Stocks & Commodities V. 29:1 (42-47): Curtis Faith And Trading From Your Gut by J. Gopalakrishnan & B. Faber

Curtis Faith And Trading From Your Gut by J. Gopalakrishnan & B. Faber

Curtis Faith is best known for getting his start as a member of the Turtles, the elite Chicago trading group. In his early 20s, Faith earned more than $30 million as a member of the renowned group that started as a bet between its founders, Richard Dennis and William Eckhardt. Drawing from his experience as an original Turtle, as well as a successful entrepreneur — having founded several software and high-tech startups — Faith developed a “whole mind” approach that gives traders at all skill levels the tools to become a master trader.

In Trading From Your Gut, his latest book, Faith talks about a method that is more art than science and gives traders the tools to use all of the weapons at their disposal: instinct and analysis.

Stocks & Commodities Editor Jayanthi Gopalakrishnan and Staff Writer Bruce Faber interviewed Curtis Faith via telephone on November 8, 2010.

Curtis, you were one of the original Turtles. How did you become one?

I answered the ad like everybody else, but at the time I was a computer programmer working at a small software company in Massachusetts. I was a sophomore in college, and I had decided to drop out of college and trade commodities full time. I applied to the Richard Dennis program and was one of the 40 people they interviewed and one of the 12 people they chose for the program for the first year. Probably the main reason I was picked was my background in programming trading systems and eventually analyzing them. This was 1983, which was way before most people were doing that sort of thing.

When you were trading with the Turtles, were you using a system they designed, or did you help them design a system as well?

They gave us a couple of systems they had designed and gave us the opportunity to trade them. We could change them slightly to our own taste, but they had done all the research for it. It was more or less consistent with some of the stuff I had been researching. It was not like it was some particularly unusual strategy they used.

How long did you do this?

I traded with them for four and a half years, which was essentially as long as the program lasted. The program was disbanded when Rich got into some legal troubles with some stuff he was doing separate from the Turtles. His lawyers advised him to discontinue trading.

Did you continue trading after that?

I gave it up for a while and started some software companies. I did not get back into trading again until 2001, when I joined a hedge fund in the US Virgin Islands. At that point, I took a lot of the commodity strategies that we had used in the Dennis program and started to look into doing the same sorts of things with stocks. I have been trading on and off since then.

Are you still trading?

I go in spurts. I’ll trade for a while and then not for a while. It depends on what else is going on in my life. I like learning new things. I like challenges. So I tend to have two or three new ventures going at any given point, but I plan on getting back into trading again in a big way over the next few months.

You have written some books that are very popular among traders. Your most recent book is Trading From Your Gut. What I found interesting is that you’re somebody who’s been in system trading, and you’ve developed systems for trading, but you decide to write a book about trading by instinct. It sounds like a completely different approach to trading. Why did you incorporate discretionary trading into your methodology?

I did that because a lot of people trade that way. I have known people who are successful doing both, but even for pure system traders, intuition plays an important role. If you think about it, the decisions you make about trading not based on raw information are based on your instincts. Even when you are building a system you have to decide what is important, what measures make sense, and what measures don’t. The process of building a new system from scratch often involves making judgments about what might be important. It is a process of discovery. Trading instinctively is not really saying you should be a discretionary trader and shoot from the hip. It’s the difference between intuition that is sharpened through trading and intuition that is sort of guessing. An expert has honed intuition and is able to make decisions very quickly.