Nov 292010

I recently started reading One Good Trade: Inside the Highly Competitive World of Proprietary Trading and so far I’m really enjoying it.

I’m very selective about trading books so any book that teaches a trading method I tend to stay away.  I do enjoy books that tell me what it’s like to be a trader or teach me general principles of the markets (Dalton’s books come to mind).

I’ve always wondered what it’s like to work in a prop firm and this book has described it in great detail.  I enjoyed meeting the traders, learning about the selection criteria, and which ones made it and which ones did not.

He also talks about getting out of a losing trade, averaging down, and other bad practices that I can really relate to.  One trader would never exit a loser.  Day after day he’d hold one.  They’d talk to him and ask him his exit point and he’d tell them and then when the price went there he just couldn’t do it.  It seems so funny and silly reading about it but I can say that it’s happened to me personally.

The main theme of the book is that we should look for “one good trade” and then “one good trade” and then “one good trade”.  It reminds me of FuturesTrader71’s message that we should not trade for money, but rather “to trade well”.

I did a lot of self-examination and I realize that I often take trades that are not that great.  Or I focus on too many things.  Or I focus on things other than the market.  Now I’ve learned that I really need to be focus on finding “one good trade” and then just keep repeating it.  If I lose money that’s ok as long as it was a good trade.

The other thing I learned about myself is that I’m not working hard enough.  I’ve been taking advantage of the European lunch time to do other things.  I work 2.5 hours in the morning, then 3 hours in the afternoon (US morning session) and then 1.5 hours in the evening (US afternoon).  That makes about 7 hours.  It was nice for me to “only” work 7 hours because I’ve been putting in mega-hours over the past 3 years.  But I realize by reading the book that my competition is working more than me.  He talks about how they arrive at 7:45am (NY time).  that’s over 90 minutes before the markets open.  And they stay past 6pm which is 2 hours after the close.  They have a saying “the day’s not over until the closing bell rings”.

So I decided I need to work more.  If there are no trading opportunities during the European lunch then I can go over my trades.  Do my ES homework.  Study previous days.  Work on my trading plan.  Read a trading book.  There’s lots of work to do.  I do think it’s good to take an hour off to exercise or play piano or get some groceries, but my “hour off” turned into 2 hours and then 3.  So I’m going to crack the whip a bit.  I do need to be better prepared, especially now that I’m following a few other markets in addition to Bund & ES.  The SMB guys trade stocks and that requires more time because they have to find the “stocks in play”.

I’ve asked myself if I should apply to a prop firm.  I’m not sure if there are a lot in Paris and I don’t want to move to London or New York.  One one hand I’d learn a lot in a team environment.  On the other it’d mean very long days (commutes to Paris are 30-45 minutes each way) and less time away from the family.  With two young kids I’m opting for making it on my own.  But if I had it to do all over again I would have started my trading by applying to prop firms.

So that’s several things I’ve learned about myself so far and I’m only halfway through the book.  I think every trader can benefit from this book, and the SMB Blog is very good too.

  6 Responses to “One Good Trade”

  1. There are not too many prop firms in Paris. The French ( No meaning to stereotype ) do not seem to take to prop trading as much as in the US or UK. The rates are not bad for a seat, but I am not sure how much you would learn in a ‘team environment’ except how to swear in French.

  2. Glad to hear you are enjoying One Good Trade. Love the work you are doing with your trading game! Well done.

  3. This is a great book. Reading it inspired me to work harder, test and trade a setup, record my trades (journal, log, and snagit images), review my trades, share my results and get feedback. I’ve learned of my personal need to place a lot more emphasis on preparation, specifically by determining levels pre-open, watching for news, and making sure I’m physically and mentally ready to trade.

    Today I did playback (although it was overwhelmed by Market Delta and crashed) and I’m considering an online blog/journal. I was in a slump and not sure how to proceed. Thankfully Michael recommended One Good Trade and my trading, preparation, journaling, and review are all showing improvement. Btw, it’s entertaining and I enjoy the sport references. Can’t recommend it enough.

  4. Sorry. In the parentheses “it” = my computer.

  5. Deltason,

    Very kind remarks. Thank you! Would love for you to share those thoughts here:


  6. My review also describes their shocking Annual Report.

    The SMB Training website reveals that “SMB is a division of T3 Trading Group, LLC, a CBSX broker dealer.” I worked full-time in a non-finance job, and I traded at home during my personal time. I traded stocks, equity options, and forex before I saw SMB Capital on the second season DVD of Wall Street Warriors. About 16 months later, I bought the book One Good Trade on Amazon. One Good Trade made me believe that proprietary traders had an exciting and lucrative career. The book mentions the high failure rate of traders numerous times, but the book gave me the impression that failure was almost always the trader’s fault. I decided to work at T3 Trading Group in Miami, and the experience was different than the environment described in One Good Trade. The combination of my experience and the financial statements reveals how T3 Trading Group really works.

    The T3 Trading Group Annual Report (Form X-17A-5) can be downloaded from Edgar on the SEC website. In 2012, 99.89 percent of T3 Trading’s revenues came from the monthly fees and the trading fees its proprietary traders paid to the company ($15,106,432). Only 0.106 percent of T3 Trading’s revenues came from its share of the trading profits ($16,082). T3 Trading charges its traders for every share they trade. Traders are discouraged from trading a low number of shares per trade even if their trades lose a lot of money and even if they are placing the same number of trades.

    T3 Trading charged each of my co-workers about $1,000 a month in trading fees. The $1,000 a month does not include the losses from the trades. On some days traders were profitable, but on most days they were not. Many traders are also charged several monthly fees. Total monthly fees can be as low as $120 a month. After one month at T3 Trading, one unprofitable trader was allowed to double the number of shares he traded ($2,000 a month in trading fees). Some traders may have trading profits that will offset some of the trading fees (and monthly fees). My manager told us on several occasions that many traders deposit additional money when the fees and the trading losses deplete their initial $7,500 capital contribution.

    Turnover at T3 Trading is high. The Linked In website profile of CEO Sean Hendelman reveals that T3 Trading has more than 400 proprietary trading jobs. My manager told us that it takes 6 months for traders to become profitable at T3 Trading. If the average trader quits T3 Trading in 6 months, then 800 people held those 400 trading jobs in 2012. In 2012, each of those 800 traders paid T3 Trading $18,883 in monthly fees and trading fees. Some traders may have trading profits that will offset some of the trading fees (and monthly fees).

    What are the odds of being a successful trader at T3 Trading Group? In 2012, all of the traders at T3 Trading had $53,607 in trading profits. The traders’ share was $37,525 (70%), and T3 Trading’s share was $16,082 (30%). It is possible that 799 out of 800 traders received nothing, and one trader received $37,525. It is possible that 798 out of 800 traders received nothing, and two traders received $18,762.50 each (the equivalent of a $9.38 per hour full-time job). It is possible that the top one percent of the 800 traders received $4,690.62 each, and the remaining 792 traders received nothing. No wonder most traders resign in a short period of time.

    The T3 Trading website reveals why revenues from the paid training products are not on the T3 Trading Group Annual Report: “T3 Live and T3 Trading Group, LLC are separate, but affiliated companies through common ownership.” The T3 Live website advertises two courses that cost $1,997 each. The Virtual Trading Floor costs $200 a month. T3 Live has many paid products. I never purchased any T3 Live training products. My manager’s free training classes were vague. My manager’s free training materials were skimpy. About two months after I resigned from T3 Trading, T3 Live sent me an email that offered me a yearly subscription to the Virtual Trading Floor for $999.50. I was also offered a package of one course (I had three choices) and one year of private mentoring for $1,199.

    There may be proprietary trading firms that offer its traders an exciting and lucrative career. My description of T3 Trading is meant to help people avoid a situation where the fees the traders pay to the company are more important than the profit the traders make. I worked at T3 Trading for only two months, and each of my co-workers traded five times as many shares as I did. One day, I plan on reading One Good Trade again, and I plan on watching SMB Capital on Wall Street Warriors again. Reading the book and watching the DVD will be more interesting to me now that I have experience as a proprietary trader.

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