Find the Best Teacher

Date: February 6, 2012

By Mike Bellafiore

New traders frequently think that learning from the most talented traders is the best way to learn. On the contrary, new traders should seek the best teacher. There is a difference.

Think about it. Who are the best professional coaches? Were they preeminent players? Phil Jackson is considered the finest NBA coach yet was not a superstar player. Coach Belichick played Division III college football but is a brilliant NFL coach. If the top coaches were not the best players, then why do new traders look to the best traders for mentorship?

I posed this dilemma to the best trading teacher I know, Dr. Brett Steenbarger. He responded, “Many of the great coaches were competent players in their own right, but not all stars. They knew the game, but their passion was for teaching and developing players. They worked on their coaching game as hard as the all stars worked on their playing game. It’s all about knowing what makes you tick, and what you’re really good at.”

The skills necessary to become a great trader are different from those required to be an effective trading coach. To be a superstar trading coach, one must be obsessed with finding better ways to teach, a great communicator, patient, demanding of others and unselfish. On the other hand, being a great trader requires superior pattern recognition and discipline.


Before every new training class at SMB, I scrub our program. I identify its weaknesses, then start developing ways to eliminate them.

A great trader constantly thinks about how to become a better trader. They scour charts to find the next big trade. A great teacher thinks about better ways to instruct. And then that teacher develops these methods. Creating SMB Webinars, SMB Videos, SMB AM Meeting, SMB Trading Plays, and the rest of our training program took years of work. I spent many after-hours alone in my office saturated in grunt work that few would ever do to accomplish their teaching goals.


A great trader may lack the incentive to create the best training program. They are making millions trading, so why bother teaching a new trader. I run a trading firm. We have a desk full of proprietary traders. If SMB builds a desk of 150 profitable traders then the personal and monetary rewards will be substantial. So I am motivated.

My partner, Steve Spencer, is an excellent trader. Almost four years ago I approached him about starting a firm. His response: “Why would I want to do that?”

Spencer immediately calculated the potential loss from mentoring. After further reflection, we both recognized that if we developed an excellent training program our sacrifices would be rewarded.


A great teacher communicates exceptionally well. A great trader can be incoherent. When I first started trading, I approached the best trader at our firm. This English-challenged, former nationally ranked Russian chess champ, though very nice, was unintelligible. Many great traders are just the same; they can’t explain their methodology intelligibly.


A new trader must start by learning the basics. Architecture students do not start by designing sky scrapers. New traders must focus on developing trading skills, discipline and controlling their emotions. They must develop a foundation from which they can build. They should start with straightforward trading setups. Simply, they should first learn how to trade.

The market is always changing. Setups that worked yesterday may not work tomorrow. It is paramount to develop trading skills so traders can adjust to market changes.


What if your personality is not suited for this star’s style? Also, a star trader takes positions that may result in drawdowns that you cannot withstand. Further, a superstar can watch multiple positions, whereas the developing trader cannot. Moreover, I know of numerous examples, at multiple firms, where the positions of superstar traders initially visible by firm members were taken down. These firms were suffering losses as lesser traders tried to copy the superstar.

Without fully developed trading skills, novice traders were unable to execute these advanced setups. A superstar teacher will teach you comprehensive trading skills so that you gravitate toward a style that is best for you.


Trading is about skill development and discipline. Developing traders who wish to make more ought to look inward. They need to become better at the setups that are working for them and learn to add size in these trades incrementally. They also need to eliminate their mental weaknesses. Contemporaneously but slowly, they should add new setups to their quivers. This is the path to improving profits.


A great trader may lack the patience to properly help a developing trader. They just may not understand why a new trader cannot learn what he or she is teaching. A great trader may just explode, “Shut up already, and start making money.”

Admittedly, I would love to do this sometimes, but this is not the best way to deal with most new traders. Great teachers use solid reasoning to make their teaching points.


It is also the job of a mentor to challenge their students. I empathize with the new trader. Trading is difficult. But standards must be set.

In February, I was disappointed with a few traders on our desk, and I called a meeting. I growled, “Your mental preparation is unacceptable. This is your opportunity to do something great. You will not realize your potential until you improve your preparation.”

But mainly I was leading them to set a higher standard for themselves. The desk subsequently went on a trading tear.


Great teachers must be unselfish. They must sacrifice a considerable amount of their trading profits.

I talk through my trades with our newest traders in real time, which diminishes my focus. And I choose stocks that are easiest for new traders to follow. This affects my overall profits.


It is an excellent idea for all of us to reach out to great traders. I do. There is always something new to learn.

Remember, though, that each person trades differently, and the best teacher is passionate about taking a trader from where he or she is to becoming a superstar. Find the best teacher.

Mike Bellafiore is a co-founder of SMB Capital (, a proprietary trading firm in New York City. He has successfully traded his own account for more than 10 years. Bellafiore writes regularly for SMB Blog at, where professional traders shares stories and trading lessons.