Tuesday, September 10, 2013

SMB Capital at Indiana U: aspiring traders, take note

SMB Capital's Mike Bellafiore shares some lessons with aspiring traders at Indiana University in this video presentation from 2011.

I recently shared this video on Twitter and am including it here with added notes. Why? Because I follow Mike (author of One Good Trade and The Playbook) and SMB Capital on StockTwits and often recommend their valuable posts and videos to friends and fellow traders.

If you're new to stock trading, or are curious about the life and work habits of full-time traders, have a listen. Bellafiore shares his experiences, from starting out as a prop trader to managing his own firm, and engages in some Q+A (and light verbal hazing) with the students throughout the talk.

Some key quotes and highlights from Bella's presentation:

● Recalling his own transition from disillusioned law student to novice prop trader, Bella cites Drive author, Daniel Pink's advice to "do what you do." In other words, make a full-time gig out of the thing you are already engaged with. If you want to be a trader, open up a small trading account or start learning (paper-trading) with a simulated account.

● The market will always find a way to eliminate you. You can be a great trader making millions one year, and be totally humbled or see your account dwindle the next. 

● "What the hell do somebody's grades have to do with how good a trader you're going to be?" Trading is a skill (related to pattern recognition, psychology, etc.) and you must have a passion for it. Your geometry grades are about as relevant as your basketball skills. 

If you want a job at a firm, the first question Mike will ask you is, "are you trading?" What are you reading, can you talk about your trades and the rationale behind them? See first point above on starting early with a small trading account. 

● Part of the value in being a trader is that you are working to become an elite performer. When you realize your goal of becoming a successful trader, you'll find that you also have the confidence to become great at other things. You may also find that you are learning to become a better person all around. 

● If you're impatient or lose your temper, the market will seek that out and take your money. It's no coincidence that top traders like Paul Tudor Jones are in great physical condition, meditating, and guarding their emotional capital and well-being. "Trading forces you to be the best person you can be". 

● Domain knowledge of your field and reading is important, but you have to learn by doing. You need intrinsic motivation to succeed. Kobe Bryant practices harder after a loss, he's not just motivated by money. High-level performers need to learn through purposeful practice and critical feedback

Talent is overrated. Mike feels that there is no "great trader gene" and that traders need to embrace a growth mindset to improve. Know that you can be better tomorrow and work at it. He offers some recommended reading on these themes here.

Enjoy the video, and check out SMB Capital's blog for more (you can always find it in our blogroll). Want to know more? Check out our related posts below.

Related posts:

1. Inner Voice of Trading: lessons on ego and risk.

2. Humans vs. algos: Mike Bellafiore on the future of trading

3. Mark Minervini interview: define and refine your approach.

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