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"One Good Trade" by Mike Bellafiore Book Review: Profile Traders

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.

  1. The market is always right.

  2. Follow the rules, or you will risk being a loser.

  3. Always trade only the right opportunities or remain patiently waiting.

  4. Be self-disciplined and cut your losses small.

  5. 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.

  1. Proper Preparation.

  2. Hard Work.

  3. Patience.

  4. A detailed plan before every trade.

  5. Discipline.

  6. Communication.

  7. 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.

  1. Focus on improving every day.

  2. Ask thoughtful questions.

  3. Develop a daily work plan.

  4. Bounce back from defeat.

  5. Eliminate your mistakes.

  6. Respect the Markets.

  7. Master basic trading plans.

  8. Learn to execute orders quickly.

  9. Fine-tune focus.

  10. 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.