it takes hard work too.  Some days (or weeks) are better than others, so it’s important to show up ready to play, both physically and mentally.  Bella’s recent example of MLB great Trevor Hoffman gives an excellent example of one such mental exercise for peak performance.  Getting good rest is another way to ensure you can be at your best on a regular basis.

2.  Maintain lists of the setups which work for you and those which don’t.  This sounds so obvious, and yet have you ever done it?  Trading responsibly includes knowing what works for you and which setups tend to fail or shake you out prematurely.  Understand which is which, and as Gartman says, “do more of what is working, and less of what is not working.”

3.  The market doesn’t care what you wish – so you must always adapt.  It’s harsh truth, but something each of us needs to hear from time to time.  Mike goes on to say that the market also doesn’t reward the trader seeking lazy trades, so be creative.  These go hand-in-hand for the trader who is willing to adjust his approach as the tape requires.

4.  You choose your attitude.  This can be said for any endeavor, including trading.  Go tell Lance Armstrong that attitude doesn’t matter.  In trading, Mike reminds that you can complain and make excuses, or you can compete (and find ways to use current conditions to your advantage).  There will always be obstacles to overcome (HFT’s, head-fakes, etc.), but never make excuses.  Poor traders blame, so don’t be one of them if you want success in trading.

5.  Make the most trades with the most size during the trading periods that statistically are most profitable for you.  Another seemingly obvious statement, yet one which most traders simply don’t understand.  You don’t have to be a statistics nut to appreciate the fact that for your trading style, there are times when you need to be active and times when you need to sit and wait.  Find out when to do which, and you’ll stop giving back gains.

6.  Work on your visualization abilities regularly. This is the best way to get better, best way to grow, best way to overcome challenges, and the best way to train your brain in the way you want to respond in any situation.  Mike works hard with his professional traders to not only review their trades after the fact, but he harps on the importance of mentally rehearsing how to respond to various situations.  That way, when the real deal comes along, the right preparation has been done.

7.  Be coachable.  Traders with a stubborn attitude or who don’t listen simply won’t improve, whether it’s what the market’s trying to tell you or something someone else is teaching you.  If you aren’t a listener, you’re going to either stay stubborn (and lose) or you will take the long road to improvement.  Those who are coachable are more able to place their ego aside and move forward, rather than adapting to what the market’s telling you (see #3 above).

8.  Trading is all about skill development and discipline.  Great traders obsess over doing their job, which is to make One Good Trade at a time.  They always live to fight another day, and they’re continually developing their skills so they can trade any market which comes along.  Discipline is shown both at their desk and away from it, and as a result, their hard work isn’t sabotaged by destructive habits.

Bottom line:  Fantastic book, and it’s not to be missed if you’re a trader who is passionate about improving.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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