Conditions first, timing second
Interview with Larry Williams
Notes from my conversation with Larry Williams, recorded for the Foundation for the Study of Cycles interview series.
Larry Williams calls himself a conditional trader, and the phrase carries more analytical weight than it first appears. Williams has been trading since 1962, created the Williams %R indicator in 1966, and won the 1987 World Cup Championship of Futures Trading by turning USD 10,000 into more than USD 1.1 million in 12 months of real-money trading, a result that still stands as the record. For this episode of the FSC interview series we talked about the part of his work that rarely makes the headline: the recurring structures underneath six decades of results.
Six decades of the same market
Williams’s continuity claim is simple. The instruments, the speed and the participants have morphed beyond recognition since 1962; the behavior has not. Fear and greed produce recurring structure, and as a result, patterns he traded in the 1960s still appear on today’s charts. For a cycle analyst this is the foundational assumption made flesh: recurrence is the raw material of the discipline, and Williams is a sixty-year sample of evidence that the material exists. The working question is never whether markets repeat but which repetitions carry information, and his answer is a hierarchy: conditions first, timing second.
The commercials know their market
The first condition is positioning. The CFTC’s weekly Commitments of Traders report splits open interest into commercials (the hedgers who produce or consume the underlying), large speculators, and small traders. Williams began reading this report in the early 1970s, decades before it became fashionable, on the logic that the commercials hold the best fundamental information about their own market.
His COT Index turns the raw report into a bounded oscillator: take the commercials’ current net position, subtract the lowest net position of the past 3 years, divide by the 3-year range, and multiply by 100. Readings above 75 mean the commercials are unusually long (a bullish condition), readings below 25 mean they are unusually short. The discipline sits in what the index is not: it is weekly data with a reporting lag, so it cannot time an entry. It tells you which direction deserves your timing tools, nothing more.
Seasonality as the calendar cycle
The second condition is the calendar. Williams built his first seasonal indexes in 1973, mapping the recurring pressure of harvests, inventory cycles, tax flows and demand patterns onto price. From an analytical perspective, a seasonal is a cycle with the length locked at 12 months and the phase locked to the calendar. The dominant cycles I measure are the free-running counterpart: length and phase estimated from the data, allowed to drift. The two are complementary rather than competing. Fixed calendar cycles supply the stable scaffold, measured cycles capture the vibration that drifts around it, and my own second book (Part II of “Decoding the Hidden Market Rhythm”, devoted to Metonic calendar cycles) argues the fixed-length case at lengths well beyond 12 months, so Williams’s seasonal conviction landed on prepared ground in this conversation.
In practice: the checklist
The framework operationalizes cleanly.
Condition one: the commercials’ COT Index above 75 on the weekly report, which the CFTC publishes free every Friday.
Condition two: a supportive seasonal window.
Condition three: a projected dominant cycle trough due in the same zone.
When at least two of the three agree, the timing tools take over, for Williams typically %R turning up out of its oversold zone (below minus 80) or a volatility breakout off the open. A cycle projection standing alone is a statistic; the same projection inside agreeing conditions is a trade. That division of labor is the transferable lesson of his six decades, and it applies to every timing method in this publication, not only his.
The full conversation is on the FSC channel:
Larry Williams: Six Decades of Trading Market Cycles
Larry Williams: https://www.ireallytrade.com
Foundation for the Study of Cycles: https://cycles.org