Mike Bellafiore - The PlayBook: An Inside Look at How to Think Like a Professional Trader

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The PlayBook

An Inside Look at How to Think Like a Professional Trader

Mike Bellafiore

Vice President, Publisher: Tim Moore
Associate Publisher and Director of Marketing: Amy Neidlinger
Executive Editor: Jim Boyd
Operations Specialist: Jodi Kemper
Marketing Manager: Lisa Loftus
Cover Designer: Chuti Prasertsith
Managing Editor: Kristy Hart
Project Editors: Elaine Wiley and Jovana Shirley
Copy Editor: WriteOrWrong Editing Services
Proofreader: Sarah Kearns
Indexer: Cheryl Lenser
Senior Compositor: Gloria Schurick
Manufacturing Buyer: Dan Uhrig

2014 by Mike Bellafiore
Publishing as FT Press
Upper Saddle River, New Jersey 07458

This book is sold with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or other professional services or advice by publishing this book. Each individual situation is unique. Thus, if legal or financial advice or other expert assistance is required in a specific situation, the services of a competent professional should be sought to ensure that the situation has been evaluated carefully and appropriately. The author and the publisher disclaim any liability, loss, or risk resulting directly or indirectly, from the use or application of any of the contents of this book.

FT Press offers excellent discounts on this book when ordered in quantity for bulk purchases or special sales. For more information, please contact U.S. Corporate and Government Sales, 1-800-382-3419, .

Company and product names mentioned herein are the trademarks or registered trademarks of their respective owners.

All rights reserved. No part of this book may be reproduced, in any form or by any means, without permission in writing from the publisher.

Printed in the United States of America

First Printing July 2013

ISBN-10: 0-13-293764-6
ISBN-13: 978-0-13-293764-1

Pearson Education LTD.
Pearson Education Australia PTY, Limited.
Pearson Education Singapore, Pte. Ltd.
Pearson Education Asia, Ltd.
Pearson Education Canada, Ltd.
Pearson Educacin de Mexico, S.A. de C.V.
Pearson EducationJapan
Pearson Education Malaysia, Pte. Ltd.

To my dad, who teaches me the most valuable lesson: work ethic

Contents

Acknowledgments

This book took almost two years to write. Numerous chapters were scrapped or substantially rewritten for the best end product. For that I thank Jim Boydfor your ideas, encouragement, and steady hand in this project. And thanks to Michael Thomsett and Elaine Wiley and Jovana Shirley from Pearson Education for helping me find the best path for The PlayBook .

All arguments I make inside received detailed research. A special thank you to Geoff Horton for his help with research. Thank you to Heath Bailey for making this enormous task more manageable. Alex Carver, great job going above and beyond with the transcriptions from previous SMB Tradecasts used for the book.

I would like to thank all of the interns who helped on research, including

Thank you to Steve Spencer for covering for me when my family needed me. A big shout out to Gilbert Mendez, GMan, for the best PlayBook trade in the book. I am grateful to have the good fortune to work every day with Seth Freudberg, who has built the SMB Options Tribe around a culture I am so very proud of. To Marc Principato, of SMB FX, your writing and morning call are outstanding.

To Andy Kershner, I look forward to building the best prop desk in NYC with your team at KTG, SMB, and you.

To Rosie Mendez, thank you for making me look smarter. To Carlton Bryon, I appreciate you putting up with my Coach Bella side and your work to ensure our guys have the best training infrastructure they deserve.

To Shark, thank you for leading this rebuilding process. I look forward to the day when you are a better trader than GMan.

To Iceman, I have never met a better young entrepreneur. There is nothing you cannot build.

To TO, thank you for your sustained and outstanding effort. You inspire me to be a better coach.

To Pippen, you prove that you can be gracious and a top trader.

To Prep, simply, we miss you!

To Rudy, stop taking our guys during the monthly SMB poker game.

To my friends at Storm Securities and African Gateway, most notably for this workMonti, JoeBoy, Phillie, Stevie, Rod, Brody, Rudders, Kevin, and Jules; thank you for the experience of a lifetime. Trade well, boys!

To PhillipCapital, your friendship and partnership excites all of us at SMB. We will see you soon in Singapore.

To the guys on my desk, thank you for making it fun to come to work each day.

To Dr. Jonathan Katz, Dr. Andrew Menaker, and Denise Shull, thank you for your contributions to trader psychology.

The greatest reward for starting SMB and then SMBU are the friendships with sharing traders and educators. Buss Bower, Michael Martin, Brian Shannon, Corey Rosenbloom, Steven Place, Tadas Viskanta, Charles Kirk, Tim Bourquin, Mark Zagora, Melissa Fann, David Blair, Josh Brown, Jerry Khachoyan, Andrew Keene, John Locke, Jeff Augen, Tom Sosnoff, our family at StockTwits, Sean Hendelman, Nadav Sapeika, Jeff White, Bruce Bower, Jeff Davis, Matt Nadell, Joey Fondura, Joe Fahmy, Jared Levy, and Jim Rogers, thank you for all the work you do for the trading community.

To the best in the business, the Coach K of trading coaches, Dr. Steenbarger, we do our best to live up to the standard you set for all of us.

Thank you to Barry Lyons for your editing genius.

To all the traders who email, tweet, or chat with me, thank you for sharing your trading journeys. Build from your strengths.

To my wife, I cannot wait to watch our son Luke grow with you.

To all who have the guts to try and play pro, I hope you find help inside The PlayBook . I am grateful that you have chosen to spend the next many hours with my trading thoughts. Please feel free to reach out to me with any trading questions or just say hi, .

About the Author

Mike Bellafiore is the co-founder of SMB Capital, a proprietary trading firm in New York City; SMBU, their education arm; and SMB Systems Trading, their algorithmic trading division. He is the author of the trading classic One Good Trade . His firm has regularly appeared on CNBC, Bloomberg TV, CNN Money, Fox Business, the BBC, and in the Wall Street Journal and the street.com. SMBs trader training program was highlighted on the TV documentary Wall Street Warriors . An international lecturer, Mr. Bellafiore has built trader training programs globally for hedge funds, prop trading desks, and retail traders, working with some of the worlds largest traders. He lives on the Upper West Side, with his wife and newborn son.