I don’t think I really discussed how I started to do what I do.
I have been investing money since I left college. I learned ways to value companies before purchasing them and then unloading them when I thought the value had been reached. I also began to learn charting, by hand, initially by point and figure charts, and then with the use of computers in the 1980s. I used to work a corporate job during the day and traded at night. I would literally scour databases online and do work in libraries to find information on companies. I would read voraciously in the Compuserve days from bulletin boards.
Over time, I amassed a nice sum of money, but as 1986 progressed into 1987, I began to notice both volatility and valuations get expanded beyond (at the time) historic limits. I began to realize that the markets were becoming overheated and that perhaps adjustments in rates would have to happen to compensate for the overheating. That is when I began to read “Stock Market Logic” by Norman Fosbeck and his now-defunct newsletter Mutual Fund Forecaster. He mentioned that liquidity issues were becoming a problem because of the strength of the dollar versus other G7 currencies. All that summer, he was projecting that panic would deliver a pretty hard blow to equity markets, as he felt that panic to sell amid a change in rate policy would cascade into a larger problem. He did not think that what was happening was a “black swan” as Nassim Taleb did, but a potential overreaction to Federal Reserve policy.
He turned out to be very right, and my later mentor Larry Pesavento also believed the same thing. Fosbeck warned of it, and Larry shorted it, making tons of money in the process. I flew the plane into the mountainside that day, as my largely tech-company-weighted (biotech and computers ) portfolio got destroyed that day.
What I learned quickly as a result of that is that I needed to understand a lot more than I did about technical analysis, and I began to read and study voraciously. I made it a goal of mine to meet people who were technical analysts and traders. By 1992, I had met John Bollinger, John Murphy, Andrew Cardwell, Gerald Appel, Marc Chaikin, Edward Dobson ( a good friend of mine, who owned Traders Press) , Larry Pesavento, and Mark Douglas (who wrote Trading In The Zone and The Disciplined Trader. Over time I have met many others including Brian Shannon, writer of Technical Analysis Using Multiple Timeframes.
I worked as an institutional broker after leaving my corporate job, having studied for the Series 7 and Series 63 on my own time. I passed the test within 10 days of starting and began to work in international markets as both an analyst and broker. It was fun working in Buckhead, but I got really uncomfortable with the founding partner when both my commission basis was cut and it looked to me that frontrunning could indeed be happening. Eventually, I left and went on my own to be a trader. I was lucky enough to be able to use a phone (there were no computer platforms in 1995) to call Linn-Waldoch’s bond desk, but I managed to survive that, trading US Treasury Bond futures. It was brutal at times, but I learned a lot.
Long story short, I began to swing trade stocks as the late 90s progressed, and it was good, but in 2000 I began talking with the late Murray Ruggiero and eventually the late Dr. Steve Ward, who became a good friend, about incorporating artificial intelligence for trading patterns. I learned from Larry Pesavento in 1998 that you could involve AI in price patterns and momentum analysis. While I could not copy that via his model, I could create my own, and I did. I used NeuroShell Trader in late 2000, and by 2002 I had viable models that involved Fibonacci patterns. I began to write in the old Trading Markets blog (then called tradehard dot com ). I began to ask questions of the owner of the now-defunct Mr. Swing dot com website about math progressions they were using to predict price patterns. As a result of that, the owner, himself a trader and a computer systems builder and analyst, asked me if I could write for him.
I did, at first for pay, but later simply for the ability to write, and that is how The Buffalo Trader series (and eventually blog) came to be. About a year after that, I was asked to do radio for BizRadioNetwork, and I did simulcasts of my trading methods live online while doing AM radio at the time in Dallas and that began to five and one-half year stint. I did not directly represent Online Trading Academy, but did demonstrate swing trading. The segments became extremely popular.
Eventually, the podcast that resulted from the replays was ranked #2 on iTunes financial podcasts. I also had content featured on StockTwits in the very early days and on Twitter. I killed the blog late in 2014, and pulled the archive in 2017, as it served no purpose at that point.
After that, the walls caved in on the network, and eventually with it, the radio and the influence of the blog. I attempted to revive the research for profit, but by that time, Reuters had destroyed the format I was using, ending my ability to run the database.
By that time, the Financial Crisis of 2008 hit, and even though I had done well through 2010, I became suspicious of the stock market, given the fact that interest rates had been driven into the ground, which distorted asset values beyond repair. I was no longer a believer in equity value as it was now a Fed-driven pump and dump scheme (something many of you are learning now : ) ).
From that point on, I began to trade stock index futures, begin to be a hard money lender in real estate and a real estate investor, and began a rather ill-fated attempt at investing in startups. Some did well, and others were disasters. I learned how to be short and long, and began to adjust trading to record low volatility in the twenty-teens until the fall of 2018 when things went crazy again (and that was a good thing, as low volatility was limiting profitability). I built some automated scalping models, but the profits were declining in total value as volatility declined. In the fall of 2018, Jerome Powell tried to raise Fed rates, and all hell broke loose.
What I began to do is to adjust my trading in Fibonacci patterns with volume profile analysis using a commercially available platform. What I started to do was to merge what I was doing with Fibonacci patterns with Brian Shannon’s work on volume-weighted average price.
I am going to stop the discussion for now and give you links to books that I think are foundational to what I do. If you want to learn how to do this, you are going to have to read and study how to do it, and then DO IT YOURSELF. Everyone’s risk tolerance and capital availability are different. What works for me may not work for you.
In coming videos, I will attempt to pull from this information to show you how I project price and take profits. I can also discuss the risk analysis I use to trade effectively.
Technical Analysis Of The Financial Markets by John Murphy
Trade What You See by Larry Pesavento
Harmonic Trading, Volume One by Scott Carney
Harmonic Trading, Volume Two by Scott Carney
Trading In The Zone by Mark Douglas
Japanese Candlestick Charting Techniques, Second Edition by Steve Nison
There are many others I can mention later, but for now, I have to shift gears. Expect a video in the early AM tomorrow.