FuturesTalk

Moderator

Dr. William {Bill} McDowell
Irvine, CA, USA

 

Approach to Trading 

I am indebted to the original FuturesTalk moderators, Barry Burns, Morris Pomey and Gil Eldridge, the many leading traders who were introduced to me at DTUSA seminars, and others whom I have sought out in books and seminars for the training I have received since becoming a fulltime trader in 2002.  Prior to joining FuturesTalk I was mentored through Chris Mercer’s Tradesight services and Mark Lycos’ Firetraders services and chat room where Chris also moderated.  My trading methodology might be described as a montage of what these named persons have advocated—with notable adjuncts.  The montage analogy illustrates my belief that it is important to avoid adopting carte blanche any singular trading methodology.  Developing ones own style consistent with personality traits, skills and most of all psychology is critically important.  Furthermore, I believe that traders must continually learn and change to maintain that necessary ‘edge’ that underlies all successful trading.  I am no exception.

I have done day, swing and position trading in stocks, options, and various index and currency futures, beginning with six months of fulltime daytrading stocks and options in 1978—and taking my sizable trading account to zero.   A subsequent business career left little time for trading until I made a commitment to fulltime trading as a profession in 2002.  Presently I trade mostly intraday the CME Globex Russell 2000 and Euro futures and am thus typically flat at the end of my trading day.  I’m especially drawn to euro futures because good trading opportunities regularly appear 16 to 22 hours a day.  This means that trading can be multiplexed with other activities essentially anytime anywhere in the world.

Strong egos come with the territory of good trading.  I’ve learned that there is a common ‘right of passage’ most trading survivors experience:  they trade and/or ‘invest’ with high expectations; lose a lot of money; learn why they lost it; humbly unlearn most of what they ‘thought they knew’; and then pursue a long difficult learning process as they develop and practice a ‘their’ trading methodology.  So is my experience.  While I consider myself a professional trader and am happy to share with others my discoveries and methods, I realize that three years trading full time represents limited maturity in this business—and I do treat trading as my primary business.  Having spent 23 years as an executive and CEO consultant in seven emerging high-tech companies (including an IPO), I find that trading requires the same type of disciplines that were needed to be successful in my entrepreneurial business endeavors—with a few important additions also.

As a trained engineering physicist (Ph.D. in Semiconductor Physics from Washington State University) I adopted early the mentality advocated by many (but notably not all) that one should look to primary data, namely price action and more specifically patterns of support and resistance, as the main focus for developing a ‘trading edge’ methodology.  I use charts displayed on candle formatted time and tick charts from month down to 1-minute timeframes.  My charts include indicators such as moving averages and stochastics that synthesize the primary data into forms that I have found useful in formulating rules for when and under what conditions I ‘allow myself’ to make trade entries and exits.  I presume these charts to be composite representations of human trading behavior that contain information I can use to give me that essential edge.  I practice rule based trading, meaning that my entry and exit decisions are based on rules in principle devoid of emotion or subjectivity.  Since I don’t use automated computer algorithms for entries and exits, human judgment and emotion is understandably present, but under control (hopefully), in my trading.  Certainly choosing and modifying my rules requires much judgment.  Simply stated, trading is a highly personalized art form.  In trading as in football, execution is everything.  I create and use my playbook (rules) against my opponents, the latter being the other traders with whom I am competing.  I am the quarterback, the primary executer, and my personal strengths and weaknesses on and off the field have as much to do with my win/loss record as does my playbook.  My purpose in trading is to produce income and net worth, but equally important I do it because of the enjoyment and satisfaction I receive, not to mention the camaraderie of sharing my experience in FuturesTalk.  And, God willing, I hope some day take my place among the top tier of trading pros.