All trading books that claim to hand you the holy grail for a paltry sum are not for real. The title of the book should not lure you into thinking this is one of them.
This is a documentary of sorts inside a propriety desk you would want to lay your hands on. Let’s get in.
A quick look into the book
The book is split into three parts for ease of reading, and we will go with the same flow.
Part 1 – Inside a Prop Trading Firm
Part 2 – Tools of success
Part 3 – Getting technical
The Inside Story
Mike says a propriety firm is as successful as the way traders are trained and hired. A prop firm is filled with talented minds that you nurture in training, and they are all on their own.
Traders in Prop firms are their bosses and take their own decisions. They don’t wait to get a go-ahead to place a trade or get okayed for its size and risk. It’s all their call. Traders at prop desks are carefully hired, and no-nonsense training is provided.
Mike traders’ fight in a prop desk is not with clients or competitors of that sort. They win, and they take home the gains. The fight is with themselves. Traders don’t have to wait for monthly, quarterly, or yearly performances. Performances in Prop desks are transparently displayed on boards daily, and you are always on your toes.
He discusses the usual success mantras one would be aware of if he had been around the trading business for a while. These trading success mantras are elaborated by case studies of in-house traders of SMBs. These are some concepts that everyone is taught about or reads about trading success.
The market is always right.
Follow the rules, or you will risk being a loser.
Always trade only the right opportunities or remain patiently waiting.
Be self-disciplined and cut your losses small.
Markets don’t reward arrogant and stubborn traders.
There are several case studies discussed in the book of in-house traders. Their strategies and trading highlights are discussed as small snippets.
One Good Trade
Mike drives home the concept of “One Good Trade” in a simple and this is a concept preached by several traders like Mark Douglas. Treat every trade at its merits, not by the profit or loss resulting from the trade.
A stop loss that is taken on a trade that was placed on sound fundamentals and as per the trade plan is a good trade. It’s all about one good trade and another one, and then another one. As long as you follow the process, every trade is a good trade. The results may vary, and the process in question may be another point of contention.
The Fundamentals – The Rules to Play
Mike calks out the seven fundamentals they expect traders to follow before entering a trade.
These fundamentals or rules, if you may put them in layman’s language, are discussed in detail. The fundamentals are listed below.
Proper Preparation.
Hard Work.
Patience.
A detailed plan before every trade.
Discipline.
Communication.
Replaying important trades.
Pyramid of Success
The most important aspect that Mike can’t stress enough is for traders to emphasize trading skill development. You have to learn how to trade first, and understanding the natural laws of trading is a good place to start.
A future successful trader can master proven methods of trading before he can create his own. Proven methods of trading and psychology are what is drilled into the already bright and open minds that look to be hired in Prop Desks.
The learning curve is something no trader can avoid. It takes time to become good, and determination to survive the learning curve is what makes or breaks it. Mike stresses the need for new traders to focus on learning for at least 6-8 months before they can think of cracking the code big time.
Mike discusses in detail and with examples all the leg work that a trader should do to achieve success.
Focus on improving every day.
Ask thoughtful questions.
Develop a daily work plan.
Bounce back from defeat.
Eliminate your mistakes.
Respect the Markets.
Master basic trading plans.
Learn to execute orders quickly.
Fine-tune focus.
Control your emotions.
Getting Technical
Mike undoubtedly says that a trader is only as good as the stocks you trade. There is more relevant to this statement than what it means literally. Importance is given to the individual and the stock that is being traded. A combination of both in sync makes that one good trade.
As the author keeps repeating the concept of one good trade, the stress is to look at each trade at its merit.
He elaborates in detail on how traders in SMBs are trained to trade stocks in play.
A stock with fresh news playing around.
A stock that is up or down more than 3 percent before the opening.
A stock that does more than a million shares of volume.
A stock that will move more than 3 points intraday.
A stock that will have real order flow and develop important intraday levels.
Stocks in play have to be the ones that are liquid as well. The illiquid ones that have some news doing the rounds still don’t give you an exit.
Slippages and liquidity are explained in a dash.
SMB’s head trader is described in the book as GMan uber-aggressive when stocks in play provide opportunities at important support or resistance levels. These are the opportunities that these traders exploit the most and go head-on with loaded guns or, as they called it, “Load the boat.”
Stocks in play normally provide the best R: R in intraday if you know what you are doing. Traders at these Prop desks don’t lose such opportunities. Again, this is something a person who is confident of his set-up would do who trades on technical.
Reading the tape is something that Mike gives equal importance to in the book, along with trading stocks in play.
He says reading the Tape is a skill that enables the intraday trader to predict more times than not whether a stock will trade higher or lower from a given price based on just examining the bids, offers, and prints.
Conclusion
If you are someone who has been reading about trading and more so on Intraday trading, then this book might seem redundant to you.
However, this is a must-read for a new trader reader as it provides several examples of actual trades of the traders in the Prop Desk SMB.
If you want more insights on these trades, grab a copy of your book.
(Amazon Paid Link)
Guest Post - Written by Mr. Lal Bajaj, Bangalore
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