Mike Bellafiore and Nick Coutrakon from SMB Capital on Trading Teams

Mike Bellafiore and Nick Coutrakon join the podcast to continue a discussion Mike had with Dave on the makeup of trading teams at SMB Capital, a proprietary trading firm in NYC.

What's the best way to include a quantitative trader in a discretionary trading team?

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Creators and Guests

Host

Dave Mabe

Host

Michael Nauss

Guest

Mike Bellafiore

Founder of SMB Capital

Guest

Nick Coutrakon

Quant Trader at SMB Capital

What is Line Your Own Pockets?

A weekly show for systematic traders who want to make more money from their trading strategies.

Michael: 00:00

Okay, everyone. Welcome back to another episode of Line Your Own Pockets. We teased a little bit last week that we've got a special episode, and I'm sure you can see if you're watching the videos already that we that we do. This is really cool interview. Again, I've been following a lot of SMB's work and Bell's work for ten, not to date anyone, for probably ten, maybe even longer, fifteen years now.

Michael: 00:23

So it's really, really cool to, you know, see a lot of these people, I'd say in person, but via our podcast as opposed to just watching them on YouTube. And we have a really cool discussion about discretionary versus systematic trading or discretionary kind of complementing systematic trading and how all of that will work. Again, really pumped for this one. So Dave, why don't you take us away, intro people a little bit, and get us started?

Dave: 00:49

Yes. Yes. Before we get started, for people that may not have heard of either of you, so Mike, why don't you introduce yourself really quickly? And then Nick, you can do the same.

Mike Bellafiore: 01:00

I'm Mike Belafuri. I am the cofounder of a proprietary trading firm in New York and Miami, SMB Capital.

Dave: 01:10

Okay. Nick?

Nick Coutrakon: 01:10

Yeah. And, yeah. I'm Nick Kutrikan, equity discretionary automated trader at SMB Capital, and kind of run the quant or the automated trading group in the New York office.

Dave: 01:23

Awesome. Great. Well, thanks for being here. So just to set the stage here for listeners, Mike and I have we've known each other a while now. It's been several years.

Dave: 01:36

We've wanted to have you Both on

Michael: 01:38

mics, just in case he was wondering, both of them.

Dave: 01:42

We've wanted to have you on the show for a while, and you and I have talked about different topics that we might talk about. We didn't come up with a really good one. We wanted to come up with a really good one. You've been seeing it on a lot of podcasts. And you and I were speaking the other day and you mentioned an idea that Nick had for the way you approach trading groups at your firm.

Dave: 02:05

And I thought it was a good idea. We had a little bit of back and forth. We got off the phone. I was I was about to type you the long email about some more thoughts I have about it after we spoke. And then I thought, well, this might be a very good topic for the podcast.

Dave: 02:21

So I just say, hey, why don't we have you on to talk about this exact topic? So Mike, can you review a little bit for the audience a little bit of our discussion and the idea that Nick had for how to change your approach a little bit for how you set up groups at your firm?

Mike Bellafiore: 02:42

So I think I should take, half a step back, maybe a full step back, Dave, and explain a little bit about what we do and what we specialize in. So we're a proprietary trading firm and our business is hiring people to trade firm capital. And we go and look for people who are passionate about trading while they're in college and we bring them into our internship program and we let them compete during their internship program. And then the best of the interns are offered a spot on our desk to trade at our firm. And our firm, as you know, is made up of primarily discretionary trading, But uniquely, we also have technology and we also give traders the ability to trade with automation.

Mike Bellafiore: 03:47

I say automated trading, you may say quantitative trading, and maybe we'll talk more about that. And so we're doing both of that in our firm. Our traders are clustered into teams. And so when I first started SMB, everybody traded by themselves, everybody traded their own book, everybody was a man on an island, but we would give them guidance. But essentially you were trading your own account and a you'd percentage of your production.

Mike Bellafiore: 04:20

That's what you did. And I'd like to think over the years we've gotten smarter and wiser and better, and I think we do year over year. And one of the things we noticed was traders did better when they were collaborating. And if we could set up an infrastructure that incentivized and encouraged and made a part of our culture traders to collaborate more, we would do better. They would do better.

Mike Bellafiore: 04:52

We would do better. They'd have a better chance to succeed. They'd make more money. They'd have more fun. Our business would do better.

Mike Bellafiore: 04:59

And so we're clustered as teams and so everybody, after they've been hired and after they come up the curve eventually goes on to join a team. The teams have different skill sets and different attributes of people on them. Think of a basketball team. We don't just put smart people together and call that a team. We don't just take eight swing traders and put them together and call that a team.

Mike Bellafiore: 05:35

We don't just take eight scalpers and put them together and call that a team. We don't just take eight automated traders and put them together and call that a team. Like a basketball team has different positions, so does a team at our firm. On a basketball team, there's a point guard and a shooting guard and a small forward and a power forward and a center. They have different skills and they have different physical attributes.

Mike Bellafiore: 05:58

And on a trading team, we think of that as well. So on a team there should be a senior trader who can tell people, Hey, this is the trade. This is the moment. This is the time to trade big based on their experience. And there should also be junior traders to help with idea generation.

Mike Bellafiore: 06:22

And now getting to your question, there should also be junior traders who can help with technology that can build scripts, that can build alerts, that can build market views, that can back test certain ideas, that can build automated strategies for the senior trader or for other traders on the team. There should be a component of a team of junior traders or even experienced traders who are expert in technology, who tee up more trading opportunities for the team, who give the team information that a particular trade has a larger chance of success, who give the team information that we should trade this bigger, who give the team information that certain types of trades are traded better, that helps the team with better entries and better exits and helps the team be more systematic about how they're approaching their work. And so Nick is instrumental in helping us to train people who come into our internship program to use technology better. And so when you come into our internship, you're also gonna spend some time with Nick where you're learning how to build an automated model, where you're learning how to build technology and tools to help find better trades and trade better.

Mike Bellafiore: 07:57

And have been under the impression, and we talked about this, I had been under the impression that we wanted to bring in traders to our firm who could be automated, but first learned discretionary trading, that perhaps had an interest in discretionary trading, and then were then trying to be automated. So they were discretionary first, they learned the basics of discretionary trading, they learned the ins and outs of how to trade, how to push the, I call push the buttons. So discretionary trading, say these are people who push the buttons. To you, that may seem arcane or Yeah.

Michael: 08:49

Saw him whinge a little bit when you said that,

Dave: 08:51

push the button.

Mike Bellafiore: 08:53

But for lots of us here at SMB, we push buttons. And so we're teaching people how to do that during an internship, but we're also teaching people how to build things, rules in, rules out. And so my thesis for a while and Jeff Holden's thesis for a while has been teach them how to be discretionary traders. Because if they don't know how to be discretionary traders and they don't know what goes into a good discretionary trade, then they're going to struggle at our firm being valuable with automation or helping senior traders with tools. And, you know, we were under that premise for a little bit of time.

Mike Bellafiore: 09:44

And I got to talking with Nick who has been bringing in some real tier one quantitative traders, some people with some real skills who have been helping him and some other traders at the firm. And Nick politely, but in a way that we like, we don't have all the answers. Giving constructive feedback based on his work with the interns and the younger guys said, quantitative traders really are the people who can add the most value to our discretionary traders and to our teams. And maybe we ought to look for in a class 20 to 30% of quantitative traders and work with them and bring them up the curve, understanding they're never gonna push the buttons, understanding they're never gonna be discretionary traders and being okay with that, and for them to go on and help discretionary traders. I'll bring Nick in here who will explain why I was probably woefully wrong with my thesis as to why the quantitative traders really are more helpful than the discretionary turned automated traders.

Mike Bellafiore: 11:08

So we'll queue up Nick and let him explain his feedback.

Nick Coutrakon: 11:14

Yeah, well, I mean, at first I think that a lot of it came from just empirically. We had a few years where we were trying that, having people go through some sort of like a discretionary training course and then at the same time learning how to build automated tools. But, you know, I think one thing that we found out is that it's really it's really difficult to be a quantitative automated systematic trader, however you wanna call it, to go through and analyze all of that data. It's a difficult task. It's and it's probably should be a full time task.

Nick Coutrakon: 11:51

And so, you know, bringing on people who who already have those skills working with data, specifically with automated strategies, you know, because how you're assessing those are little bit different than just any general data task, you know, optimizing for smoothness of returns, drawdowns, whatever, kind of keeping them in that bucket and, you know, pairing them with a discretionary trader who can kind of point them in the right direction for a certain piece of edge. But I think one of the things that we realized is that we don't necessarily need to teach quantitative first traders the discretionary approach so that they can find places of edge. That's something that an already experienced discretionary trader can just point them in the direction. And just how the discretionary trader doesn't need to fully articulate all of the variables that go into the setup, he can point them in the direction, and then the quantitrade trader can take over and say, I get that you're saying high volume. You know?

Nick Coutrakon: 12:54

But I'm the quantitative guy. So let me break down all of the eight different ways that we can actually describe that. And then it's kind of like they're just passing, you know, the workload back and forth. And we think that's promising so far.

Dave: 13:11

Yeah, I really like this approach and I like the way you describe the collaboration because when you mentioned this idea, Mike, the first thing I thought was, you're going to have, I think, like a more predictable outcome when you start from a discretionary side and try to become automated. Now, don't think that's really what you want. I think what you want in this situation is a high variance of returns, which I think you'll get in this situation. You want to create a situation where there's some magic, where client becomes sort of a question answer for a discretionary trader that has a lot of good questions. And the more time that goes on in that situation where they're coming at it from really different angles, but having empathy about, okay, what questions can I answer that maybe the discretionary trader hasn't thought of yet?

Dave: 14:18

Or what can I do now to give those questions, give them the answers to the questions that he might have very, very quickly? And then the discretionary trader starts to see what questions can be answered and they'll use their imagination to come up with completely new ideas, different ways of trading, edges that become possible from this. So I think it it I believe that you're going to have a higher variance of outcomes but I think in your business, that's what you want. You want you want some of these interactions to be very, very, very successful And I think that's what will happen.

Michael: 15:07

Yeah, so we talk about it all the time and I think this is interesting and kind of the point that I really thought of when you mentioned this was for us quants, right, systematic traders, whatever you want to call us, the idea generation is really kind of the hardest part, right? After that, you know, there's a lot of tools out there to test and to verify and to optimize and to systematize. So by using someone who, you know, spends their entire day at the screen pushing buttons and having that person almost as a data collector and, you know, recognizing patterns and coming up with that, I really think that's the largest edge that you could have there because then they're noticing something and say, hey, I've seen this thing happen three or four times, and then using the quant to make sure they're not just kind of looking for shapes in clouds. But I guess at the end of the day, one of my my big questions to you is that who there's there's some scenarios that I would see that could not be fully systematized. So, you know, say you have a team and this discretionary trader has actually been doing really, really well with this one setup and has been making a bunch of money, but then the quantitative trader has run the numbers, say, over a longer period of time or has done some sort of evaluation in that way and has found that, you know, this might not be a money making strategy in the long run based off the data, you know, how would you resolve that that kind of difference or discrepancy or argument of the guy saying, yeah.

Michael: 16:39

You know what? But I trade this thing and it makes money. And then the other guy goes, yeah. But I've tested it. And if you keep doing it, eventually, it's gonna be a negative EV bet.

Nick Coutrakon: 16:48

Yeah. I I mean, I'm I'll jump in there for a second. You know, I I think that for me, when I think about that, that just comes down to the data, you know, that goes into it. So when I think about, you know, a lot of the really great trades on the discretionary side of the desk, Trying to quantify those things, there's usually something that is not quantifiable about that setup. It could be of the animal spirits attitude of the market, be in a particular theme, there could be something in the news going on.

Nick Coutrakon: 17:22

If you don't have the data that quantifies those aspects to go back in time, then you might not be able to have a positive strategy. Also, discretionary guys, they're trading high anomaly, very rare instances, which maybe aren't the best things for automated or quant strategies in general.

Mike Bellafiore: 17:53

So there's a mural that sits on the walls at SMB here in New York City, and it says when you see it, this is to Nick's point, it says when you see it, swing the bat hard. And one of the things that the truly great discretionary traders do is when they see an unusual setup, an asymmetric risk reward setup, they are trading it with lots of size. They're also leaving room, by the way, at a firm like ours to put on exponential risk for special setups. And so you might ask for four times the amount of risk from your risk manager for one of these special setups. We have every month, we have monthly reviews.

Mike Bellafiore: 18:53

We're actually having them today around this discussion. And there are three really big trades that I can think of off the top of my head that I know every team's gonna talk about. And they actually happen to be technical setups on daily charts, technical breakout trades, all of them. But there were certainly more than three daily breakout technical trades in the month. But there certainly were three really special ones where we had a lot more risk on and kind of the better discretionary traders knew it and they were sharing it and they were talking to their junior guys about it and they were sized up in it and it made the month.

Mike Bellafiore: 19:43

We had a terrific month because of those three big opportunities. And so yeah, that to Nick's point, we are here. We have developed 7 figure a year traders since 2005 and even 8 figure a year traders and that's our business. That's what our reputation is known for. But you can't be an 8 figure a year trader without swinging the bat hard when you see it.

Dave: 20:26

So would you say that the main motivation for having a quant on these teams is to help those discretionary traders swing the bat harder with the trades that they're taking? Or do you look at it as coming up with strategies that are completely additive to what they're doing? Or is it some combination of both? Nick?

Nick Coutrakon: 20:54

Yeah. So in this example, I think it's additive, to be honest. I don't know how much a quantitative or automated trader is going to help a discretionary trader crush one of those trades that Mike brought up, you know, that makes the month and they're locked in on. You know, that's we're they're really good at doing that. For the additive, though, you know, they might be able to describe they might say, we wanna try to automate this one trade that we're really crushing, and they might try to describe that, and they have a really good idea of what that is.

Nick Coutrakon: 21:27

They think they know the parameters for that setup. And then when they bring on the quant trader to help them do that on a much larger basket, many more instances during the trading day, you know, the hyper parameters might have different values, you know, and that's what the quantitative guy can kind of tune, you know, the trip, and that will open up, you know, much more trades along the same idea. Maybe it's a similar technical breakout, but it it it likely will be trading things that kind of fall below the, the ROI for that discretionary trader, because their time is super valuable to either trade five or 10 of these a day and not have to manage it. That's kind of how I look at it.

Dave: 22:12

Yeah. The way I think of it is, at your firm, discretionary trading is like in your DNA, that's your bread and butter, that's always going to be the case. You're always going to want to swing the bat hard. I look at that as like the scale up approach. When there's another approach which quants tend to look at is they want to scale wide.

Dave: 22:35

So how many trades can we create for this idea? And the interaction and the language around that is sometimes orthogonal to the discretionary trader. So I think it's really important to get the right kind of quant in there that knows how to communicate with the discretionary trader. And it's tricky because a lot of quants have never seen a machine learning model that they don't love. But that's not really going to help the discretionary trader who's really looking for the theory and really looking to confirm theories that they have.

Dave: 23:19

I mean, that's really the only way they're gonna speak the same language and be productive in their work. Do

Michael: 23:29

you

Dave: 23:29

have instances where that works really well in certain groups? Do some groups work better than others in this interaction? And what sort of qualities of the collaboration do you think lend itself to that?

Mike Bellafiore: 23:48

So great question. One of the key parts of our culture, Dave, which I think is unique to many other proprietary firms is collaboration. So we're a firm that you may notice shares lots of stuff on YouTube and just doesn't believe the way to build your firm is to figure some stuff out and hide the crumbs. We are in front of the public sharing lessons and best practices that we've learned in our trading and people see on our S and B Capital YouTube channel. That attracts talent to our firm, which we then go ahead and develop into the next generation of great traders at SMB.

Mike Bellafiore: 24:41

And that's a big part of what we do here. But we also say to everybody who comes in, there's not really a secret sauce and let's not hide the crumbs. There's a really big ocean we need to go fish from. And if you work together, you're gonna be able to fish in more places and that's gonna be great for you. And that's actually pretty hard to do.

Mike Bellafiore: 25:07

There are younger guys who find some stuff out and instinctually they wanna hide it and you kind of have to say to them, I love that you're making a lot of money right now and you figured something out but this is not gonna be your career. A, this is gonna go away and B, you can do so much more than just trying to make $50 here and this You did great work to find this $50 but this is not the career you are capable of having. But specifically to your point, we have a couple of discretionary traders who are not stars at our firm. They're mid 6 figure a year traders. They are still on the younger side, probably in the two to three ish year experience.

Mike Bellafiore: 26:00

But they're not the Max Ganics of the world making mid 7 figure a year traders. They're not the Stephen Hayjars of the world. They're not yet stars. They had some ideas. And they went to a young guy with really great quantitative skills to Nick's point.

Mike Bellafiore: 26:23

This is a guy who really had the skill set. This is not a discretionary trader turned automated trader. This was a person brought into the firm with elite technical skills who never wanted to push the buttons, told us he didn't wanna push the buttons. We were never gonna ask to push the buttons. If you gave him an account and asked him discretionary trade, he's 100% would lose money.

Mike Bellafiore: 26:47

And that's okay. That's okay. And he looking around to try and help some people and he found a couple of these guys and they started talking. And the discretionary guys were trying to build some automation and failing. But they had good ideas and the quantitative younger guy who had never made any money in anything even on his own models came in and started working with these guys and they were able to turn in multiple models that have made real money.

Mike Bellafiore: 27:33

They're making real monthly income from these models. And it's this combination, to Nick's point, of quantitative skillset with discretionary traders who don't quite and Nick explains this to me all the time They don't quite understand the edge. They're close to it and they're definitely headed in the right direction. They say things like the volume's coming in, but they don't really know what that means and there's lots of different ways to define it. But the quantitative trader helped them sift through where the real edge was and build something meaningful.

Mike Bellafiore: 28:16

So we certainly see areas of that. And then there's lots of other examples where technology driven traders build tools that help the discretionary trader make more and build tools the discretionary trader can never build and build them better so they're spotting more opportunities and finding more stuff.

Dave: 28:47

Yeah.

Michael: 28:47

So first of all, I think for the audience, if you are like the quant that was just described, there's hope for you. And I I was laughing and nodding because especially when it comes to day trading, that's a 100% me. I I could not, you know, try different ways, but from a discretionary point of view, just wasn't for me. And I think that's really cool that people like that are able to find a spot and say, Listen, I have a skill set here in, you know, building models and quantitative and doing that kind of things and I don't have the skill set on that side of things and being able to find people, I call it left brain, right brain or whatever it does that cause it, but different people having different attributes and different skill sets, being able to find a nice place in the the thing. So it sounded like this guy, you know, had a dream to become a trader, but just didn't want to actually do the the the button push pushing as you call it, but loved the idea of kind of exploring the math behind it and the models, and it's just super cool to hear that because I know there's probably a lot of people that were like me watching and saying, Good, there's hope for me yet.

Mike Bellafiore: 29:59

Yeah, and the way that we thought of think about it also to supplement what you guys talking about before, we think about trading done in teams. The best trading on our desk is done collaboratively. We have many traders who trade joint accounts together and I'm thinking of a team, and this is probably the best team that we actually have at the desk. They are making the most money recently and their risk adjusted returns are the best. And they spend the day talking to each other about certain trades, game planning certain ideas, kicking around ideas, getting people with different points of view to give input on certain trades.

Mike Bellafiore: 30:52

And they collectively are able to make better decisions. We think that I've sort of stopped from sort of saying people shouldn't be trading by themselves anymore. I'm getting really close to just sort of saying that publicly. Maybe I just have. But like when we started, everybody did it for the most part by themselves.

Mike Bellafiore: 31:21

I'm getting really close to saying that there should be the Surgeon General should come up with some warning against that and it should be plastered on all of the brokerage accounts. Don't do trading by yourself. And it's not just you should just get this gaggle of people or this collection of like minded people and get them on a headset with you together as well. I don't think that's the optimal way to do it either. I think it's this team approach where there are people of varying skills who can collaborate to help people make more, and certainly quantitative traders have to be a part of that even for discretionary traders like us.

Mike Bellafiore: 32:10

Quantitative traders have to be helping with backtests. They have to be helping with tools. They have to be trying to automate certain ideas. And, when you do that, you know, we see, as we say here, one plus one equals 99.

Dave: 32:29

Yeah, I like that approach. I have this roadmap product that I give people that sort of gives them a roadmap for success. And one of the things I include in there is coming up with a trusted trading group, how to create a trusted trading group. It's just so important to do that. And most people's instinct is, like you were alluding to before, most people are takers, they're not givers.

Dave: 32:59

And when you take, when you hoard, you're actually creating an island for yourself. You're gonna be so much better when you're giving. And when I think back on my career, the biggest turning points, the biggest inflection points were interacting with others and not other people that were just like me, other people that were very different and have a different perspective and had ideas that I would never have thought of on my own. So yeah, I think that's absolutely important and it goes against a lot of people's instincts.

Mike Bellafiore: 33:37

And people also think that what they should do is they should go find the trader who makes the most amount of money and just copy them and only learn from them. And so we do have a lot of really star traders on our desk, like truly some of the best to ever do it. But we tell people, on those legendary trader teams, that they can learn, yes, from the star trader, but they also will learn a lot from people who are at the same experience level as them. And they will also learn a ton from people who are younger than them, that have less experience than them. You don't want to just learn from the person above you.

Mike Bellafiore: 34:23

You want to learn from the person with less experience. You want to learn from people that have the same experience, to get a full because you don't know what's really gonna be that catalyst to take next steps forward, and it's not always just that guy who makes a lot more money than you. We just don't see that on our desk. A lot of times, it can be the guys in the same position who are in on a Saturday reviewing a trade that they could have made more in and going over their entries and their exits and pointing some stuff out to each other that really can move the needle. And I'll just sort of say this one more point just about quantitative traders for teams as well is that we see on our desk, I'm thinking of one particular trader, there's a ton of models who was doing okay but when he went to go start to work with other people who were on the quantitative side of the firm, people like Nick, other automated quantitative traders at the desk, and started to use their tools that they had built that this other trader didn't have and started to talk about models with these other quantitative traders.

Mike Bellafiore: 35:45

These other people who didn't generate the ideas were able to help the trader improve their models dramatically so that this trader now is doing so much better. And so I think it can be true on the automated and quantitative side to be teaming with people as well.

Nick Coutrakon: 36:12

Yeah, and I would add that I think on the quantitative side there's maybe even more of that tendency to kind of keep your IP and be more isolated because you've got your code and that can be more easily replicated by some other discretionary guy telling you their strategies and stuff. But at least for the quant group in the New York office, the more that we can focus on the non IP specific parts of strategy building so that we're all not reinventing the wheel. That's how we can unlock that one plus one equals 99 stuff while preserving everyone's property.

Dave: 36:54

Yeah, that's a good point about code being the tendency to keep that closer to the chest. That makes a lot of sense. I can see. So how do you convince somebody that might be hoarding their ideas or have that mindset, how do you convince them to open up and be more of a giver than a taker? It seems like it's Well,

Nick Coutrakon: 37:20

is a 100%. That was definitely a challenge, especially with the quant guys. Because, again, it's code. You give to someone. They have it now.

Nick Coutrakon: 37:30

They can reproduce it exactly. It the I think that comes down is, like, the softer skills. You know, you have to create, you get everyone bought in, you gotta create a sense of team of identity. And it starts by example, you know, like, so I built a bunch of kind of just like open source, whatever I was using and said, Hey guys, here's a bunch of shit that I use that's non IP specific for submitting backtests, analyzing backtests. We're a team.

Nick Coutrakon: 37:56

We're a group here. Let's all contribute to it. And, you know, after a couple months and, you know, happy hours help, people socializing, all that stuff helps, but it kind of organically, then you get everyone who's like, Okay, we're doing this together. That's the best answer I got, I think.

Michael: 38:18

Know you I'm sorry. Go ahead, Dave.

Dave: 38:21

So in my CTO days at Trade Ideas, I hired a lot of developers. And developers have that kind of mindset. They work a lot of work, but not really. They aren't accustomed to working on a team. And the thing I came up with that was effective was really challenging specific people to not only be the best they can be, but how can you make others on the team better?

Dave: 38:51

Like, that is how I'm going to be judging you. How can you, what can you do to make other people on the team better? So that, that was effective, and I think that could, I think it could have this a similar promote a similar mindset with traders that I think would be effective. Can you do to make other people on the team better?

Michael: 39:11

Well, and and to go into that, right, we've we've talked to Brett Steenbarger on this this podcast as well. He talked about the whole group thing. He's very big on that. And we know you guys are big relationship with him and big into coaching. And how do you notice or have you had any experience with coaching, like, say, a quant versus a discretionary trader?

Michael: 39:31

That to me seems like it'd be wildly different, whereas one is, you know, more in the emotional control side of things and maybe on the quantitative side, you've got to approach that or maybe open that up a little bit differently. I always thought that was that was interesting what you do because you know it just almost seems like a hey you know go go back to your computer and work hard, I just don't know how I'd start to coach that kind of trading.

Mike Bellafiore: 39:58

So I So I appreciate the word coaching and the spirit that you're using it. If I can just get back, I actually wanna supplement your comment, Dave. I think it's very important for a firm like ours to hire the right people. And if I actually really think about it thoughtfully, which I think we do, it's not even just about hiring the right people. You have to attract you have to spend a lot of time at a firm like ours attracting the right people to apply to your firm.

Mike Bellafiore: 40:38

And and how are you gonna do that? And then the second thing is you have to hire people who will fit your culture. And we do see that there are people that will not fit into a culture of sharing and collaborating, and who will be quick to hide the crumbs. And we also see people that really enjoy working with others, that do have a history of teamwork, that legitimately find it to be way more fun to work together than to sit in front of a computer screen for ten hours a day staring at data going up and down and trying to make some P and L. Are people that get a lot of satisfaction from doing it together and providing value.

Mike Bellafiore: 41:50

So that's important to fill a firm with people like that. That firm will do a lot better than a firm filled with hide the crumbs people, and it'll be much more sustainable. So that's important.

Dave: 42:09

Yeah, I love that. I would think that there's, you guys have been around a long time and was there a certain point where you realized that the culture, I mean, it kind of sounds like the culture is the most important thing ultimately. And was there, did you set out to create a culture that you wanted and you had that in mind or did that evolve over time? Can you talk a little bit about that?

Mike Bellafiore: 42:33

It definitely evolved and Doctor. Steenbarger has been an integral part of how we teach and develop in our culture here. Getting back to your point, Michael, about coaching, I think a lot of people don't understand what it is somebody like Nick or myself or Jeff Holden does to help develop a trader. And I think a lot of times people think it's, you you give them a pat on the back and you say, You'll get through it. Just be patient.

Mike Bellafiore: 43:12

Or, Why don't you do some breathing exercises when you're on tilt? Like, that's gonna help you. And not that that isn't effective. That is a good technique. You know that from being a former athlete.

Mike Bellafiore: 43:25

There are techniques to calm your body down, and that stuff works to a certain extent. But nothing works in this game unless you have edge. And what we really do around here, and our culture speaks to this, is we teach people how to find edge. And so our culture and there's are things that go with finding edge, our culture certainly speaks to that. So one of the things that's way more important than copying a master is somebody who has a growth mindset.

Mike Bellafiore: 44:02

Shark is one of the great traders to ever do it in our space and is still to this day, I think almost miraculously trying to get better. He's trying to be bigger, he's trying to risk more on his best trades. He sets a tone for everybody else here. Guys at our desk really do wanna swing the bat hard when they see a really great trade. That's a part of our culture.

Mike Bellafiore: 44:34

And the next time they wanna wanna swing it harder. Collaboration is is really important. This is a game about finding edge, and you really do need to be here on a Saturday when you're coming up the curve and a Sunday when you're coming up the curve watching film, doing playbook trades, doing your ERC's, other report cards, doing your trade review, studying your work, studying your charts to find that edge. So people say they really want to make it and they really want to make a lot of money in this game. They say in every interview.

Mike Bellafiore: 45:16

And then Steven Hajar walks in

Dave: 45:18

the firm.

Mike Bellafiore: 45:20

And that's a person who's hungry. That's a person who really wanted to be a great trader and now is doing really well. I mean, that's a person who was here on the Saturdays and here on the Sundays and watched back tape and picked the brains of senior traders and, you know, was intensive with all the work that goes into moving the needle. Like, that's what that that's what Hungary looks like. Not not saying it during an interview.

Mike Bellafiore: 45:49

So, yeah, picking I've said before you're only as good as the people who walk through the doors. SME is only as good as the traders that we train, and you you gotta you gotta pick the right people.

Dave: 46:05

Yeah. I love that. So I remember a quote from you. Just trying to think how, you know, some of the people in our audience who are in the retail space, maybe never will be in the prop trading space, what they can take away from this podcast. And I think I remember you saying one time, networking is a trading skill.

Dave: 46:31

That's totally true. The better you are at networking, the more interactions you're going to have with other traders. I hope that listeners can take away some good points here to apply to their own trading, their own journey on becoming more and more successful and interact and be more of a giver than a taker. So just to wrap up here, Mike, Nick, do you have anything on the horizon that you're excited about or working on and how can people get in touch with you if they'd like to?

Nick Coutrakon: 47:18

I'm not really I I get in touch through, I guess, the SMB page, hiring page. That's that's mostly my interaction.

Dave: 47:31

Okay. Great.

Mike Bellafiore: 47:34

I have an email, [e-mail], and I'm at Twitter at mike bellafury.

Michael: 47:41

Mhmm.

Mike Bellafiore: 47:42

And I'm on LinkedIn as well. Same name. But, yeah. I mean, what one of the things that's just really promising about even the independent trader space is the ability for people to be able to trade with discretion and quantitatively unlike they did when I started. And your ability to connect with people is easier than when I started.

Mike Bellafiore: 48:14

And you can go to events like Traders for a Cause in Miami coming up, Q1 next year and meet a lot of really serious retail independent traders and connect with them. I've always found if you look, if you reach out to somebody who you really wanna talk to and they say no, you haven't really lost anything. And I found that lots of people actually say yes. And so I still do that today. I still reach out to people.

Mike Bellafiore: 48:53

Today, I actually wrote an email to somebody the other day who hasn't written back to me, which is fine. But, you know, lots of people and that that is important to keep growing your network. It's it's important for you to keep thinking about growing your business. So you've got a bunch of models that are working right now. Try and put in some safe measures there.

Mike Bellafiore: 49:17

Can you diversify that existing business? You do it by adding a new strategy. We have many, many different strategies at our firm that we run and we're still, always spending some time trying to build out a new one. There are some strategies right now that are a big part of our P and L that two years ago weren't. They just weren't.

Mike Bellafiore: 49:44

We put a team together, they started Ling, they had some success, it spread to other people at the firm, and it grew from there.

Michael: 49:54

So, yeah, again, I I love all this. I love the the combination of of where each, you know, discretionary and systematic and have their strength and and working in teams, something we talk about all the time. And and more than anything, just appreciate you guys coming out for a chat. I know our viewers are gonna absolutely love it, and and make sure you're going. Checking out the S and B YouTube.

Michael: 50:17

Again, I'm a subscriber. I watch the the videos that come out and love them there. Insane amount, like like was already mentioned, insane amount of free content, insane amount of just giving ideas and and systems, and there's been a couple things that you guys have then mentioned from a discretionary point of view or or reviews of trades that you've put out that I've gone back and then just start to try to test and and model and build from there. So great resources there, and appreciate you guys all for coming out. And hopefully, you'll be back one day, and and we'll talk some more.

Mike Bellafiore: 50:53

Absolutely. And if people are out there and they need capital and they need some tools, can I say this? Is it okay for me to say this? Absolutely. Do hire quantitative and automated traders who who need capital and resources and technology, at our firm.

Mike Bellafiore: 51:15

You you go to our website at sandbcap.com/careers and and happy to chat with you.

Michael: 51:22

Awesome. Well, absolutely do that. I highly recommend it. We're probably gonna get more than a couple, I'd say, from our audience. Again, appreciate it very much and again, hopefully talk to you guys soon.

Mike Bellafiore: 51:33

Alright.