Larry Williams has been a trader and market researcher since the mid-1960s and is the author of numerous books and a speaker at major investment conferences throughout the world. Currently his time is spent in full-time trading and research. Mr. Williams has created numerous market indicators including Williams % R, the ultimate oscillator, COT indicators, POIVI (a combination of price open interest volume accumulation indicator), synthetic VIX indexes that have applications for all markets, and pioneered the use of the Kelly ratio for money management. He has won the Robbins World Cup trading championship, trading $10,000 to over $1 million in real-time with this money management technique.
Fast-moving markets and electronic trading have made daytrading even harder, says Larry Williams, while swing traders have more time to allow trends to work in their favor.
We're talking about short term day trading with our guest, Larry Williams. Larry, let's talk first about timeframes. Which ones do you use that you recommend other traders use?
I throw them all out. Because you have a really different market now. You have markets that trade very inactive for a long time period so if you use a five minute bar chart during an inactive time period, how do you compare that with a five minute bar chart during an active time period? I really prefer tick bars or volume bars. I think time bars are kind of dead because of the inactivity of the market and then it gets very active again thanks to the electronic trading.
So it sounds like traders have to be very nimble and be able to adapt to the situations?
Well, they've always got to be nimble to day trade and I think that's one of the problems with day trading. Day trading, the dream of day trading usually ends up a nightmare because you're really limited in terms of time. The base of all profits is trend. No trend, no profits. Well, trend is a function of time. No time, no profits. This is really hard. You've got to be very nimble to be a day trader and I think for most people it's a waste of money and a waste of time. There are easier ways, lower hanging fruits in day trading, but that's what people want to do. So it's possible but it's tough.
Well, talk a little bit then about what do you recommend instead of day trading?
Well, I can day trade and make money at it but I think actually swing trading for moves of three days, 12 to 15 days, that's where the big money is. The big money in day trading? No. Because your losses are going to be probably bigger than your gain, so that's tough. When swing trading, I can limit my losses better than day trading and it's not nearly as emotional or at my age, 70 years of age, I don't need to day trade. I want something a little less nerve wracking and I wish I would have started that approach when I was 20 instead of when I was 70.
Do you think a lot of people go into day trading because they want the excitement, the adrenaline rush, maybe the idea of some fast profits?
I think that's part of it and they also have this I can't get hurt during the night session. Well, actually, you need the difference of the change between last night's close and today's open, that's where the money is holding a trend move. So I think that's a fallacious assumption on their part that I can limit my risk by not holding overnight. That just means they're betting too big during the day if they can't hold overnight.
What kind of mindset change is necessary to move from day trading to a more swing trading style?
You need to be more relaxed. You don't have to be so focused. You don't have to try to make money immediately on the next tick on the marketplace. It's kind of a step back removal to all better lifestyle.