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This chapter is from the book

What’s Inside

Here’s how the PlayBook works: After each trading session, I ask the players on our desk (and now you?) to archive a trading setup that made the most sense to them during that day. They archive this play in a template form, which we share: the SMB PlayBook. This exercise brands their winning trades in their trading brain, synthesizes the most important market patterns for them to study, and helps them internalize their best trading setups so that they trade them instinctively in real-time. There is no real-time deep thought and hesitation for their A+ trades. They spot a favorite trading pattern, they execute (and with size). The best traders know when they are right and get bigger. They spend their energy searching for more of their favorite setups and focus on where they can add size responsibly. In this book, you will learn how to get bigger in your best trades so that you improve your trading performance.

In this book, most chapters are divided into three sections: an introduction to a pro trader; their PlayBook trade; and a review of this trade with the trader, our desk, and me. We begin most chapters with a delicious look at a character, a pro trader, and his journey, from which you will learn. What best practices can you co-opt from this trader? What should you avoid? What solutions worked for some of these traders that you can implement if you experience similar struggles? You will meet experienced, new, developing, and underperforming traders, some who made it and some who failed. As is my writing niche, interesting, page-turning, and often humorous trader stories are wrapped inside of trading principles and lessons to help you improve your trading performance, while enjoying this read.

The second part of most chapters is a specific trade archived in SMB PlayBook form. You will learn patterns that our desk uses that you might co-opt for your trading. We break down each trade as follows:

The Big Picture

Intraday Fundamentals

Technical Analysis

Reading the Tape

Trade Management

Trade Strategy

Trade Review

Note the detail provided for each archived trade. It is not my intention to preach that you should dissect trades exactly like I do, as you may trade a different product or time frame or see the markets differently than me. I do, however, encourage you to develop a similar system of archiving your best trading setups that makes the most sense to you in the format that works best for you. Frankly, if you have not developed your PlayBook, you should. Recently, I met with a series of very experienced but underperforming traders. The common denominator for this group was that none of them had a methodology to archive their favorite setups, nor could they clearly, definitively, and instantly articulate their best plays. They were more or less just flying by the seat of their pants (that is, unorganized and unstudied intuition). Your PlayBook’s contents are up to you. But its existence, with all due respect, should not be. All traders should build a PlayBook.

The third part of most chapters consists of a trade review between the pro trader introduced, our desk, and me. Tick by tick, we review the highlighted trade. Trading fundamentals and principles are explained and explored as we unveil these trades made by pro traders. Pay closest attention to how we think through our trades, the detail, the clarity of thought, and the standard of professionalism. To be a pro, you must learn first to think like a pro.

You do not become a great trader by being shown cookie cutter technical setups and then soon become successful. That is a myth from what I call Trader Disneyland. It would be wonderful if Trader Disneyland existed, marketed and spun by too many that it does, but it doesn’t. I intend to teach you how to think like a pro trader and develop a methodology that enables you to recognize your strengths, provide a foundation for you to prosper when the markets change, and jump start your progress to becoming a CPT and then YBT.

The PlayBook begins smartly with a summary of how to develop a PlayBook trade in Chapter 1, while explaining the top ten ways it can help your trading. Chapter 2 reviews the trading journey of Shark, the model for those who want to quit their job and take up trading full-time. He gets his own chapter because he is the best trainee, the hardest worker, I have trained in five years. Chapter 3 introduces the concept of Reasons2Sell that will give you a guideline for how to exit your winning trades. Also, this chapter highlights a trade setup in Knight Capital after its infamous $444 million trading error that Shark archived and we reviewed together, paying close attention to whether he had enough size.

Next in Chapter 4, you meet TO, who teaches you how to compete as a pro trader and find out how good you can be. You also get a sneak peek into his personal daily trade review. Further, TO walks us through a Fade Trade, a trading pattern that melds best with his personality. Chapter 5 introduces Pippen, who presents a path to follow for developing and new traders. We do something special in this chapter and review the historic IPO of Facebook, stock symbol FB, with his trade review. Chapter 6 explores the insufficiency of trader education in colleges, introduces the humorous and concurrently sad “GM test,” and pounds the table about what traders should be doing before they turn pro. Special Projects, our intern, is placed on the hot seat as we review his Reversal Trade, a powerful trade for developing traders.

Chapter 7 introduces Prep, who might just become the hero of underperforming traders everywhere, as he made almost every mistake a trader can make but stayed in the game. We review his failed trade in JCP that was still One Good Trade. Stay tuned for the plot twist involving Prep in the postscript of this section. In Chapter 8, we introduce Rudy to debunk the theory that the bright start their trading career on second base, ahead of others. I allegedly rip Rudy in this memorable trade review, of an awful Technical Trade. What some call “rip,” I call essential critical feedback. In Chapter 9, Iceman challenges you to take on more risk with your trading and gives you an inside look at the psychological journey from newb to pro trader. We check out his gutsy Opening Drive Play in the high beta stock, LNKD. This chapter helps you answer an important trading question: Are you taking on enough risk in your trading?

In Chapter 10, we study an SMB icon, GMan, to demonstrate the importance of continuous great coaching in your trading career. GMan shares his favorite and most profitable trade of late in great detail, the Pullback Trade, transcribed from an SMB teaching event in Singapore. This trade is worth many re-reads. Chapter 11 brings us to South Africa, showing how The PlayBook can help pro traders in other markets and products. We meet some interesting players from the largest prop firm in South Africa and review a few trades we made with them while I visited. The PlayBook concludes with my assessment of the future of trading, focusing on our future opportunity. It has never been a better time to be a trader!

You will learn to think through your trades and develop your own PlayBook. This book exposes you to trading patterns that you can co-opt and start to make your own. Trading fundamentals and principles too numerous to list are included with each trade review, with our traders recounting their trading journey. You will marvel at the work and detail of a pro trader striving to compete in the highly competitive world of the proprietary trading. You will laugh, shake your head, and learn from the stories shared by some we trained from scratch on my desk. This book was written to be a page-turner while also offering significant market lessons. I want to remind you that this is a game to be enjoyed and that you can play successfully with the right purposeful practice, archiving your best trading setups that make the most sense to you.

It is also my ultimate hope that you embrace the opportunity you have, that you are grateful each day for the privilege to follow your passion, and that you discover the true value of striving to be your best trader, whether successful or not.

How’s my dad? Did he make a full recovery? Not yet. But he has made a substantial recovery. His relentless will to improve inspires me. Let’s give him some more time. As for you, there are about 250 trading days a year for you to progress by working on your PlayBook. My firm? Things are going really well for us, which we will discuss the how and why of inside. Keep moving forward in your trading career motivated perhaps a bit by my story but more authoritatively by the words of Ray Dalio, founder of the largest U.S. hedge fund:

  • Weaknesses don’t matter if you find solutions.

Next, let’s explain how to create a PlayBook and how it can improve your trading. It is my great privilege to present to you, The PlayBook.

Mike Bellafiore



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