The Godfather Of Trading: My Final Warning To The Next Generation!

Charts show where the market has been, not where it's going

Asked about his shift away from technical analysis, Williams says it has a well-defined place: identifying the trend and changes in trend, plus a few short-term patterns that repeat. But charts cannot predict; they record what price did, like chicken scratches, not what it will do. Markets are driven by conditions — oversupply, undersupply, panic — and the chart is the emotion of the day. He watches where the close sits inside the day's range: the lower the close, the more bullish the next day; the higher the close, the more extended the market.

Find the method that fits your mind

Williams came up when there were only about three market theories; now everyone has a computer and a theory. His test is trading results: show me someone actually making money with Gann, Elliott Wave, or any other system. He doesn't dismiss methods he can't use — he couldn't play basketball despite playing football — because minds process information differently. He was lucky not to be the smartest guy in the room: intelligent friends overthink, while he takes what is in front of him. Every strategy works sometimes, and a football play designed to score still fails when the defense adjusts — as Mike Tyson said, everybody has a plan until they get punched in the face.

Trend needs time — and accuracy is not profit

Williams argues that all profit comes from trend, and trend needs time. A day trader in a trade for four hours cannot capture a big move; a swing trader who holds for days, weeks, or months can. Short-term trading also demands large size to make meaningful money, which means risking a lot to make a little. He cites a study of real-time strategies: the most profitable had the lowest accuracy, while the highest-accuracy managers made the least because their losses were large when they came. Being right is hardwired, but profitability is the point.

A 95% win rate can still lose money

The host asks whether accuracy matters less than risk-to-reward per trade. Williams says a system that wins 95% of the time can still lose money: the 95 wins look great, but five blow-up trades can erase everything. Winning feels good because people are wired to be right, but being right is not the same as making money. He notes that many trend followers are right only about 30% of the time and still profit, while he personally wants a higher hit rate — a tension he says comes down to ego.

The COT report: hedgers set conditions, not timing

Williams was the first to use the Commitment of Traders report and explains its three groups: small traders, fund managers, and commercials. The commercial is a hedger — a producer or user of the commodity — who buys weakness to lower production costs rather than to call a bottom. That makes COT a condition, not a timing tool: it tells you when commercials are heavily long or short, which sets up a potential rally or decline. In some markets, such as hogs and cattle, small traders are as good as commercials, so you must know the market. He treats COT as one of several confluences, alongside valuation, seasonality, cycles, and accumulation; no single indicator is the path.

Open interest tells you who is driving the move

Williams adds total open interest to the COT picture. High open interest usually appears near significant market highs because everyone is in the market and no one is left to buy. The useful question is who caused the increase: if commercials drove it, that is bullish; if small speculators did, it is bearish. He is watching gold in the interview, where public open interest is rising while commercials are leaving — a condition that eventually resolves lower, though timing still requires technical analysis.

The best market is the one set up right now

Williams is asked how he combines these signals and says he looks for a market with cycles, seasonals, COT, accumulation, and a bit of trend change — whichever market that is today. He has no love affair with any market: it might be gold, silver, or potato chips. Every Saturday he goes through all the markets and makes two lists, those set up to rally and those set up to decline. He then drops to the weekly and daily charts to find where a significant trend change could occur, and only then places a trade.

How to read commercial accumulation

Asked to define accumulation, Williams says commercials buy and sell differently from the public. About 35 years ago he began studying the relationship between today's open, high, low, close and tomorrow's, and built a synthetic index that estimates when commercials are accumulating. He pairs that with a valuation model — not a timing tool, but a way to know when a market is overvalued or undervalued. The combination tells him when to step in; the rest is patience. He has already made millions of trades and does not need more — he wants a good, big trade.

Conditions first, technicals for timing

The host asks whether accumulation means a Wyckoff-style consolidation zone before expansion. Williams says you can use Wyckoff, Elliott waves, astrology, or a dartboard once the market is conditionally set up, but the core belief comes first: markets move for a reason. Charts don't move markets; they show what happened. Charts can tell you that you're at a high or a low, but not the magnitude of the move — that comes from conditions, some fundamental and some technical. He wants the reason before he wants the timing.

Don't pick tops — and risk only what you can sleep with

Asked whether he fears catching a falling knife, Williams says he does not try to pick tops or bottoms. In roughly 10 million trades he has caught the low about twice; anyone who claims consistency at it is bragging about one instance. He wants a chunk of the move, not the exact turn. On risk, reward requires exposure, but high exposure demands accuracy; Ralph Vince's optimal f is too close to disaster for most people. The real limit is emotional: six of his friends in the business committed suicide, one after a soybean loss. The test is whether you can sleep at night — if not, you are risking too much.

Risk tolerance is temperament

Williams says risk tolerance is partly nature and partly nurture: some people are simply more emotional, and each trader has to plumb their own depth to find what they can handle. He traces his own optimism to growing up in Montana, where he learned to live off the land and never feared starting over. That willingness to go back to zero lets him hold trades long enough to reach their potential. At 83 he risks less, not because the math changed but because he no longer has the same fire — and he points to Sinatra's last concert and Ali's last fight as warnings about staying too long.

Retirement, boredom, and why he still trades

Williams has tried to retire since he was 30, when he made a million dollars and lasted four weeks in a Montana cabin before boredom sent him back. He does not garden or build things; all he knows is trading, and he still needs some involvement. The pressure has been daily since 1962, and money still matters — a conversation with a Rothschild housekeeper about the family's nearly empty refrigerator was a wake-up call about how even the very rich live. He is now more interested in understanding cycles and market behavior than in building more wealth.

Market cycles: ranges, closes, and time

Williams describes several cycles. One is internal: markets move from closes near the low to closes near the high and back, which he measures as where the close sits within the daily range. Another is range expansion and contraction: long stretches of small ranges tend to precede large ranges, and the large ranges are where the money is made. Then there are time cycles — high-to-low intervals of 18 days, 33 days, or longer — including the roughly three-and-a-half-year cycle Edgar Lawrence Smith described almost a century ago, which he says still operates.

Astrology, numerology, and finding your method

The host raises astrology and numerology, and Williams is open to it: he has seen a wealthy Dubai trader who follows his religious gurus' astrological alignment and an Indian trader who moved the jewels in his ring after a bad streak. He doesn't need to understand why it works — the market is a fight, and he will use any advantage he can. He notes academic papers showing a small lunar influence on stock prices across major markets, too small to trade on its own. The practical lesson is fit: find the teacher or method whose logic you immediately grasp, because you won't learn from someone whose language you can't read.

Fibonacci and the correlation trap

The host suggests that Fibonacci levels may work because pullbacks cluster around the middle of a distribution, not because the ratio causes reversals. Williams agrees and cites his own study of all pullbacks in the Dow over about seven years: the most common retracement was none of the Fibonacci numbers. A bell-shaped distribution will always produce a popular middle, so there is no magic number. Markets are random in the short run because news arrives, but conditions do cause moves — a premium in wheat exists because that market is bullish, which is causation, not correlation.

The World Cup year and the million-dollar loss

Williams entered the World Cup once, in 1987, and turned $10,000 into $1.1 million — an 11,000% gain that still stands as the record. He risked close to 30% on every trade and was so focused that he was not pleasant to be around. The account peaked at $2.2 million, fell to $750,000 in the 1987 crash, and he traded it back to $1.1 million. The government audited his records after accusations of cheating, and the trades are public. He says the loss did not own him: it is easier to make new money than to reclaim old money, and carrying losses around is what makes traders emotional.

The cost of 30% risk — and the 4% rule

Pressed on how he avoided blowing up while risking 30% per trade, Williams answers bluntly: don't be wrong. He had a real edge in pit-session markets and pushed it to the maximum, and he says that edge no longer exists. A client, Susan B. Kringle, turned $60,000 into about half a million and then sued him for $53 million because her account did not duplicate his championship result; the judge threw it out, and the experience convinced him he was not a fund manager. For ordinary traders he recommends about 4% risk per trade: three losses in a row cost 12%, which most people can absorb, while 5–6% risks blowing up and 1–2% takes too long to recover. He notes that the wealth-maximizing number is closer to 20%, but the risk of ruin at that level is too high.

Drawdowns, ego, and the drive to win

Williams does not cut position size as quickly as a mathematician would during a drawdown, because he believes he will come back — confidence in himself as a trader overrides the formula. He distinguishes that confidence from ego: you need an ego to compete, but the egotists he knows end up in regulatory or financial trouble. His son, a psychiatrist, interviewed billionaire traders and found they shared confidence without overconfidence; they were humble. Williams also thinks greatness comes from some internal upset or drive — a need to prove something — and that successful traders must keep that drive under control.

What successful traders share

The host compares Williams's son's five traits with another study of top CEOs. Williams says the most important for a trader is stress tolerance: you have to absorb big winning days and big losing days without letting your emotions swing. Whatever "a lot of money" means to you, you cannot get too happy when you make it or too sad when you lose it. He adds that the successful traders in his son's study were also unusually good with details — which he says is his own weakness.

Why traders fail: no edge, no patience

Williams corrects the host's premise: the main reason traders fail is not impatience but a lack of correct knowledge — no winning strategy. People buy systems advertised with fancy cars and lifestyles, and the marketing says nothing about whether the strategy works. You need something that works, and then you have to work it, like a race-car driver who has a good car but still has to drive it better than everyone else. Patience comes next: he learned it hunting in Montana, waiting for deer, and he still catches himself entering before the trend has actually changed because he wants to be rewarded immediately.

It's not luck — the system is teachable

Asked whether the imposter syndrome ever goes away, Williams says no, but the feeling that it was all luck is wrong. If it were luck, his students would not have consistently won trading championships; the fact that they do proves the method is teachable. Some people are less suited — lawyers and doctors often think they can outsmart the system and argue with the market, which never works. After 63 or 64 years, he says a streak that long is not luck, and a successful strategy persists like McDonald's or Starbucks built something that lasts.

Records are made to be broken

The host asks about ICT and others who say they will dethrone him. Williams is unbothered: he gets emails from people promising to beat his record and tells them he hopes they do, because records are made to be broken. He warns against fixating on him instead of making money in the market, and mentions tall-poppy syndrome — the tallest poppy gets cut. What does bother him is people using his name to sell accounts; a woman once called to verify that the "Larry Williams" asking for her money was really him, and it wasn't.

What he's most proud of

Asked whether the 11,000% year is his proudest achievement, Williams says no. He is most proud of his children and the friendships he made through the markets — Ralph Vince, Tom DeMark, Richard Joseph — and of seeing the world. Of the market work, he is pleased rather than proud that he wrote books, which will outlive him, and that the industry acknowledged him with awards including the Market Technicians Association paper of the year. He says the markets were like a business and he did okay, though he could have done better.

Advice for someone starting out

For a new trader, Williams says the first step is finding a teacher whose mind is in sync with yours — whether that is astrology, Elliott Wave, fundamentals, or Warren Buffett. You need the "aha" experience; if you don't immediately grasp the teacher's logic, you won't learn from them. Then check your own emotional wiring: how much risk, loss, and reward you can handle. He admits he did not handle success well when he was younger, and that some of that only comes with age.

Longevity: stress, health, and a sharp mind

Williams says traders don't last because they lose, their strategy fails, or the emotions and stress become too much. He handles stress better than most because he doesn't overthink, but he treats stress as a physical killer and has worked at staying healthy since his thirties, when he read Adelle Davis and realized he was out of shape. He ran marathons and still runs, though at 83 he cannot hold his old pace. Mentally, he says oxygen and a healthy lifestyle help, and so does not carrying the past on your shoulders.

Fatherly advice: be nicer, put more in

Asked what he would do differently, Williams says he wishes he had been nicer when he was younger and had spent more time with his family. He was too proud and thought he was better than he was, and he could have done better research. His father's lesson stayed with him: you only get out of life what you put into it. Putting a lot into trading or any craft returns a lot; putting little in returns little. He closes with the horse: it is easier to ride the horse in the direction it is already going than to force it somewhere else.