Larry Williams has been trading futures and stocks for over 50 years. In 1987, he turned $10,000 into more than $1.1 million in just 12 months at the World Cup Trading Championships – an 11,000% return that still stands as the highest ever achieved in that competition. His daughter later won the same competition with a 1,000% return, and his students have won it in other years too.
Larry is also the creator of some of the most widely used market indicators in existence: Williams %R, the Ultimate Oscillator, the Williams Accumulation Distribution Indicator, COT Indices, and more. He wrote the first book ever published on seasonal trading, back in the 1970s, and has been a consistent voice for fundamental-driven systematic trading ever since.
In this episode, Larry shares the framework he has built over five decades – conditional trading, COT analysis, cycles, market tops, and the lessons that took years to learn the hard way.
Watch the full episode below, then read on for the complete breakdown.
What It Means to Be a Conditional Trader
Early in his career, Larry traded buy and sell signals in isolation. A three-day moving average crossing a seven-day average was a buy signal – and that was it. No context, no filter.
That changed when he developed what he now calls conditional trading. The core idea is simple: technical signals work better when the underlying market is set up for them. A buy signal in a bullish fundamental condition will outperform the same signal in a bearish fundamental environment.
“I need to have conditions that are usually associated with substantial rallies or declines in the market. Then I can bring in the buy signal, the technical mumbo-jumbo stuff – but I need to put that on top of a condition in the market that says we should rally.”
For Larry, conditions come before signals. That layering is what separates consistent traders from those cycling in and out of the same frustrating results.
The COT Report – and How to Read It Correctly
Larry began using the Commitment of Traders (COT) report before almost anyone else – in the 1970s, before the term had become mainstream in trading circles. His view is direct: the markets were created to serve commercial businesses, not speculators. Understanding what commercials are doing is therefore a fundamental edge, not a technical one.
The COT report publishes net positions each week for three groups: commercials (producers and hedgers), large traders (funds), and small speculators (the public). Larry’s insight is that most traders misuse it.
“This is not a light bulb that’s on or off. Commercials respond to price structure. They will buy at certain price levels and you really need to put price into the equation.”
A key nuance: commercials buy weakness by nature. If you are Cadbury and the price of sugar falls, you buy more sugar because your margin improves. That buying looks bullish, but it is just business logic. Without understanding that backdrop, COT data misleads as easily as it informs.
Larry also applied the same commercial-buying algorithm to stocks, developing an index that mimics the COT signal for equity markets where no official report exists.
Using Multiple Conditions – The Combination Lock Approach
Larry does not act on a single condition. His framework requires three or four aligned signals before he considers a trade worth taking.
“I got the notion that it’s like a tumbler and a combination lock. I get one number, go back the other way, come the other way. I got three numbers in place – the lock is probably going to open up.”
His inputs include seasonals, COT data, valuation models (comparing commodity prices to gold as a baseline), accumulation measures, and spread relationships. None of these alone is enough. The more that stack together, the higher the conviction.
This approach also changes how he thinks about indicators. He has no interest in adding more. “All of these indicators including mine are redundant. If you have stochastics, RSI, and commodity channel index on, they’re all saying essentially the same thing. Fewer indicators – that’s huge.”
Cycles and Forecasting Market Tops and Lows
Larry wrote the first book on seasonal patterns in trading and has studied market cycles extensively. He uses cycle analysis to anticipate when market highs and lows are likely to occur, not as a precise timing mechanism but as another conditional layer.
When asked about small sample sizes in seasonal research – a common critique – he acknowledged the limitation but pointed to the consistency of certain patterns across decades as the evidence worth weighing.
He applies cycle analysis to futures primarily, using price relationships between markets (particularly relative to gold) to identify overvalued or undervalued conditions. A commodity that is strong while gold is weak may be expensive. One that is weak while gold is strong may be cheap. That valuation lens feeds directly into his trading setup checklist.
Short-Term Emotional Patterns
Beyond longer-term conditions, Larry also trades short-term emotional patterns – one and two day price moves driven by crowd psychology. These are not based on fundamentals. They exploit the tendency of the public to overreact to recent price action.
He is clear about the limit of this approach. Charts do not move markets. Conditions move markets. The short-term emotional patterns are a tactical tool, not a framework for understanding why prices move.
“Conditions cause markets to move. Charts don’t. We can find short-term emotional patterns that give nice one and two day pops – doing the opposite of the emotions. But by and large, charts don’t move the markets.”
Money Management as the Turning Point
Larry is candid about how long it took him to grasp money management. He describes his early self as a “kamikaze cowboy” – aggressive, undisciplined, cycling between gains and losses without ever building durable equity.
“I woke up one day and said I’m just cycling over and over. So you better figure it out. Back then nobody had written about money management. We didn’t have a clue.”
His summary of what changed: bet small, catch big trends, manage your money, quit being a cowboy. That shift – from signal-chasing to risk management – is what he credits for lasting success.
He also connects bet size to psychology. A trader who is overexposed becomes emotional. A trader who is appropriately sized can execute without interference. “Your bet size controls your emotions.”
Confidence, Repetition, and Why Most Traders Struggle
When asked about traders who hesitate to pull the trigger, Larry traces the problem to confidence – specifically, the lack of it. Confidence comes from repetition and testing, not from reading about a system or taking someone else’s word for it.
“I wouldn’t trade any approach until I tested it. If you test it, then you have confidence in it. If you don’t have confidence as a trader, you’ll get out of your losing positions too soon and you won’t have enough positions on.”
He is also skeptical of mentoring as a concept. Every successful trader he has studied trades differently. Imposing one person’s style on another may work as a marketing technique – but it is not how traders actually learn.
The thing that keeps Larry motivated after 54 years is not money. It is the drive to get better. “Peak performance is not driven by money. It’s driven by a huge passion to get better at this, to be the best – which I’m not even close to. But I’m working on it.”
Related episodes
- Ralph Vince on Position Sizing, Optimal f, Diversification and Risk
- The New Indicator That Improves Momentum Trading Signals with Alex Spiroglou
- Trading Champion Andrea Unger on Creating Trading Strategies That Work
Want more on trading indicators and systematic strategy development? Subscribe to the Better System Trader podcast for weekly interviews with the world’s top systematic traders and quantitative researchers.
