One Good Trade
Everyday we very intentionally try to get 1% better and add value to our lives and our pursuits. So, we hope we can add some value to yours as well! And for our value add here, we are so excited to talk to you all about a book that we absolutely love and found tremendous benefit from. It is One Good Trade by Mike Bellafiore of SMB Capital. Becky had first read this book about a year and a half ago and loved it then. And, re-reading it this past month in preparation for this episode, Becky admits that she gained so much MORE value from it now than previously. And that makes sense, as she’s a year and a half deeper into her trading career and is quite a different person and trader than she was back then. Summer 2024, we really enjoyed pulling out our favorite gems from this book and are so glad we are going to discuss so many great tips from it for all our fellow traders out there!
This book was so good and really powerful coming from the experience of an intraday trader’s first 12 years of trading and through his growth as he and his business partner co-founded a very successful prop trading firm in Manhattan in the early 2000’s. Published in 2010, In One Good Trade: Inside the Highly Competitive World of Proprietary Trading, author Mike Bellafiore shares the principles and techniques that have enabled him to navigate challenging markets, both as a trader and as a mentor. Through stories of his trading experiences and traders within his firm under his guidance, Bella emphasizes the skills and factors that are key to success in the challenging world of trading. Some of the fundamentals essential to developing statistically profitable trading strategies covered in this book include the principle of One Good Trade, prioritizing trading only stocks in play, and the skill of reading the tape. This is a larger/longer book than most, but that is because it is truly packed with great examples of important factors in a trader’s journey.
Even the intro of this book started right off with some great one liners that had us making notes right away! For example: “Trading is about skill development and discipline. Unfortunately, too many people think trading is only about making predictions.” We have had to learn this the hard way ourselves. When you start to learn chart and technical analysis fundamentals, it is easy to fall down the rabbit hole of which direction a few bits of information are leaning towards. This creates a directional bias within your view of the markets. But, to then just trade that bias without appropriately weighing all the pertinent live data during your trading session is a very dangerous way to trade. Making predictions and then blindly trading that prediction will never work and we totally heard that!
“Being a consistently profitable trader is about doing the thousand little things everyday, like proper preparation, that impact your P/L.”
That speaks so clearly to the intricacies of trading. And how much work is really required to successfully pull off a few solid intraday trades. When we make one good trade in the morning for our trading day, that trade may only take 5 minutes from entry time to exit. But it is the result of hundreds and likely thousands of hours of studying, trading, journaling, personal discipline training, and truly hard intellectual work. Becoming a successful trader is not a quick process. It is the result of a thousand little things all built over time into the trader that we each can become.
Check out our full discussion in the podcast below, including more of our favorite quotes and how we’ve adapted the advice into our own trading journeys and lives.
We really like the point Bella makes in the book about there being “some months when a prop trader works 50 hours a week and takes home no money. There are some months when a trader works even harder and loses money. I spent 2002 unable to make a dime. On the contrary, there have been days when a prop trader is up over 10k by 9:35 am” (6:35 PST) That’s 5 minutes after open guys! He really drove home the points about trading having no guaranteed contracts or bi-weekly checks. Bella also stated that in prop trading “WE ARE THE CLIENT.” Man this is the truth, and depending on the day or perspective, this is the most incredible thing about trading or the worse. At it’s best, this gives us freedom to not have to sell ourselves or convince others to buy into our product or service. We get full control to create and run our own businesses processes and systems how we choose and have authority over when and how we participate. We’ve heard other advanced and successful professionals refer to trading as the ability to wake up and have the ability to print money on any given day. So incredible right? But of course the flip side, that part that can be the hardest to overcome is it is a solo sport no matter what you know, how you act will determine if you’re worthy of taking from miss markets abundance or if you need more pain to gain the experience and lessons. No one else is going to keep you in line or come take that pain away. There are absolutely no guarantees in trading.
Alright, this next quote from Bella is really just one of our favorites. It reads: “A great trader is an elite performer. Elite performers spend every day trying to improve. Everyday we trade is an opportunity to learn from the market. My mistakes and those of other prop traders are just gifts from the market for us to improve.” Any one who is a dedicated, persistent trader, you feel this one in your heart! We know that we feel incredibly dedicated to our careers as a day traders now and that our success is just starting to blossom in this arena. And as such, we also know that we have to spend every day trying to improve, recognizing that there is so much more to learn and fine tune! And you know we love the perspective of mistakes being gifts from the market for us to expand from. This is a required perspective for a trader, honestly, if you really are going to stay in this game. Because it is just far too unhealthy and unproductive to fight with Miss Market. She is the boss. And the more we can stay humble and attentive to learn her moves instead of trying to force our own upon her, the shorter our learning curve will be and the less pain we will endure in the long run!
Ok, we also just have to mention that we LOVED how Bella refers to the market as “Mother Market” and “she” throughout the book because we do that with “Miss Market!” And especially in the parts about respecting her. That leads into this next great quote that goes: “Sometimes the uber bright and talented get sent home packing. It does not do any good pretending to be a prop trader.” Alrighty, so this is definitely a big part of the way Miss Market will humble us learning traders. It’s so easy to get caught up in conceptualizing all the parts of trading and falling in love with being a trader before truly becoming a consistently profitable trader, or CPT, as Bella says. We’ve been there for sure wanting to have all the successes and status of a CPT before paying all our dues and market tuition necessary. He also says: “The market demands that a trader follow all her rules every day and every moment. Many just cannot thrive in this unbending universe.” After reaching new milestones and maintaining consistency, it’s far too easy to forget about the enemy that’s just outside our walls waiting for that one day or even moment that you break a rule. This type of mental fortitude and awareness is very difficult to stay on top of and we’re still trying to master our greatest weaknesses to this day and are sure that we always will be on some level as we keep advancing. It does very much feel like an unbending universe and being at her mercy is no way to play this game, so take it from us, follow her rules.
There was a concept literally written in this book and as an undertone to many of the chapters that is really just so powerful. It’s the adage that success for the better or for the worse is totally self dependent. And we really loved that whole concept. We are the creators of our destinies as traders. This book was published 14 years ago and even then there was accessible experience in the trading world to learn from, blogs and tweets, firms to join. You could find help and guidance to become a profitable and successful trader. Well, in today’s world, there is so much more! There’s a wealth of information on trading, from blogs to YouTube channels, discord groups, all manner of social media, and thousands of helpful books. And if you are lucky enough to land in a really good trading community, then you have what you need at your fingertips to learn this world.
Regarding learning from mentors, Bella had some wise words. He advised: “Ask thoughtful questions. Your learning experience is as good as you make it. There will be things you don't understand. This is common. What is not okay is to ever leave a lecture or move on from a topic without mastering it. And if this means questions to your mentor, then this is your responsibility. Please ask.” So, with this statement, and the whole book really, you can tell that Bella is a mentor who is truly invested in the growth and development of aspiring traders.
A great mentor will want members to ask questions and seek clarification on anything they are unsure about, knowing that the more students can grasp a concept, the less likely they are to repeat mistakes that ought to be teaching them. When young traders ask clarifying questions and get thoughtful answers, this will cause their trading skills to improve and enable them to move forward more smoothly and with a stronger fundamental base. So, Becky and Kendra definitely second that request - please ask questions! Of your mentors, of us if we can help, of fellow traders. Use every opportunity to learn! Because this gig is not easy!
There is so much learning and personal growth that trading requires and that’s a big part of why Becky and Kendra fell in love with this pursuit. Bella really gives credit to that in this next quote that goes: “Traders learn more about themselves in their first year of trading, than many learn in their entire adult lives.” Wow, that is a grandiose statement but he’s not lying! Trading exposes soooo much that most people never even get the chance to discover, or would want to for that matter. This is the down and dirty part of the huge psychology hurdle that we face in this arena. It’s exactly why we created market mamas and have so many episodes now on various topics that all circle back to trading.
Each of our journey’s will be unique and have lots of varying challenges that will force us to go deep and learn about ourselves if we want to grow past them. We’ve talked a lot about pain and trading trauma between Becky, Kendra, and our guests on the podcast, and know first-hand that not one individual we’ve known has been immune to it. And we believe it truly is a blessing because it’s when everything is falling apart that you find what you’re made of. Many of us have realized we’re a lot stronger than we previously were or at least thought we were. Every time we faced setbacks but got back on track with our growth and goals, it has pushed us further into realizing and actualizing our greatest potential. This required endurance really rewires your brain to a higher level of performance than most other adults experience. Trading surely delivers transparency, accountability, and instant feedback that we can not ignore.
One concept Bella does such a good job of putting into perspective is the variance between day trading and a regular corporate job. At a corporate job, your annual review provides feedback and offers a bonus and or salary bump based on a year in review. But in trading, Mother Market provides instant feedback. Either you traded well and were rewarded with profits. Or you were humbled and your loss should educate you in some way. A few direct quotes he said along these lines are: “Let me introduce you to our boss - the market.” And “If you choose not to change your behavior, the market will just reach into your bank account and take your money. Simple. Honest. Unwavering.” He’s not wrong! And we’d rather not have Miss Market drain our accounts, so we listened carefully to this whole book!
One of the many pragmatic and actionable pieces of advice from this book was so good in fact, that we wrote it down and want to share it with you all as a take away bit of work that a trader could do to help us each level up. It is: “Let me offer you a quick exercise to help with your trading. No matter what your skill level, go get your trading journal. Draw a line down the middle. On the left, keep a list of things that do not work for you, trading setups that do not work, pre-market routines that are not effective, trading rules that are not helpful. On the right, keep track of what works for you. Do more of what is on the right hand side, and don't do any of what is on the left hand side.” So, that is an exceedingly simple activity. But, if you really think about it and utilize it in daily practice, it would be incredibly powerful. Identify what you do that is slowing your progress, write it out, then commit to not doing what’s on that list. Inversely, write out what is helping you progress/ your best setups/ supportive life activities, such as exercise and visualization practices, etc. and do more of that. Straightforward, actionable, and uncomplicated.
Another great quote from Bella goes: “The biggest reward of this job is the challenge to become an elite performer. I seek everyday to improve and I’ve been at this for a while.” There are certainly no lies found there. We’re always looking for ways to improve our performance by identifying where we could have understood better or acted differently in real time to make more of the opportunities Miss Market gives us. The amazing thing about trading is it gives us the stage to do just that. While most of us who’ve been at this for years now have developed a fairly set style, edge, and specific setups we look for, not one trade will ever be identical. Sure we have some very balanced days that repeatedly respect the same zones you can trade in and out of, but even then, every trade is unique and independent. Trade review and replay are two great ways to really intentionally improve your performance. Also, another level to this we’ve tried to embrace more is not just on the days we feel we underperformed, but the days where we were at peace with our piece, followed my plan and got good results. It can be even more beneficial on those days to look for ways that would have taken that trade from good to great. Doing this on a consistent basis can give you material needed to challenge yourself to get better.
We liked one of the trader’s stories in the book called “Franchise” in which Bella is coaching him and instructs him to work on 3 short term goals to improve his trading. Sometimes, we can try to target too many things at once, so we really liked this advice to sort of zone in and target just 3 things at time. That’s inline with building a solid foundation brick by brick for sure.
Alright, it’s true, Market Mama Becky has a problem... She has been guilty on more than one occasion of dollar cost averaging or “doubling down” when in a trade and it pulls away from her intended direction. In this book, Bella has nicknames for the trader’s in his office and the stories he relays about their experiences. On the topic of dollar cost averaging, he talks about a trader referred to as Skippy. Here it is: “Some would rather be right than make money. These are the types that conveniently forget that the market can remain irrational longer than you can remain solvent.” “Predictions are fine, but the price action of the market or stock is most important for intraday traders like us. If you have what you believe is an irrefutable trading opinion and the price action does not confirm your bias, then do not make the trade. Predictions absent validation from the price action are not advisable if you wish to enjoy a long intraday trading career.” Bella specifically also says: “Doubling down does not work for the intraday trader, I’ve tried it. 85% of the time you will profit when you double down. But the 15% of the time you are wrong, you will get smoked. The losses during these trades will far outweigh the gains from the 85%. The math does not work.” This explanation is why it is kryptonite for Becky! The 85% of the time that it works and this maneuver saves the trade. But, when it pushes hard and fast farther against the position, the losses have been truly detrimental to Becky’s progress. So this part of the book was a bit of a personal gut punch for Becky and a known area that she is working on curtailing. Plainly, Bella stated: “There is a difference between buying into a pull back and averaging down. One makes you money, and one ends careers.” Alright, point taken!!
Along these same lines, Bella said in the book to all us traders listening: “If you want to recognize your potential, then be the best listener on your desk or in your trading community. Listen to experienced traders. Listen to what the Market has taught us.” This is facts. Fits with the old and accurate saying: you have two ears and one mouth - so we should spend twice as much time listening to those more wise than ourselves, including our boss, Miss Market.
Bella is the most spot on with how we must align our behavior with our actions to play this game the right way. This next part sums that up nicely. He says: “I am not trying to make money as a trader. My focus is on doing the right thing. All I can ask for is excellent risk and reward opportunities and then I execute. Being good at my job requires an obsession with my trading fundamentals. Money is just a byproduct of me executing fundamentally solid trades.” We have heard this from the beginning, to not focus on the P&L, but it’s so hard. Especially, when you prematurely start to make claims to those profits that haven’t been actualized, it can really mess with your ability to uphold your risk parameters and put you in an overly aggressive trade hunting mode, not a selective and purposeful mode. We did an episode on the addiction of trading where Kendra stated how the only antidote to addiction is obsession because you need something stronger to overcome those urges. The point Bella makes about being obsessed with trading fundamentals and doing the right things is the only way you will make money but more importantly KEEP IT! This is the core of appreciating our risk to reward opportunities while factoring in the game of probabilities to keep us focused on executing solid trades within our proven edge.
We love this next bit from Bella on the trading preparation advice regarding an “if, then” statement. And it is a solid foundation for trade planning. He says: “with well developed if, then statements, your results will be more consistent.” In the book, he gets deep into some examples of what this can look like for an intraday trader in his firm, so you’ll want to read that all the way through for yourselves. But for the sake of length here, it would start with something like ‘If ES opens above daily support at 5400 and can’t push below that level within the first 15 minutes of the NY session, then consider a long position….’ And then you would elaborate in writing in your morning trade plan as to what price action and data would prompt you to make what decisions within your trading session. You are outlining a guide map to a logical day before your trading session begins so that when the candles start to print, you have a solid, well thought out plan to work from. This is really great advice for day traders because it really simplifies it and can keep us from veering off of our trade plan, in our opinion. Tips like this approach to trade planning can really help.
Bella emphasized that we need to operate from the global objective to live to trade another day. A trader frequently mentioned in this book is J Toma, a trader who eventually made partner, and earned the ability to trade his own account and keep all his profits. But how did it go with his first account? Apparently, he nearly blew it all shortly after earning this privilege. Then he got serious with a performance psychologist and implemented several interventions to adjust his trajectory. The market will demand you change if you are to be successful. I love the quote in the book that plainly says: “If you live to play another day, enormous trading opportunities will come.” The trader J Toma is a highly successful trader within SMB Capital now. But early on, he struggled too. His example outlined by Bella is a beautiful representation of tenacity and grit and faith in his greater abilities and goals. He encountered major failures in his face, in front of his peers, and in his bank account early on that could have had a less dedicated trader quitting. But he didn’t and became very very successful as a trader. GOALS
We consume a lot of other trading podcasts and interviews as we’re forever learning from those in this game longer, and this next bit of the book is the path that all CPT’s have really stressed is the best approach as well. It goes: “Build from a profitable base, not risk $1000 to make $1000, but make x amount consistently with risking a fractional amount consistently then build up from there. Keep pushing yourself to do better but do not force it. This game is about putting money in your pocket, not throwing away weeks worth of gains.” Oh gosh this is the absolute truth about longevity, the long game of all of this. It’s the reality of trading vs seeking out the windfall gains that are often plastered all over trading marketing ads. From our experience, it can be very hard to push yourself to do better without forcing things, as some days require you to back off and lower your risk and participation, while other days need to be met with more strength of conviction. We have referred to this as protecting our castle, and when you look at your progress as a whole, it can help to not become over leveraged at any one point in time and throw away all that progress. It’s probably one of the greatest challenges that keep individuals from becoming CPT’s, in our opinion.
One sentiment in this book that we really enjoyed was about having a love for trading. Bella wrote that If you don’t love trading, you will not make it. It’s too challenging and with the hard, continuous work required to gain edge, without true passion, you will quit. That is from his perspective as a trading coach and prop firm co-founder and it truly makes so much sense. We have to love it to choose to endure the pain that is required to become consistently profitable. Now, we have talked previously at Market Mamas about the power of visualization to rewire our brains and actually have a great trading visualization episode that we wrote (https://youtu.be/FTT_LOfnjA4?si=K3yw1DNMZtdAwl-8). Bella and SMB capital also have some excellent advice about visualization. All SMB traders are taught to visualize for at least 15 minutes as part of their daily premarket routine. The example mentioned involves deep calming breaths, and then visualizing frequent trading experiences and how the trader will manage them, example being hitting out of a losing position. This practice encourages us to feed our minds with the executions you intend to perform.
A part of the book that we really found inspiring was the sections about managing trading slumps. Bella wrote: “How many times have I wondered if this is the end for me? Sometimes I actually go home, sit on my couch, and wonder if I am capable of continuing as a trader. And I would say I have done this at least twice a year for the past 12 years. This is a healthy process as long as these thoughts are then replaced by solutions. This is healthy because I do not want to feel this way. My personal disgust with my trading and inability to accept failure fuels an internal need to improve immediately. And it forces you to focus on what you do best as a trader and then execute. You either get better or go home. Just like a pro athlete.” Ugh, we just love how he normalizes the slumps. It’s powerful when he encourages traders to use these times to focus on skill development, flexibility, patience, and hard work. It is a time where we can adjust, grow, and persevere. That frame is so much more stabilizing and healthy. Hard times don’t have to be here to stay, they can teach us and provide fuel for our next growth period, or evolution. I love that view on this subject so much more.
One final piece of this book that we needed to mention before we close is about how important it is to adapt with new rules and trading conditions. Bella, when referring to changing market conditions over the years and through major global events, such as 9/11 and the financial crisis of 2008, said: “The good traders adapted. You have to find a way. Hey, you had a choice. You could’ve become a whiny ex-trader, or adapted and conquered this new market.” I mean, real talk right there.
Ok, so this was a long episode, but this book is incredibly comprehensive and really very powerful and timeless for any trader. There is so much more in the full text that we know you all would really enjoy. In the notes on this page, we have links to this book, either in paper copy or through Audible, so you can get it for yourselves. We are so grateful to be Amazon and Audible Associates.
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