The Futures Millionaire Confidential Training Course by Larry Williams 4 DVD Set

Larry Williams: Futures Millionaire Confidential Training Course

4 DVD-  ranging from 60 - 88 minutes
 

Introduction

The first thing you have to get over with this series is its name, which exhibits the usual over-the-top hype associated with American series. It is actually a very well produced video of a seminar run by Larry Williams, with the less ambitious title of "Introductory Guide to Futures Markets", which better describes its contents. The objective for the overall series is to show you how to employ many of Larry Williams’ techniques for identifying market opportunities. This will be based around three headings:

• How Futures markets Work

• How to Develop a Trading Style

• How to Predict Markets

DVD 1

This initially sounds like a CD you could skip. However, there is some important wisdom about trading in it that makes it worthwhile viewing. It should be compulsory for anyone who has not traded futures before.

The critical difference between stocks and futures is discussed. Larry sees stocks as something ephemeral and their value is based on a myth.. On the other hand, he sees commodities as real products, with a real underlying demand for the product.

He sees another problem in that there are something like 26,000 US stocks to choose from, but only about 15 or so commodities. Thus, Larry believes that you can be in all the good moves in commodities in a year, but have no chance to do the same in stocks.

One difficulty seen, however, is that commodity futures expire. This complicates the trading process, but has a spin off in that expiry provides a real test of demand. This is not duplicated in stocks. Associated with this idea is that prices are driven by supply and demand. It is put that it is easier to measure supply and demand for commodities than it is for stocks.

Larry uses the technical approach because he believes that there is informed money in the markets and therefore price will move ahead of news. He promises to return later to techniques for identifying what informed money is doing.

Larry spends a little time on explaining orders. He tells us why he does not buy "at market", but prefers buy-on-stop and buy-at-limit orders.

Next, he discusses how to select a broker and explains how brokerage is often a trade-off with slippage.

Almost as an aside, there is an interesting passage on knowing too much or over-learning versus a simple approach. Maybe I am just conscious of it because I regard this as a major reason for ineffective trading.

Larry then poses some questions to ask to determine your trading style:

• How do you make your mind up?

• What is your sporting background? (the physical mimics the mental)

• How risky are you? (If you are unwilling to take risk, keep out of futures trading)

• Why are you trading? (The only valid reason is to make money)

• Does trading conflict with your lifestyle?

• Are you a better starter or finisher? (a very interesting discussion)

Finally, Larry talks at length about fear and greed. He sees greed as a much stronger motivation than fear. He believes that most losses are by holding on to a trade too long, driven by greed (losing and winning trades). He gives a fascinating guideline – when you find yourself calculating the profit you have in a trade, that is the best signal that you should close the trade at market. Ironically, what you need to fear is greed.

A somewhat unconvincing passage is how he uses systematic desensitisation to handle fear – exposing your self to decision making in a casino over and over again. He says this can be used for getting out too soon and for reluctance to put on the trade.

DVD 2

This CD begins with a discussion of whether there is a "them" or "they" in the markets that are out to get us. Larry points out that "they" do not exist – there are not people out there who know what the market is going to do. If your stop is hit and the market turns and goes without you, "they" didn’t get you, your stop was in the wrong place. Getting rid of the paranoia about "they" is important to good trading. This another way of saying that you have to take responsibility for your trades. In fact, prices are controlled by supply and demand and other participants do not collude to beat us.

Another strand is the common idea that there is a guy out there who has found the secret. If we can find him, we can short circuit all the learning. Well, there are good traders out there, but they won’t tell us what to do. The best we can do is to track their actions in the market and try to trade with them. This is what most of this CD is about.

Larry tells us that the first step is to follow the commercials. The action of the commercials is equal to long term value, while the action of the public equals short term value. The key is to look at the relationship between what the commercials are doing and the what the public are doing. The commercials tend to be right, though often early, about future direction and it pays to be with them.

Next, there is a discussion about open interest and how the two key set-ups can be very powerful:

• If price rises and goes into a trading range AND open interest declines, then it is bullish, because commercials are covering shorts.

• If price falls and then goes into a trading range AND open interest increases, then this is bearish, because commercials are shorting.

Larry then offers an interesting insight, when he offers that successful futures trading is a combination of techniques rather than a single technique. It does not seem to bother him that this is close to a contradiction of what he said in the first CD.

We next look at how premiums can be used to detect commercial activity. If a market has been bid to a premium, then the commercials need the product badly now. This idea can ferret out the big commercial bull markets. Larry then goes on to show the different strategy used to trade a commercial bull market (premium) as compared to a speculative (carrying charge) market.

The CD then goes on to show how to use the spread divergence pattern to detect turning points in trends.

Next, we explore comparative strength to select which commodity to trade – especially at turning points.

Finally, Larry talks at length about measuring market sentiment and develops an idea for a non-survey technique. He shows how the two important cycles are the small/large range oscillation and the relative position of the close in the range. He fills this out with discussion of the importance of opening price to the professionals, whereas the public looks only at the closing price. This is all a lead-in to the Accumulation/Distribution indicator which will continue on the next CD.

DVD 3

This CD begins where CD two left off with a discussion of how to use the Accumulation/Distribution indicator. However, it is quite understandable on its own.

Larry shows a number of examples of divergence signals on the indicator, signalling turning points.

Then he goes on to use oscillators, specifically the Williams %R. Interestingly, he sees their use only to pick overbought and oversold areas. It would seem that all the other signals have been added over the years by other analysts. Larry maintains, moreover, that the Williams %R has to be used with Accumulation/Distribution, rather than on its own, because it gives a lot of false signals. Thus, it is used as a timing signal for a trade that was selected using another tool.

It is also pointed out that divergences are very dangerous – Larry believes that many do not work any better than tossing a coin and that more money is lost with oscillators than with any other indicator.

Next, Larry moves on to Trading Systems specifically for the S&P. These set out to take advantage of bias in the market. One important bias is that the S&P tends to decline on Friday and advance on Monday. This leads to a simple entry technique, where he looks for two consecutive days that close below the previous low. He then buys at the low of the previous day, providing it is not a Friday.

Another use of bias on the S&P is to buy on the close of the Friday before option expiration and sell on the first profitable open with a $2700 stop. He claims this works 87% of the time.

The next section concerns counter trend trading. Against all conventional thinking, Larry sees the best short term (one or two days) trades to be counter trend trades in a good trend. In particular, he sees outside days with down closes in a down trend to be bullish signals for a rally. He buys if price moves 20% of the range above the close.

Next, Larry looks at his OOPS! Trade in the S&P. This is based on the psychology of people who stew on a trend over the weekend and place orders to get out on the opening on Monday. When price does not confirm their trade, it is a great reversal trade. It can be used both long (weekly chart) and short term. The set up is a Monday opening below a Friday low and then a rally to above Friday’s low. He buys for the rally to continue. It can also be used on a Tuesday. The sell signal is the exact reverse, except that you look for these trades on a Thursday or a Friday.

An important aside is that Larry only picks these systems to trade when there is a set-up. He does not believe that profits can be made trading every tick. It is important to wait for the set-up.

Then follows discussion of the Bail-Out short term exit technique: when wrong use a $2700 stop, when right, exit on the first profitable opening.

Next, is a long discussion of seasonal trading. Larry uses seasonal tendencies as road maps, rather than sure thing trades. They are strong tendencies, but no more. Some of the seasonal tendencies are:

• Heating Oil: peaks in October, after a rise in September.
• Cruse Oil: Similar to Heating Oil.
• Orange Juice: Best to buy in February-March and sell in Mid January.
• Coffee: Usually rallies in May.
• Copper: Often rallies in August.
• Lumber (one of the best): Buy early November and sell January-March.

Some wisdom: There are two alternative ways to trade-

• Short Term – Take big positions looking for small moves.

• Long Term – Take small positions looking for big moves.

Larry believes the latter is the best way to trade and is safer – especially for beginners. Interestingly, he says on CD four that he is primarily a short term trader! This is just one of many contradictions in these CDs.

On prediction: Larry says he does not believe that you can predict where a market will go and it is nearly impossible to buy the lows and sell the highs. He eventually realised that you do not need to predict accurately to make money in the markets, where the objective is to make money rather than to predict accurately.

Then, he contradicts himself immediately, by saying that there are some guidelines that can be used, though he says they are not used in an absolute sense of being right all the time.

The first of them is called Zero Balance. Larry demonstrates this in detail. The system sets out to define profitable swings and gives buy/sell signals when price gets out of line with Zero Balance, after three moves in the same direction.

Then he shows Ring Highs and Ring Lows. These are sometimes called swing highs and swing lows and are also very similar to pivot points, except that there is no close criterion needed. The discussion develops into detection of intermediate and long term highs and lows. He then uses the Zero Balance concept on these points.

Finally, there is a discussion of a method for prediction of daily highs and lows. The interesting thing is that Larry then uses this counter intuitively by buying predicted highs (buying strength) after a down close, looking for a big range day. He offers the wisdom that more money is made buying strength than buying weakness – the exact opposite to the natural tendency to look for a bargain.

 DVD 4

This CD begins with a demonstration of Larry’s plastic overlay target shooter, which is based on the Fibonacci series. He admits that he does not really believe in it himself enough to buy and sell on it, but uses it to take profits. It is also demonstrated how it can be used to predict time for a move to complete.

Next he mentions his 1.28 formula which is used for cycle highs and lows. Eg. Next low = last low + ( high to high x 1.28). Disconcertingly, he then says it might not be a low at all, but a high!

Trading Systems: Larry then takes us through a useful discussion of ways to evaluate trading systems. His key determinant is the average profit per trade. He claims that you need $300 to allow for accidents.

Next, you should look at the largest winning trade. If nearly all the profit is from one trade, the system is no good – just a fluke. Always look at it without the one or two largest trades. If it will not stand up without them, forget it.

The drawdown is also important. It must be tolerable for you. Do not lose sight of the length of time the drawdown lasts for either – most of us can not sit through a long losing streak.

Another thing to examine is the Risk/Reward Ratio. RRR = Average Profit divided by Average loss. We should look for a strong ratio like at least 2:1.

Also make sure you can tolerate the number of losing trades in a row. It should be noted that good RRRs tend to go with lots of losing trades. It is difficult to find a good balance.

The best test is to walk the system forward through data not used in the testing.