BPD Trading

10.12.2007

Je suis très heureux de vous présenter l'interview de Alan Farley. Je voudrais le remercier très sincèrement pour sa disponibilité.
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Q - When and how did you start trading?

Alan Farley - I started trading almost twenty years ago after reading all the stories about the 1987 crash. My routine back then was to go to the library on weekends and review Value Line charts. I didn't know the difference between fundamentals and technicals, and tried to make decisions using Peter Lynch methods, i.e. success stories. That didn't work too well.

I opened early accounts at a big brokerage firm where the fees were ridiculous. I switched over to online trading as soon as Compuserve made it available in the early 1990s. There I hooked up with a bunch of market professionnals, including Jimmy Rogers and John Bollinger, who here hanging out and chatting on the Investor's Forum.
Before trading, I was a manager in the insurance claims industry for over 20 years. They facilitated my education when the were downsizing in the early and mid 1990s. I was the boss and I had the only modem in the office, as wall as plenty of free time. So I used to watch the markets all day and trade while I was supposed to be working oon claims.

Q - All traders agree that capital management is a key factor. But there are large discrepancies between the many traders I know about the amount of risk involved. Do you use a typical risk or do you use variable risk for each kind or style of trade?

AF - I match my risk to the market. During quiet periods of lower risk, I can have 15/20 overnight positions active on one time. In bad markets, or volatile one, I just day trade and carry nothing overnight. I'm trading very small right now, until the market makes up its mind about the larger scale trends.
My day trades far exceed swing trades in quantity. I probably do 5 or 6 day trades for each swing trade. That makes sense because I'm testing the waters ans doing a lot of scalping, while I'm waiting for overnight holds to set up.

Q - The success of many traders year on year is a confirmation that the random walk theory is invalid. Despite this fact, many people think that is not possible to beat the market, and most traders lose money during the first months or years. Do you have any advice for them?

AF - Control risk, control risk, and control risk. As long as I focus on the profit side, I'm doomed because that's what the market gods want me to do. Underlying greed sucks money out of your pockets. I've also learned that it's not a fair or efficient market. It's a dirty place where powerful people are playing all sorts of cruel tricks on smaller traders. You have to see this instinctively to avoid traps. Then you can play with them, or get out the way.

Q - Could you identify whether a person will be a successful trader or not? and if you can, can you tell us what quality is essential in a successful trader?

AF - Most traders react to situations rather than being proactive. So they follow price movement around and get caught in all sorts of reversals. Also, most traders don't really want to put in the hard work required to make money over a long time period. They see the market as a quick and easy way to get rich.
I also believe many traders don't want to succeed on a subconscious level because this requires too much self-analysis and self-discipline. It sound easy in theory but is is more difficult to put it into practice every day. Just ask someone who is trying to quit smoking.
Successful traders have controlled weaknesses in other aspects of their lives before they risk money in the market. They also know how to observe, without letting their own bias influence what they're looking at. Finally, they're fearless and not afraid to lose money, because they know they'll get it back.

Q - Trading or good trading is a combination of three elements for me. Strategy and techniques, money and capital management, and the psychology and organisational ability of the trader. Which of these three elements is the most important for you, if there is one?

AF - Trader psychology is way overrated after you've been trading for a number of years. At that point in the learning curve, pure performance is the only issue and psychological analysis is just a crutch.
Going back to what I said earlier, controlling risk is the single most important aspect of successful trading. That falls under the category of money management.

Q - Do you have any words of wisdom to share with those who desire to trade for a living and who are just getting started?

AF - It can takes5 years or longer to figure out the markets and have a plan to take advantage of price movement. If you're committed, stay in the game until it all makes sense. But lower your share commitment until you have a track record that tell you its Okay to risk high levels of capital.

Q - Do you remember a particular experience that increased your trading skill?

AF - I took my worst drawdown in three years in 2006. My focus now is on avoiding those periods by shortening my time frame, and taking a hit and run approach with most trades. I've also increased my size and overall exposure to the highest in my history because my results tell me its foolish to trade smaller.

Q - In my experience, traders who enjoy success in trading, are working more and more simply. Trading is for me the art ok keeping simple a world of complexity! Do you agree with this statement?

AF - Absolutely. I've stopped looking for new technical indicators and just rely on the patterns, a few moving averages, a few moving averages and Stochastics. They tell me just about everything I need to know about trade entry and exit.

Q - Do you have any words for the French reader of this website?

AF - I've been to France three times in the last three years, conducting seminars and speaking to traders. I absolutely love the place and the people. French traders are extremely focused and knowledgeable about their craft. They're also far less cynical about their market obsession than amrican traders. I find that extremely refreshing.

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Interview réalisé par échanges de mails durant le mois de novembre

Bon trading à tous.

Mise en ligne de la traduction rapidement.

ZenT

BPD Trading

Interview Alan Farley

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BPD Trading

Interview Alan Farley

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