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Thursday August 26th 1999, 9:59 AM
Mentor Profile: Stan Moore: Learning Markets Takes Time
Mentor Stan Moore focuses on the S&P futures and stock index options for his teaching. He encourages novices to seek out experienced traders and take whatever time is necessary to learn the ins and outs of trading.

By Allen Sykora

"Trading is the greatest game in the world, but you can't do it on your own."

Those are the thoughts of Stan Moore, who believes that it's not reasonable for a novice trader to attend a weekend seminar or read a book and then expect to make money consistently the following Monday morning. "That's what seems to be promised out there," he continued.

Instead, he encouraged novices to find experienced traders to help them learn the craft over whatever length of time is necessary. With Moore's own tutorial program, he works with traders for up to a full year or longer if necessary.

"I had 15 mentors in my life, and I learned something from each of them," said this former Wall Street money manager who now teaches trading from his home in Nev. "You need someone who knows what he is doing.

"I spent hundreds of thousands of dollars, because I had to do it better than most people if I was going to survive. The average person can do it, but it takes years, and they don't have the time or money to do it."

He teaches the S&Ps is a countertrend market. There are 12-15 possible trades a day. But I only want you to Focus on the 3 or 4 best ones. During the morning, he will look for trades at retest failures at retracement levels, in the direction of the prevailing trend. He considers the afternoon trades more predictable and uses what he calls "time of day," feeling the market has a tendency to reverse direction on a predictable time basis.

The key first, though, is to determine the type of day. "As soon as you can define the type of day it is, you know where all the good trades are lining up. If it's a trend-up day, you're buying all the dips. If it's a trend-down day, you're selling the rallies. If it's a trading-range day, you are buying and selling tops and bottoms and taking profits at a 62% retracement."

Moore also likes the OEX index options because of their limited risk. One of his favorite strategies is to recommend puts or calls, when he determines the indexes to be at extremely oversold or overbought conditions, particularly ahead of some news event. For instance, he recalled a put position he recommended ahead of Federal Reserve Chairman Alan Greenspan's infamous "irrational exuberance" speech a few years ago.

Moore felt the market was already overbought and wondered to himself: "What can Greenspan say to make it go any higher?" So he thought puts.

Greenspan's speech caused a huge sell-off in global markets and you were able to profit as a result. But because you were using options, you would not have been hurt seriously even if the market had gone in the opposite direction. Since the market was at an extreme, he explained, you would have only lost a small portion of the options price.

Like a number of other veteran traders, Moore is willing to share his techniques with others. But, he said, "it takes anywhere from six months to a year to become a good S&P trader. You have to be aware at all times of the big and small pictures. Not only are you trading a 30-minute chart, but you're dropping down to the five-minute, one-minute and tick charts to enter the particular trade. Or if you're trading options, you're trading a 30-minute chart and going down to the five-minute chart. A lot of things have to come together at the moment of decision, and it just takes time to master that."

Moore explained that he takes the time to help a trader differentiate between types of trades, learning to wait for the potential six- to 10-point moves, rather than continually taking one-point moves and immediately getting out of the market.

Moore said he frequently has people express "total disbelief" when he tells them to plan on spending 40 to 90 days to learn to trade options, and six months to a year to learn to trade the S&Ps.

"They say, `What do you mean--it's going to take six months!'" he continued. "I say, `How long did it take you to become a lawyer? Three years. How long did it take you to become a doctor? Eight to 12 years.'

"The S&P (futures) and options are zero-sum games. That means for every winner, there is a loser. To beat and win consistently in the S&P pits and the options, they have to take away money from guys like me with 38 years of experience.

"And they (think they) are going to do that in a weekend or by reading a book?"

He now lives in a small town between Reno and the California border. The area is ideal for his favorite hobbies, which include skiing, fishing, boating and mountain biking. "There are 19 ski areas within one hour of my home," he added.

Moore explained that his interest in teaching trading in the S&P and OEX index increased as volatility rose.

"Up through 1994, the average S&P daily range was three points or less," Moore commented. "So you really couldn't make a lot of money trading....By early 1995, we started trading a six- and seven-point range, Today over 20 points now, people could start making money."

His career took a turn when he was invited to be a speaker at a seminar. After lunch, he continued, one attendee asked him to demonstrate how he would trade based on three-minute bars on the S&P futures.

"Over the next 3 1/2 hours, I nailed the vast majority trades on a three-minute chart, flashing one bar at a time, saying I'm going long here, getting out here, going short here, getting out here. It was like a speeded-up version of day trading."

Some of the students figured Moore could do this only because of his many years of experience, he continued. "I said, No, I can trade this way because there is a rhythm in the market.'"

One of the participants in the class was a university professor, Joe Conway, who had a doctorate in communications. "He said, `If you teach me to trade like that, and I'll write a book about your methodology,'" Moore continued. "Since I did not want to spend the rest of my life sitting in an office trading alone, I collaborated on the book."

He then began teaching. One of the benefits, he said, was the opportunity to meet others with sharp minds that he can exchange ideas with. He has become good friends with many.

Moore provides his students two books, "Rhythm of the Markets" and "Option Magic," as well as past charts, audio and video tapes. After students digest this, they get access to real-time charts on his web page (www.rhythmofthemarkets.com), and they can call Moore to discuss what they are seeing. Eventually, they can trade with Moore for two days at his Nevada office, with these sessions limited to three guests at a time. Afterward, students can continue to call Moore to discuss trades.

Under the program, a trader could simply follow the signals generated. But Moore encourages his students to learn how he arrives at the trades, so they can continue to trade "if something happens to me tomorrow, like I get hit by a truck." Later, he added, "I want them to tell me what they should be doing and why they should be doing it, so they're not just using me as a crutch."

Moore considers the S&Ps to be mainly an intraday market because of the leveraged risk that traders carry if they hold a position overnight. He also does not recommend a large number of S&P contracts at a time. He recounted how a number of S&P traders were devastated in the fall of 1998 when they were short and the Federal Reserve unexpectedly trimmed interest rates one day, sending the index nearly 50 points higher in 10 minutes.

"When you want to trade multi-day trends, do it with the options."