be your ultimate goal: becoming your best trader (YBT) (View Highlight)
I gave that audience everything I had, answered every last question, and shook each hand with a smile such that no one detected my personal hardship. Just like my dad would have done. (View Highlight)
You do things as well as you can because what else is there? (View Highlight)
The strongest person I have ever known was now as fragile as a newborn. (View Highlight)
Okay, at this point (or well before, and if so, thank you for your patience), you might be wondering why I’m sharing this personal story with you, an account that has yet to say a single thing about trading. As it happens, this drama is pertinent, as you are about to see. And if ever there is a person who can inspire you to improve everyday as a trader, or serve as an allegory for the path of the new, developing, or underperforming trader, it is a recovering stroke victim. Further, an event like this helps traders place their work in the proper context. No one has ever lost a loved one in a losing trade. More to the point, the PlayBook might never have been born without this calamity. (View Highlight)
. I write often on the SMBU blog that trading is an exercise in getting better everyday. A stroke victim personifies the ultimate real-life, all- consequences example of a struggle to get better each day. (View Highlight)
Building your PlayBook is a similar test. As a trader, you must make connections in your trading brain for the setups that make the most sense to you. Then you can execute these plays as automatically as you breathe, walk, and talk. But before, each trade is a struggle of indecision and uncertainty. (View Highlight)
By the end of the day, Dad improved. He had the infrastructure to make progress, like a new trader must. And he was determined with every breath and thought to get better. (View Highlight)
For the next ten days, I woke early, grabbed a few protein bars, and headed over to the rehab center to spend the day with my dad. I had in my head that the more he moved and thought, the better he would get. Sort of like the more screen time you get as a newb, the more you improve. (View Highlight)
It was also hard to miss how my dad outworked the others in rehab (and by a large margin). Many did enough not to get in trouble, literally stopping their reps when the staff stopped looking. My dad did extra reps. (View Highlight)
After every rehab set where I noticed progress, I praised him. We built from the positives. I would tap his stomach and say, “Good set†or “Good work, Dad.†The trading coach in me knew that to sustain his motivation I had to encourage the effort and not the result. I knew that act of touching would help reduce his stress and communicate we were in this together. (View Highlight)
, “You are going to make a substantial recovery. People can make remarkable recoveries from strokes. Keep working. You are going to get better.†I could have been talking to one of my traders. (View Highlight)
I see this behavior in my traders with whom I am close. They do not want to disappoint me. Coaches who love their players will see them do almost anything not to disappoint them. Love is a powerful motivator. (View Highlight)
During speech therapy, my dad earned the nickname “Friendly Frank†because he gabbed with everyone in the facility. Friendly Frank grasped that he needed to talk as much as he could to expedite his speech progress. So he talked to everyone. He was working to get better and enjoying himself with his latest challenge. (View Highlight)
There were periods of frustration to overcome. On one particular day, my dad got discouraged at a lack of staff attentiveness. He directed unkind comments at their competence and performance. He was acting like a trader on tilt. I had to keep him focused on his task. When Dad started complaining about bad service, I refocused him on the only thing that was important: our day of improvement. I told him to count to ten when he got mad, and to take deep breaths between each number. All that mattered was that he play as much as he could with his rubber bands and speech exercises and jabbing drills we had created to speed his recovery. (View Highlight)
In trading, we say, “One Good Trade and then One Good Trade and then One Good Trade.†(I hear there is a pretty good trading book by this title.) (View Highlight)
On day ten, my dad stood, placed his right hand on a handrail, and walked 40 yards up the rehab hall and then back. Wow! He was going to walk again! I couldn’t wait to go home and tell my mom. (View Highlight)
Over the next several days, we flew my dad back to Long Island, buried my mom, moved my dad into a rehab center in our hometown, and kept moving. (View Highlight)
During all of this, the markets don’t close, the competition in the trader education space doesn’t discontinue business, trading systems need tweaking, and my traders require coaching and direction. (View Highlight)
The Perfect Storm A perfect storm of events compiled to stop and reverse SMB’s forward progress. As a firm or business, particularly in the money business, you never want to be backtracking; after all, the firm’s very existence depends on forward momentum. Running a prop firm is very expensive. Specifically, even a flat month in P&L can cost 200k plus after fees, expenses, staff, and rent. From profitable to broke can come fast. Add to this strain 1) some of our profitable traders left, 2) the industry as a whole was struggling, 3) a large legal bill was ahead, 4) new regulation increased costs, and we were headed in the wrong direction. All of this came when I wanted to be elsewhere, with my dad and family. (View Highlight)
And your individual trading business will not be easy for you to run either. (View Highlight)
Solutions must be found, you must uncover a way to subsist and even reinvent yourself. (View Highlight)
This is the life we have chosen. As it so happened, The PlayBook was the key for how we weathered this storm. (View Highlight)
That perfect storm? First, some of our consistently profitable traders left. At that time, the career path for our traders was this: become a consistently profitable trader and then get bigger. How 2007! Other firms (poachers from the League of Lesser Firms) learned of the success of many of our home-grown traders. (View Highlight)
The problem was we were not offering enough value to those who we had trained to become consistently profitable heading into their year three or four with us. SMB thought loyalty and our present value would keep the traders we built for their entire career. (View Highlight)
SMB had a math problem. You see a prop firm takes losses on underperforming or new traders so that one day those better traders will have a new crop of traders around them offering fresh ideas, new strategies, and lower transactions costs. You are only as good as the stocks you trade. (View Highlight)
A firm can become like a downtrending stock that needs a catalyst for it to change direction. Arcades offer a seat and computer but do not offer downside risk, draws, or value-added trading tools and services to traders. (View Highlight)
With our past model of “get good and get bigger,†(View Highlight)
aduate or turn pro and you have to develop a whole new set of players. Perhaps those traders should have been more loyal.
Whatever the reasons, winners get to write history. You cannot keep losing consistently profitable traders and then claim you were right. That is a world of failure. All that said, I am proud that most of those traders were grateful for the trading education they received from our firm, how much they learned, and our indisputable contribution to their trading success. Some now are seven-figure traders. Many gross more than $250,000 each trading year. A few are even running their own firms. A bunch manage money for others. A half-dozen even work at places like Bridgewater, the second-largest hedge fund in the world. One thing was crystal clear from the loss of traders in 2009–2010: We needed to get better and offer more. (View Highlight)
g costs. Also, there was the “day trading is dead†blog of the week. These were exaggerations. Day trading (a term I refuse to recognize; it’s called intraday trading) was contracting, times were tough, but it was not dead. (View Highlight)
ecognize; it’s called intraday trading) was contracting, times were tough, but it was not dead. When I first started, we were taught the trading principle that not all years on the Street are wildly profitable. (View Highlight)
and our business model is regularly scrubbed by attorneys. None of us could think of anything. The whole reason I started SMB was to give new, developing, and underperforming traders their best chance of succeeding. Check the thousands of blogs we have shared for free in the blogosphere. See One Good Trade and the hundreds of webinar hours released to the trading community. And here I was worried about having done something improper and having to expend money and time and stress to contain this matter? (View Highlight)
The SEC and other Wall Street regulators have a difficult job. Wall Street is a dangerous, powerful place with a few dishonest players. It’s often the case that “good guys†are in fact the crooks; so how can governmental lawyers know whom to trust? Jon Corzine, a U.S. senator, governor of New Jersey, and former head of Goldman Sachs, blew up his futures firm, MF Global, including customer money totaling 1.6billion,withabsurdtradingrisk.LongTermCapitalManagement,whosetraderswereonceknownbythephrasea^€œthesmartestguysintherooma^€blewup4.6 billion following the Russian financial crisis, which required intervention by the Federal Reserve. The head of JPMorganChase, who used to possess the best reputation on the Street, testified to Congress that a “London Whale†trading loss would be in the vicinity of 2billion.Itturnedouttobemorethan6.2 billion. Recently, major banks, most notably Barclays, have been fined and charged with fixing interest rates. And let’s not forget Bernie Madoff. (View Highlight)
Note: Reminds me to read Financial Wisdom by Mihir Desai, to really understand where is this capital flows to.
Okay, so this was not the best of days for our firm. SMB was not very good. On the Street, like in golf, we learn to play the ball where it lies. We needed a solution. We knew improvement would take time, at least two years. We needed to invest in our strength, building new and developing traders, with new and better techniques and wait. We went all in on our core competency, building profitable traders from scratch. (View Highlight)
now the difference between mentoring and coaching.) This is true of any sport. Going to the office on most days was not possible, as I was still helping my dad rehab, so face-to-face, one-on-one coaching sessions with our traders also were not an option. I faced a quandary: How could I contribute to the firm in this psychological state—and from Long Island?
The answer was The PlayBook. I needed a way to show our traders I still cared about their progress, though as this absentee coach. You cannot teach or coach anyone if students/players do not know you care. Reviewing their PlayBook trades and providing detailed feedback showed them that I did. I required a way to rebuild the desk without being on the desk. (View Highlight)