Is it harder to trade off the floor? Not in the long run. My profitability in 1987 and 1988 has been pretty good.
You mentioned that your first year off the floor was very difficult. Was the main problem that you were still trying to trade the market as you did on the floor? Yes, that was the number one reason. The second reason was that the transition occurred during the 1986
runaway bull market. I was bound to lose because my style was not based on following trends.
Is that still true? No, it has changed. I've gotten better. I can still countertrend trade real well, but I found you can also make a
lot of money trend following.
Do you use trading systems? No, we are "discretionary traders." We only use technical indicators and systems as trading tools. One
particularly interesting system we have developed is based on quirks related to volatility. Our belief is that volatility
offers clues to trend direction. Although we've found through backtesting that this system gives you good signals, we
do not blindly follow the trades.
For an automated, computerized system, what would you consider good results in terms of average annual return? About 40 to 50 percent, with maximum equity drawdowns under 10 percent.
But systems will always have larger maximum drawdowns than that. That is why we haven't directly traded money on them.
Do you think any system can compete with a good trader? I haven't seen one yet, although there may be one somewhere.
There are some traders who have the skills, but who don't succeed. What is it that keeps them from becoming successful? Most traders who fail have large egos and can't admit that they are wrong. Even those who are willing to
admit that they are wrong early in their career can't admit it later on. Also, some traders fail because they are too
worried about losing.
