Mike Bellafiore is the co-founder of SMB Capital, a proprietary trading firm based in Manhattan. SMB trades equities, futures, options, and engages in automated trading.
The firm is exceptionally successful, at a time when many retail traders are struggling. Mike, who is also an author and professional coach, says that he is keen to engage with retail traders as much as possible, and has multiple reasons for doing so.
Explaining the difference between retail traders and proprietary traders, he is keen to emphasize that individual traders working for proprietary trading businesses, unlike retail traders, never risk their own money. Their firms fund all their trades – though, as he points out – losing money is not the best way to ingratiate yourself with your boss.
The big question most retail traders have for Mike is what retailers can learn from successful proprietary traders like himself.
He started trading in the late 1990s and launched SMB in 2005. If he has regret about those earlier years, it is that he wishes he had been more professional. He says the professional approach is being more diligent, working hard and sticking to a daily routine.
By doing so, you will get progressively better at trading, come to understand where you have an edge and realize the areas where you don’t do so well.
Working Out What You’re Good At
Retail traders, he says, lack sufficient exposure to different types of edges, that is if they even get exposed to any edges at all. The problem is they often team up with a mentor in one particular area, maybe make a small profit, and never try an alternative approach.
However, they could likely do much better with a different strategy that is more tuned to their individual talents and personality. Often they conclude that they are not too good at trading and abandon the exercise entirely.
A much better approach, Mike advocates, is to sample multiple niches to find which you like and which you don’t. Once you have discovered that, it is time to dig much deeper into that kind of trading strategy.
In a nutshell, Mike says the secret is to find out what you are good at, and work at getting better at it. Wise advice many retail traders would benefit from – “Do more of what you do well and do it bigger.
Know Your Limits
Mike reckons that retail traders often fail to halt losing positions or they lose too much in bad trades. SMB Capital avoids such problems by setting an inter-day loss limit, a per-trade loss limits, as well as weekly and monthly loss limits. Individual traders sign up to these limits.
Should a trader exceed these limits, they are punished, for instance, by stopping them trading for several days. Should they do it several times, they will be fired.
While proprietary traders have this kind of discipline enforced from outside, retail traders have only their own resources to go on.
Mike says the best approach for retail traders is to write up appropriate loss limits and empower a trading friend to take the role of a risk manager and enforce these limits by imposing penalties should the loss limits be exceeded. An alternative approach is to ask your broker to enforce these limits.
The Playbook and other books by Mile Bellafiore
Mikes latest book is “The Playbook”, published in 2013. He added the subtitle “An Inside Look at How to Think Like a Professional Trader.” The book does pretty much what it says on the cover.
It is based on Mike’s training programs and walks through many actual trades explaining each step as it goes so you learn how professional retail traders think. He shows how to make exciting profits while avoiding hidden pitfalls. He also delves deeply into the traders’ psychologies, basing his insights on dealing with hundreds of other traders.
Mile’s previous book was “One Good Trade: Inside the Highly Competitive World of Proprietary Trading.” Published in 2010, in it he describes the mentally and emotionally challenging world of proprietary trading.
He emphasizes the skills that are critical to success, the differences between an underperforming trader and one who is consistently profitable while including many entertaining tales of traders who have either excelled or failed.
Mike’s latest book, due to be published in 2021, is called “How to Become a 7 Figure Trader.” In it, he asserts that great traders are made rather than born. Each chapter deals with a specific 7 figure trader, and the book looks at ten of them and what they all share. It should make an excellent and highly informative read.
One of the frequently asked questions is what is Mike Bellafiore’s net worth. It appears to be a closely guarded secret.