|“Motivation, or inspiration, is not enough to trade well. You need a winning trading methodology, discipline and sound risk and money management.“|
Background Info / Introduction
Q. Can you please start by making a few comments about yourself to include your trading style and what products you trade, your experience in years, and what other things of a trading nature take your time on a regular basis (e.g. writing trading books/contributing to forums/coaching/speaking engagements)?
I started trading back in the late 80’s while working for Wall Street firms. During my 20 years of trading experience I have written three books about trading and many articles for popular magazines as an invited author. I trade short-term futures, stocks and forex using mechanical trading systems based on price patterns. I am the president of Tradingpatterns.com, a company that has developed one of the most powerful software programs for discovering price patterns and trading systems automatically. I am also president of Harrison Investments Inc., a company that provides financial advisory services to offshore institutional investors and hedge funds.
Q. It is fair to say that most people are initially attracted to trading by money. Is this what initially attracted you or was it something else?
I believe money is the main attraction. In my case, I also wanted to apply my quantitative skills to a very difficult problem. I have two masters degrees, one in Mechanical Engineering and the other in Operations Research with emphasis in financial engineering and before I started developing trading systems I had extensive experience with modeling and simulation of complex dynamical systems of all kinds.
Q. What are some of your good and bad memories of your early trading days?
When I started trading back in the late 80’s as a manager of a small fund, my systems were based on a trend following strategy and I traded currency futures. I remember that a few months after I started, around November 1990, the fund I managed was up more than 60% and I decided to close all positions and secure my performance fee for the year. That is a good memory because it was the first time I made serious money using a mechanical trading system. One of the worse memories I have is when I did not adhere to my money management rules and I doubled open positions in currency futures because I got too greedy. The result was a loss of the open position profit plus a good fraction of my initial equity because of a price reversal that took place right after I increased the risk exposure.
Q. How would you describe a couple of your biggest mistakes in your early trading days?
Ignoring risk and money management rules on certain occasions was the biggest mistake I made in the beginning.
Q. Looking back to the beginning, in the face of the usual challenges, what motivated or inspired you to learn to trade well?
I believe my trading success is not due to some motivation or inspiration but due to a comprehensive and fully quantitative approach I adopted right from the start. Motivation, or inspiration, is not enough to trade well. You need a winning trading methodology, discipline and sound risk and money management.
Q. On reflection, was there a single moment in time or situation that ultimately had the greatest influence on your trading?
Yes, it was a moment in time back in the early 90’s when I realized that the tedious, trial-and-error process of searching for a mechanical trading system could be automated using computers. This led to the development of APS Automatic Pattern Search, which is a software program that discovers automatically trading systems based on price patterns that fulfill user defined performance criteria and risk/reward parameters.
By January of 1994, I have developed a DOS version of the program and I joined a futures trading contest with real money that lasted for the whole year. I had the program look for patterns in T-bond futures historical data, I traded that market and finished the year up 36% in third place. The following year my return was 18%. It was when I realized the power of price patterns and mechanical trading systems because my methods were put to actual test and made good money.