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Thursday, December 17, 2009 at 8:16 AM
Interviewed by Charles E. Kirk from "The Kirk Report"
I have had the distinct privilege of interviewing a number of top traders who utilize technical analysis to produce significant outperformance in the market. Continuing that tradition, this month I am honored to share this extensive Q&A with Sylvain Vervoort who has over 35 years of trading experience.
When I read Vervoort’s new book Capturing Profit with Technical Analysis, I was so impressed with its straightforward, no nonsense educational format that I felt compelled to invite him in for a Q&A. Mr. Vervoort’s book is the best trading book I’ve read this year.
Mr. Vervoort has earned high respect among the traders who develop their trading strategies on rigorous backtesting and technical analysis. His claim to fame more recently has been an excellent series of articles that have appeared in Technical Analysis of Stocks & Commodities Magazine. Many of you are already quite familiar with his work as you’ve seen at least one of his indicators, the Modified ATR Stop, at use in many of the stock charts I share. Though I’ve used a variation of ATR analysis for many years, his variation and other indicators Vervoort has developed have been useful. I have also linked to his website Stocata on many occasions and will continue to do so as it offers a treasure trove of information.
In this interview we will talk about Mr. Vervoort’s background, his trading strategy, the indicators he uses and much more. While this interview will be no replacement for his extensive book or website, I think you will enjoy it at least as an introduction to his type of trading and analysis. In addition we hope you’ll find something of value here in your own journey toward more success in the markets next year. As fair warning, in this Q&A we dive into a number of complex ideas and methods. By no means will a novice trader be able to grasp every concept discussed without additional research. This Q&A is geared more toward the advanced technical trader and those of you who wish to improve your technical analysis skills even though I think some concepts in the Q&A will be helpful for all long-term investors.
We hope you enjoy it and find it helpful as it has taken quite a bit of time and energy to put this interview together for all of you!
Kirk: Hi, Sylvain. Welcome to the Q&A! We are excited to have you here so we can learn more about you and how you approach the market.
Vervoort: Thank you, Charles. I certainly enjoy the opportunity.
Kirk: Before we focus on how you trade and your analysis, let’s start back at the beginning. When and how did your interest in the market begin?
Vervoort: I have always lived with the idea that some day I will make enough money in the market to make a difference for people and organizations that need support. It is one of those things that would make me happy. So it is no surprise that, after writing a book about playing the lottery, my first contact with the financial markets was trading options. At the time I believed it was possible to make lots of money with limited starting capital. That was some 35 years ago when an enthusiastic stock trader with whom I worked initiated what has become a lifelong hobby for me.
I can still remember the first technical analysis program running on my first homemade IBM PC. The European Options Exchange (EOE), Europe’s first option and futures exchange, was founded in Amsterdam and my friend convinced me that this was the place to make money. And so, a group of colleagues gathered enough to start an options investment club. I was making the trades based on technical analysis, and everybody would become rich in no time! A few months later, the money was gone.
Since hitting that bottom, it has been a lifelong hobby and struggle on what seems to be a never-ending quest to find the ideal way of trading the stock market purely based on technical analysis techniques.
Kirk: Was there anything in particular you found helpful during the initial learning curve?
Vervoort: I think there were two things that proved most helpful. One is that from the very beginning I always conducted back-testing which helped me to decide that some ideas were not that brilliant. Perhaps the second most helpful thing was one of my other hobbies, namely electronics. PC hardware and programming made it possible to try out different things without getting stuck or waiting for help from somebody else.
Kirk: Were there any mistakes that you made early on that would prove to be excellent learning experiences? If so, what were they?
Vervoort: I believe the mistake I have been making from the very beginning and perhaps still make most is the fact that I try to trade at the price turning point against the trend, not waiting for a confirmation. Even if there are good indications that a turning point is imminent, there is never a guarantee with technical analysis. I always seem to have difficulty trading on entry points that go with the trend even though there is a bigger chance for a successful trade.
Another point, especially at the beginning, was completely neglecting money management. The idea was that if I was good enough using technical analysis, I would make so many positive trades that money management was irrelevant. That, of course, was a big mistake!
Risk Disclosure: Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.
Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. no representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.
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