Glen Ring: Differentiate Between Roles of Analyst, Trader

By Allen Sykora

As somebody who has worked as an analyst for nearly two decades and has been a trader even longer, Glen Ring knows that it is essential to differentiate between the two roles when playing a market.

Otherwise, a trader might end up hanging onto a losing position for too long.

Ring is president of Glen Ring Enterprises, which aims to provide education and research for the futures industry through seminars and newsletters. He produces the biweekly View on Futures newsletter and View on Futures Daily Update. He has conducted seminars across the United States and Europe, has been featured on some 20 videos, and is author of the TRB System for Success manual.

Going back to the 1970s, Ring has been involved in futures first as a farmer/hedger, then later as a broker, market analyst and seminar speaker, always trading on the side.

He is almost completely self-taught. To succeed, he had to be tenacious and persistent.

"When I went into the brokerage end of the business and then as an analyst on my own doing seminars, I spent as much as 12 to 18 hours a day studying markets," he said. "I was determined to figure out everything I could about the marketplace."

But he later realized that whereas tenacity helped him as analyst, at times it could work against him when trading.

An analyst and trader "can be compatible, but they certainly play different roles," said Ring.

A trader comes into the marketplace to make money. "His performance is simply measured by the bottom line."

But an analyst's main objective, he continued, is to understand and figure out what markets might do. He is measured by whether he is right.

"I think (Disciplined Trader author) Mark Douglas put it very well when he talked about early on for a trader, the better of an analyst he is, the tougher time he is going to have trading," said Ring. "If you don't differentiate between the two, the trader may become more concerned with about being right and wrong. And markets don't work that way. They'll take your money away."

The bottom line is a trader has to be willing to admit when he's wrong and get out of a market, rather than continuing to hang on to a losing position just to show he's right.

"A trader must react to whatever signals or methods he has, or what his rules are," said Ring. "So many people never differentiate between the two, and thus so many people walk into the marketplace and are not trying to make money but are trying to prove themselves right. And that's why they'll hold onto a losing trade forever. Because for them to get out of that losing trade, they have to admit they're wrong."

Ring added that as an analyst, he does not try to make outright predictions as much as projections on what might happen.

"I work like a doctor," he said. "I evaluate a patient and check the current conditions of the patient. And from what I can discern--some of it factual and some of it from my experience--I see a probability that under these conditions, this is likely to be the outcome."

An analyst can then advise a trader of a potential opportunity, but the trader must still develop a strategy, related Ring.

Money management is a key part of trading, he explained.

"They need to know before they enter a market how much they can risk," he said. "If the market requires a bigger risk than that, then are they going to pass on the trade, or are they going to find another technique to take advantage of it?"

Players must decide where they want to put stops. "Are they going to be based on what they're willing to risk, or where the market tells them they're wrong in a particular approach?"

They need to decide how to allocate their trading funds, such as how many contracts to enter in different futures markets. "One contract in S&Ps is not equivalent to one contract in oats," he reminded.

They must also make decisions on how much of their funds they can dedicate to any one trade, to ensure that they can "survive" and "thrive" in the business.

Ring's interest in the futures markets began when he was a lad growing up on a farm in western South Dakota.

"I was raising hogs with my dad," he said. "He didn't care much about markets, but I started following them and tracking them. Then somewhere in that timeframe I read an article in Successful Farming magazine about the hog cycles, and how every 3 1/2 years hog prices were low, and in between they were high.

"When I got to thinking about that, I said there must be something to it. Because every time prices were high for hogs, we didn't have very many. And every time they were low, we had a whole bunch."

While farming as a young man in the 1970s, Ring spent considerable time studying market fundamentals and cycle analysis. He also went to as many brokerage- or agency-sponsored seminars as possible. As the 1970s wound down, he said, "I got to the point where I loved the markets more than I loved anything else I was doing for business."

He wanted to become a full-time analyst, but knew positions were limited, so he began as a broker. When analyst positions remained scarce, he began working as one on his own, initially teaching farmers about markets and beginning his own newsletter, Patience and Discipline, in 1985.

After two years, Ring joined Iowa-based Oster Communications. He spent a decade there as editor of Trends in Futures and its predecessor, Commodity Close-Up. He began Glen Ring Enterprises in 1997. His services are outlined on the website www.glenring.com, and he can be reached at gring@forbin.com.

Ring labeled himself as a discretionary trader who follows a strict set of rules.

"I am a position trader," he said. "Most of my trades are going to last from a few weeks to a few months. I trade with the trend as much as possible, and I trade breakout patterns very heavily.

"I don't know when a breakout is going to occur, but I try spot a situation that offers the potential for a breakout to occur. Then the moment the market breaks out, I go with it. That means breaking out of trading ranges and congestive patterns."

He conceded that "my favorite markets don't treat me as well as markets that I trade less often. I think that's because for those I trade less often, I give more respect."

Thus, despite his agricultural background, some of the markets that Ring has fared best in include bonds, stock indexes and currencies, along with corn. But while "I'll trade anything that moves," he has shied away from lumber because of the low volume.

Ring does not rely heavily on fundamentals when trading because "it takes such a superior ability to evaluate fundamentals correctly and trade them well," he said. "Besides, fundamentals would only spot opportunities for me."

Ring characterized himself as a technical trader, particularly when looking for an entry or exit from the market. But when working as an analyst, he tries to be a "student of market behavior" looking at more than just charts.

"Technical analysis itself does not adequately explain the market," said Ring. "Neither does fundamental analysis. Neither do people who try to trade off just sentiment and contrary opinion.

"If you put them all together, I think you can adequately explain the market."

Ring generally does not take part in the after-hours screen trading opportunities that have evolved in recent years, although there have been some exceptions--such as during the Gulf War, or trading grains during hot summer weather. He explained that it's important for him to get away from markets when the trading day is done, in order to have a life away from work.

Ring's hobbies include coaching youth sports, particularly football. He likes to fish and read historical books, and volunteering in for church activities is especially important to him.

He also takes care of a one-acre garden at his home in Cedar Falls, Iowa. In fact, the garden even plays a role in his trading, he related. He advised traders to trade in an environment in which they are comfortable. So when Ring feels a need to relax, he'll step outdoors from his home-based office to pull weeds or pick some strawberries.

Besides finding an appropriate physical environment, he also encouraged a trader to find the right form of trading to suit his personality.

For instance, somebody shouldn't day trade if he comes home at night so stressed he hollers at his children or kicks his dog. Likewise, position trading may not be right for somebody who anxiously checks the charts every five minutes.

"You need to match these things up," said Ring.

As a result of being self-taught about the markets, said Ring, he came into the business with "few beliefs that I had to change." Instead, "I came in with a sense of discovery and open-mindedness about markets."

He learned markets by putting price charts on a wall, drawing in lines and then studying them.

If he was to do it over again, he said he would study as many mail-order courses, videos and books as possible. His purpose would not be to find that "one Holy Grail" on which to base all of his trading, but instead to search for "ideas I could check out."

"I subscribe today to the idea that even some of the poorest courses offer some ideas and concepts useful to learn from," said Ring. "Instead of risking a few hundred dollars on a trade, I think I would risk the few hundred dollars on materials."

His initial advice for novice traders would be "study a lot before they start trading." And then when they do wade in the market, start by trading on a small-scale level, so that any losses will also be small.

"Trading small and losing small early is a way to start understanding the process," said Ring.

He encouraged beginning traders to develop a structured approach to their trading, including how they will respond to market movements. For instance, if a player goes long in corn future because he thinks the price will rise, he should also have a plan on what he will do if it doesn't.

Ring suggested the biggest mistakes a trader can make is to not have a plan and to not follow their plan.

"A favorite saying of mine is, 'Any fool can get into the markets. It's the pros who know how to get out.'"