Price Headley

This is the fourth interview for the Chicago Board of Options Exchange special event: 3 Gurus Plus. This online webinar features The Three Gurus — Larry McMillan, Fari Hamzei, and Price Headley — plus a panel of their peers including Fast Money contributor Jon Najarian, CBOE Faculty member Jim Bittman, and former CBOE Specialist Dan Sheridan.

You can learn more about this educational event or register at www.cboe.com/3gurus.

Price Headley has been a trader since college. He has learned the skills necessary to earn a living in this challenging profession. In our interview, Price talks about his decision to become a full-time trader, his firm Big Trends, and the important lessons he’s learned along the way:

Background

Price: I started trading during an investing competition in college. While using “buy and hold” I was in the bottom quartile, so I decided to start trading every day. One month later I was in the top 1.5%. I loved it. I called my father and said, “I’m changing majors!”

At that point I started learning everything I could about markets, trading, and investing. After college I was briefly a broker and quickly realized it wasn’t about trading. But that led to a job as a research analyst for the largest options newsletter company in the country. After rising to head the group for several years, I decided to start Big Trends in 1999.

Advice

Damien: What is one of the keys that keeps you interested after so many years?

Price: I am always learning. If you want to be a great trader, always be learning. At Big Trends we say, “Always be green and growing rather than ripe and rotting.” The markets mandate for traders to stay on their toes.

The last decade has shown that opportunities can be found on both sides of the market. However, you must be ready for those opportunities by staying flexible andadapting to what the markets tell us.

Damien: What are other important lessons you’ve learned during your long career?

Price: A lot of traders fall in love with one stock or index and get locked in trading that one vehicle. That’s fine if you’ve got a good feel for the personality of that stock or index. But why not keep your eye out for the next big trending stocks and take advantage?

Another big lesson is: it’s easy to get into a trade, but very hard to get out without a plan. Most people watch losers run because they are hoping the stock will come back. On the other hand, many traders are afraid of giving back profits, so they exit too quickly. Traders must learn how to properly use stop losses and take profits. That’s the only way to be consistently profitable.

From a psychological perspective, we must learn to stop fighting the tape and instead go with the flow. Many people want to pick tops and bottoms, so they end up fighting the market when they are wrong. I’ve learned that you don’t want to be a hero. You want to hit the sweet spot of a trend where the predictability is much higher.

This helps with training yourself to do things which lead to consistent profits. Unfortunately, I see a lot of traders score big while loading up and getting lucky, then loading up again and getting unlucky. As a professional, I want to remove the element of luck and turn trading into a game of probabilities. That requires training myself to trade with risk management and a plan.

Click here to read the Interview with CBOE Faculty Jim Bittman.

Click here to read the Interview with Fast Money Trader Jon Najarian

To receive additional wisdom from Price and the other industry leading professionals at the CBOE, learn more about this educational online event or register at www.cboe.com/3gurus.