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Larry Williams Strategy - Guide Part 25
Larry Williams Merchant
Larry Williams burst onto the business scene in 1987 after he succeeded in what used to be called the Robbins Business Competition. Now is the World Cup Business Championship. He has turned a $ 10,000 account into well over $ 1.1 million in 12 months. By the way, it has turned the accounting into well over $ 2 million, however two final operations did not work and the accounting concluded closing at $ 1.1 million.
Over the years, he has shared his business ideas and written a gigantic proportion of books, I think about 11 business books, which is perhaps more than any other merchant. He has performed internationally and also used to hold his "Million Dollar Challenge" (MDC). He more on that a little later. On those days, you will find Larry talking about his trading on his website IReallyTrade.com.
I think he is, a genius. Incredibly generous with each of the business ideas he has posted. He is a super nice guy.
Now, what do we have the possibility to learn from any trader?
He will never operate exactly like another operator. However, study what they do, understand why they make it, and tailor what works for you. I think it is excellent advice for everything you read, learn or watch online about business. It requires taking the ideas that resonate with you and working on them and making them your own. This is the best way to operate, rather than trying to mechanically continue what someone else is doing.
Larry Williams Business Strategy
Input using settings, indicators and patterns
This is Larry's business methodology the best I can summarize. He argues that he is not a technical trader, that is, that he is not based on technical research. His configurations are based more on the "fundamentals" and he uses 3 main indicators of the market to see when these configurations remain happening:
Merchant Engagement - He was one of the first merchants to take a deep look at merchant engagement data and has written a number of books on the subject.
Interrelationships between markets: The interrelationships between the activity market and bonds, gold, etc. These interrelationships between markets are very relevant in their negotiation.
Seasonality and multi-year patterns: The month-to-month seasonality patterns in certain of the commodity markets are incredibly relevant. However, in addition, multi-year patterns. Exemplifying, the 4-year period in the stock market that is driven by the presidential election period. Later, a period of 10 years that is identified in the stock market, and in this way successively.
Their trading configurations stem from these 3 fundamentals: merchant engagement, market interrelationships, and seasonality. Then, to activate trade entries, use historical patterns.
Exit using basic system rules
To exit operations, Larry uses certain different procedures:
"Bailout" exit: in other words, closing a position at the first profitable opening. Now remember, several of Larry Williams' trades are swing trades. Actually, he is not a daily trader. If he has a profit on an open trade, he will come out on the open. If he is in a losing stance, wait until the next opening to see if he is profitable at the next day's opening.
Number of days: in other words, close a position after a fixed number of days, let's mention 3, 5, 7 or 10 days. It will put different days as mechanical or systematic output.
Wide Stops: Sayings keep you in business for a bit longer. He is the source of much criticism. Several traders comment that wide stops are insane, with the proportion of capital that you have to trade for those wide stops to work, they still work.
The way it is there, that's all, in a nutshell, my perspective on Larry Williams' trading methodology: setups, inputs, and outputs. So what can I convey, in terms of lessons learned, by trading with Larry Williams? Without breaking confidences, without revealing concrete configurations, etc., these are the principles in general, the visualizations and what I have learned from reading and looking at the Larry Williams business.
Business lessons learned
Lesson # 1: Use the market trend to re-mean
The market is in a horizontal channel and you go out of that channel and then you want to go back to the channel. Or it is in a trending stage, either up or down and temporarily oversold or oversold. Either way, the market will want to return to a medium reversal stance. Periods in which mentally things get out of the head temporarily, are resolved by returning to the mean.
This became clear to me, whether it be on the second or third day of the MDC, once Larry was defining a particular setup. He was quite interested in where the open compared to the close, the highs and lows of the day before. Someone in the audience commented, "What if the open space is further away?" And Larry coded it using his Genesis program, which is quite powerful for backtesting patterns with interactions between markets. He commented, "Yes, it could be a great trade as it tests well and opening in such a stance would especially lead to a winning trade."
Then the merchant comes back and says, "Well, what if the open space was somewhere else?" And again, it seemed to me that what Larry Williams was really mentioning was that the further he was from the mean, the more likely it was that bartering would be profitable. He was constantly trying to find those opportunities where the outfield got out of control, he was out of position compared to where he had historically been. He was trying to find opportunities to close that gap and make the market mean again.
So the market re-signifying is a pretty deep force in the market, and he he was using that to look for business opportunities. Said is the first lesson.
Lesson # 2: The market is often more random than rational
It had nothing to do with an actual Larry Williams quote, but rather a generalization of which he was actually mentioning. And again, this came from a question on the MDC. It would have been the second day in which one of the merchants asked: "What is it just what he has learned in the business that is the best initiative that he has come up with?" He mentioned: "The exit of the 'rescue'". Exit at the first profitable opening once you are trading a position. He commented that he hadn't really come up with the initiative, yet he had done so much backtesting on the initiative that it felt like it was his.
The "rescue" exit works with a huge stop as it is using the randomness and volatility of the market to get it out of the way for a position to be profitable. And so he fundamentally says, "If you have a profitable stance, get out, get out." Its effectiveness lies in the conjunction of using a profitable first opening with a huge stop, those 2 things together. The huge stop enables you to sit through enormous volatility in the market. Afterwards, if you have a profitable open position, close the position and take your money.
The market is often more random than rational. Your reaction to the business should keep that in mind. I think it's really quite a fundamental lesson that we try to see the logic and that the market is up or down on a particular day, or trends in a particular direction, why does it do that? It does not have a reason for being. I think you can look at the stock market and see in the longer term, in the medium and long term and yes, pose various rational causes why the market did that. Yet minute by minute, hour by hour even at times day by day, the market is commonly incomprehensible and more random than moving in a special direction for pretty good root causes.
Lesson # 3: Failed Technical Patterns Are Usually The Highest Trades
This is truly the result of technical study and trading books that keep getting so ubiquitous. So much has been written about trading patterns that you can almost "fade" famous trading patterns and be profitable. Such patterns are so well known to all players that by the way the strongest moves are generated once you do the opposite of which such known patterns predict.
Exemplifying, a candle head like a shooting star in which a place opens and new highs are made and then closes at the lows. The general agreement is that this could be a huja shift that a lot of people will see as bearish. Well, if everyone looks at that boss and says, "Well, it's time to cut back." There are many stops above the Shooting Star bar. If the market is trading above that, it is going to knock all these people out of their stops and cause a rebound in the market.
So once the classic, usual, and well-known technical patterns fail or are faded by the real experts, they end up being pretty good trades. Well, quite a few people, plus the amateur side of things, made an obvious trade-off and are therefore going to be arrested once it doesn't work out as planned. They are really worth keeping in mind.
Lesson # 4: Use market volatility and cycles in market volatility.
There are so many interactions that are ethereal in the business. They will work for a time and then they will break and reverse. There are quite a few things you can trust, not just week after week, month after month, but year after year and decade after decade. However, there are 2 things. One is the cycles of volatility from day to day. The market goes from periods of fairly active to fairly quiet, from fairly active to fairly quiet. I don't think that will ever change, so use it to your advantage.
If you have had two consecutive days of extensive variety. The most likely thing is that the next day will be calm. If you've missed out on the long-range trend movements, don't expect the same activity after the long-range days. Later, if you have a sequence of days where things are fairly calm and fairly subdued, you will occasionally break out of that on larger range days and high trend days. That is one aspect of volatility cycles, and that is an interaction that will continue ad infinitum. It's a psychological thing, driven by humans.
The second is the daily range. That is to use the huge days to be aware of the giant movements. So once you have a great day setting up like an open range breakout, those will tend to travel the distance, and you end up with huge range days. I think those kinds of days will continually persist. If you can find them, they are going to be good business opportunities. Don't expect each day to be a trending day, however once you identify trending days, dissolving range open trades are consistently going to be a winning initiative.
It's going to be good times and bad, however long-term, long-term, breakthroughs of the opening range and cyclical changes in market volatility are good principles to integrate into your trading approach.
Lesson # 5: Use Cross-Market Collaborations to Filter Losing Trades
Now, with this particular lesson, I really don't agree with her. Whether a deep disagreement is intended or just a big question mark, it is possibly more appropriate that it dictates that the jury is not in consensus, I am not so convinced of this.
In Larry Williams' setups and operations, it relies heavily on interactions between markets. Especially once he's trading the occupation market, watching the bond market and then trading the bond market and looking at the gold market. I am not convinced that these long-term interactions will hold. You are seeing patterns in the short-term trend in those markets with each other, rather than long-term correlations between them. However, still in this way, I am not convinced that these kinds of interactions are maintained in the long, long term.
For me, what has changed my criticism has been the financial crisis of 2008: many of these collaborations that looked good and worked well over the years and almost decades previously, were completely broken. I still think that with the global financial crisis we are through the mirror, everything is turned upside down. With the advent of quantitative easing, bank bailouts and bank bailouts, central banks around the globe take positions in corporate bonds and occupations, each of these follies, the planet changed.
I don't think long, long-term cross-market collaborations can be trusted. If you create a trading system based on short-term trends in bonds versus occupations, or gold versus bonds, I am not convinced that they are going to work in the long, long term. The historical results of the system tests have the possibility to teach that they work historically. However, will they endure and continue to function in the future? I am not convinced.
Lesson # 6: Don't Be a Slave to Sample Size and Statistical Significance
In Larry Williams' post-testing, especially of market interactions, the size of the trade sample is shockingly tiny. Even though the results have the potential to look really good with a high percentage of profitable results, much of that is being driven by the exit from the "rescue" and the big stop. Trades are only the result of market volatility to create the results of the system rather than actual interactions between patterns and interrelationships between markets.
The criticism you get is that the sample sizes are quite small and there is definitely no statistical significance to the results you are getting. Therefore, you should not trust such patterns in the future. Therefore, you could be quite cautious about using small samples to build a theoretically sound business system that will function for years and decades into the future.
Larry Williams burst onto the business scene in 1987 after he succeeded in what used to be called the Robbins Business Competition. Now is the World Cup Business Championship. He has turned a $ 10,000 account into well over $ 1.1 million in 12 months. By the way, it has turned the accounting into well over $ 2 million, however two final operations did not work and the accounting concluded closing at $ 1.1 million.
Over the years, he has shared his business ideas and written a gigantic proportion of books, I think about 11 business books, which is perhaps more than any other merchant. He has performed internationally and also used to hold his "Million Dollar Challenge" (MDC). He more on that a little later. On those days, you will find Larry talking about his trading on his website IReallyTrade.com.
I think he is, a genius. Incredibly generous with each of the business ideas he has posted. He is a super nice guy.
Now, what do we have the possibility to learn from any trader?
He will never operate exactly like another operator. However, study what they do, understand why they make it, and tailor what works for you. I think it is excellent advice for everything you read, learn or watch online about business. It requires taking the ideas that resonate with you and working on them and making them your own. This is the best way to operate, rather than trying to mechanically continue what someone else is doing.
Larry Williams Business Strategy
Input using settings, indicators and patterns
This is Larry's business methodology the best I can summarize. He argues that he is not a technical trader, that is, that he is not based on technical research. His configurations are based more on the "fundamentals" and he uses 3 main indicators of the market to see when these configurations remain happening:
Merchant Engagement - He was one of the first merchants to take a deep look at merchant engagement data and has written a number of books on the subject.
Interrelationships between markets: The interrelationships between the activity market and bonds, gold, etc. These interrelationships between markets are very relevant in their negotiation.
Seasonality and multi-year patterns: The month-to-month seasonality patterns in certain of the commodity markets are incredibly relevant. However, in addition, multi-year patterns. Exemplifying, the 4-year period in the stock market that is driven by the presidential election period. Later, a period of 10 years that is identified in the stock market, and in this way successively.
Their trading configurations stem from these 3 fundamentals: merchant engagement, market interrelationships, and seasonality. Then, to activate trade entries, use historical patterns.
Exit using basic system rules
To exit operations, Larry uses certain different procedures:
"Bailout" exit: in other words, closing a position at the first profitable opening. Now remember, several of Larry Williams' trades are swing trades. Actually, he is not a daily trader. If he has a profit on an open trade, he will come out on the open. If he is in a losing stance, wait until the next opening to see if he is profitable at the next day's opening.
Number of days: in other words, close a position after a fixed number of days, let's mention 3, 5, 7 or 10 days. It will put different days as mechanical or systematic output.
Wide Stops: Sayings keep you in business for a bit longer. He is the source of much criticism. Several traders comment that wide stops are insane, with the proportion of capital that you have to trade for those wide stops to work, they still work.
The way it is there, that's all, in a nutshell, my perspective on Larry Williams' trading methodology: setups, inputs, and outputs. So what can I convey, in terms of lessons learned, by trading with Larry Williams? Without breaking confidences, without revealing concrete configurations, etc., these are the principles in general, the visualizations and what I have learned from reading and looking at the Larry Williams business.
Business lessons learned
Lesson # 1: Use the market trend to re-mean
The market is in a horizontal channel and you go out of that channel and then you want to go back to the channel. Or it is in a trending stage, either up or down and temporarily oversold or oversold. Either way, the market will want to return to a medium reversal stance. Periods in which mentally things get out of the head temporarily, are resolved by returning to the mean.
This became clear to me, whether it be on the second or third day of the MDC, once Larry was defining a particular setup. He was quite interested in where the open compared to the close, the highs and lows of the day before. Someone in the audience commented, "What if the open space is further away?" And Larry coded it using his Genesis program, which is quite powerful for backtesting patterns with interactions between markets. He commented, "Yes, it could be a great trade as it tests well and opening in such a stance would especially lead to a winning trade."
Then the merchant comes back and says, "Well, what if the open space was somewhere else?" And again, it seemed to me that what Larry Williams was really mentioning was that the further he was from the mean, the more likely it was that bartering would be profitable. He was constantly trying to find those opportunities where the outfield got out of control, he was out of position compared to where he had historically been. He was trying to find opportunities to close that gap and make the market mean again.
So the market re-signifying is a pretty deep force in the market, and he he was using that to look for business opportunities. Said is the first lesson.
Lesson # 2: The market is often more random than rational
It had nothing to do with an actual Larry Williams quote, but rather a generalization of which he was actually mentioning. And again, this came from a question on the MDC. It would have been the second day in which one of the merchants asked: "What is it just what he has learned in the business that is the best initiative that he has come up with?" He mentioned: "The exit of the 'rescue'". Exit at the first profitable opening once you are trading a position. He commented that he hadn't really come up with the initiative, yet he had done so much backtesting on the initiative that it felt like it was his.
The "rescue" exit works with a huge stop as it is using the randomness and volatility of the market to get it out of the way for a position to be profitable. And so he fundamentally says, "If you have a profitable stance, get out, get out." Its effectiveness lies in the conjunction of using a profitable first opening with a huge stop, those 2 things together. The huge stop enables you to sit through enormous volatility in the market. Afterwards, if you have a profitable open position, close the position and take your money.
The market is often more random than rational. Your reaction to the business should keep that in mind. I think it's really quite a fundamental lesson that we try to see the logic and that the market is up or down on a particular day, or trends in a particular direction, why does it do that? It does not have a reason for being. I think you can look at the stock market and see in the longer term, in the medium and long term and yes, pose various rational causes why the market did that. Yet minute by minute, hour by hour even at times day by day, the market is commonly incomprehensible and more random than moving in a special direction for pretty good root causes.
Lesson # 3: Failed Technical Patterns Are Usually The Highest Trades
This is truly the result of technical study and trading books that keep getting so ubiquitous. So much has been written about trading patterns that you can almost "fade" famous trading patterns and be profitable. Such patterns are so well known to all players that by the way the strongest moves are generated once you do the opposite of which such known patterns predict.
Exemplifying, a candle head like a shooting star in which a place opens and new highs are made and then closes at the lows. The general agreement is that this could be a huja shift that a lot of people will see as bearish. Well, if everyone looks at that boss and says, "Well, it's time to cut back." There are many stops above the Shooting Star bar. If the market is trading above that, it is going to knock all these people out of their stops and cause a rebound in the market.
So once the classic, usual, and well-known technical patterns fail or are faded by the real experts, they end up being pretty good trades. Well, quite a few people, plus the amateur side of things, made an obvious trade-off and are therefore going to be arrested once it doesn't work out as planned. They are really worth keeping in mind.
Lesson # 4: Use market volatility and cycles in market volatility.
There are so many interactions that are ethereal in the business. They will work for a time and then they will break and reverse. There are quite a few things you can trust, not just week after week, month after month, but year after year and decade after decade. However, there are 2 things. One is the cycles of volatility from day to day. The market goes from periods of fairly active to fairly quiet, from fairly active to fairly quiet. I don't think that will ever change, so use it to your advantage.
If you have had two consecutive days of extensive variety. The most likely thing is that the next day will be calm. If you've missed out on the long-range trend movements, don't expect the same activity after the long-range days. Later, if you have a sequence of days where things are fairly calm and fairly subdued, you will occasionally break out of that on larger range days and high trend days. That is one aspect of volatility cycles, and that is an interaction that will continue ad infinitum. It's a psychological thing, driven by humans.
The second is the daily range. That is to use the huge days to be aware of the giant movements. So once you have a great day setting up like an open range breakout, those will tend to travel the distance, and you end up with huge range days. I think those kinds of days will continually persist. If you can find them, they are going to be good business opportunities. Don't expect each day to be a trending day, however once you identify trending days, dissolving range open trades are consistently going to be a winning initiative.
It's going to be good times and bad, however long-term, long-term, breakthroughs of the opening range and cyclical changes in market volatility are good principles to integrate into your trading approach.
Lesson # 5: Use Cross-Market Collaborations to Filter Losing Trades
Now, with this particular lesson, I really don't agree with her. Whether a deep disagreement is intended or just a big question mark, it is possibly more appropriate that it dictates that the jury is not in consensus, I am not so convinced of this.
In Larry Williams' setups and operations, it relies heavily on interactions between markets. Especially once he's trading the occupation market, watching the bond market and then trading the bond market and looking at the gold market. I am not convinced that these long-term interactions will hold. You are seeing patterns in the short-term trend in those markets with each other, rather than long-term correlations between them. However, still in this way, I am not convinced that these kinds of interactions are maintained in the long, long term.
For me, what has changed my criticism has been the financial crisis of 2008: many of these collaborations that looked good and worked well over the years and almost decades previously, were completely broken. I still think that with the global financial crisis we are through the mirror, everything is turned upside down. With the advent of quantitative easing, bank bailouts and bank bailouts, central banks around the globe take positions in corporate bonds and occupations, each of these follies, the planet changed.
I don't think long, long-term cross-market collaborations can be trusted. If you create a trading system based on short-term trends in bonds versus occupations, or gold versus bonds, I am not convinced that they are going to work in the long, long term. The historical results of the system tests have the possibility to teach that they work historically. However, will they endure and continue to function in the future? I am not convinced.
Lesson # 6: Don't Be a Slave to Sample Size and Statistical Significance
In Larry Williams' post-testing, especially of market interactions, the size of the trade sample is shockingly tiny. Even though the results have the potential to look really good with a high percentage of profitable results, much of that is being driven by the exit from the "rescue" and the big stop. Trades are only the result of market volatility to create the results of the system rather than actual interactions between patterns and interrelationships between markets.
The criticism you get is that the sample sizes are quite small and there is definitely no statistical significance to the results you are getting. Therefore, you should not trust such patterns in the future. Therefore, you could be quite cautious about using small samples to build a theoretically sound business system that will function for years and decades into the future.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.