How to trade stocks for a living: Mike Bellafiore

Professional trader at SMB Capital analyzes stocks and other markets. (Source: SME Capital, SME|U)

Through Mike Bellafiore, co-founder of SMB Capital and SMB|U

Recently, I visited the Pace University Investment Club to talk about the life of an owner trader. Our company strives to contact college trading and investment clubs to meet their members. Some of our best traders come from these clubs. In addition, students rarely have the opportunity to interact with a professional trader, so it is useful to share our experience.

During my pitch for Pace, a sharp member asked, “How do you recommend we start trading?” That’s an excellent question. Here is my answer :

  1. Read, read, read about markets and trading. New traders need to develop their knowledge of markets and trading, and a great way to start is to read. Read books. See 20 books every trader should read. Read blogs. View traders’ favorite trading blogs. To read magazines. Visit financial websites. See The Best Financial Websites to Prepare for Your Trading Day. Build a knowledge base.

  2. Train to trade. Complete a trader training program. These courses can help you avoid some mistakes that others have made. They can help you save thousands of dollars in the markets when you start. And they can expose you to trades worth investigating. See Unconventional Training for the Unconventional Trader.

  3. Paper trade. Start with the paper trade. See The Best Paper Trading Tools for Success as a Trader. Experiment with different trading systems with fake money. When you find one that works for you, then and only then, move on to the next step.

  4. Trade with real money. Paper trading is very different from live trading. I’ve seen some of the greatest paper traders start out in our business and then never make a dime. In fact, the first person we hired at SMB was a demo superstar. When he traded live, he lost every day. It got to the point where we thought he was losing money on purpose! Start small with a small risk and increase in size after only periods of success. Only increase your risk after you have demonstrated a clear benefit.

  5. Work with a mentor/coach. You wouldn’t expect the next Olympic gymnast to be self-taught. We wouldn’t expect the next big NBA star to rise without a coach. The same is true for a trader. The best coaches make you better. They help you identify and leverage your strengths, what sets you apart. See Get a trading coach already.

  6. Find a like-minded business community. On our desk, the best traders work as a team. See Build your sales team. Teams tap into the diverse and unique talents of members to enhance individual traders.

  7. learn to code. Customer filters built with code help you earn more as a trader. Automated models built into the code can complement your discretionary trading. Our Junior Traders all build their own filters and models via python. Try this Python coding course recommended by our Quant leader in New York.

  8. Learn to backtest. Backtest the trading ideas you learn. See if they have an edge. look Trade like you are backtesting.

  9. Internal. During our last two hiring promotions, each was partially filled with former interns. Find out if you really like trading. Some think they do and find they don’t. Find out which companies would suit you in terms of culture, trading style, risk and training infrastructure. Apply here for a trading internship at SMB.

If you want to be hired as a trader, don’t be that candidate who shows up and says, “I really like trading and the markets!” And when you are asked why, you answer: “I am glued to CNBC and I read the the wall street journal.”

This shows insufficient demonstrable interest in trading and markets. It won’t make you attractive to a hiring partner. Speak our language. I wrote about Penny in A good trade. His answer ? He gave concrete examples of why he loved trading with examples of live trades he had made and why. If you can do that, you will really stand out.

Businesses want to make great decisions about how to use their resources. Make it easy for them to hire you.

More posts by Mike Bellafiore

8 trading lessons from a proprietary trading desk

9 Reasons to Trade at a Proprietary Trading Company

5 lessons from the prop desk

A newly highlighted trading strategy on the props desk

The #1 problem traders want to solve on our desk

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