How Does He Do It?

Matt Caruso caught up with legendary trader Larry Williams in Sydney, Australia by phone. In this revealing interview, Larry shares some of his secrets on how he does it.

Larry Williams has been trading futures and commodities for well over 40 years. He is among the most highly regarded and well known short term traders in the world. No other trader is as accomplished as Larry Williams. He has taught thousands to correctly trade the markets, won many trading championships, and has been the only futures trader in the world to repeatedly trade $1 million of his own money live at seminars around the globe.

Larry began following the markets in 1962 after his interest was sparked by the Kennedy market crash, when President Kennedy forced a roll back in steel prices. The crash was front page news everywhere. People lost millions but Larry was more taken by the fact that if you had been "short" the market, you would have made millions. Larry began to understand that he could make a $100 day trading the markets, whether the market was going up or down, and he was smitten. To a 20 year old college kid, $100 bought a lot of beer and pizza. Larry Williams graduated from the University of Oregon in 1964 with a bachelors in Journalism, thus his passion for writing.

By 1965 Larry was actively trading the markets and began writing newsletters as well. In 1966 Larry developed his famous timing tool, Williams %R. In 1970 Larry's first investment book, The Secret of Selecting Stocks, was published, followed shortly by, Sure Thing Commodity Trading, How Seasonal Factors Influence Commodity Prices.

In between trading, researching and developing trading tools, teaching, and writing, Larry managed to run twice for the U.S. Senate as well as 65 marathons. He holds a higher degree in archeology and has manned several expeditions. Larry's long list of best-selling books includes 1982's How to Prosper in the Coming Good Years, which accurately forecasted the largest bull market and surge in economic growth in American history. He is a past board member of the National Futures Association and the recipient of numerous awards. On October 6, 2002 the mayor of San Diego declared that day as Larry Williams' Day.

Matt Caruso [MC]: Good afternoon, Mr. Williams. What is your professional job description?

Larry Williams [LW]:  I just call myself a trader and author.

MC: When you apply technical analysis are you a top-down or a bottom-up analyst? Do you look first at the long term charts going from monthly to weekly to daily or do you look first at the intraday charts, then daily to weekly etc…?

LW: I actually first look at weekly and then go to daily charts but as you know I look more at fundamentals than I do to the technical side. I don’t look at the technical view to first to find a trade, I think that’s fundamental selection. After that I’ll go to daily charts and what we call technical analysis to look for entries.

MC: Once you have the desired setup for a trade, what specific techniques would you use to enter it?

LW: I’ve found is that the market is really hard, and there is no one entry technique that works all the time. Therefore, I have a repertoire of entry techniques, maybe 6 or 7 entry techniques, and hopefully one of those will appear when the market is ready to move, but I may still miss a trade. Usually one of those techniques is there but you just don’t know, the markets don’t always top and bottom the same way.

MC: Do you have a certain way to exit your trade or a certain technique or a tool that you use?

LW: Exits are a little different. First, as soon as I’m in a trade I have a stop because I don’t want to get tagged on the markets too much. Then I usually have, but not always, a target that the price should go to. I have a trailing stop, and lastly, I may have an opposite signal.

MC: What kind of money management do you use and how important do you feel it is in trading?



Figure 1 – Crude Oil with %R, Stochastics and CCI (Chart by TradeNavigator, www.genesisft.com)