bill williams_justine williams

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 thatthe dollar is going down, so anythingvalued in dollars is going to be moreexpensive.

So it’s safe to say you’re a trend trader?BW: Absolutely. We’ve been teach-

ing people to trade for decades now, andone of the things that almost 100% of allnew traders do is they get in and out toooften. We’ve had our best success wherewe’ve analyzed the market, tried to fig-ure out what the long-term trend is andget in and stay in for a while, so yes I amdefinitely a trend trader. Now, one ofthe ways we get into a trade is if we seethat a trend has overextended itself. Wehave what we call a bullish/bearish di-vergent bar or period where we haveindicators that show us that the markethas gone up too fast, so we know how tocounter–trend trade that market. Often,our first entry into a market is with thiscountertrend 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 theProfitunity 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, andTrading Chaos: Second Edition — have contributed to furthering hisunique trading concepts. He is also well known on the speaker circuit,with a loyal following of high-level traders. He has taught seminarsthroughout Europe, Asia, and the US on subjects including the fractalof the Elliott wave, the money flow index, the “Wise Men,” and theProfitunity “Alligator.”

His daughter, Justine Williams-Lara (JWL), is the president of theProfitunity Trading Group. She has been actively trading for 14 yearsin both the stock and commodity markets. She too has trained tradersin the Profitunity methodology and teaches private tutorial classes inher office in California. Trading is her life, she says, and teachingothers to trade for their freedom is what makes her continue herfather’s work.

John “Jay” Norris (JN), senior market strategist at Brewer FuturesGroup, interviewed the Williamses in person on February 23, 2008, inSouthern California.

We’ve been teaching to trade fordecades now, and one of the thingsthat almost 100% of all new tradersdo is get in and out too often.

an you tell us how you didlast year trading?

BW: Last year was ourbest year ever. I’ve been trad-

ing now for a half century, and the yearbefore last was our best up until thatpoint, and last year was better than that.I trade only stocks now, but most of mycareer I’d been trading commodities.[Earlier, Williams explained how hehas substituted many of the commoditymarkets with ETFs in the stock market.—JN]

Last year, we had several differentaccounts, and one account was up over100%. [This account is his everydayaccount from which he takes the profitsonce a month and buys physical goldand interest-bearing gold certificates.]The big account was up over 40%. Westarted something a couple of yearsago because I believe one of the thingsthat hurts people’s trading is that theyget in and out too much, too quickly.So I am a trend trader and like to stay inthe market as long as possible. I madethe 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 wateruntil the end of the year, and that onetrade was up 40% that year, and then up50% the year before, so by our stan-dards we’ve done quite well.

I know you’re quite an experiencedtrader and know a bit about commodi-ties. Was there any one trade or cam-paign over the last few years that standsout for you?

BW: Yes. There have been quite afew. Here we are at the beginning of2008 and the dollar is going down realfast and anything that is measured bythe dollar is getting more expensive,whether it’s wheat or gold or curren-cies. If you look at gold, for example, ithas gone up tremendously in dollars.But if you look at gold in some of theforeign currencies, the chart doesn’t looknearly as bullish as it does in dollars. Sowhat we’re really talking about — andas we speak, we are in a housing slump— is most people were thinking theywere making money on their houses andnow they are finding out they weren’tmaking that much money, and the un-

Bill WilliamsAnd Justine Williams-Lara

Bill WilliamsAnd Justine Williams-Lara

A Father–Daughter Team

http://www.traders.com/


kets every moment of the day. In fact, onetime my wife challenged me to eat lunchaway from the screen. For 12 years or so,she brought me lunch every day [while Iwatched] the screen. If she didn’t bringme my lunch, I didn’t eat. And what Ifound once she got me off the screen wasthat the less time I spent in front of thescreen, the more money I made.

How do you select markets, or stocks totrade?

BW: I do a lot of trading in exchangetraded funds (ETFs) — that’s a big boonfor traders. I find so many market op-portunities that I really don’t have anorganized way of looking for them. Iknow there are several scanning pro-grams, but just in the daily run of lifeyou hear so much. For example, goingto the gas station we know that the priceof gas or oil is going up so we can lookat the oil stocks and see if it fits yourparameters and if it does, you can tradeit. So there’s no problem finding oppor-tunities. There are more opportunitiesthan you have time to take advantage of.

What about comparing fundamentalnews in the papers to what’s currentlyhappening in the markets?

BW: As far as researching the com-pany and reading about the products? Idon’t do any of that. I look at the chartand only the chart. I may occasionallyread something in the paper and look atthat chart, but I don’t go looking fortrades. There are so many opportunitiesevery day; it’s a matter of evaluatingthose opportunities to get the best trade.

Do you think system trading couldmatch an experienced trader pullingthe trigger?

BW: I don’t think we’re to that pointyet — as much progress as we’ve madewith computers and processing andevaluations, it doesn’t match the humanbrain. So we try to get all the informa-tion we can about the trade and againwe’re looking at the chart. The chart isthe “EKG” of the market; it tells youexactly what the market is doing. Whenwe teach people to trade, we actuallygive them 10 seconds to evaluate thechart — where to get in, why to get in,where to take losses, stops; all within 10seconds, and that takes practice but it’seasy to do. It’s not good to spend toomuch time thinking about it, and think-ing what good or bad could happen.

What is your own educational back-ground?

BW: My bachelor’s degree was inengineering physics, which is super-scientific stuff, and my doctoral workwas in psychology, which is sort ofartsy-craftsy stuff. Both helped and bothhurt. Trading is much simpler, in ouropinion, than we want to make it. I onceheard a famous trader, who had mademore money than anyone else in theroom, say when asked what his secretwas: “Early on, I learned there is a lotless here than meets the eye.”

And that’s our motto here. We wantto whittle out everything that confusesus and only go for the things that makea change in the market structure, andwhat we mean by market structure iswhat moves the market, which is humanbehavior. The chart is the EKG of themass of traders out there right now. Iwant to emphasize I’m not sure myeducation assisted me so much. I had toget over that education to become suc-cessful at trading.

What did you do professionally beforeyou became a trader?

BW: After college, I joined the AirForce and became a pilot. After that Iworked several jobs and became an ex-ecutive vice president of the largestcarpet manufacturer in the country. ThenI became interested in the mind–bodyconnection and became a body workerfor several years. And all the time I wasdoing this I was trading part time. From1980 on, I’ve traded for a living.

Have you found that some professionslend themselves better to trading thanothers?

BW: The ones that lend themselvesthe best are basically those with a gen-eral education background. The great-est numbers of people who want to learnto trade are from the medical profes-sion. A medical doctor’s education doesnot benefit them all that much; a scien-tific education does not assist. You haveto realize the market is different; themarket is human behavior. The morewe learn about psychology and psycho-therapy and how a person operates, welearn it takes pretty much a generalist totrade. The background is not nearly asimportant 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 withthat. What most traders do is get a goodsystem and ruin it for themselves by notsticking to it. No matter how good amethod you have, you’re going to havesome losses. They give up on theirmethod or philosophy or approach justbecause they’ve had a few losses. Mostpeople don’t really follow through withtheir approach to the market. Theychange it and when they start changingit, they start doing the wrong thing.

Is mental toughness teachable?BW: It’s easy to learn, but it takes

commitment. And it’s scary. If you’re ahusband and you go out to dinner withyour wife one day and she asks how youdid and you have to tell her you lost allthis money, that’s not easy. More timesthan not, traders won’t tell the wholetruth because it’s embarrassing. I don’tknow of any way to get over that exceptto go through it and come out the otherend. But the key point is to decide onwhat your approach is and to believe init. It takes a great deal of faith to becomesuccessful.

When do you know you have that faith?BW: I think it depends on your daily

profits and losses. If your profits areexceeding your losses and you can im-prove on that ratio, you’ll be okay.

Do you have an incident or trade youremember in particular because of fear?

BW: A very specific one. My wifehappens to be a psychotherapist also,and we decided in 1980 that we weregoing to quit our jobs and trade for aliving. We had never had a bad yearwhen we were trading part time, butonce we began trading for a living, westarted taking losses. We consideredourselves professionals, not because wewere good, but because we had no otherjob. Our account went down precipi-tously and got to a very bad point.

We were living in Georgia at thattime and we decided to take off for theweekend and figure out what we weregoing to do. Fortunately, I have a greatsupportive wife, and she said, “Whatwould you rather do than trade?” I an-swered, “There’s nothing I would ratherdo.” She said, “Okay, you go back inand trade and if we lose everything, thenwe can go back and practice psycho-



INTERVIEW

therapy, and get some money and youcan trade again.”

My sitting here today is because ofher attitude. You need support. Thatwas the lowest point in my trading ca-reer and since then it’s been an upwardclimb and has been good ever since.

Do you find it important to maintain aparticular trading environment?

BW: Absolutely. You need a relaxedenvironment to trade in. When I cameback from that break, I had nine com-puters going. I had a special table builtto hold them all. I did this because mythinking was that more information wasbetter. But in trading, more informationis not better. Correct information isbetter, and you don’t need everythingthat people want.

So now I’m down to one screen and Ilike to have nice music on and I don’tanswer the phone when I’m trading. Ionly trade the dailies now, so my tradingday is about 15 minutes. Earlier in mycareer I traded all the way down to thefive-minute chart, and that can be a grind.

Is there any trade of yours that stoodout because of event risk?

BW: Back in the early 1980s whengold ran up, we made a considerableamount of money by our standards, andwe felt like we were masters of themarket and we knew what we weredoing. We quickly managed to lose allthat money and then some. And that’swhat 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 wasjust coming to fruition. And because ofmy background in physics, I got veryinterested in chaos theory. By the way,the science of chaos is not chaotic at alland delves into the deeper feelings ofpeople that create behavior and createsactions. We hired three doctorates inphysics and mathematics and they wentinto a mainframe and they did the workto figure out the chaos of the market andcame up with a picture of the marketthat was much more accurate than any-thing I had seen. They came up withthree moving average lines, which wecall the “Alligator.”

What was interesting was that all thenumbers they came up with to put on thechart as a guide were all Fibonacci num-bers, and the mainframe didn’t know

anything about Fibonacci numbers sothat gave us confidence. In the yearssince, we’ve simplified it, and the morewe’ve simplified it, the more profitableit’s become.

John Wiley, the publisher, wanted usto write a book about it and we did andthen they wanted a revision and Justinehad the biggest part in that. If anyone isreally serious about looking into ourapproach, we suggest reading TradingChaos, the second edition, or visitingProfitunity.com.

Justine Williams-Lara (JWL), Bill’sdaughter, is the president of ProfitunityTrading Group and is active in tradingcommodities and assisting clients. Hereshe 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 thedifference between them. The marketoffers so many possibilities for us as faras what we want to do, but we have tominimize the risk for the trades, espe-cially in the learning stages. The biggestproblem for traders is their ego. Theywant to be right. Typically, traders arein the top 10% intelligence-wise, whichmeans we are accustomed to being suc-cessful in most everything we have done.If you want to be right all the time, thismay not be the place for you. You aregoing to take losses in the market, so ifyou can’t be flexible and control yourrisk, you could be in for a tough ride.

There are also a lot of traders whowant to reinvent the wheel and spendmore time analyzing than trading. Theywill typically have problems and maynever actually place a trade. The mostsuccessful traders we have trained arenow relaxed, have let go of their ego-driven ways, and have fun trading. Thatis our goal: Have fun while makingmoney!

How do you react when a student wantsto contribute to your method?

JWL: That depends. If they have realtrading experience and similar philoso-phy and background, then they may addto what we have done to make it workfor them. I don’t think ours is the onlytrading methodology that works. I doknow 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 themethods. If you have been using anindicator that works well for years andit does not contradict our indicators, Itell them it’s fine. Just make sure youknow you are adding to the basic meth-odology.

One of our favorite indicators forconfirming the Elliott wave count camefrom a friend/student. We are alwaysopen to new information. Overall, thestudent who just wants to learn from asuccessful trader, follows the rules, andasks questions when they have anydoubts tends to be successful much fasterand with fewer losses.

What do you feel are the three mostimportant factors that will lead to suc-cess?

JWL: 1. Attitude. 2. Common sense.3. Trading system and enough capital tofollow the system. If you have thesebasic things, your chances of being suc-cessful in the markets is better than theaverage new trader.

BW: Attitude, work habits, reality-oriented. Understanding that what is, is;and accepting the reality of what’s go-ing on right now. Flip Wilson, the co-median, used to talk about the Church ofWhat’s Happening Now, and to me themarket is the Church of What’s Hap-pening Now.

JWL: We humans tend to overcom-plicate everything we touch. The mar-ket is very simple. The market reallyonly gives us the open, the high, thelow, and the close, and people havederived different strategies and attitudesusing just that information. So our ap-proach is to look at the market and keepit simple.

I’d like to ask a question that’s gearedmore toward getting below the tip ofthe iceberg of how you think and oper-ate in your daily life. How often do yougo on vacation?

BW: I’m on vacation every singleday. I only spend 15 minutes a day withthe market. And with software, comput-ers, and wireless technology, we cantrade from anywhere.

JWL: I wish I could say every day, butwe do a lot of teaching and I need to beavailable for support to answer callsand emails from our clients. We try tovacation twice a year as a family, butevery day I like to take an hour and reada book or sit outside in the sun, take a



S&C

INTERVIEW

walk, or do some yoga.BW: It’s absolutely important that a

trader be relaxed when they trade.

What periodicals do you subscribe to?What’s on your coffee table?

BW: Mac World. I have more com-puter magazines than trading magazines.I read the trading magazines when theycome across my desk sometimes, but Idon’t spend a lot of time reading aboutwhat people think. I’ve found thatdoesn’t pay off. Everything you need toknow is in the market itself; anythingsomeone says is just gossip, not reality.The reality is that the market is where itis because that is where it is supposed tobe and it is supposed to be there becausethat is where it is. Anything you add tothat is just pollution.

JWL: On our coffee table you’ll findVanity Fair, Rolling Stone, STOCKS &COMMODITIES … and Dog World.

Justine, is there any one memory thatstands out for you because of the fearassociated with it?

JWL: Absolutely. I had been tradingfor about a year or so and I wasdaytrading the old NYSE stock indexcontract on a five-minute chart. I wastalking to the broker placing a stoporder and I literally dropped the phoneon the floor and did not know what to dowhen the market fell like a rocket. It wasat about a 30% loss on the account. Irealized I had to regroup. I quit tradingthe five-minute chart for a while. I stillremember the overwhelming fear.

I think because I was Bill’s daughterand I was working in the trading room, Ithought I knew more than I really did andI was cocky. That was my most memo-rable point of fear, and it was a humblingexperience. The importance of a risk-reward ratio is what became apparent tome that day. I was trying to trade a$10,000 account in a market that couldmove $2,000 in minutes! That experi-ence taught me a lot about myself andwhat I could tolerate as my pain level.

After that trade I went on to doublethat account that year in markets I wasmore comfortable in, and better suitedfor my personality.

Do you still trade intraday?JWL: Every now and then. I’ve been

trading for more than 13 years now. Ithink when you’ve been looking at chartsthat long you develop a bit of intuition.

I don’t know why I know, but I do, andtypically it’s crude oil or the Dow Joneson a 10- or 15-minute chart. I still dolike the indexes. I don’t trade intradayon a daily basis. Typically, we see muchgreater profits from position trading onthe daily charts.

Will either one of you occasionally passon a signal given by your methodology?

BW: Yes. I think both of us will fromtime to time. There’s a certain aspect ofour methodology that doesn’t lend itselfto figures. On some of the trades, wewant to see how much the market ismoving against the trend. And some-times there is an angulation betweenwhere we think the market should beand where the market is really going.Those are little judgment calls that comewith experience, but our entries into themarket and exits are very specific.

JWL: That’s true. There are timeswhere I will pass on a trade, typicallybased on Elliott waves. If I see a marketgoing into a correction or heavy con-gestion and if I’ve exited a nice trendmove, I will definitely pass on tradesgoing the other way. I think it’s interest-ing that humans are the only animal thatwill sense fear and walk right into it.Every other animal uses their sense ofintuition for survival, and I like to thinkI can incorporate that into my tradingand help others to do that as well.

Trading can stir up some of the mostprimal feelings we have when under pres-sure or in a losing position. Being able toavoid those situations can be very profit-able both mentally and financially.

What’s the first thing your eye is drawnto on a chart?

JWL: The Alligator, the price bars.I’m looking for a chart that is aestheti-cally pleasing. The Alligator and theprice bars tell me instantly what type ofmarket we are looking at. I look at acombination of these things.

So you follow the Elliott wave?BW: Yes, I look at the Elliott wave. I

don’t put in a trade based exclusively onthe Elliott wave. For my trading there aretwo ways to get in and two ways to add onand two ways to get out, and that’s basi-cally it. But choosing whether to do thattrade will depend on what Justine wassaying as to where we are in the Elliottwave and where you’ve been and whatyour comfort level of that chart is.

JWL: Bill is trading stocks, whereasI’ve been trading commodities, whichis 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 acorrection, we all know how that typi-cally ends up: disastrous. If you knowyou are in a trending market, you havethe opportunity to trade more aggres-sively and take advantage of the move.

Understanding the basic patterns ofthe Elliott waves can keep you fromtrading corrections; 85% of losses oc-cur in corrections, so learning to avoidthem can cut out a great deal of pain.

Do you follow trendlines and Fibonaccimeasurements?

BW: No. We use the alligator. Essen-tially, the Alligator is our trendline. Ittells us what the market is doing at themoment and what it’s doing on a highertime frame of about three to five timesthe length of the timeline. So if Justineis trading the 10-minute chart, the alli-gator will tell her what the market’sdoing on the hourly chart and the dailychart without looking at those charts.It’s telling you where the market wouldbe without any new incoming informa-tion. And it’s new information thatmoves the market.

Thank you, Bill and Justine.

John “Jay” Norris is the senior marketstrategist at Brewer Futures Group. Norrishas more than 25 years’ experience in thefutures industry, having started on thetrading floor of the Chicago Board ofTrade and held analyst positions beforeswitching to the brokerage side of thebusiness. He may be contacted at 800971-2154 or [email protected].

SUGGESTED READINGWilliams, Bill, and Justine Gregory-

Williams [2004]. Trading Chaos, 2ded., John Wiley & Sons.

Williams, Bill [1998]. New TradingDimensions: How To Profit FromChaos In Stocks, Bonds, And Com-modities, John Wiley & Sons.

Williams, Ellen G. [1988]. “Trading WithSteidlmayer,” Technical Analysis ofSTOCKS & COMMODITIES, Volume 6:June.


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