Manifesto of a Trader

I am not licensed to give investment advice and nothing in this writing should be
construed as such.

Often in this field our goals can become clouded. Trading and speculation takes a
certain type of individual. Research on the other hand takes another type of individual.
The goal is to get a system that the individual can trade, then, trade that system.
It is no secret that to succeed in this field (trading) one is going to have to get an
education within this field (trading). My own education began with a little research
years ago into existing trading methods. I tracked down Benjamin Grahams system of
value investing from the 1930’s. This worked wonderfully in the mid 1990’s bull market.
It soon became apparent, to really succeed in the long run in individual needs to know
when a bear market is around the corner. It was this exact point that fueled my on-going
research. In order to better use leverage I studied options. In 1996 I bought about 10,000
worth of put options on Cascade Communications. The stock did go down and the
options went heavenly into money. However, on the day this occurred I had a severe
case of the flu and could not get out of bed for the next couple of days. When I did make
it to the computer to close the trade the price had reversed and the options were not
worthless! 10k down the drain. That was a lot to a young man but later I viewed it as an
education and now I am writing about it so that you can think about it and be able to use
my experience without it costing you any dollars etc. That was my 10k lesson, the most
expensive to date, there have been other although less expensive.
I recall doing the “value work “ on KLA Instruments (KLAC) and it came time to
trade and I felt this huge impulse to buy. I recall I was awaiting a wire transfer (which
was a delay) and thinking that KLAC was going to get away from me. “Damn it was
taking that wire transfer so long, where the hell is it, I needed it yesterday.” Well the
money finally arrived and I executed the trade. I bought the shares at the EXACT HIGH!
All those feelings of “I absolutely have to buy” would take me a few years to understand.
Now looking back I understand the CAUSE. Although KLAC recovered many months
later so there was no real cost in this “education incident” I learned going forward that if I
absolutely MUST buy something it is a sure sign that it is topping.
this leads to the psychological aspect of trading. You will never know this factor and no
one will ever be able to tell you, there is only one way and that is to cut your teeth. If I
was giving advice to someone that asked me for help, I would suggest here to “cut your
teeth” slow with money that will not be. REALLY missed and only do so via small, very
small trades, stocks are great for this and I believe you would learn much about yourself.
You can have a great system and still get blown up due to psychology. One example of
this includes a moderator of this site, I gave the individual a system that I had found
worked particularly good in a certain market. The individual began to trade the system
and had 9 wins ina row in which the trades were closed out at the profits each time. The
individual on the next trade took the profits and went into another (different) market and
quickly gave back all of the profits. The system was violated and the inevitable followed.
I bring this up so that we can learn from this.
I do not gamble on gambling boats, but my wife does, and I have attended some of
these. I have noticed that she and others, when winning on a certain machine will stay at
that winning machine. The point here is we can learn from these so we don’t have to
experience the loss. My wife consistently goes into Casino’s and walks out ahead
(sometimes thousands) on the slot machines. She will walk around putting quarters in the
slots, one quarter per slot until she hits on one, then she will sit down and play (select)
that particular one. Gann had his favorite stocks etc. We are familiar he was so good
trading Mexican Petroleum that they called him Mex-Pete. He had his favorites and they
became such essentially the same as picking the appropriate slot, by what THEY PAID!
So the question you must ask yourself is “How am I going to find the right stock or
commodity?” There is only one way and that is to “ put a quarter in a few until you get a
payout. “Once this is done the next step is to figure out that stock or commodity.
Certain individuals are where I call “intuitive traders” in that they have a “6th” sense
about trend and duration. I have seen these people with my own eyes. I do not possess
this ability; the minute I rely on my gut I get blown up. SO what I have to rely on is a
system. I have to adhere to the rules I set forth in my system. My system needs to be
based on cycles that affect my stock or commodity. My system will actually be a “tool”.
The more “tools” I acquire the better I should be able to trade.
Financial Markets are based on laws. All movements of price adhere to these laws.
The better one understands the laws applying to the stock or commodity under
investigation the better ones ability to profit from that market.
I gave, in the Australia, New Orleans and Paris seminars a technique to deduce from
the data, scientifically, the operable cycles of any market. I did however leave out the
secret. The secret is this: when you have 2 points that are in angular relationship one
time and turn the market those 2 points, again in angular relationship and no, turn occurs.
Then you must find out what factors were present or absent in the turn and not in the
other. The gullible public “assumes” that all of this is random; it is not. There are
reasons and you must dig to find them. It is in this area that swift initial success, at a
beginners level can be found. Produce a system that comes in around 80%, like in the
Bonnie Lee Hill video, and use that ad a beginning point.
If you have found a stock or commodity but can not find any laws operating in that
stock or commodity it is for ONLY one reason, you need to further study the methods of
deducing natural law, i.e. study the methods used to deduce these laws from stocks or
commodities. Because that stock or commodity has many natural laws operating in it.
They are there in each and everyone without exception.
Generally, when you develop a system outside of these natural laws for your stock or
commodity you are dealing with another factor. Not only does that stock or commodity
have to like you, that system also has to like you. These systems are what I call topical,
“applied to the surface.” This is what traders such as Gann use. The problem here is as
stated. I have directly witnessed time and again, a topical system make a trader money,
consistently. Then, another trader takes that same system and consistently gets blown up.
Natural law systems, such as Gann’s etc. hold for individuals, i.e. you do not have the
above transference problems.
This brings us to another point. I have said for years that there is more than one way
to “skin a cat.” At the Paris seminar in 2005 I was walking around and came up to
Ablack 1940, (a man whom I much admire) and he stated; “ There is ALOT happening at
Hi’s and Low’s.” That just crystallizes it. And you have it ALL right there. Are you
now seeing what I am trying to tell you?
 The next Secret is this. If you know all the cycles operating in you stock or
commodity and you know the Natural Laws that are applied to those cycles then you
know ALL OF THE TURNS AND THEIR DURATION. You can really trade the hell
out of it.
From this writing one can produce a master plan of attack.
1) find something that works around 80% of the time
2) Make a system out of it
3) Begin trading small and slow just to understand the psychology
operating while trading
In this field there are two types of traders; a topical system trader and a natural law
trader. The first requires minimal investigation and produces hard fought, shaky profits.
The natural Low Trader investigates the cycles inherent within that stock or commodity.
In this the cycles within that market are traded while further studying. I.e. making money
as you go.
Sweat trading; the art form of placing a trade and sweating it out is something I do not
suggest. This usually occurs when there is no system in place (one is trading based off of
gut feelings) and usually with money one can not afford to lose.
The importance of the system is that it in part can take away some of the uncertainty.
In part its your friend and confidant. You have to make sure the parameters of your
system are well defined. Meaning that as and example your system says to enter a trade
at point X. You need to know where your stop is, (if the trade goes against you) and
where your exit is, either price objective or trailing stop/time stop. Shaky/Sweaty trading
is a sign you are in doubt. When in doubt, get out.
I was a kamikaze trader once and that was with those options. Many traders I know
do occasionally take kamikaze trades. A kamikaze trade is a trade that is made with
money that you really cannot afford to lose. You are no longer “safe trading” you are out
on a limb. Now I know that the thought of losing 10,000 to some people can be quite an
emotional deal, it is survivable and in this business expected, but that’s not what I am
talking about. I mean you are out on a limb and you know you are out on that limb. You
are somewhere you are not suppose to be and you know it…only one thing eventually
happens to a kamikaze; you get blown up. I still see traders do this. I never did again.
Only play with money you can afford to lose. NEVER BET IT ALL.
I have been asked by people if it is worth it, the time put into studying to be able to
trade. To that I will use something here that Ruth Miller told me. She was flying out of
state to teach an individual how to trade, to detail this she left met the following; “I am
doing this because he needs the income you get from trading.” Now you have it right
there. There are other examples. I have been there when students and friends break
through and achieve their goals. Payoffs for their efforts. These are incredibly rewarding
moments I will never forget as long as I live. Personally speaking this field is incredibly
enlightening.
Sometimes I think that some people do not realize that once you find you “groove”
with all of this it becomes repetition. You can mutate and enhance your groove but its all
repetition, its fun and its financially mega-rewarding.
Personally I always knew I did not fit in with the corporate crowd and owned several
businesses in my early 20’s. Besides dealing with clients, inventories and employees I
found I never had time for life. Some people do but I found I was not truly “living”.
Dealing with a tremendous amount of headaches (problems) zapped my energy and drive.
I came to realize that to TRULY be successful one must have MONEY and TIME (time
to spend it).
There is a 36 year old mother of three that I know. She has full time job and comes
home to work on her crafts in the evenings for craft shows. She is “successful” at the
shows and makes fair money at them. The shows are on the weekends and preparation
takes all week. Well she is making what most would call O.K. money. The cost is
neglect of children, husband and house. Her children are young. Virtually it is a
sacrifice for dollars. The cost here, the real cost, is all encompassing. In financial
markets we are fortunate that our costs are in the form of education up front. Thus the
true “lifestyle” of a successful trader is, in itself, conducive to a truer, much truer form of
success and freedom.
I later adapted my motto to what it is today. “One must have time, money and
knowledge”. This creates a super success, and in this we have a path because tiem and
money will come once you acquire enough knowledge.
Switching gears here for a minute, I just received and e-mail from a WITS member
that states he has been profitably trading a system since April and that he and his wife
will be at the next seminar. I get “success e-mails” pretty frequently and each one brings
a smile to my face. See he has a system that is working for him , if he gave this system to
you it may not work for you. You MUST take it upon yourself to find your own.
Some individuals claim there is no 100% systems out there. That is hogwash. Lorin
and others have several systems. Looking back through my studies over the years I can
definitely state that in this field anything, and I mean anything is possible. Lost people
limit their own minds.
There is an old proverb that goes; “I used to chase the Goddess of money and she
would not smile on me. Later, I chased the Goddess of knowledge. This make the
goddess of money jealous! I now have the goddess of money.” And you got it all right
there.
Every stock and commodity operates ENTIRELY off natural cycles. There are no
exceptions in freely traded markets, NO EXCEPTIONS. Finding even one of these
cycles is easy and profitable. An example of this is cotton in Bonnie Lee Hill’s tape
where she comes in with 80% using one cycle. There are SIMULTANIOUSLY many
other cycles operating in that cotton market. The word cotton can be interchanged above
with “whatever your favorite market is.”
Through gimmicks or “topical” systems it is impossible to consistently arrive at price.
IT MUST BE DONE THROUGH THE NATURAL OCCURING CYCLES. So this
blazes a path for you. Get the cycles then study price, NOT the other way around.
Over the weekend I was talking with a trader that told me a story about a stock. He
had the direction right but his broker kept putting in limit buy orders and he kept missing.
The price kept getting away from him. Finally he said “Just buy it at market” which the
broker executed at what wound up to be the top. Then, while he had a long position it
began to reverse. He closed the trade out at an 8,000 loss. The point we can learn from
this is that until you know if a stock or commodity is going to “be good to you” don’t
risk this type of money i.e. Start out small.
Your stock or commodity is chalk full of natural cycles just waiting for you to
discover. N example of ONE of these cycles is on the Bonnie Lee Hill video with the
80% cotton. Your job is to isolate similar cycles in your stock or commodity. Go back
and look at that specific cycle she found and the parameters she used to find it. Your
stock or commodity is loaded with similar cycles! The point is this; learn your stock or
commodity, use these cycles to profit. Begin small.
The last trade I took this year went against me and I closed it out even before it hit the
stop but that comes through trial and error. I was swift…I recall the days when I was not
swift. My point is to put this out so some can learn from the mistakes. I focused on the
bad trades but let me tell you there are the winners. Boy there are the winners.

Disclaimer: nothing written here should be construed as investment advice. Before

trading you should consult your broker or other qualified professional.