Veteran member of T2W and site moderator, Mark Williams talked about the past, present and future of his trading career in this exclusive T2W interview.
How long have you been trading for?
Holding shares for 9 years, but only trading seriously for the last 5 years.
How did you first get involved in trading?
My parents were offered Norwich Union shares when they floated, and I brought £150 worth.
Do you remember your first trades?
Yes. I still have nightmares about them now! The strategy was to buy anything that was a takeover target. Very risky.
What were your first few months like? Were you profitable initially?
Mixed results. The profitable trades were more by luck than judgment.
Has your trading style changed radically from when you first started?
Completely. I now have a strategy!
How did you learn to trade?
I started by attending a taster session by Chris Manning, and practicing the basics.
Are you a self-taught trader, or did another trader teach you worthwhile lessons?
I have been taught by TheBlindSquirrel, who gave me the basics, and then later by Alan Farley. TheBlindSquirrel taught me the basics of technical analysis and Alan Farley moved my knowledge on further with the introduction of strategy building techniques and money management.
Trading – In Practice
What markets do you trade?
Swing trade the FTSE 100 stocks, as well as Spread trading US commodities
What is your basic approach in analyzing and trading the markets?
My whole approach is based around technical analysis. Buying when price bounces off a support level or selling when price bounces of a resistance level.
How would you define your trading style?
How often do you make a trade?
1-3 trades a day.
Do you prefer to trade long or short and why?
Short. I was going long throughout the whole of the bear run when I didn’t understand what I was doing, so now I have the chance to short shares – I can get my own back on them. I don’t mind going long, but I prefer to short generally. The other benefit of shorting is that generally prices fall faster than they rise
How do you pick your trades?
I scan for shares that look promising on the end of day charts and then use the 60 minute charts to fine-tune my entry and exit.
Is there anything you can single out as the most important element in deciding to put on a trade?
2:1 reward-to-risk ratio. I must have at least 2 times more potential profit than loss. This makes sure that I only take trades that are worth my time taking. Although 2:1 reward to risk ratio is my minimum, I generally prefer to use 3:1 whenever possible.
Do you use trading systems?
“Trading Systems” is an area of trading that I have looked into. Trading system designing is something that I can see myself doing in the future.
How much do you risk on any single trade?
2% of my trading capital. 2% is high but I’m a fairly defensive trader, I will only trade when I’m 100% confident and then go in big.
Do you use stop or limit orders?
I use both stop and limit orders. I have found that using them give me better entries and exits than just using market orders.
Do you use chart patterns such as reversals and breakouts?
I use most chart patterns, as they are all variations on the theory of support, resistance and trendlines. My favourite patterns are double tops and double bottoms. I have found these to be very powerful and profitable.
Do you use Level 2 data to trade?
No. I understand how to use Level 2, but it is a very intensive style of trading and I prefer to take things easy.
Do you decide where you are getting out before you get in on a trade?
All the time. It’s the only way to define risk for a trade.
How do you decide when to take profits?
When the risk outweighs the reward at any point.
Is slippage/bad fills a problem in your trading?
It is a problem, but I have come to expect it, and it is part of my risk calculation.
Do you use the opinions of other traders in making trading decisions, or do you operate completely solo?
Completely solo. At the end of the day, it’s my money that I work hard for, and not someone else’s. Having said that, I’m always open to ideas but then I will go and do my own research.
Trading – The Theory
What are the trading rules you live by?
Only take trades with at least a 2:1 Reward / Risk ratio.
Never risk more than 2% on any single trade.
Do you believe chart reading can be used for successful trading?
I know it can.
Are there any technical indicators that you have found to be particularly valuable?
I’m not a big fan of indicators. All of them have their flaws
What are your thoughts about using fundamental analysis as an input in trading?
I can’t use fundamental analysis. I know people who do use it profitably and if you can then great, but it’s not for me.
Do you ever use contrary opinion as an aid to trading?
Sometimes, but my risk has to be very low for me to use it.
How important is having a sound risk/money-management philosophy?
Without sound money management you will get wiped out, no matter how good your trading is. Poor money management is the main reason why new traders fail.
Trading – The Tools (Brokers & Systems)
Which brokers do you use and why?
Deal4Free spreadbet. Mainly because I haven’t got £25,000 to open a IB share trading account, and the costs are pretty small to trade.
What software do you use and why?
I use ESignal as my charting package, and I use it to manually search for good trading opportunities
Do you have an opinion about trading systems sold to the public?
I’m very suspicious of anything that is sold to the public, and I see trading systems as “get rich quick” schemes that don’t work.
Do you feel a good system can compete with a good trader?
A good trader will always be better than a system, mainly because a good trader will be ahead of the system.
In your trading experience, is there one particular trade that stands out as the most dramatic?
I had shares in Manchester United before a bid by BSkyB came out. The stock jumped 30+% in one morning and I made £200 just by going to school.
What is the most prominent fallacy in the public’s perception about trading?
Most people see it as gambling for rich people – it definitely isn’t. It’s a job that requires discipline far and above that of any other industry.
How much of a role does luck play in trading success?
Trading is calculated luck. You do need a bit of luck, but it is mainly skill.
How important is gut feel?
Gut feeling has been the enemy in my trading over the years. As I get more experience though, it has become less of a factor, which is something I have had to work hard on over the years to combat
Success & Failure
How do you judge success in your trades?
An individual trade is judged on how well I followed my plan and how I executed my trades. A collection of trades are judged on the average amount lost versus the average amount won and also the percentage of winning trades. This allows me to see at a glance how well the strategy is working and if it needs to be amended in any way.
What are the most important elements to becoming a successful trader?
A passion for trading, an approach that is based on sound money management and most importantly discipline.
Is the joy of winning as intense as the pain of losing?
There is no longer any joy or pain in my trading. I’m fortunate that I’ve managed to eliminate emotions from my trading. This allows me to look at trading from a more mathematical view point as opposed to the emotional rollercoaster that it used to be.
Why do most traders lose?
Poor money management. Trading is a journey of learning and development. Along the way, you pick up more knowledge and turn from a losing or inconsistent trader to a winning or consistent trader. Without good money management from the beginning, new traders have their trading accounts wiped out and don’t then purse trader further.
When you do hit a losing streak, how do you handle it?
I take a complete break from the markets. I’ve taken weeks off to relax and get back the passion for trading. After all I can’t lose money if I’m not trading.
Is the ability to accept losses a characteristic of a winning trader?
Yes. If you can accept that you will be wrong most of the time, then handling losses becomes a lot easier.
What was your worst time trading? What went wrong?
There’s been quite a few. Most of the time it is mental tiredness. The one that stands out was a time when all my discipline went out the window, I was placing wild overnight trades and the market in it’s wisdom gapped all over the place for 3 days in a row. This hit me hard, but it gave me a big wake-up call to just how important money management is.
Can you describe any specific trading mistakes that you learned from?
Over the years I have made a lot of mistakes, I am tempted to say all the possible mistakes I could have, but I’m sure there are others. Looking back, what I do take comfort in is that the majority of my mistakes I’ve been able to learn from and move on without too many problems.
Are there any books you have read, that you would recommend to people?
The best 2 books I have read are ‘The Master Swing Trader’ by Alan Farley and ‘Trading in the Zone’ by Mark Douglas. The former is a very advanced book and I now use it as a reference book, as it covers most areas of trading. ‘Trading in the Zone’, however, is a lot better as a general read and it has made me look deeper into my own psychological make up, which has shown up a few fundamental flaws in my trading which I was then able to correct.
What is the most important advice you can give the average trader?
Make sure your trades have at least a 2:1 Reward/Risk ratio, ideally 3:1. Anything less than that and your money will slowly be drained from your account.
What advice do you have for the beginner trader?
Learning to trade well is a long journey, which uncovers all human nature’s weak points. If you can accept it is a long journey, then start by learning the basics of TA and money management. From there you can develop your trading into more complex areas. Also, start off by paper trading until you can trade profitably, then look to start small with little trades and build up over time. Staying in the game is the most important thing when you’re looking to trade
What are the traits of a successful trader?
Discipline, a passion for trading and a sound risk/reward strategy.
The View From The Floor
Do you enjoy working from home?
I prefer it to work from home. After working in the city of London, not having to travel to work is wonderful.
What environment do you trade in, for example do you have a separate office, multiple monitors and CNBC on the telly?
I trade from my living room, with 2 19″ monitors and a powerful computer.
What effect has trading had on your personal life?
It’s completely changed my life. It gives me a lot more time to do the things that I want (mainly golfing), and I now enjoy life a lot more.
Do you sometimes need to get away from the market for a few days?
Quite regularly. I trade a lot better after I’ve had a break from the market.
Is trading for a living firstly viable and second desirable?
It is for me. I wouldn’t like to do anything else.
If you weren’t trading what would you want to spend your time doing?
If I wasn’t trading for a living then I would be studying accountancy or working more on my golf!!
Do you have any goals at this point?
My main goals are longer term ones. There are a lot of exciting projects in the pipeline at the moment, and each one I’m looking forward to implementing.
Do you still see yourself trading ten or fifteen years down the road?
Yes. I can’t see any reason why I would want to stop.
When you make your first million, what will you spend the money on?
Cars!!!! The wish list is growing rapidly
Any comments about T2W?
T2W is going from strength to strength. The future developments of the site are very positive, coupled with some excellent ideas. The entire site is a credit to Sharky, along with his team and I hope they’re very proud of what they have built.
Any last words?
Bulls make money, bears make money, pigs get slaughtered