May

14

Larry WDo not subscribe to what I consider a massive market myth…

that "super traders" will detect market inefficiencies, trade them and then the advantage disappears. Here's why: There are no super traders (with the exception of Steve Cohen).

All traders/managers have ups and downs, no one consistently makes money, no one has ever cornered the game. Everyone gets off track, off his game, even when trading a known advantage.

So advantages can persist longer than traders focus and concentration.

Proof: I have told several traders exactly what I do, some made money, some lost…but all of us had the same rules (supposed advantage).


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13 Comments so far

  1. Ronin on May 15, 2008 9:17 am

    But over the longer term… two years plus… the great traders are still around and making money. Is this not the case?

  2. Jeff Watson on May 15, 2008 11:13 am

    Larry, Very astute observation. This reminds me of the old cliche that “You can beat a race, but you can’t beat the races.”

    Jeff

  3. George Parkanyi on May 15, 2008 6:23 pm

    Well THANKS Larry … why not just add ” - even Livermore shot himself.” … I was just starting to have fun. So NOW what are we all supposed to do? :)

    Cheers,
    George

  4. manuel bravochico on May 15, 2008 11:44 pm

    There are a few more exceptions than just Stevie Cohen, and his edge is not as big as it used to be. Still, you gotta give him credit. What a simple strategy. Pay the highest commission to the Street per million under management and get the first call on just about all the stocks that are moving.

    I'm sure Larry forgot about Jim Simons, the best trader of all time and more importantly the one whose edge, you can almost be certain, will not erode in the future. Now that's impressive.

    And then there are a few private guys. One in particular who used to be a bartender, then turned 200k into 15 million in 12 years. And he's not pulling a Livermore. He retired last year.

  5. Bob on May 16, 2008 9:24 am

    Certainly, even if a system has a persistent edge, if it requires a high volume of short-term trades, individual differences in vig and slippage could account for this disparity. Also, systems that require precise entry and exit points are most susceptible to enriching the System instead of the Trader. As an aside, I’d be delighted to test Larry’s theory and trade his system, but somehow that seems unlikely.

  6. Alex S. on May 17, 2008 9:00 am

    " I’d be delighted to test Larry’s theory and trade his system, but somehow that seems unlikely."

    Bob,

    you should seriously consider studying Larry's methodology.
    There is something there for everyone (novice & advanced traders)

    rgds
    Alex S.

  7. Bob on May 17, 2008 2:46 pm

    Thank you Alex,

    After reading Alex’s comments, perhaps I wasn’t clear in mine. I have the utmost respect for Larry Williams, and have enjoyed reading his market insights. My intended bit of levity was that it would be unlikely that Larry would divulge his EXACT trading system to a stranger.

  8. TD on May 17, 2008 8:14 pm

    What an astute and scary observation.

  9. steve leslie on May 18, 2008 5:40 pm

    It is not my job to paraphrase what Mr Williams is stating. He is more than competent to do so. Judging from the comments there may be some confusion as to his statements. Perhaps he could clarify them for us.

    that said:

    I think what Larry is trying to say is that similar to other forms of endeavors in life there are few outliers. That is to say there are few who consistently perform at the highest end of their profession or at the highest level for long periods of time. Of Course Cohen, Simons and a few others are the obvious exceptions in trading. D.E. Shaw is another however even this quant based money manager has had a few lean years of underperformance in between. I am sure there are some others who work beneath the radar screen and do very well. But suffice it to say, there are not many and that is as it should be. And there are far more flame outs than consistent winners and one needs to be very cognizant of this fact.

    We see this manifest in other fields as well. In law, there is Jerry Spence esteemed barrister who never loses in court. He is generally considered the most successful lawyer in civil law in American History. He is the attorney famous for the Karen Silkwood lawsuit vs. Kerr-McGee, Randy Weaver vs. the United States of America civil case and Imelda Marcos vs. the United States criminal case. Others who deserve to be mentioned in the same breath are Edward Bennett Williams and Clarence Darrow. Contemporaries of Mr Spence esq. are Roy Black, Racehorse Haines and the late Johnny Cochran.

    In golf, of course there is the great one Tiger Woods who has performed magnificently for over 11 years now. This was interrupted by but an 18 month lapse while he rebuilt his swing following the 1997 Masters victory.

    In horse racing there have been just 11 triple crown winners the first in 1919 and most recent was Affirmed 30 years ago. Forty three horses won the first two legs of the triple crown but failed to win the third at Belmont Park. John Henry raced up to the age of 10 years of age and out of 83 races captured 39 firsts 15 seconds and 9 thirds. This is in a sport where the best horses are retired after a few years of racing.

    In Poker, there is Johnny Moss, Stu Unger and Chip Reese all deceased, and Doyle Brunson who has been a professional poker player for 50 years. He claims to have not had a losing year.

    In fact, in Education of a Speculator it is pointed out that it is a daunting challenge to outperform in speculating due to the odds stacked against Mr. and Mrs. typical trader which include trading costs, spreads and executions.

    So as with all things in life caveat emptor.

    sl.

  10. Jennifer Flanders on May 19, 2008 11:06 am

    With such a level of inflation, they hardly have time to introduce new notes into circulation. Earlier this month, 100-million and 250-million dollar notes were issued, and last week, a half-billion-dollar note issuance was announced. And all you can get for this amount now equals to two loaves of bread. Interestingly, a 50-billion-dollar (!!) note called “agro cheque” will also be issued for farmers in order to facilitate their agricultural buys.

  11. Tiffany Matthews on May 20, 2008 10:13 pm

    Larry, that's great. I know that you love Obama, but, how is your case going and are you planning to return to the Virgin Islands after this is all over — if so maybe you will have your chance to vote for Obama. By the way I hope that everything goes well for you.

  12. Jason Leavitt on May 22, 2008 10:20 am

    I don’t see what the point of this post is. All Williams is saying is “Babe Ruth is super and if your career numbers aren’t as good as his, you’re not super.”

    Luckily, in trading, I can suck and only make $500K/year. Who knows, maybe trading is the only sport you can suck (relative to the best) and still make a living.

    And his “proof” in nonsense. A catcher can tell several hitters what pitch is coming next, and different results will follow.

  13. Jack Hackett on May 27, 2008 2:49 am

    Things are not going so dandily for dear Larry in Sydney. If the balls don't fall the right way he may be a considerable outlier in this city of ex-convicts. He may indeed have an attentive if somewhat restrained audience for his market hoopla in the not too distant future.Jack

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