Jay Kaeppel On Trading Futures, Options, Gold, Sectors by J. Gopalakrishnan and B.R. Faber
Independent trader and author Jay Kaeppel is a trading strategist with Optionetics, Inc., and writes a weekly column titled “Kaeppel’s Corner” for Optionetics.com, conducts online seminars, and contributes material to new trading courses. He was Head Trader at a commodities trading advisor for nine years as well as a trading system and trading software developer for 15. A prolific writer, Kaeppel has penned numerous articles for Stock & Commodities over the years, including a series of articles on his Provest option trading method in 2008. An avid systems developer, in 2007 he collaborated with Optionetics to create the Optionetics Futures & Commodities Home Study Course, and in 2008 he collaborated with Rick Pendergraft of the Pendergraft Research Organization and Tom Gentile, cofounder of Optionetics, to create the Velocity Strategy system.
Kaeppel is the author of a number of outstanding books including his current one, Seasonal Stock Market Trends (Wiley 2009), as well as The Four Biggest Mistakes In Option Trading, The Four Biggest Mistakes In Futures Trading, and The Option Trader’s Guide To Probability, Volatility And Timing.
S&C Editor Jayanthi Gopalakrishnan (JG) and Staff Writer Bruce Faber (BF) interviewed Jay Kaeppel via telephone on September 9, 2009.
Jay, how did you get interested in technical analysis?
I started out interested in numbers. I was always a sports numbers guy. I knew everybody’s batting average and all that. When I got to college, though, I realized this wasn’t going to do me much good. Then I happened upon the business page of the newspaper one day and I noticed the stock prices, and it was like, “Wow! There sure are a lot of numbers here. I wonder what this is all about.” It started from there and progressed.
After I got out of college I was in accounting for a while, still fixated on numbers, but then I started following the stock market. I began reading everything I could. I was looking at fundamentals and technicals, and I fell into the technical end of things. I could read all about the fundamentals and analyze them, but the analysis I was doing there wasn’t doing me any good.
JG: Why do you think that was?
I would read about earnings forecasts and things like that, and it drove me crazy that you could get a company that comes out with record earnings, but the earnings would be three cents off of what the analysts expected and the stock would be down 15% for the day. That still happens today and that still drives people crazy. When you get the call right but you still lose money, that is tough.
JG: It is! Please continue on your journey into technical analysis.
The company I was with got bought out, so I got laid off. In the mid-1980s I started writing a newsletter on mutual funds and trading on my own. In the late 1980s I joined Essex Trading, which at the time was a software firm, and we put out programs like Futures Pro and Option Pro. They were quite popular for a while. Then in 1995 we became commodity trading advisors (Ctas). I was the head trader for that. I developed all the trading methodologies we used, and risk management techniques. I did that for nine years, and we made money in eight years out of those nine. The other year we lost 2%.
At the end we went from a maximum drawdown of 8% to a maximum drawdown of about 13% and some of our biggest customers felt that was a warning sign, so they pulled their money out, and at that point the business wasn’t there any more. So I left Essex and joined up with Optionetics in 2004. I’ve been consulting with them for about five years. I write a weekly column for them on Optionetics.com called “Kaeppel’s Corner.” I can basically write about any topic I’d like. I also work on projects for them.
A couple of years ago I did the Optionetics Futures and Commodities Home Study Course. It was about three days of taping for six hours of video and by the end I really did not want it to end. During the last hour we were just bantering about markets and trading, and it was a lot of fun. I also do a lot of writing, as you know. I write articles, and I have written four books.