The future of prop trading


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If you missed this Webinar with Mike Bellafiore, author of the “trading classic” One Good Trade, on “The Future of Prop Trading: Introducing the Multi-Product, Multi-Market Discretionary Quant Trader”, you can watch the recording now

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The future of prop trading

  1. 1. The Future of Prop Trading Mike Bellafiore Co- Founder, SMB Capital Co-Founder, SMBU Author, One Good Trade and The PlayBook
  2. 2. One Good Trade• “trading classic”• “the bible of prop trading”• Built trader trainingprograms globally• Hedge Funds, prop desks,foreign brokerage houses
  3. 3. Discretionary Traders are undervalued• Get them to understand their best setups• Bionic• Auto trading• Multi-product• Multi-market• Constant Coaching• Scalable Risk• Opportunity for us
  4. 4. Understanding their A+ setups• Recently consulted for a Hedge Fund• The traders knew a lot about trading• Momentum, relative strength, news catalysts• Over-reliance on their intuition• A lack of methodology to build from their strength
  5. 5. Develop Your PlayBook
  6. 6. The PlayBook• Archive your favorite setup after each close• Template form• From these trades choose your A+ setups• A percentage risk of your stop loss• Swing: (2-5 percent)• Intraday: 30 percent of your intraday stop
  7. 7. The All-In Trade• Let your traders develop All-In Trades• Set risk rules for these trades• Risk their week/day in their favorite trade• If these are their best setups worth the risk
  8. 8. The PlayBook Template• Big Picture• Fundamentals• Technical Analysis• Reading the Tape• Intuition• Trade Management• Trade Strategy• Trade Review
  9. 9. Make the trades your own• Jim Rogers in Singapore• Told everyone to become a farmer• Give me a hot stock tip!!!!!!• Internalize your trades
  10. 10. Build from your Strengths• Understand what you do well• Trade them more often• Trade them with more size• Trade them with a system that is scalable• Trade them with more confidence
  11. 11. Bionic Discretionary Trader• Custom Filters that spot their A+ setups• Exit Management Tools• You cannot miss your A+ setups in this market!
  12. 12. Multi-product• Become a CPT in one product• Become a CPT and then trade bigger• Not the best career path anymore• Margin of error is getting smaller in all• Express your favorite patterns in other products• Intraday swing traders better with options
  13. 13. Multi-market (South Africa)• The largest prop firm in South Africa• 10 percent of their market• Teach them US equities• And help them with LSE and JSE
  14. 14. A suburban oasis• Mansion• Two maidspreparing braii• Fully stocked bar• Lounging area• Pool• Gym and shower• 2nd Fl trading desk
  15. 15. First Rule of Coaching• Show you care• Credibility• Trader First
  16. 16. A core firm philosophy• Elite tennis players turned pro traders• Former high-level athletes will fight better every tick
  17. 17. Elite traders need coaching too• You do not get to make up your own trading fundamentals• Head traders must keep traders on track• Mindset of Brody
  18. 18. First Rand• The Made Up Fade Trade• Broke out on fresh news and volume• Shorting and shorting and shorting• Short the first pop• But after Time and Volume now you are making a fundamentally poor trade
  19. 19. Naspers (NPN)• Caught the break above 52 week high• Made 50k instead of down 15k• Held until Reason2Sell
  20. 20. Scalable Risk Management• Discretionary traders are wasting energy complaining about their risk rules• Rules based on percentages and not P&L• Percentages are scalable• Just give them a bigger book• Develop clear rules• Trader Buy-in• If not get rid of them
  21. 21. Great and Continual Coaching• Never a destination for a trader• Improve everyday• To become great at anything requires: Domain knowledge, sustained energy, critical feedback and purposeful practice• The Talent Code, by Dan Coyle
  22. 22. The Coaches of Phil Mickelson• Swing coach- Butch Harmon• Short game coach- Dave Pelz• Putting coach- Dave Stockton• Psychology coach- British Open improvement• Strength and conditioning coach• Caddie- Bones
  23. 23. Trader Coaches• Strategies• Psychology• Mentor• Head Trader
  24. 24. Auto Trading• Easy software• Quant support for discretionary traders• Another revenue line• Improves their discretionary trading• Discretionary traders best chance to figure out the next new market
  25. 25. Contact•• @mikebellafiore