Part III : On Markets

TJ : How do you view the market ?

MW : That’s easy. I view the market as unknowable.  I have given up trying to predict market direction. I enter trades (premium selling) with the idea of being able to profit if the market does not move too far, too quickly.  I also view the market as very friendly.  It allows me to make a living, but it has a violent nature that shows itself on occasion.  That means I always buy protection for those times when the market unexpectedly goes crazy.

TJ : What has changed in the markets now from when you first started ?

MW : Computerized trading makes a big difference.  There are automated buy and sell programs and sophisticated programs that force inefficient markets back into line.  That means fewer opportunities for profit.

TJ : What remained the same in the markets now compared to when you first started ?

MW : Greed is still present (Gordon Gecko would appreciate that).  It’s still subject to all the emotions of crowds, as evidenced by the bubble of recent years.Part IV : On Trading   

TJ : You’ve been trading for some time. I think one of the most difficult things traders are faced with is dealing with emotion. How do you avoid falling into the type of trap? 

MW : I keep my emotions under control when deciding how to handle my positions.  The biggest emotion for me is FEAR.   When afraid of getting hurt, I tend to adjust now, take a reasonable loss (if necessary) and move on.  I used to close my eyes to danger and hope for the best.  That is not a successful trading style. 

TJ : Do you think it is important for an options trader to be aware of every type of strategy there is or should they pick a few diverse ones and know them extremely well ? 

MW : The fewer the better

TJ : In your experience as a trader, are there any techniques a trader can apply to increase his or her confidence to become a better trader? 

MW : Nothing instills confidence like winning.  Thus, to me, the answer is to initiate positions carefully and do all you can to keep them from becoming big losers.  Some losses are inevitable, but the amount lost must be reasonable when compared with the reward potential.

TJ : What else should people keep in mind when they are managing risk ?

MW : It is a significant part of any trading methodology.

TJ : In your opinion, what is the biggest pitfall in trading options ?

MW : Beginners jump right in and make trades before they are prepared.  Education comes first; more learning comes 2nd and trading comes next.

TJ : How much capital did you start with ? How much capital is required to start trading for living ?

MW : I began trading as a market maker and required a substantial amount.  Retail traders require much less.  Trading for a living requires that the trader have a proven method.  But how much capital is required - there is no set answer.  First, traders must have enough capital to cover potential drawdowns.  Second, must have enough to cover margin requirements of trading positions, with room to spare.  Because margin requirements vary with the method used, no one can tell another how much is required.  But, margin calls must be avoided at all costs.

TJ : We always hear that about 90 to 95% of traders fail. Why do you think that might be? What would be some of the reason behind that and to overcome it? 

MW : Trading is NOT for everyone.  People who have no business making the attempt do get into the trading business and they fail.  People have no idea what’s involved – in fact I have no idea what’s involved in trying to be a scalper or day trader.  I’d never considered trying to do that.  What I do is open option spreads that I believe have a high probability of success and a risk/reward ratio that allows me to earn profits, even after taking those occasional losses.  Not every trade is a winner.  I don’t make money every month.  But I do come out with enough income over time. 

TJ : How do you measure success in trading?

MW : Enough income to make it an acceptable substitute for a real-world job and more importantly, being satisfied at the end of the day that this is work I enjoy doing.

TJ : Given a chance, what do you like to do differently in trading again?  

MW : At the start of my career, I would like to have had a much better risk and money management skills.

TJ : Let’s talk about trading education. How long do you think it would take someone to master the art of trading?

MW : Wow.  What a question.  I could say “a lifetime” because mastering anything takes constant practice and there is always more to learn.  But it really depends on what one wants to learn and how involved one wants to be as a trader.   I teach my beginners some solid investing guidelines and strategies that work in the real world.  That’s enough for some people to go on and make good money on a consistent basis.  Are they ‘traders’?  Probably not, but they are successful investors.  Investors do trade, and if they do well, haven’t they mastered part of the art?    For most people who consider themselves traders, that would not be nearly enough.   They have much to learn and it takes plenty of time to develop skills and to learn from experience.  I don’t believe anyone needs to be a MOT (master of trading).  Instead they need to master some niche. 

Part V : Trading Systems and seminars

TJ : What is your view on trading systems ? Do they work?

MW : My view is entirely negative.  But, that’s a bias, as I have no solid experience, nor do I want any, with a trading system.
 
TJ : What are the pros and cons of trading system? 

MW :Bottom Line: To me, if a system worked, the developer would NEVER sell it. Thus, I believe they are all too expensive and not worth the price. 

TJ : You conduct seminars too. What do you teach at the seminars? 

MW : Seminars are designed for beginners. I make certain the attendees understand what an option is and how an option works.  I give them examples of how they already use options in their everyday lives and that contrary to much negative publicity, options are nothing to fear and are easy to understand.  I talk about why anyone would want to buy pr sell an option.  The risks and rewards.  I teach them how to use options is one or two very basic, risk-reducing strategies.  I want my clients to comprehend what they are doing and to get started trading options with enough knowledge to make trades that provide a high probability of success.