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Richard Welsh, alias The Welsh Wizard of “thewelshwizard.com” and the daily commentary page “footsie.members.beeb.net,” which is read in 29 countries, has been trading his own accounts since 1987 and for a living full-time since 1991. Richard also writes for many other Web sites and journals. Today he lives and works as a recluse in the middle of nowhere in Wales, Great Britain. He often describes himself by saying, "The difference between me and Robinson Crusoe is that I do NOT keep an eye out for passing ships" and that he is "the oldest but fastest Trader in town."

It was a pleasure to get to chat with a longtime trader like Richard and get a feel for how he attacks the markets. Here is the first part of that conversation.

Optionetics: How did you first become interested in trading the markets?       

Richard: In the summer of 1987 I was a freelance corporate accountant and legal eagle specializing in keeping small sized dying corporations financially alive while rescue plans were formulated. A client who was an Australian Managing Director felt that my forensic financial analysis skills would lend themselves well to trading the markets and to prove it he immediately arranged for me to have a Share trading account on which I had to buy and sell within two week periods, on credit. If I won I would collect a check and if I lost I had to write one out. I never wrote one out. I pulled out of the market just before the October crash and changed to trading Equity Options for some years, before finally specializing in Index Futures and Binaries which I continue to trade to this day for my living.

Optionetics: Do you ever use options and if so what are your favorite strategies?

Richard: I trade Index Options both bought and written.

Optionetics: What are the things you like best about being a trader?

Richard: Trading is something I love to do and which enables me to design my working life around my lifestyle instead of the other way around required by orthodox jobs which would not provide the timeslots for me to pursue various hobbies and pastimes which give me with a great deal of pleasure but no income. I am a great believer that not only are we a long time dead but also can never know if we might become dead before a long time comes. 

From this I derive my philosophy of life, which states that the only asset we have which has any true value is time itself. I only require to generate from trading that amount of money needed so that I do not need any money. It is also the only job I know of in which I cannot be made redundant, or be told I am too old to do it, or be told how much more I cannot earn and it is the only job I know of that pays this much for never needing to open the front door and go anywhere to earn it.

Optionetics: How do you treat losses and how do you go about establishing your risk tolerance before the trade is entered?

Richard: I trade standard sizes\stakes for each type of instrument I trade which is calculated first upon my level of emotional pain tolerance, second on an expectable level of contribution to my total monthly net income target, and last but certainly not least at a balance between the smallest possible percentage of available trading funds against the minimum levels of stake needed to make trading viable as a way of making a living. In short, I trade much smaller than most traders I know, and so my losses are almost always smaller than most incur. 

I focus on avoiding trades in which my methodology does not offer the highest odds in my favor and end up making less trades but more winning trades. Losses are cut dead as fast as I can cut them. If I make three losses in a row, on anything, I take two days off before I trade again, on the basis that something is wrong and I will probably never find out what it is but that it will always be my fault not that of the markets.

Optionetics: Do you prefer long-term strategies or short-term strategies?

Richard: This question is best answered by stating that he average time between when I enter and exit a trade is between 1 and 18 minutes. This does not apply to my Share trading though in which I will exit a positional trade after either (a) two weeks have passed or\and (b) when an acceptable level of return has been achieved or (c) when it has hit my stop loss level which I calculate geometrically from the chart of the instrument, whichever occurs the earlier. I am, then, a Trader not an Investor, though I do also hold some long-term investments outside of my trading arena.

Optionetics: Thanks, Richard, for sharing your trading ideas with our Optionetics reading audience.

Jeff Neal
Senior Writer, Options Strategist & Profit Strategies Radio Show Market Correspondent
Visit Jeff’s Forum
Listen to Jeff at www.ProfitStrategiesRadio.com

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