Currency-trading firm takes a giant step upward
In 1977 Stanley C. Waldner began testing a computerized system he had developed for trading currencies. Starting with $35,000 of his own and employees' capital, Mr. Waldner and his firm, Waldner & Co., traded it to $722,000 in four years.Skip to next paragraph
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Beginning this week, Mr. Waldner and his company hope to do the same thing for investors who plunked down $10 million in the Chancellor Financial Futures Fund, a limited partnership underwritten by Bache Halsey Stuart Shields Inc., the brokerage house.
Behind Mr. Waldner's success is a computer. The computer is programmed to consider some 200 to 800 technical variables making up the markets in currencies , interest rates, and gold.
Based upon the computer's analysis of major trends, the partnership will either buy currencies, Treasury bills, or gold on the futures markets or sell them short. Unlike funds that take part of their cash out of the markets during volatile periods, this fund is designed to be in them 100 percent of the time and to avoid the major tops and bottoms of markets.
Naturally, the use of a computer does not assure success in trading such volatile financial instruments as currencies.
However, Mr. Waldner, in a phone interview from his Chicago office, points out the computer programs have been fine-tuned since 1972. Before 1972 he had been a limited partner at Lamson commodity area. In 1972 he resigned and went to the floor of the International Monetary Market, a division of the Chicago Mercantile Exchange, to trade for his own account. During that time he became involved with computer modeling to make trading decisions and learned "not to trade against the computer."
While at the IMM, he wrote the chief executive officers of 12 major corporations, including DuPont, Dow Chemical, Standard Brands, Hoover, International, Gulf Oil, Exxon Corporation, and Phillip Morris to sell them his expertise in foreign-exchange exposure management. Ten companies agreed to see him and he walked away from the interviews "convinced we had a product probably more viable in dealing with foreign exchange than anything I suspected was available."
Once he had established his credibility, Mr. Waldner began pulling in fees from corporations that ranged from $15,000 to $75,000.
However, all of the money was reinvested in his company, and into more sophisticated computers and research. Mr. Waldner, and his partners, J. David Tolson and Donald B. Reece, did not draw down a salary. Instead, they lived on the proceeds of their trading account, which was using their computer model.
Mr. Waldner and his partners decided to "go public," with their model since their demand for more computer capacity outpaced their income. Mr. Waldner says that this year his company has budgeted $400,000 for research. Next year research spending will be $600,000-$700,000, and in a few years, he expects the amount to be as high as $1.5 million. By going public, Mr. Waldner says, they have a projected cash flow of $1 million a year, based on their management fees and performance incentives.