Reprinted from Technical Analysis of STOCKS & COMMODITIES magazine. 2008 Technical Analysis Inc., (800) 832-4642, http://www.traders.

com
INTERVIEW
derlying structure of this market is that
the dollar is going down, so anything
valued in dollars is going to be more
expensive.
So its safe to say youre a trend trader?
BW: Absolutely. Weve been teach-
ing people to trade for decades now, and
one of the things that almost 100% of all
new traders do is they get in and out too
often. Weve had our best success where
weve analyzed the market, tried to fig-
ure out what the long-term trend is and
get in and stay in for a while, so yes I am
definitely a trend trader. Now, one of
the ways we get into a trade is if we see
that a trend has overextended itself. We
have what we call a bullish/bearish di-
vergent bar or period where we have
indicators that show us that the market
has gone up too fast, so we know how to
countertrend trade that market. Often,
our first entry into a market is with this
countertrend signal.
What time frame do you trade?
BW: Basically, I only trade the dailies.
I spent many decades looking at the mar-
Bill M. Williams (BW), a former psychotherapist and founder of the
Profitunity Trading Group, has more than 49 years of trading experi-
ence. Besides coaching traders in private tutorials, his three best-
selling books Trading Chaos, New Trading Dimensions, and
Trading Chaos: Second Edition have contributed to furthering his
unique trading concepts. He is also well known on the speaker circuit,
with a loyal following of high-level traders. He has taught seminars
throughout Europe, Asia, and the US on subjects including the fractal
of the Elliott wave, the money flow index, the Wise Men, and the
Profitunity Alligator.
His daughter, Justine Williams-Lara (JWL), is the president of the
Profitunity Trading Group. She has been actively trading for 14 years
in both the stock and commodity markets. She too has trained traders
in the Profitunity methodology and teaches private tutorial classes in
her office in California. Trading is her life, she says, and teaching
others to trade for their freedom is what makes her continue her
fathers work.
John Jay Norris (JN), senior market strategist at Brewer Futures
Group, interviewed the Williamses in person on February 23, 2008, in
Southern California.
Weve been teaching to trade for
decades now, and one of the things
that almost 100% of all new traders
do is get in and out too often.
an you tell us how you did
last year trading?
BW: Last year was our
best year ever. Ive been trad-
ing now for a half century, and the year
before last was our best up until that
point, and last year was better than that.
I trade only stocks now, but most of my
career Id been trading commodities.
[Earlier, Williams explained how he
has substituted many of the commodity
markets with ETFs in the stock market.
JN]
Last year, we had several different
accounts, and one account was up over
100%. [This account is his everyday
account from which he takes the profits
once a month and buys physical gold
and interest-bearing gold certificates.]
The big account was up over 40%. We
started something a couple of years
ago because I believe one of the things
that hurts peoples trading is that they
get in and out too much, too quickly.
So I am a trend trader and like to stay in
the market as long as possible. I made
the decision two years ago that on Janu-
ary 1, I would put on a trade and would
C
not get out of it come hell or high water
until the end of the year, and that one
trade was up 40% that year, and then up
50% the year before, so by our stan-
dards weve done quite well.
I know youre quite an experienced
trader and know a bit about commodi-
ties. Was there any one trade or cam-
paign over the last few years that stands
out for you?
BW: Yes. There have been quite a
few. Here we are at the beginning of
2008 and the dollar is going down real
fast and anything that is measured by
the dollar is getting more expensive,
whether its wheat or gold or curren-
cies. If you look at gold, for example, it
has gone up tremendously in dollars.
But if you look at gold in some of the
foreign currencies, the chart doesnt look
nearly as bullish as it does in dollars. So
what were really talking about and
as we speak, we are in a housing slump
is most people were thinking they
were making money on their houses and
now they are finding out they werent
making that much money, and the un-
Bill Williams
And Justine Williams-Lara
Bill Williams
And Justine Williams-Lara
A FatherDaughter Team
Reprinted from Technical Analysis of STOCKS & COMMODITIES magazine. 2008 Technical Analysis Inc., (800) 832-4642, http://www.traders.com
kets every moment of the day. In fact, one
time my wife challenged me to eat lunch
away from the screen. For 12 years or so,
she brought me lunch every day [while I
watched] the screen. If she didnt bring
me my lunch, I didnt eat. And what I
found once she got me off the screen was
that the less time I spent in front of the
screen, the more money I made.
How do you select markets, or stocks to
trade?
BW: I do a lot of trading in exchange
traded funds (ETFs) thats a big boon
for traders. I find so many market op-
portunities that I really dont have an
organized way of looking for them. I
know there are several scanning pro-
grams, but just in the daily run of life
you hear so much. For example, going
to the gas station we know that the price
of gas or oil is going up so we can look
at the oil stocks and see if it fits your
parameters and if it does, you can trade
it. So theres no problem finding oppor-
tunities. There are more opportunities
than you have time to take advantage of.
What about comparing fundamental
news in the papers to whats currently
happening in the markets?
BW: As far as researching the com-
pany and reading about the products? I
dont do any of that. I look at the chart
and only the chart. I may occasionally
read something in the paper and look at
that chart, but I dont go looking for
trades. There are so many opportunities
every day; its a matter of evaluating
those opportunities to get the best trade.
Do you think system trading could
match an experienced trader pulling
the trigger?
BW: I dont think were to that point
yet as much progress as weve made
with computers and processing and
evaluations, it doesnt match the human
brain. So we try to get all the informa-
tion we can about the trade and again
were looking at the chart. The chart is
the EKG of the market; it tells you
exactly what the market is doing. When
we teach people to trade, we actually
give them 10 seconds to evaluate the
chart where to get in, why to get in,
where to take losses, stops; all within 10
seconds, and that takes practice but its
easy to do. Its not good to spend too
much time thinking about it, and think-
ing what good or bad could happen.
What is your own educational back-
ground?
BW: My bachelors degree was in
engineering physics, which is super-
scientific stuff, and my doctoral work
was in psychology, which is sort of
artsy-craftsy stuff. Both helped and both
hurt. Trading is much simpler, in our
opinion, than we want to make it. I once
heard a famous trader, who had made
more money than anyone else in the
room, say when asked what his secret
was: Early on, I learned there is a lot
less here than meets the eye.
And thats our motto here. We want
to whittle out everything that confuses
us and only go for the things that make
a change in the market structure, and
what we mean by market structure is
what moves the market, which is human
behavior. The chart is the EKG of the
mass of traders out there right now. I
want to emphasize Im not sure my
education assisted me so much. I had to
get over that education to become suc-
cessful at trading.
What did you do professionally before
you became a trader?
BW: After college, I joined the Air
Force and became a pilot. After that I
worked several jobs and became an ex-
ecutive vice president of the largest
carpet manufacturer in the country. Then
I became interested in the mindbody
connection and became a body worker
for several years. And all the time I was
doing this I was trading part time. From
1980 on, Ive traded for a living.
Have you found that some professions
lend themselves better to trading than
others?
BW: The ones that lend themselves
the best are basically those with a gen-
eral education background. The great-
est numbers of people who want to learn
to trade are from the medical profes-
sion. A medical doctors education does
not benefit them all that much; a scien-
tific education does not assist. You have
to realize the market is different; the
market is human behavior. The more
we learn about psychology and psycho-
therapy and how a person operates, we
learn it takes pretty much a generalist to
trade. The background is not nearly as
important as how you look at the world,
what your philosophy is, how you think,
and how you use your brain.
Any thoughts on discipline?
BW: You need to have some sort of
approach to the market and stick with
that. What most traders do is get a good
system and ruin it for themselves by not
sticking to it. No matter how good a
method you have, youre going to have
some losses. They give up on their
method or philosophy or approach just
because theyve had a few losses. Most
people dont really follow through with
their approach to the market. They
change it and when they start changing
it, they start doing the wrong thing.
Is mental toughness teachable?
BW: Its easy to learn, but it takes
commitment. And its scary. If youre a
husband and you go out to dinner with
your wife one day and she asks how you
did and you have to tell her you lost all
this money, thats not easy. More times
than not, traders wont tell the whole
truth because its embarrassing. I dont
know of any way to get over that except
to go through it and come out the other
end. But the key point is to decide on
what your approach is and to believe in
it. It takes a great deal of faith to become
successful.
When do you know you have that faith?
BW: I think it depends on your daily
profits and losses. If your profits are
exceeding your losses and you can im-
prove on that ratio, youll be okay.
Do you have an incident or trade you
remember in particular because of fear?
BW: A very specific one. My wife
happens to be a psychotherapist also,
and we decided in 1980 that we were
going to quit our jobs and trade for a
living. We had never had a bad year
when we were trading part time, but
once we began trading for a living, we
started taking losses. We considered
ourselves professionals, not because we
were good, but because we had no other
job. Our account went down precipi-
tously and got to a very bad point.
We were living in Georgia at that
time and we decided to take off for the
weekend and figure out what we were
going to do. Fortunately, I have a great
supportive wife, and she said, What
would you rather do than trade? I an-
swered, Theres nothing I would rather
do. She said, Okay, you go back in
and trade and if we lose everything, then
we can go back and practice psycho-
Reprinted from Technical Analysis of STOCKS & COMMODITIES magazine. 2008 Technical Analysis Inc., (800) 832-4642, http://www.traders.com
INTERVIEW
therapy, and get some money and you
can trade again.
My sitting here today is because of
her attitude. You need support. That
was the lowest point in my trading ca-
reer and since then its been an upward
climb and has been good ever since.
Do you find it important to maintain a
particular trading environment?
BW: Absolutely. You need a relaxed
environment to trade in. When I came
back from that break, I had nine com-
puters going. I had a special table built
to hold them all. I did this because my
thinking was that more information was
better. But in trading, more information
is not better. Correct information is
better, and you dont need everything
that people want.
So now Im down to one screen and I
like to have nice music on and I dont
answer the phone when Im trading. I
only trade the dailies now, so my trading
day is about 15 minutes. Earlier in my
career I traded all the way down to the
five-minute chart, and that can be a grind.
Is there any trade of yours that stood
out because of event risk?
BW: Back in the early 1980s when
gold ran up, we made a considerable
amount of money by our standards, and
we felt like we were masters of the
market and we knew what we were
doing. We quickly managed to lose all
that money and then some. And thats
what led to that trip, incidentally.
What inspired you to write books?
BW: A few years into our being full-
time traders, the science of chaos was
just coming to fruition. And because of
my background in physics, I got very
interested in chaos theory. By the way,
the science of chaos is not chaotic at all
and delves into the deeper feelings of
people that create behavior and creates
actions. We hired three doctorates in
physics and mathematics and they went
into a mainframe and they did the work
to figure out the chaos of the market and
came up with a picture of the market
that was much more accurate than any-
thing I had seen. They came up with
three moving average lines, which we
call the Alligator.
What was interesting was that all the
numbers they came up with to put on the
chart as a guide were all Fibonacci num-
bers, and the mainframe didnt know
anything about Fibonacci numbers so
that gave us confidence. In the years
since, weve simplified it, and the more
weve simplified it, the more profitable
its become.
John Wiley, the publisher, wanted us
to write a book about it and we did and
then they wanted a revision and Justine
had the biggest part in that. If anyone is
really serious about looking into our
approach, we suggest reading Trading
Chaos, the second edition, or visiting
Profitunity.com.
Justine Williams-Lara (JWL), Bills
daughter, is the president of Profitunity
Trading Group and is active in trading
commodities and assisting clients. Here
she joins in the conversation:
Have you noticed how different per-
sonality traits play into trading?
JWL: There are risk-takers and gam-
blers and we have to figure out the
difference between them. The market
offers so many possibilities for us as far
as what we want to do, but we have to
minimize the risk for the trades, espe-
cially in the learning stages. The biggest
problem for traders is their ego. They
want to be right. Typically, traders are
in the top 10% intelligence-wise, which
means we are accustomed to being suc-
cessful in most everything we have done.
If you want to be right all the time, this
may not be the place for you. You are
going to take losses in the market, so if
you cant be flexible and control your
risk, you could be in for a tough ride.
There are also a lot of traders who
want to reinvent the wheel and spend
more time analyzing than trading. They
will typically have problems and may
never actually place a trade. The most
successful traders we have trained are
now relaxed, have let go of their ego-
driven ways, and have fun trading. That
is our goal: Have fun while making
money!
How do you react when a student wants
to contribute to your method?
JWL: That depends. If they have real
trading experience and similar philoso-
phy and background, then they may add
to what we have done to make it work
for them. I dont think ours is the only
trading methodology that works. I do
know that it works well for many trad-
ers. There will be personality differ-
ences and differences in experience lev-
els for those who want to fine-tune the
methods. If you have been using an
indicator that works well for years and
it does not contradict our indicators, I
tell them its fine. Just make sure you
know you are adding to the basic meth-
odology.
One of our favorite indicators for
confirming the Elliott wave count came
from a friend/student. We are always
open to new information. Overall, the
student who just wants to learn from a
successful trader, follows the rules, and
asks questions when they have any
doubts tends to be successful much faster
and with fewer losses.
What do you feel are the three most
important factors that will lead to suc-
cess?
JWL: 1. Attitude. 2. Common sense.
3. Trading system and enough capital to
follow the system. If you have these
basic things, your chances of being suc-
cessful in the markets is better than the
average new trader.
BW: Attitude, work habits, reality-
oriented. Understanding that what is, is;
and accepting the reality of whats go-
ing on right now. Flip Wilson, the co-
median, used to talk about the Church of
Whats Happening Now, and to me the
market is the Church of Whats Hap-
pening Now.
JWL: We humans tend to overcom-
plicate everything we touch. The mar-
ket is very simple. The market really
only gives us the open, the high, the
low, and the close, and people have
derived different strategies and attitudes
using just that information. So our ap-
proach is to look at the market and keep
it simple.
Id like to ask a question thats geared
more toward getting below the tip of
the iceberg of how you think and oper-
ate in your daily life. How often do you
go on vacation?
BW: Im on vacation every single
day. I only spend 15 minutes a day with
the market. And with software, comput-
ers, and wireless technology, we can
trade from anywhere.
JWL: I wish I could say every day, but
we do a lot of teaching and I need to be
available for support to answer calls
and emails from our clients. We try to
vacation twice a year as a family, but
every day I like to take an hour and read
a book or sit outside in the sun, take a
Reprinted from Technical Analysis of STOCKS & COMMODITIES magazine. 2008 Technical Analysis Inc., (800) 832-4642, http://www.traders.com
S&C
INTERVIEW
walk, or do some yoga.
BW: Its absolutely important that a
trader be relaxed when they trade.
What periodicals do you subscribe to?
Whats on your coffee table?
BW: Mac World. I have more com-
puter magazines than trading magazines.
I read the trading magazines when they
come across my desk sometimes, but I
dont spend a lot of time reading about
what people think. Ive found that
doesnt pay off. Everything you need to
know is in the market itself; anything
someone says is just gossip, not reality.
The reality is that the market is where it
is because that is where it is supposed to
be and it is supposed to be there because
that is where it is. Anything you add to
that is just pollution.
JWL: On our coffee table youll find
Vanity Fair, Rolling Stone, STOCKS &
COMMODITIES and Dog World.
Justine, is there any one memory that
stands out for you because of the fear
associated with it?
JWL: Absolutely. I had been trading
for about a year or so and I was
daytrading the old NYSE stock index
contract on a five-minute chart. I was
talking to the broker placing a stop
order and I literally dropped the phone
on the floor and did not know what to do
when the market fell like a rocket. It was
at about a 30% loss on the account. I
realized I had to regroup. I quit trading
the five-minute chart for a while. I still
remember the overwhelming fear.
I think because I was Bills daughter
and I was working in the trading room, I
thought I knew more than I really did and
I was cocky. That was my most memo-
rable point of fear, and it was a humbling
experience. The importance of a risk-
reward ratio is what became apparent to
me that day. I was trying to trade a
$10,000 account in a market that could
move $2,000 in minutes! That experi-
ence taught me a lot about myself and
what I could tolerate as my pain level.
After that trade I went on to double
that account that year in markets I was
more comfortable in, and better suited
for my personality.
Do you still trade intraday?
JWL: Every now and then. Ive been
trading for more than 13 years now. I
think when youve been looking at charts
that long you develop a bit of intuition.
I dont know why I know, but I do, and
typically its crude oil or the Dow Jones
on a 10- or 15-minute chart. I still do
like the indexes. I dont trade intraday
on a daily basis. Typically, we see much
greater profits from position trading on
the daily charts.
Will either one of you occasionally pass
on a signal given by your methodology?
BW: Yes. I think both of us will from
time to time. Theres a certain aspect of
our methodology that doesnt lend itself
to figures. On some of the trades, we
want to see how much the market is
moving against the trend. And some-
times there is an angulation between
where we think the market should be
and where the market is really going.
Those are little judgment calls that come
with experience, but our entries into the
market and exits are very specific.
JWL: Thats true. There are times
where I will pass on a trade, typically
based on Elliott waves. If I see a market
going into a correction or heavy con-
gestion and if Ive exited a nice trend
move, I will definitely pass on trades
going the other way. I think its interest-
ing that humans are the only animal that
will sense fear and walk right into it.
Every other animal uses their sense of
intuition for survival, and I like to think
I can incorporate that into my trading
and help others to do that as well.
Trading can stir up some of the most
primal feelings we have when under pres-
sure or in a losing position. Being able to
avoid those situations can be very profit-
able both mentally and financially.
Whats the first thing your eye is drawn
to on a chart?
JWL: The Alligator, the price bars.
Im looking for a chart that is aestheti-
cally pleasing. The Alligator and the
price bars tell me instantly what type of
market we are looking at. I look at a
combination of these things.
So you follow the Elliott wave?
BW: Yes, I look at the Elliott wave. I
dont put in a trade based exclusively on
the Elliott wave. For my trading there are
two ways to get in and two ways to add on
and two ways to get out, and thats basi-
cally it. But choosing whether to do that
trade will depend on what Justine was
saying as to where we are in the Elliott
wave and where youve been and what
your comfort level of that chart is.
JWL: Bill is trading stocks, whereas
Ive been trading commodities, which
is a little different because of the vola-
tility. It definitely helps if you under-
stand the type of market you are trading.
If you are trading aggressively into a
correction, we all know how that typi-
cally ends up: disastrous. If you know
you are in a trending market, you have
the opportunity to trade more aggres-
sively and take advantage of the move.
Understanding the basic patterns of
the Elliott waves can keep you from
trading corrections; 85% of losses oc-
cur in corrections, so learning to avoid
them can cut out a great deal of pain.
Do you follow trendlines and Fibonacci
measurements?
BW: No. We use the alligator. Essen-
tially, the Alligator is our trendline. It
tells us what the market is doing at the
moment and what its doing on a higher
time frame of about three to five times
the length of the timeline. So if Justine
is trading the 10-minute chart, the alli-
gator will tell her what the markets
doing on the hourly chart and the daily
chart without looking at those charts.
Its telling you where the market would
be without any new incoming informa-
tion. And its new information that
moves the market.
Thank you, Bill and Justine.
John Jay Norris is the senior market
strategist at Brewer Futures Group. Norris
has more than 25 years experience in the
futures industry, having started on the
trading floor of the Chicago Board of
Trade and held analyst positions before
switching to the brokerage side of the
business. He may be contacted at 800
971-2154 or jnorris@brewerinvestment
group.com.
SUGGESTED READING
Williams, Bill, and Justine Gregory-
Williams [2004]. Trading Chaos, 2d
ed., John Wiley & Sons.
Williams, Bill [1998]. New Trading
Dimensions: How To Profit From
Chaos In Stocks, Bonds, And Com-
modities, John Wiley & Sons.
Williams, Ellen G. [1988]. Trading With
Steidlmayer, Technical Analysis of
STOCKS & COMMODITIES, Volume 6:
June.