Bruce Gwyn
By Active Trader Staff
A familiar story line in the markets is the trader who struggles with various discretionary techniques, eventually achieving success only after adopting a mechanical approach that forever removes emotion and ad hoc decision making from trading.
You won’t find Bruce Gwyn in that camp.
wyn, managing partner of New Orleans-based commodity trading advisor (CTA) Level III Management, has put together solid numbers since launching his futures trading program in 2007. After a negative partial first year, his Level III Trading commodity pool posted returns of 21 percent in 2008, 43 percent in 2009, and 38 percent in 2010, according to fund-tracking firm BarclayHedge (Table 1). And Gwyn has done it employing a multi-tiered discretionary approach — not the systematic techniques he favored early in his career.
After graduating from New Orleans’ Tulane University in the mid-1980s, Gwyn, 50, was first exposed to the markets through the Chicago futures pits — a popular training ground for those looking to break into the business in the days before electronic trading.
“Like most people who go to Chicago, I started out as a runner and then became a phone clerk,” he remembers.
Over the course of 18 months, Gwyn worked his way up to broker’s assistant (in the T-bond pit), and eventually to managing his firm’s order desk. At the beginning of the 1990s he moved back to New Orleans to partner in a brokerage firm, New Orleans Futures, where he ran the trading desk for five years. He benefited from having seen trading from the perspective of both the exchange floor and order desk, and being able to talk to a wide range of brokers, traders, and clients.
“I thought I became experienced in different types of market analysis, be it fundamental or technical,” he says. “I started employing some of those techniques and trading methods for some of the clients I had.”
Gwyn was, he stresses, firmly in the mechanical trading camp in the early years of his career.
“I was very much a systematic trader,” he says. “This was right around the time personal computers were really coming into their own, and I was big on getting data, crunching numbers, and working through different formulas,” he says. “And being 26 or 27 years old at the time, I thought that was the deal — I thought it was a really nifty way of looking at the markets.”
After a while, however, Gwyn found himself confronted with what he saw as the limitations of following a strictly technical, computerized trading approach.
“I had lots of clients and we’d make some money and lose some money,” he notes. “But over the long haul, I didn’t see that being as successful as I thought it would be.”
Gwyn’s perspective began to change over time as he gained more experience and talked to more successful traders. He saw the advantage of a wider-ranging approach that integrated different inputs and used discretion to apply them.
“As an old trader used to tell me, I use a very old type of trading system, called ‘thinking,’” he says. “Basically, that meant analyzing the markets from a fundamental perspective while being aware of the technical aspects — which I was very familiar with by that time — as well as market psychology and looking at the interaction between different markets.”
As time passed, Gwyn says this holistic approach became a successful way for him to trade. Today he applies these ideas in the futures markets across different time frames.
“My experience in dealing with markets for more than 25 years has allowed me to see the setups in intermarket and intramarket relationships — how they react to moves, how the technical formations are setting up,” he says. “I’ll recognize situations that have come up in the past — that when things line up in a certain way, there’s typically a certain outcome. If it comes to pass, a lot of money is made; if it doesn’t, there’s a limited loss.”
When asked how much discretion is involved in his trading, Gwyn replies, “It’s completely discretionary. I know there are funds that do very well using completely mathematical algorithms, but I’m probably the absolute opposite of that type of trading. I’m much more of a ‘This is an art, not a science’ type of guy. One thing I’m very careful and mathematical about, though, is money management — using set points to limit losses, and so on.”
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