Are you frustrated by having lost money in trading, despite all your efforts? You are not alone. Even a seasoned trader faces a period where the profit appears to be elusive and losses appear to pile up.
SMB Capital is one of the largest proprietary trading firms in New York and Miami, with advising since 2005. They have managed to create an environment where even slumping traders can draw from top resources: mentorship from top traders into becoming profitable again.
We’ll break down eight trading rules that will help reverse trading performance, by Mike Bellafiore and his team at SMB Capital. These are straightforward, actionable, and battle-tested by successful traders on the desk.
8 Trading Rules to Reverse Your Performance Slump
Rule 1: Lower Your Size and Risk
Lowering your size and risk is one of the first and most important steps to becoming profitable again. The urge is to go big and recoup losses quickly, but, paradoxically, this often makes the slump worse.
By reducing position size and assuming less risk, you increase your breathing space and will not compound errors from poor trades. With smaller positions, you are allowed to think more clearly and trade minus the emotional weight of oversized losses.
Rule 2: Be More Selective
You want to start being much more selective about the trades you take when trying to get back on your feet. Do not jump on every opportunity that comes up. Wait for those setups that almost fall into your lap. That is, for high-probability settings that work well with your trading strategy and market conditions. Being overly selective would mean focusing on the best opportunities while avoiding unnecessary risks.
Rule 3: Shorten Your Time Frame
If you are a trader, taking your time frame shorter can be the new game in town. The longer your time frame, the more variables and market noise there will be – increasing the uncertainty level.
Try concentrating on shorter time frames to reduce the influence of external variables while keeping it easy to achieve consistent results. This rule is especially helpful for day traders who live on the idea of high-speed decision-making and accurate execution.
Rule 4: Don’t Trade Alone
Trading can be an isolating activity, but it does not have to be. What creates accountability and emotion is sharing your experiences with a teammate or trading group.
Having a trading partner keeps you disciplined; you can learn from each other’s successes and mistakes. “No one feels the pain and excitement of trading like another trader,” emphasizes Mike Bellafiore.
Rule 5: One Good Trade
Be single-minded on one good trade at a time. The mantra serves to teach you patience in awaiting the right setups, as opposed to how you can win back all that is lost with one big swing. It breaks it down to manageable pieces: instead of trying to recover all of your losses in one big swing, focus on “one good trade.” You’re taking your mind off trying to chase profits and putting it into executing your process correctly, which makes you profitable.
Rule 6: Keep a Daily Report Card
You have to measure it to improve at the game. There is one area of your trading that you’re going to want to concentrate on—improving entries, improving exits, or improving risk management—and then you’ll go back and review each of your trades every day and give yourself a “report card” on how you did with that strategy.
With each passing day, you will catch patterns of behavior that are allowing things to go wrong, one after another. Daily report cards have proven effective for desk traders at SMB in fine-tuning performance and establishing consistency.
Rule 7: Control Your Heart Rate
Trading is as much a game of the mind as it is a strategy. High stress levels cloud judgment and lead to emotionally impulsive decisions. Check your heart rate while you’re trading and you will be so calm you can keep on going while your heart finds its normal rate, allowing you to make clearer, more rational decisions.
A subpar heart rate allows for much better and sounder reasoning of the situation. Proper tools and wearables can be fitted to give instant feedback on heart rate so you know you are in the zone for peak performance.
Rule 8: Plan it and Stick to it
Formulate a plan using effective best practices and stick to it. Write down your action plan and commit to following through step-by-step. Share your plan with a mentor or teammate, so you are accountable.
This structured approach keeps you on the right track and outlines an easy path for trading improvement. A plan is more than a list of dos and don’ts—it’s a commitment to being consistently disciplined in decision-making.
Conclusion
Trading is tough. Dumps are inevitable. But these eight rules of trading give an ordered way out of terrible spots and back to profitability once more. Lower your size, be selective, shorten your time frame, and don’t trade alone. Concentrate on one good trade, use a daily report card, monitor your heart rate, and stick with a well-thought-out plan. Apply these tips and you will make the game easier by setting yourself on a consistent path to profitability.
If you are ready to get your trading turned around, then try incorporating these strategies into your daily routine and see how they transform your results.