Oliver Velez remembers how he felt as a child when he placed second or third in a race, or when his team lost a baseball game. "I felt a great degree of shame at not winning. And I'm still very aware of always wanting to win. But I think that as an adult, I've used that pride and competitive instinct in a positive way."
At age 33, Velez is the president of Pristine Capital Management (http://www.pristine.com), one of the world's top resources for analysis of financial markets. Pristine has over 10,000 subscribers in 48 countries worldwide and has been rated the industry's number one resource for active stock market players by Money as well as Barron's. Velez gives seminars all over the world that focus on teaching people how to play the market intelligently—he's the world's largest seminar giver in the area of active stock market play.
In addition, Velez has a wife and two small children he calls "the best investment I ever made, with the sweetest dividends." And he's a car collector, author, and movie buff—marks of a man who has earned some money and time to spend as he chooses.
Velez's successes with his company and in his life in general have come about because of a few key strengths. He's seized his opportunities without undue fear, learned to use the tools of the investment business, and spotted vital trends in his industry. Plus, he's kept the competitive spirit and desire to win that he found in his youth, and they've served him well.
Velez had spent three years at Hunter College in New York—and made a few market trades on his own—when he came across a chance he couldn't refuse. A large entertainment firm offered him a full-time accounting position with some market responsibilities. He decided to accept the offer, then continued to play the markets as an individual as well as fulfilling his job responsibilities for a few more years.
That led to another opportunity he calls "a life-changing experience." He was assigned to co-manage a $40 million hedge fund for his New York firm. For the next two and a half years, he performed exceptionally well, sometimes making more money for his firm in one day than he earned per year in salary. Soon, he says, "the light bulb went on:This was something I could do for myself."
There was one problem with the idea of trading on his own—a lack of money. But with his impressive on-the-job success, Velez easily overcame the obstacle. A few friends invested in him, and he soon had a mini-fund to trade. For six years now, he's been trading professionally. From that experience grew the services he offers through Pristine today.
Using the Right Tools:"We Fell in Love With MetaStock
During his early years doing accounting and investment work for the entertainment business, Velez met his current business partner, Greg Capra. "We had just started looking at technical approaches to the markets when, one day, Greg excitedly invited me to his house," Velez remembers. "He had a computer program to show me, one he'd seen at Dr. Alexander Elder's weekly investment group.
The program was MetaStock®, a charting and analysis program for all types of securities from the Salt Lake City software firm Equis International Even in the early version they were looking at ten years ago, MetaStock allowed Capra and Velez to look at visual representations of price data with surprising ease and clarity, and to quickly analyze them with mathematical indicators and other tools.
From that moment," Velez says, "We fell in love with the product. We've used MetaStock for virtually every single form of analysis we've done to this very day. We come up with all of our services, all of our stock picks using MetaStock.
Velez regularly uses The Explorer, a MetaStock tool designed to filter, sort, and rank securities from a database, to help him pick winners. "I program The Explorer with my own specific criteria," he says. "It takes a large universe of securities, which would be impossible to follow manually, and narrows it down to a controllable number. At that point I can construct a template using MetaStock's invaluable bank of built-in line studies and indicators, then apply that template to each chart as I look at it individually. This is very easy to do in MetaStock and very important to us at Pristine. I'm definitely big on keeping the feel I have for the markets and applying my individual knowledge to decide exactly when to buy and sell.
Can other programs do what MetaStock does for Velez? Yes, but according to him, they're "cumbersome and slow." Velez also says he thinks he'd be hard-pressed to find another company like Equis, the makers of MetaStock. He often recounts his first experience with the company's customer support department—"so I remember it very clearly," he laughs. "About eight years ago, I had my first copy of MetaStock and wanted to set up an exploration in The Explorer, but I really wasn't comfortable with the formula language and had some other problems. I called the support department late on a Friday afternoon and found an individual so bent on solving my problem that it became his problem. We were on the phone 45 minutes to an hour past Equis' closing time. This representative then assured me that if we couldn't get my exploration going within the next fifteen minutes, he would come in on Saturday morning to get it done. It was the most amazing thing!" From that point on, Velez says, he was completely sold on the program and the company that makes it.
In addition, he says, he's found MetaStock meeting his needs ever since he was a beginning investor. "Someone on the beginning level of technical analysis can find tremendous value in MetaStock, as can the professional who is very well versed in technical analysis. It's a program that, even today, I'm still growing into. I find myself learning more and more with it each year.
Asked about the goals he's attained in his trading career, Velez says, "My skills for approaching the markets from a technical perspective are almost entirely due to my use and mastery of MetaStock. In a sense, my life's dream has come about with MetaStock as a key component," he says.
An Infant Revolution:Velez on Making Money in Today's Markets
Velez says we've started a revolution with electronic trading, but it's really still in its infancy. "Several things that will mean big changes for the way we do business are very close to occurring," he says. "24-hour trading will be upon us in the next couple of months. Also, I think programs like MetaStock, along with data services and electronic brokerages, could become as commonplace on computers as browsers and Internet access services are today. I can imagine them being pre-installed. Charting programs will have the ability to place trades directly. And I think we may be moving toward one worldwide exchange sometime in the future.
In this industry, the entire markets are moving into the new millennium. There's mind-boggling growth going on right now, driven by technology. And it's just begun. We're growing rapidly technologically but staying the same emotionally and psychologically. That creates opportunity for the trader or investor.
How can someone take advantage of that kind of opportunity? Velez readily shares his advice in four parts—education, pacing, competition, and starting small.
Find a mentor if possible," he says. "Develop a trading and investment plan and approach the markets with that. It will help you remove the more emotional side of trading." That's one thing Velez appreciates about technical analysis:It helps traders avoid the fly-by-the-seat-of-your-pants approach. "It's amazing to me that people still trade that way, without technical analysis," he observes. Still, he finds a hybrid of technical and fundamental analysis to be a very valid approach. "Applying technical analysis to fundamentally sound companies is a great way to go," he notes.
Second, Velez advises, beginners should take it slow and be patient. "We learn to trade the way a child learns to walk," he says. "It's trial and error. Education can cut down on the ‘tuition' you pay, but you still have to make some mistakes in order to learn." New investors shouldn't become frustrated and leave the markets simply because of those mistakes. If they learn well from their errors, they can do better in their ensuing transactions.
The next piece of advice from Velez:Never underestimate the markets or your competition in them. "This is one of the most difficult endeavors on the planet," he cautions beginners, "because it's an emotional and psychological game. We do not play stocks;we play people. It takes human response to make the markets move, and that's what makes the game difficult. Every time you place a transaction, you have to remember that someone else is on the other side of that transaction betting in the opposite direction. Who is that? And maybe most importantly, is he or she smarter than you are?" He finds it deceiving to think about buying or selling stocks from some nebulous institution—the controlling elements in the markets are the human factors of greed and fear, and the key to making money is determining which is in control.
Finally, Velez offers a tidbit of wisdom from his own experience. "Do not be afraid to trade small—ridiculously small," he says. "I remember feeling pressured and embarrassed that I couldn't play 100 shares or more. This should not be the case." He encourages people to play ten or even five shares at a time to get the feel of the markets and gain proficiency. This approach is better than paper trading, he says, because "paper trading removes the psychological response. You need something real on the line to test how you respond in real scenarios.
Playing the Game
Velez is with the markets virtually every minute. In the morning, before the markets open, he's reading voraciously in the online versions of major U.S. newspapers. He also recommends staying abreast of changes on a minute-by-minute bases using sites like briefing.com or free Internet resources like CNBC, CNNFN, or CBS Market Watch. And at his own site, pristine.com, Velez offers a real-time investment chat room where sophisticated traders can find minute by minute guidance and market updates.
In the evenings, he's at the computer, making plans for the next day's trading. His five-year-old daughter watches at his side. To her, it looks just like a video game. And in some ways, it is a game—a challenging, high-stakes match of wit and skill, the perfect pursuit for an enthusiastic, competitive soul like Velez.