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SMB Capital – When The Traders Win, They Win
Updated on: 2022-02-09
Is trading for a living your dream? It’s a common one, we know.
But if you’re like most traders, you’re probably spending all of your time trying to figure out how to make it work—and not enough time actually doing it.
There are of course folks, that make sure you spend the time with maximum ROI and are aligned with you making money because with you being profitable, they are too.
One such firm is SMB Capital (SMBC). SMBC is a proprietary trading firm started by Mike Bellafiore and Steven Spencer in 2005.
When they started the firm, Mike and Steven had one mission in mind: to help traders improve their skills. They drew from their own experiences as traders to create a firm that offered coaching, training, and capital to traders. The firm’s “eat what you kill model” has been successful for both the company and its employees: SMB Capital is able to provide quality training and capital that would otherwise be unavailable to traders, while traders are able to earn income based on the profits they produce.
Thrive, Not Just Survive
Since 2005, SMB Capital has helped thousands of traders learn the skills they need to succeed in the market—and not just survive, but thrive.
Its training and mentoring programs are rigorous and challenging, but that’s because SMB Capital wants its traders to be the best. The best for themselves, and for the firm. After all, they are just a group of only 25 traders who trade more than $100 million a year.
SMB Capital believes in making sure its traders get paid what they deserve; after all, why should someone else get paid for any of the hard work put in by the trader himself/herself?
One of the most prominent moves SMB Capital was known for, was to take in inexperienced traders, and team them how to become profitable ones, which was featured in a television series called Turtle Traders. This is coupled with how SMB Capital is known for relying on its proven training systems, where they don’t hire ivy league traders, but rather mostly everyday people that will be trained by the experts in SMB Capital.
The story of the Turtle Traders is one that was mentioned as well by a number of the modern funders, like the ones we feature here in our Fundsfinder, as the inspiration for creating businesses that would thrive from educating and mentoring professionals without any experience in trading.
This is an interesting video about the story of the Turtle Traders; by the way: it has nothing to do with moving slowly, or animals, or lettuce 😉
The Stocks In Play Strategy Of SMB Capital.
SMB Capital is known to teach its traders to actively review “Stocks In Play” for each particular trading day. SMB Capital believes that the profitability chance will be more than 95% if the stock is in play.
Stocks with great order flow are what you want to trade. This is because they do several things that give traders an advantage:
- increased order flow increases liquidity which allows them to risk less on each entry and exit from a position;
- the greater order flow creates additional volatility which leads to many favorable risk/reward scenarios during the day;
- the large number of orders will overwhelm the plethora of sluggish algorithmic trading programs out there which results in a stock moving more cleanly.
Reading The Tape
Another famous technique, or foundation drilled by SMB Capital in its traders, is tape reading. Tape reading is an old technique of analyzing price and volume data for a particular stock. The method involves observing the time and sales tape, which is a list of all completed trades in a given time period, to identify trades that have taken place.
Through tape reading, you can see the number of buyers and sellers in a stock, and get an idea of the share’s future price direction. Tape reading is used mostly by day traders who build their strategies upon intraday trading information.
SMB Capital essentially puts a lot of focus on “reading the tape” to understand the current sentiment, and uses it as a leading indicator in their courses, and also when they reveal live trade walkthroughs with their traders.
Mike has been a very strong advocate on tape reading and mentioned that one of the first things traders need to learn when trading is how to read the tape. This means the ability to start deciphering the order flow in a stock, and it’s a skill that every new trader must develop.
Reading the tape; a leading indicator, as compared to technical analysis on charts; a lagging indicator, will enable the trader to:
- Entering trades at better prices
- Offering trading plays that may not be apparent on technical charts
- Improving trading wins’ consistency. Mike believes that a solid intraday trader should be positive for 80% of all of their trading days
In this youtube playlist the team from SMB Capital provides ssome high quality content abou trading and how to improve our performance, I’m sure you’ll find this interesting.
SMB’s Structured Methods That Beat The Market
SMB Capital offers three programs to help traders improve their knowledge and skills. These programs include both knowledge and skill development, with sufficient time to cultivate a high level of skill. Each program builds on the ones before it and progresses through skill development in closely supervised simulated and live trading.
The first program, SMB Fundamentals, is a comprehensive introduction to the SMB Methodology. The program includes principles and practices for trading, risk management, and money management. It also covers core technical patterns, indicators, and setups.
The second program, SMB Options Training Program, is a comprehensive options trading course that teaches traders and investors how to trade options efficiently by using non-directional strategies. The program covers the basics of options theory as well as advanced covered call writing strategies.
The third program, SMB Proprietary Trading Program, introduces the proprietary indicator system (SMB Edge) developed by SMBC for its equity desk traders. Additionally, the program introduces proprietary high probability options trading strategies that are used on the options desk at SMBC.
On their website dedicated to educational programs, you can find a range of strategies and courses for trading options.
Live Trading On Day 26
A peek into what life is like and different in SMB Capital, is written in One Good Trade, a book by Mike, where SMBC differs from the rest of the other proprietary trading firms. Unlike other larger firms or ivy league cladded spaces, where new traders often have to wait quite a while and do other mundane stuff just to catch a glimpse of the action, SMB Capital throws the new traders into the deep end, almost immediately.
It applies the same set of training wheels for its successful traders where results are immediately seen based on hours and hours of rinse and repeat, until the muscle memory is achieved, especially for sensing what you see on the tape.
Similar to the SMB foundation course seen for one of the courses SMBC offers, the most grinded out section that new traders will experience day in day out, is the live trading simulation with active data feedback. The constant push to find, review, attack, and log the trade based on why the trade was even taken in the first place, is the core bread and butter of real life applicability that produces results, and consistency is highly preached at SMB Capital.
There’s no pressure to take on more trades than you should, and a lot of the traders trade in the style that fits them the best. From scalping; the kind that will see many trades per hour, to intraday traders, where a position will be opened for more than a day to catch the big move, the focal point is still to make one good trade, and another good trade, and another, consistently.
Continued Mentoring And Coaching
SMB Capital has made a name for itself in the trading community by taking an active approach to mentorship and coaching. SMBC mentors work one-on-one with their carefully paired mentees to review daily footage and strategize on how to improve performance.
They’re not afraid to get into the nitty-gritty details, either: everything from brokerages and platforms to screen setups, trade management, and risk management are all fair game for review. It’s an unparalleled opportunity for traders at any level of experience to get feedback from experts who have seen it all–and done it all.
This is similar to the way professional boxers and basketball players review footage of their matches; they know they can’t become better at their craft without learning from past mistakes and successes, and the same goes for traders at SMBC.
There are many proprietary trading firms that focus a lot on just marketing their courses and don’t actively put the pressure on walking the walk. SMBC’s model is one that aligns whatever their courses preach, to actionable outcomes that can beat the market. The added caveat is that a trader doesn’t get paid until he is profitable, and this motivation, not only drives sniper-like one shot one kill perfection in trade execution, but also sets a good foundation of consistency.
Between the online courses, and in-person courses, there are obviously its perks and downsides for each (mostly cost-related), but just like boxing, it’s a lot easier to improve taking physical lessons than online lessons. Also for online lessons with their structured plan and active feedback methods, it’s still a better option compared to scrolling through thousands of videos and articles to reach that same point. The drastic shortcut of the learning curve is key here.
If you’re serious about being a trader, do know what your starting point might be, and what you are willing to do (you can have an idea of sorts now with SMBC) to achieve consistent profitability.