Legends of Trading (Part 2): Is this the best recorded trading result in history?

Larry Williams - brilliant trader and inspirational mentor

There are only a handful of people in the world of financial markets who have left an indelible mark on it with their trading skills. Larry Williams is undoubtedly one of them - his sense of opportunity and his unwavering determination and discipline have cemented his place in the trading hall of fame. But Williams went even further and later taught his art as well. And he started nowhere else but with his daughter. She went on to wipe the slate clean of traders many years older. But let's not get ahead of ourselves...

On top of that, Larry Williams, in addition to trading, also developed various technical indicators. Those bearing his name are still widely used among traders today. The name Williams is guaranteed to be familiar to every trader, even if they don't necessarily know who it belongs to. After all, that is what we will try to fix in today's article.

Early life

Born in 1942, Larry Williams showed an innate curiosity and interest in financial markets from a young age. Williams initially honed his skills as an economics and law student at the University of Oregon. However, his thirst for knowledge coupled with a burning desire to succeed in the world of trading soon led him to develop innovative trading strategies and techniques.

Larry Williams began trading himself in the late 1960s when he joined his father's brokerage firm. Initially, he took a position as an analyst, focusing primarily on providing research and analysis to clients. However, Williams soon realized that he had a remarkable talent for spotting trends and predicting market movements. This realization fueled his passion for trading and led him to develop unique trading indicators and strategies that set him apart from the rest of the traders and analysts of the time.

Larry Williams' business approach

Larry Williams' trading strategy incorporates a comprehensive range of technical analysis tools, fundamental factors, and market sentiment analysis. Williams places considerable emphasis on understanding market cycles according to which he timed his trades. He uses a variety of indicators to identify potential entry and exit points, including moving averages, trend lines, and volume analysis.

In addition, he also incorporates fundamental analysis to assess the impact of economic news and events on market movements. Taking inspiration from Lary Williams' trading strategy may be easier than you expect - in fact, Williams is the author of several indicators that help traders identify the ideal entry point. We take a closer look at the Williams %R indicator.
 

The uniqueness of the Williams %R indicator

Williams consolidated his position as a legend by creating several indicators of his own, which are still widely used by traders today. Probably the most famous and, according to Williams, the most successful one is called Williams %R.

This oscillator measures asset movements by comparing the closing price to a range of highs and lows over a period of time, very often 14 days. The indicator oscillates between values of 0 and -100, with values above -20 indicating overbought conditions and values below -80 oversold conditions.

Williams' %R indicator, however, is far from the only one that brought this legend into the world. His other indicators include the Ultimate Oscillator, the WillCo Index, the Williams Sentiment Index, and the Williams Money Flow Index.

But let's get back to the Williams %R, which can give traders valuable information about potential trend reversals and can be used to generate buy and sell signals. However, a technical indicator alone is not enough to enter a position; traditionally, it is advisable to supplement it with at least support and resistance levels, or another technical indicator such as moving averages. Indeed, to use the Williams %R indicator effectively, traders usually look for divergences, and confirmations from other technical indicators and note outliers in overbought or oversold areas.

_{USD/JPY pair on D1 chart in cTrader platform with Williams %R indicator (14)}

Although Larry Williams traded primarily commodities (which like to trend), his Williams %R oscillator can be used in virtually all markets. The chart above shows the evolution of the USD/JPY currency pair on the D1 chart. The chart also shows support (black) and resistance (purple) levels. At the bottom of the chart are the values of the Williams %R oscillation indicator with a 14-day period. The oscillator values between 0 and -20 show us overbought levels and between -80 and -100 show us oversold levels. Complementing the chart with correctly drawn supports and resistances is key to identifying trade entry.,

 

Williams %R indicator is part of our MetaTrader 4 and cTrader trading platforms

While oversold and overbought levels occur regularly on the chart, confirmation by touching or briefly breaking (and pulling back) support and resistance has occurred in a total of five cases. On three occasions, a touch of resistance occurred along with confirmation of the oversold level using Williams %R. These cases are shown by the green rectangle. In two cases, support was touched while confirming the overbought level using Williams %R. These cases are shown by the red rectangle. However, for successful trading, one must also keep an eye on the fundamentals, which can significantly affect any asset.

Larry Williams' biggest achievement - from $10k to $1.1m in a year

We've already covered the theory and practice, now let's take a look at a few trades that made Larry Williams a legend among traders. In fact, he made a number of them during his rich career and many of them were truly memorable.

One extremely profitable trade may be possible for many traders in a career, but being profitable in the long term is another matter. And this is where Larry Williams excelled.

His most famous success came in 1987 at the U.S. Investment Championship, where he turned $10,000 into more than $1.1 million in just twelve months by trading commodity futures contracts. Yes, you read that right - a hard-to-believe 11,300% in a single year. Of course, the trading at the time was with real money.

Larry Williams' uniqueness is also demonstrated by the second-best result in the history of the competition - the second-best trader managed to increase his capital by almost 1,300%. Such an achievement is of course very rare in the financial markets and requires a high level of risk-taking. While in normal trading Williams took a risk of around 0.5-5% of capital on a single trade, in this competition he had to take a significantly higher risk.

Another of Williams' notable trades was his prediction of the sharp rise in oil prices during the first Gulf War in 1990. Then, during Iraq's invasion of Kuwait and the subsequent Gulf War, the price of oil rose from $13 to $50 a barrel. Williams anticipated the escalation of tensions well and profited from the subsequent rise in oil prices.

 

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Why such stunts do not belong in the world of real trading?

Although Williams himself never stated the exact risk management, it is likely that he took even four times the risk. Such a strategy can wipe out an account very quickly with a few failed trades. Unfortunately, the percentage of successful trades that Williams made during a given year is also unknown. However, given the risk taken, it must have been well above 50%. If you are interested in learning more about this legendary feat, you should not miss Williams' book titled "How I Made One Million Dollars Last Year Trading Commodities".

But ordinary traders do not have to chase their capital at huge risk and they do not have to compete for the title of world champion. Williams' indicators and tips for traders are something that anyone can be inspired by without taking such a high risk.
 

Take inspiration in your beginnings

Larry Williams' journey from a novice trader to a respected market wizard is a testament to his unwavering determination, innovative strategies, and exceptional trading skills. His profound impact on the trading community is evident in the development of the Williams %R indicator and the success of his trading methodology. Beginner traders can learn invaluable lessons from Williams, such as the importance of thorough analysis, effective risk management, and more. Perhaps this brilliant trader will inspire you.
 

Tips for Beginners by Larry Williams

• There is no such thing as "easy money"; long-term profitability requires education and experience.
• Invest no more than 30% of your assets, for beginner traders Williams recommends no more than 20%.
• Risk no more than 5% of your capital per trade, but ideally between 0.5% and 2%.
• If you trade commodities, monitoring open interest is a must.
• Don't forget to follow the fundamentals!​

Did you know?

That Larry Williams' strategy can be truly successful and inspiring is proven by the legend's daughter, the famous Hollywood actress Michelle Williams. At the age of 17, she won the Futures World Cup, the same competition her father had won 10 years earlier. She achieved a handsome capital appreciation of 1,000%, which no one has done since (and puts her in third place in the historical ranking). In this case, it is safe to say that the apple did not fall far from the tree.

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