INTERVIEW
Celebrating 50 Years Of Trading
Larry Williams And The Art Of Short-Term Trading
Larry Williams has taught thousands to 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.
Williams began following the markets in 1962 when the market suffered a severe fall. He discovered that if you had been short the market right at that point, you could have made millions. He also found out that he could make $100 a day trading the markets, whether the market was going up or down, and with that, he was smitten. To a 20-year-old college kid, $100 bought a lot of beer and pizza! By 1965 Williams was actively trading the markets and began writing newsletters as well. It wasn’t long before he began producing ground-breaking market research. In 1966 he developed his famous timing tool, the Williams’ %R, a tool that is still published in major financial newspapers and that is a standard indicator provided on trading websites from Msn’s Money Central to Yahoo.
In 1970 Williams’s first investment book, The Secret Of Selecting Stocks, was published, followed up with the first book ever on the seasonality of stocks and futures, Sure Thing Commodity Trading: How Seasonal Factors Influence Commodity Prices. He spoke with Stocks & Commodities Editor Jayanthi Gopalakrishnan and Staff Writer Bruce Faber on August 22, 2011, via a telephone interview.
Larry, how did you get interested in trading?
It all began in 1962. What captured my attention was that the stock market crashed, just like it did recently. President Kennedy had lowered steel prices in 1962 and maybe that was the reason. It was the worst decline in years. Of course, it was on the front page of all the newspapers.
I was in college at the time and did not know anything about stocks, so I asked what that meant. I was told, basically, that I could have made a lot of money in one day if I had known about the crash beforehand. The idea of making a lot of money in one day really appealed to me.
What happened between then and when you were trading futures in a big way? How did you go from “that sounds like a good thing” to being a big trader? What was the progression?
(Laughing) Oh yeah, I traded one day and then I made millions.
Yeah, that’s what we thought.
Not quite. I started following the markets, asking, “What is this?” I have a degree in journalism. I started as an art major in college. I was totally clueless about this stuff. But my art background was great because I could see all these patterns and relationships. I could look at charts and see things that others would not. The first book I ever read about the markets was by Joe Granville, whom I think of as such a hero. I don’t agree with him on a lot of things, but he made some major contributions. He taught us so much about so many things. After reading his book I started trading stocks.
Losing money is the best experience, because by winning money, you don’t necessarily learn anything. In fact, you may get overconfident.I didn’t know anything about futures. That was the farthest thing from my mind. By 1966 I was trading stocks and had a bit of luck. A broker said to me, “You are doing great at this. Why don’t you trade commodities?” I said, “Isn’t that risky?” He explained that pork bellies don’t have as large a percentage move as, say, utilities do. The problem is that to buy a utilities stock you have to put up 60% of margin, but to buy pork bellies you have to put up about 5%. So it is how much money you put up that makes it risky. Most commodity traders want to put up the bare minimum. That means they get knocked off the horse all the time because they are not capitalized for this. So he told me if I capitalized the trade correctly, with my trading skills, I should be okay.
And back then, the big thing was to make a $5,000 trade in stocks. Your commission would be maybe $650–700, and a similar trade in commodities was about $40. Commissions were really high in stocks, so I thought I would give commodities a try. I did, and the rest is history.