Futures Trading with Skip Kelley

Mr. Stillman's opus John Stillman here, along with a special guest today. I'm joined by Skip Kelly who is a fellow financial advisor is in Manchester New Hampshire skip yes or upon the great White North.

Here Jesus really cool to be called social guest there you go well. Skip is a true Bostonian as you could probably tell just by those couple sentences. There he does very much the same kind of thing I do overall planning. He's a fiduciary as I am but skip I'm most interested in talking about your past life because I think it's something a lot of people don't really understand so when you were trading futures. Basically, first of all, explain what that is and you know what did your typical day look like when you were doing. Oh what a trade futures for them for 11 years and the typical day. No, once you become a bona fide intelligence trader that makes money consistently that prior to that, your tip.

There is no such thing as a typical day because you might work 24 hours a day trying to figure out what's going to be your niche what's coming to your strategy. Once you have your strategy put together and you and you work that strategy then my typical day, one in which I enjoyed the most was pretty much flipping on the computer around 730 or eight in the morning and will be done trading by around 1130 or noon but everybody finds their own niche in the periods of time where they can can do best when that it's a really great way to make a living.

If there is volatility is volatility.

You can make a tremendous living trading futures. If there is no volatility again to get Chuck to smithereens in the market doesn't tell you when it's going to have volatility and when it's going to be dead that's that's the challenge and the other thing is is that understanding that this tremendous volatility not only in marking markets and commodities. This tremendous volatility right now is everyone's witnessing but we've gone years at a time with very little to no volatility, just like we did from approximately 2010 to 2014 there was nothing that the markets with dead flat it into anything on a daily basis. So, explain the mechanics of how this works. I mean, what are you looking for what exactly are you doing, how does the process go futures trading is not a whole heck of a lot different than trading in stocks or mutual funds in the market you're trying to buy low and sell high, or converse in cell hi Bilo, so either way, but you you are working both sides. The market just like Wall Street's doing against almost every investor on the planet. People get their money and 401(k)s will guess what, guess we are working against your work. Hence Wall Street because Wall Street isn't doing what the vast majority people of money. The market is doing. Most people in the market, the door one thing they're investing they put their money in their hope and it goes up Wall Street does something entirely different and that's that they trade date they work both sides of the market still by yourself and that's we need to know that you you're working against. When you're an investor. There are people out there who put a lot more work into it and make a heck of a lot more money than the average Joe. So let's use a tangible example what would be some of the typical commodities that you will live traded in on a regular basis while the 33 markets that I looked at it and a lot of people. Some people will work in whatever is the hot market at that particular time. I liked working with one index and to commodities. I liked working with the S&P gold and oil so you know it it it honestly it's much easier to do that business that is to try to be a stock picker or a mutual fund picker that's hard to get thousands and thousands of choices but when you're dealing with just a couple of commodities or or one or two indexes at some you can really get to know how those things move what might be happening next.

We keep one thing in mind.

Nothing in the markets ever makes sense if you're trying to apply your brains in your knowledge and your experience to what's going to happen next in the market. Forget about it. You can't say everything is is counterintuitive.

So let's use the example of oil. Oils price pretty low right now. So if you're commodities trader desk at the house with your feet up on the desk as you described to me before how you automated what you looking for what you what you hoping is going to happen. What you doing with oil currently price low to try to make money for yourself what you're really looking for is movement. First of all unite most traders are looking for news because when news comes out things things happen. Things pop in and you need to take advantage of that movement, but you can't try to interpret that news because so many times. Good news equals a loss or or downward movement can't try to equate news to which direction the markets going to go on and how many times we get good news. The market goes down. How many times you get bad news in the market goes up, you can't apply that what you have to do is understand the movement where it's going and then jump in and jump out. Take some you don't you don't try to take it all.

You try to take some that's the key and biggest thing that one has to learn if they do that for a living is you need to completely remove emotion from what you're doing you need to have a strategy and that there are as many different people as there are on the planet. There are that many different strategies. Everyone has to have their own strict strategies. Sometimes strategies work sometimes they don't need to have a plan for that but you cannot deal with the two basic emotions in the market that's fear and greed. If you do, you will lose all your money very very quickly while so use to trade futures and now your more of a classic financial advisor operating the same as I am you helping people with retirement planning income planning, managing risk, all those kinds of things. How did you go from the futures world to me what caused you to make that text. Well, I need something consistent and interesting to give you the path of someone who does what I do I you mentioned me sitting there back when I was doing most of this work, I was between New Hampshire and Florida when I was doing that work. Especially down to Florida. It is beautiful home on a golf course at my feet up on the desk and I have my Skype on with four or five buddies all around the country so would be having a great time was a very collegial atmosphere. Give each other tips or or you keep each other abreast of any movement that there were in different markets and things of that nature. It was fun. It was so much fun. I enjoyed the heck out of it and you know when you're when you finally do figure out what you're doing. You can make a lot of money and it's just a terrific way to make a living, but I need to I need to go back one step and let you know that Tom if you think that you can just pop in and into this business and plug yourself and because you're smart and will all equate to success, that's that that's wrong it's it's a 3 to 5 year tuition that you're going to pay learning this market. If you need to make income during those 3 to 5 years of learning then you're in the wrong business because it's not gonna happen. Don't believe anything you say as far as people be able to do you in a short period of time because you will go through that tuition paying process where you give your money the market in order to learn it.

It takes a long time is very tedious, but when the time comes. If you have enough money to get beyond that you can start making a very very good living.

The key here is as I mentioned earlier is that if the markets don't have volatility. You're not going to be able to make a living and what happened to me was that the numb from 2010 to 2014 is a three year. There were the volatility went just plain dead flat and instead of making the terrific live in that I become a cop accustomed to in that business and I did make a great, great love and now all of a sudden I was getting chopped to pieces because the movement wasn't large enough on a daily basis. In order for me to take my cut and what happens is is that you just get shop to smithereens and you just maybe you don't lose a lot. If you have good strategies you will never lose a lot, but you will consistently not make a living that you need to make in and so for me personally. I had to make a decision I'm 60 years old. Now I'm on the home stretch. I really want to pound it. As far as income goes for the next 10 or 50 however long I mean I love this. This business John, I think you understand is a spectacular business to be in right now though the one the word, and now his advisors because every single person that we meet were helping.

How do you beat that wall. So what would be your message to folks who maybe want have some involvement in the futures world is a something where maybe 5% of the population is something they can sorta do on the side as part of their overall retirement plan or something most people should stay away from what would be your guidance on well it's it it's if you are going to devote yourself fully to learning it. And in doing it. Forget about it.

Do not dabble because the adult take every dime you have a more and you lose it so fast you can possibly imagine. Because that's the whole thing with with futures your leverage is through the roof so little, very quick tics in the market and money evaporates quickly and that's why it's extraordinarily hard for most futures traders or for potential futures traders to get over it. You can't deal with a little money need a lot of money and when I say a lot I mean a lot.

You can't start with a little and you need to make sure that you have the ability to not have to make money for long period of time because if that's the case if you need to make money today you will make mistakes in your motion will will lead to the moves that I gonna leave you doubtful, plain and simple. So it's not this is not a dabblers market. You really have to be in it till when it and even then, as you said were talking 3 to 5 years in that world before you really understand what you're doing when I was told that originally I said I'm smarter than that. That's all. And you know what, that's the kind of person that the market loves to eat up. There are so many retired dentists and engineers and doctors who think that they can do and that's exactly who market loves to swallow up whole because those people like they think that they're smart, but that they're trying to equate logic to the markets, there is no logic there is only movement, and you have to understand that if you try to apply brains to what you're doing.

One of the direction of the market happens to go when you will lose and you will lose fast is that why you were pretty good at it.

You're saying you're not that smart. Is that what I just then I could save those first few years I was a dumb I don't remember the old Fred's friends never show Sanford and son. Don't call me dumb about the you know when you look back and some things I look at it. What I did and the learning curve that I had looked back in horror and in retrospect, so I remember days were I was giddy. I made a fortune to be on the golf course now tell my buddies what kind of a day.

I had a spectacular and then there were days when I couldn't even I couldn't even hardly lift my head out to be on the same golf also. The same guys Debbie moping around sick to my stomach on the stupid mistakes that made that day. United it's a you have to get beyond that point have to be. You have to get beyond the emotional point in the work your plan and have the discipline to work at that sounds a lot easier than it actually is a very interesting world, one that I think a lot of people are familiar with. So wanted to provide a little insight to it. Skip thanks very much, John, nice chat with you this is Mr. Stillman's opus talking next week