Reprinted from the Safety in the Market Spring 1994 Ticker Tape
I still get labelled with that ‘overnight success’ tag in the press. It makes me smile. You could say it has been a long night, but this “time period” does give me a working knowledge of what traders need in 1994.
For those of you just starting out I must say that the very best I can pass onto you in your early days – the very essence – comes from my early days as a trader. Sure, I feel the enthusiasm you put into your letters to me, and I enjoy the humour, but in other cases I pick up the drama.
What is it really like to make it? Before I answer that, I must tell you one thing. As well as learning how to ride, you must also learn how to take a fall. This was one of the first things I endeavoured to teach my boys. So your first question should probably be, “tell me about the hard times that are part and parcel of making it”. I feel I am qualified to answer both aspects of that particular query.
Discipline is the first requirement of a truly excellent trader. An analytical mind helps, and a willingness to challenge the status quo also comes in there somewhere. Some of us are lacking in other areas. Perhaps we have never acquired the ability to formulate goals and objectives. I think we all need a spot of creativity every now and then for our ‘plans’ to be born, to sprout wings and to fly. I’d hate to think of a world where it is all planning and no flying.
In some cases, even to create a plan, we need the ability to ask questions. I am often amazed at some people’s lack of skill in asking the right questions. This is more often a problem for those who have traded for some time with, perhaps, limited success. That is their specific problem, but they choose to cover it up with a ‘know it all’ approach. I have found that this approach is often a desperate plea for help. It just comes out a bit funny to start with. Underneath all this is a ‘sensitive new age guy’. Once you get over the problem of asking constructive questions, and you can, you must be in the frame of mind to accept the advice that is given. What you are trying to do is learn by the mistakes of others, otherwise, as they say about history, you are bound to repeat them.
When you have accomplished these skills we are ready to talk about discipline. Of course you must have discipline to follow any form of trading plan and those who trade with no plan whatsoever are destined for the scrap heap. Their capital, however much it may be, ends up in that great ‘Money Home’ in the sky. But even with all these things going for you, you will be called upon to draw on strengths never before utilised just to stay with a profitable position – and even more of the same to close out a losing trade.
Often the press will choose to highlight a series of trades that result in a large profit for a big player. But what is it like to hold a large position for a couple of months – not just overnight? Do you know what it is like to sit bolt upright when the phone rings in the middle of the night – to believe that the worst affliction that could possibly strike the world is any news that would affect your position against the US Dollar? To go to bed each night fervently believing this?
… Then it happens. You are long the Swiss Franc against the US Dollar and some figures are released that indicate consumer confidence is way up and retail sales are strong. The phone is your alarm clock, literally. You have three calls from the States – bang; bang; bang – each one a broker. Each one carrying a large position for you which you had added to before going to bed. Now it’s 3am. The markets are going against you at an alarming rate as each call is progressively worse. You have stops in place but everyone is telling you to jump ship. You must instantly balance your total position. T Bonds are weak; the S&P is roaring; the dollar is strong and each tick is eating into that profit built up over many weeks. Now it could all go – and then some. You stumble downstairs to the “War Room” and turn on the screen. You off load half of your position on the spot market right on the low of the night. It’s just a spike – by the close the market is back to the openers. You have crystallised profit on half of your position. You realise you jumped a bit quick, but the rest of your position is still in place for the big run and you have only seven more weeks until your pressure time, when you must stop and reverse the position to begin it all again. As I say, my hand never shakes when I take a profit – but only traders know this. You must walk the walk, to talk the talk.
So, what makes it all worthwhile? It must be more than money? Your family must absorb many of the blows. So make sure they enjoy the fruits of your labours. It helps to look at trading as a fun thing. Release the pressure with a bit of humour. Often your very actions look, let’s say, different from those in other professions, so don’t take yourself too seriously. My teenage kids often call my seminars my ‘Great Man Act’!
I’ll share with you a little about the lead up and trading of the 1989 share market top. I had submitted my forecast for 1989 to a number of newspapers and trading journals in 1988. At that stage of the game I had no plans to be involved with seminars etc. I just wanted to prove what was possible by way of forecasts. W.D. Gann had been very kind to me and many of those around me. Because of my success, a number of the trade people I approached published my story in America as well as Australia. In the article, I told of my experiences in 1987 and gave some detail on how I calculated the top for 1988. I also called for a top on 3 October, 1989 followed by a reversal and panic in the market. Late September / early October was 180 weeks and 180 months (180 degrees) from the beginning and end of the major cycles. I knew I had an 85% chance of being right under normal conditions, but as 1989 was a major year, actually my odds were much higher.
I never feel that I have to be right. My trading rules kept me safe then – just as they do now. In any case, the release of my forecast brought people out of the woodwork to the degree that it was affecting my trading time, so I changed to an unlisted number. Makes me laugh now when some think I was trying to cash in… I was desperately trying to cash out. I was not paid for my stories, nor for my time talking to investors. I was starting to feel the pressure of being in the spotlight. Research Technology Corporation asked me to conduct a seminar – I agreed – and it booked out in a matter of five minutes flat. So my career as a public speaker began in earnest. Investors, traders and institutional people flew from Japan, New Zealand and all over Australia. Nikki Jones, the owner of Lambert-Gann Publishing in the United States, flew to Sydney for the first seminar. All of this was adding to the pressure of going public with my forecast.
To make a long story a little less long, I’ll say that when the low for 1989 came in on 7 April, I felt better as it was basically 180 degrees or six months before my forecast date for a major top. I had called the figure of 1855 at a series of one-to-one instruction days early in 1989. These were a forerunner to the Incubator Trading which I first ran in August 1989. All of this was so vastly different from my chosen path as a trader. I started to ask a fee for my time that was in line with the quality of trading expertise I was sharing. This made me feel worthwhile, which either lowered the pressure or made it bearable – I’m not sure which! It certainly put a spring in the step of my bank manager.
Well, one week before my forecast date the market was trading at 1656 – 199 points lower than I’d called, as many ‘experts’ kindly pointed out! In the following seven days it rose the 199 points to top at exactly 1855. I had my stops at 1856. How did I feel? All I can say is that you only have to do a call like that once in your life for all of the work to be worthwhile. Many of you have seen my charts for that day, as I use them to illustrate my rules in my short-term trading lessons. There was a lot more drama to it than I have written here, but when it was over we celebrated as a family. We had some fun. More fun was to come as we had the crash of 1989 – or Black Friday, on Friday 13 October – more fun even yet on Monday 16. I rang some of the ‘experts’.
What did it mean to us as a family, because that’s so important. Pauline and the kids had lived more than twelve months with that forecast so I made sure we all had fun.
Sure the trading account looked good. I have often said that trading is the quickest way to accumulate money without a gun and a balaclava, but it can’t be just that. I crave the opportunity to use control of self, under pressure; to have a plan before I go into battle; to work out the strategies and to have the opportunity to see the plan become a living thing. That’s what I try and ‘bottle’ into a course or seminar – the living thing.
The most valuable part of my trading experiences is that I have learned to repeat my successful outcomes. In other words I can keep on doing it! That is why I give you a written trading plan – so you can too.
This gets to the very heart of what is worthwhile in trading. It’s like riding a bike – once you learn how to, you develop the knack, and you never forget. I often say for me it’s like being paid to play golf or to go fishing. I love conducting seminars… the feedback from fellow traders – and I have some good ones… the stories of success from your people just setting out… the good humored banter I enjoy with the Trading Congress attendees… and in particular, the friendships. It’s like having the biggest family in the world – and you are an important member of it!