|
Here is how Floyd
got started...
Before making the transition
into his own business, Floyd was a part of big corporate America. He held a
number of engineering positions in the semiconductor industry for ten years
upon his graduation from college. He spent three years with Intel Corporation
in New Mexico in the eighties, and then spent the next seven years working for
Motorola. Although he thoroughly enjoyed his time with such prestigious fortune
500 companies as Intel and Motorola, he wanted to achieve a greater level of
success in his life. Most importantly, he wanted to be free to pursue his own
interests. He has never been one that just wanted to sit around. He always kept
very busy, and he enjoys being busy! However, he wanted to be busy doing what
he wanted to do, and not what he had to do to please his boss. He always knew
that he wanted to start his own business, but never knew what that would be.
He knew it had to involve technology because that was one of his passions. It
wasn't until he discovered his passion for trading and for the markets that
he knew beyond a doubt what he wanted to pursue. Nothing really excited him
more than the markets and the study of the markets. Here was his opportunity
to combine technology and his ambition to run his own business. Part of his
passion has been to figure out how things work. As a child, he didn't play with
his toys; he spent his time disassembling them to see how they worked. This
eventually led to a degree in electronic engineering. Finally, this curiosity
led to the discovery of the markets, one of the biggest mysteries he has ever
encountered. He decided trading and professionally assisting others with trading
& tracking futures would be his business and way of life.
He spent a great deal of
his spare time and money researching the investment world while working as an
engineer. His dream was always to be self-sufficient. He never wanted to rely
on anyone for his financial well being. His greatest desire was to be financially
independent. Unfortunately, he discovered this was not a possibility by simply
working for someone else. Even though he had a very good salary, saved over
20% of his yearly pay, he could not get where he wanted to be for at least another
15 - 20 years. He needed a business.
He knew there was an enormous
amount of money in the investment world. He had already started trading stocks
and had experienced some success at it. He knew others were making money as
well. Stocks were slow however. He did not want to wait ten years for a stock
to go up or recover, and he did not have the hundreds of thousands of dollars
needed for adequate leverage. He found out it was a slow process. Next, he investigated
stock options. He found stock options certainly had the ability to multiply
his money several times in a very short period, but here again; he made some
money and lost money. There was no consistency to it. He had no system and relied
on information from the media, newspapers, friends, and gut instinct. All of
these sources proved to be inconsistent and unreliable. He needed an approach
and a system.
Finally, he decided to
try commodities. He really knew nothing about commodities when he made his first
trade. He read enough about commodities to understand how they worked, but he
did not yet know how to trade them. He started out like everyone else, reading
the Wall Street journal religiously and buying Barron’s every weekend.
He spent hours looking at charts and reading books. Soon, he found that he ended
up with the same scenario. He made some money and lost some money. It was then
that he made one of the worst mistakes of his trading career. He decided to
let a so-called expert show him how to trade. A broker. The broker did worse
than he did. He lost his profits, and nearly lost all of his investment money
with the broker in charge. Discouraged, he considered doing what most people
do, give up. Somehow though, he found himself unable to quit. He believed he
could make money at it, but he was finding that like everything else in life,
he had to be patient and wait for the right opportunities. He learned that he
could not trade just because he needed the money. The markets weren't going
to yield opportunities every time he needed money. Therefore, he had to make
sure he had other ways to ensure adequate money for his day-to-day living expenses,
while he researched the markets, and waited for the real opportunities. When
the opportunity presented itself, he learned to pounce and he quickly made money
at it. However, here too, he learned something. He learned that even the best
looking opportunities do not always yield a profitable result. Thus, he learned
that he had to combine risk containment with his patience. Over and over again
he found that if he waited and was cautious, he was able to make money. If he
wasn't patient, or if he was reckless, he almost always lost money. There was
a pattern developing here. There were opportunities to make money, but they
did not happen every day, and they were not easy to identify. Thus, he had to
build a complete system for tracking and identifying these opportunities. By
this time he had already spent a small fortune on different software packages,
systems, programs and data providers. None of them provided him with consistent
results or the clarity he was seeking. He figured if he was going to do this
right, he had to get all the data and build his own system completely from scratch,
based on what he found to work.
He began the long process
of filling up his computer hard drives with all the commodity price data he
could get. He got historical daily data, and Intra-day tick data spanning decades
of time. Using his knowledge in statistics and engineering background combined
with his programming skills, he designed his own trading system based on repeating
patterns and conditions characteristic to individual commodities. What he found
from computer back testing was amazing. There is an underlying order
in the commodity markets not found in the historic price movements
of individual stocks. In his research he discovered specific patterns in commodity
prices unique to each market. He found that these patterns are highly correlated
to the positions held by the participants in the commodity markets. Using the
Commitment of Traders data supplied by the U.S. government, he was able to separate
the open interest for each commodity into three distinct groups. While everyone
else has been looking at prices or price structures for core indicators (there
are tens of thousands of indicators derived from old prices), he developed his
own proprietary trading & tracking system using the data from the three
unique groups of traders tracked by the U.S. government. This finally led to
an entire proprietary trading system, complete with unique indicators, derived
from the Commitment of Traders data, and further supplemented with traditional
but proprietary, price indicators. There is no other system like this in the
world. Floyd developed everything from the indicators to the charts themselves.
Finally, with this software and trading system, and the knowledge he obtained
from all his hard work, he decided a career change was in order. He was able
to quit his corporate job for good. He now spends his time doing what he loves,
trading, tracking and studying the markets!
Floyd found out early in his trading career that the commercially available
charting software and price tracking systems were not versatile nor complex
enough to do the kind of statistical studies on fundamental data and comparison
correlation's that he needed to do in order to gain a unique perspective into
the market. Using the same software, methods and indicators everyone else was
using, basically provided him with the same results as everyone else. After
reviewing everything on the market, he decided to create his own software package
for tracking everything from prices, roll dates and trends, to sophisticated
correlation studies, inter-market relationships, mean regression analysis and
much more!
Traders often look at the market as a thing, "the market". The market
is really the result of all the participants, and the actions of each. Much
of this is not common knowledge however, and is certainly NOT part of all common
trading systems. To achieve success on a consistent basis in this field, one
must step outside the realm of common knowledge (what everyone already knows
and may already be doing in the market) and tackle the market like a problem
needing solved, using the tools necessary to explore and solve the problem at
hand. Solving the challenging problem the market provides is not an easy task
and never will be because the heart of the matter is wrapped around the complexities
of human emotion. The driving force of the market is in fact, irrational behavior.
The markets do not behave rationally, because people under pressure do not behave
rationally. However, there are certain traits, habits and behaviors that all
people possess, and under certain conditions, all people will react the same
way! This is part of our overall analysis of the markets, and something we discuss
regularly in our reports. In addition, there are certain patterns in the market
that will signal when crowd behavior is extreme or overwhelmingly one-sided.
This is something we track and measure.
Make no mistake about it, tackling the challenges the markets provide is a very
complicated and complex endeavor. Those that try to make it sound simple probably
do not seriously attempt to solve these complexities. Our trading systems deal
with these issues and include well defined position management rules and principles
along with risk containment procedures, so that we are able to avoid the pitfalls
of our own weaknesses as much as is 'humanly' possible!
Traditional indicators, mainstream software packages are common knowledge in
this business. Everyone starts out using these tools. However, only a few eventually
become successful on a consistent basis. I have found that everyone I've ever
met that is consistently successful in this business, all have one thing in
common. That is, they do not conform or follow the traditional way of thinking.
Many people initially fall for the idea that this business can be learned very
easily using traditional commonplace books, tapes, seminars, and software. That
is not the case. This is not a normal business that simply requires following
a book of instructions to succeed.
Commodity trading is a zero sum business. That means each time we make money
on a trade, somewhere someone has lost money taking the other side of that position.
We know that based on the facts, roughly 80% of small speculators lose money
trading futures. All small speculators typically use the same software packages,
same indicators, and they all make the same mistakes, over and over again. Thus,
the average trading life of a smaller speculator is about a year. New ones are
coming in, as old ones give up and quit. If you want to step outside of the
mean, you have to be willing and able to look at the market differently, in
a unique fashion, outside the mainstream way of thinking.
Nothing about what Floyd has done has ever been easy. First of all, it is not
easy breaking free from the corporate world to venture out on your own. You
must be prepared, financially prepared and psychologically prepared. He also
recommends having several potential sources for generating cash flow. There
is no law that says you can have only one business. He has found that there
are many ways to make money, of which trading is only one of them. Furthermore,
you can trade stocks, commodities, bonds, options, all of which he trades himself.
In addition, you can invest in real estate as well as other investments. He
decided early on that it would be wise not to place all of his eggs into one
basket. Trading will always have its ups and downs. That's just how the markets
are. You need to be financially prepared for that. Few mention this, but its
true. If you plan to rely 100% on trading, which Floyd does not, then you better
have enough money saved up to pay for all your expenses in the case you have
a down year.
Floyd became a CTA to help others learn what he has learned about the markets
through his research and hard work. Assisting others inherently keeps him more
focused on the markets and his system, while generating additional cash flow
in exchange for his contribution. While not for everyone, Floyd likes working
with people, and he has found that trading can be lonely, especially if you
come from corporate America. This job fit perfectly with what he loves to do.
As you can imagine, when Floyd left the corporate world to go out on his own,
there were many unknowns. He left with one goal in mind, to pursue his dreams
and to live his life his way. He didn't want to work for anyone else. Once on
his own, he had the time to pursue his stock investments, futures trading, real
estate investing, as well as the time to build his proprietary trading systems
and software. Floyd was never willing to give up on his dream. You shouldn't
either. Whatever your dream, only you can make it happen. Be smart about it
however. Never put all your eggs in one basket.
During his years as an "employee", he got to know many people who
were unhappy in their careers or jobs, but did not know how to break free, or
were to afraid to do it. You need to have a plan if you are going to strike
out on your own. Futures’ trading was Floyd’s plan. His system gave
him the confidence to leave the corporate world behind. Later he was able to
contribute his trading experience and software to help others learn as well.
Even with a plan, it takes guts to leave the security of corporate America to
try something completely on your own. Futures traders are entrepreneurs in Floyd’s
opinion, and both major risk takers. Floyd certainly falls into that category,
as leaving a comfortable 6-digit yearly income for the unknown was risky. He
believes you must be willing to take calculated risks in life in order to achieve
and to obtain your dreams. You also must dream and believe in yourself.
Recognized Quotes from Floyd W. Upperman Jr. CTA
"In truth, it is very difficult to make money on a consistent basis
by speculating on the price fluctuation of any market, but particularly in the
futures markets! Difficult does not mean impossible however, but it clearly
does mean the opposite of 'easy'! Anyone that says this is easy is simply not
being truthful in my opinion! However, when it comes down to it, sometimes it
is simply a matter of being in the right place at the right time. The key however
is having the knowledge to recognize this and the means to act in a timely fashion
(before everyone else knows about it)! That may be simple, but the waiting as
they say is the hardest part!"
"You
never want to be the person left holding the bag (e.g. LTCM in the late 90's).
As we observed with LTCM, even though they were the creators of a very successful
approach for trading options (which made them millions) once everyone knew about
their system and how it worked, the inefficiency that they were exploiting virtually
vanished over-night as a result of the actions of everyone that learned of it!"
"Those
that do this for a living have acquired the necessary skills and knowledge through
years of experience and meticulous market observations."
Floyd
Upperman Jr. CTA
|
