In this episode of Better System Trader Andrew Swanscott interviews Larry Williams. Larry Williams started trading futures in 1962 and has been successfully trading for almost 60 years. Surprisingly, he graduated as an Art Major and doesn’t have a mathematically background. Larry credits his artistic eye to helping him view charts with a different perspective than other traders do. In 1987 Larry won the World Cup Trading Championship turning $10,000 into over $1,100,000 in just over 12 months. That represents a 1100% annual return and is the highest return ever achieve in the contest. Ten years later his daughter won the championship with a 1000% return. A number of Larry’s students have also won the championship. Obviously, Larry knows what he is talking about! Larry is also an Author of numerous trading books and has a number of indicators named after him including the Williams %R momentum indicator. Larry classifies himself as a conditional trader which means he needs a number of conditions to align before he will enter a trade. He uses fundamental analysis to predict when markets should trend combined with technical analysis to determine when he should enter and exit trades. He looks for a number of conditions, usually 3 or 4 to line up before entering a trade. Larry compares his trading style to the opening a combination lock. If you can figure out the first two number there is a good chance that you will be able to figure out the third number and open the lock (i.e., get into a winning trade). Unlike many traders who only trade based current price action, Larry tries to forecast the direction of the market based on seasonality and historic price patterns. During the interview Larry answers listeners questions which cover all areas of trading. Larry’s favourite trading book is The Zurich Axioms by Max Gunther.
Trading advice from the Podcast that will make you a better trader:
- Retail traders like to buy strength while professional traders prefer to buy weakness. For this reason, professional traders are typically more successful.
- Most indicators are redundant because they all basically reflect price action. You should try to minimize the number of indicators you utilize in your trading strategy.
- Larry’s son is a professional psychiatrist. He studied the psychology of successful traders and one of the major findings was that none of them had the same trading style. One thing that they had in common was that they took time to develop trading style that fit their personality.
- Stop looking for a holy grail trading strategy.
- You don’t trade the markets; you trade your personality.
- You need to find the trading style that is compatible with your personality.
- Market tops usually take time to form while market bottoms tend to happen quickly. As such market tops are hard to predict while market bottoms are easier to spot as they generally exhibit some type of technical pattern.
- Fundamentals do a better job of predicting market tops than technical analysis.
- Short term chart patterns are helpful to traders because they are a reflection of human emotions and therefore, they are repetitive.
- The big money in trading is made trading relatively small positions over a longer time period.
- The market trend is the basis of all profits; no trend, no profits.
- Larry doesn’t believe you can be successful over the long term as a day-trader. Most people are drawn to day-trading with the belief that you can make a lot of money quick. Unfortunately, you can also lose a lot of money quickly and that ultimately takes the majority of day-traders out of the game.
- Larry risks 2% of his capital on each trade and has a maximum of 4 active positions at one time.
- Successful trading is all about keeping as much of your capital as you can so can trade again tomorrow.
- You need to back-test every trading strategy you use so you have confidence in the strategy and can stick with it over the long term.
- Good money management is the key to long term trading success.
- New traders should focus on small trades until they have a track record with their trading strategy and can continue to pull the trigger on new trades even after a sustained losing streak.
- The more money you risk on a trade the more emotional the trade will be.
- As a new trader you need to condition yourself to understand that the market is not going to go straight up. Depending on when you start trading in the market cycle you may have to endure multiple down years before your strategy becomes successful. If you don’t stick with your trading strategy during the drawdown you won’t be there to capitalize when it becomes profitable. You won’t stick with your strategy if you haven’t backtested it and trust it.
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