© Ed Seykota, 2003 - 2005 ... Write for permission to reprint.

Ed Seykota's

Frequently Asked Questions

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April 19 - 26

 

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Questions

(Quotes from Ed in Red)

Answers

Tue, 26 Apr 2005

 

Trend Following Magazine Cover

Hi Ed!

I see this magazine cover today at http://www.sfomag.com/

currentissue.asp

There is also an interview with Mark Rzepczynski of JWH. The text "Light at the End of the Tunnel," along with the image seems to represent someone's prediction that good times for trend followers are right around the corner.

 

 

Trend Traders learn to observe many disciplines:

 

Trade with the Trend

Ride Winners

Cut Losses

Manage Risk

 

Trend Following, by itself, does not automatically guarantee good times.

 

A magazine cover about Trend Following might indicate a major trend might be ending.

Tue, 26 Apr 2005

 

A Question about DIM -- the process


Hi Ed,

I recently realized that I have spent a lot of time and effort stuffing feelings of sadness and loss, along with fears of humiliation and failure.

On the hot seat, I went deep into my feelings of failure. This led to a release, a still point beyond the suffering.

 

It struck me at that point that a large part of what I had experienced as suffering was simply resistance to the feeling.

 

In the days following that meeting I was more honest and open, to myself and others. I was not afraid, as I had been in the past, of telling it like it is. If things weren't going well with trading or any other area of my life, I could say so, with ease.

However, the results of going into my feelings, between meetings, have not been nearly as successful. I attempt to embrace sadness whenever it comes up, but I find that when I do, I tend to get stuck in it. And, it can stay with me, on and off, for days. I do not reach a still point, and find myself falling into familiar patterns of pain avoidance.

My hunch is that outside of the meetings, I am not really feeling the feelings. Some part of me is resisting them. Hence, I am left with a lingering sadness.

I'd appreciate any thoughts you have on this. Also, any ideas for what I can do between meetings to keep the feelings flowing.

Thanks for your work!

The DIM (Do It Myself) process and even one-on-one talk therapy have some limitations in developing forms and in re-integrating feelings.

 

You might consider taking your feelings about being stuck to your Tribe.

 

 

Sadness

passes quickly when you experience it

 

when you don't,

it may last a lifetime,

and even longer.

 

Clip: http://www.latsa.com/images/

products/BK%2052%20%20

FEELING%20SAD.jpg

 

 

Mon, 25 Apr 2005

 

Email Pass-It-Along Schemes


http://www.borgerisd.net/

soapbox/soapbox.htm

OK, this one I'm passing along.

Sun, 24 Apr 2005

 

The Long Emergency

Ed,

Found the attached article last week from a new book about the depletion of oil as the lynchpin for disintegration of world economies and societal structures.

 

Really spoke to me given the trend in oil prices.

 

PDF File


http://www.amazon.com/exec/obidos/

tg/detail/-/0871138883/qid=1114375468/

sr=8-1/ref=pd_csp_1/102-2356022-

7656107?v=glance&s=books&n=507846

Typically, the top of a market entrains books about disasters.

 

 

Belief in the Inevitability

of higher petroleum prices

 

during corrections

 

might prove to be

a long emergency all right,

for the longs.

 

Sun, 24 Apr 2005

 

The Trading GYM


Hello Ed,

A thought came to mind which is: if I manage to pull my trading system off and make profits on paper and real-life I can start a small trading shop facing the street which teaches trading.

 

Just a place where you purchase membership and you are allowed to consult as much as you want and create a system or just acquire knowledge.

It will be like a trading GYM, employees are:

- My self: boss of business development

- Chief Dealer: one who has knowledge from an actual dealing room for Forex and Stocks technical details.

- Programmer: one who can program visual basic into Excel sheets and build trading models for the members.

We can also setup competitions for trading systems and exercises.

Starting small with small fees will make the way for the idea to forge its self to success or failure but really success doesn’t matter, what matters is to have one hell of a ride and have fun and debunk all the hype made around trading and bring it down to simple logic and fun.

Most traders already know how to trade.

 

They do not always follow principles they know to be sound.

 

 

 

Working Out Works Wonders

 

as long as you

stick to the system.

 

 

Clip: http://www.cathe.com/images/

Gym-Style_Back_390.jpg

Sun, 24 Apr 2005

 

Trading Tribe in SFO

Hi Chief !

You and the Trading Tribe are featured in the latest issue of the magazine Stocks, Futures and Options which is dedicated to trend following.

 

See:

http://www.sfomag.com/

homefeaturedetail.asp?

ID=22474652&MonthNameID=

May&YearID=2005

Yes, that's an article by Charles Faulkner - who, incidentally, is helping to present the Trading Tribe Workshop in Reno.

 

See more on Charles Faulkner at FAQ Fri, 23 Jul 2004 NLP Modeling and at his web site at:

 

http://www.influentialcommunications.com/

 

Sat, 23 Apr 2005

 

Easy and Hard

 


I am so excited about attending the May seminar. I just read the thumbnails of your new book which I have ordered. I too am from Los Altos - well Hills in the 60's to 1970. I think there was something in the water with regard to "trading" and "engineering". Traded my first stock when I was 18 and went to engineering school.

Now that I'm much older, having read a lot regarding trend trading - I can see that there really isn't much to trend trading the commodities market. It's all about following a system and not trying to control a system being careful of the risk. If one puts the orders / stops in the night before the next trade day - and never looks at the market until the following night - he actually wins because he doesn't day trade - usually on emotion. Easy, but hard.

Yes, almost anything can be easy and hard.

 

 

 

 

Bela Fleck

makes the impossible

 

appear easy.

 

 

Clip: http://www.flecktones.com/

photos.asp?category=1

Fri, 22 Apr 2005

 

Positive Intention of Drawing Down


Hi Ed,


I begin trading my new strategy in early March – and I immediately experience a very nasty period for this particular strategy (especially this week.) I consider it an opportunity, because I’m willing to have it go up and down, and I’m willing to experience my feelings about the equity curve as it presents itself.

During equity draw-downs, I like to take the opportunity to experience the heat fully, and I notice that it often seems to help me clarify new rules to add to my strategies.

 

Draw-downs have a positive intention. Ignoring draw-downs or pretending that they are “just a cost of doing business” seems like an approach that misses the opportunity to capitalize on the positive intention of the draw-downs.

By really diving in to the experience of the heat and processing it, I am able to check my intentions with respect to not only how much heat I am willing to tolerate, but in what ways I am willing to tolerate it. For example, I experience that I’m willing to have a 20% maximum peak to trough drawdown, but as I mature as a trader with the help of TTP, I get a richer experience of the heat, and I think about the nature of the draw-downs beyond only the amplitude. I notice their velocity and acceleration, their frequency and periodicity, their time-to-recovery and, most importantly, the specific differences in market action that underlie variations in these characteristics of the equity curve.

I find the results from TTP to include; a willingness to have the account go up and down, a significant increase in attentiveness and intuition, and clarity in “drilling down” intuition into code.

Events, like draw-downs, are just events.  They only have the meanings you give them.

 

The feelings they excite may have positive intentions.

 

 

 

Taking a Bath

 

in the tub

or in the markets

 

is just an event.

 

Your feelings about it

may have positive intentions.

 

 

Clip: http://www.wordsources.info/

bath-1-sm.gif

 

Thu, 21 Apr 2005

 

Book Available At Workshop



Will your new book be available at the May Workshop, or do I need to order my copy via mail?

Regards,

I have a couple dozen books on a fast track for the Workshop.

 

The rest of them are due to arrive a couple weeks after that.

Thu, 21 Apr 2005

 

Is Buy Low / Sell High Really Wrong?

Hello Ed,

I am absolutely against buying low and selling high, but putting aside the pride of trend following and thinking objectively about following a trend and its reversal.

 

It really doesn’t make deference if you keep trying to buy low with stop-loss and risk management until you capture an up trend or the opposite.

 

The point is to follow the successful trend when it happens with commitment to the system.

I think I am wrong.

When an up-trend happens, the price is moving up.

 

You might take your feelings of wanting to be right, and to get a clever bargain, to a Tribe Meeting.

 

 

The Sign for When

 

a bull market trend is happening

 

is that the price is going up

 

Clip: http://www.lifeprint.com/

asl101/lessons/lesson6quiz.htm

Wed, 20 Apr 2005

 

Aspiring Member of The Trading Tribe

Hi Mr. Seykota.

You and I have never met, but I would like to take this time to introduce myself.

Mr. Seykota, last month I began a career transition from a health care executive to aspiring trader. As I did when I entered the health care field, I became a student of my business. I am applying the same focus to trading.

Being a neophyte to the trading world, my efforts thus far have consisted of taking training courses, reading, locating research tools, paper trading, minimal “real” trading and more reading (yes, all in a six-week period).

 

Two books I have read, Market Wizards and Trend Following, bestow high praise to you.

 

Trend Following also listed your Web address, which I visited yesterday. I clicked on the  www.tradingtribe.com link and took the time to read about The Trading Tribe.

At this time, I would like to affiliate with a group of people who share the same trading aspirations as I do. Ideally, I could find one or more “seasoned veterans” who can foster my knowledge and help me avoid pitfalls.


From what I have read, The Trading Tribe sounds like it is something fantastic. Unfortunately, there is no Tribe in my area. The closest is in Miami, which is about four hours from my home.

Mr. Seykota, I am determined to make myself a successful trader. I realize I do not bring much to the table in the way of trading experience, but is there any way to participate with you or your organization? I would consider it an honor if you could respond to my request.

Many thanks for your time and I hope to hear from you in the near future.

See the link to Tribe Directory, about for information about how to join and / or start a Tribe.

Tue, 19 Apr 2005

 

Understanding the Markets



Dear Ed,


I do appreciate your taking the time to speak to me today. As I have indicated I am very interested in having you mange my money. Everything I have read about you from The New Market Wizards, Trend Following and Mike Covel's site motivates me to want to work with the very best, and I consider you to be one of the best. I have just started to read your homepage regarding the Trading Tribe and will familiarize myself with your philosophy, it appears it compliments my philosophy as well.


Ed, in addition to myself, there are several others that would be very interested in having you mange their money. We all met as students of [study course] and have been supportive of one another as we study and learn about investing.

 

We have come to the conclusion that though it is to our advantage to understand the markets we all want to have a good money manger and each and everyone of us would be honored to have you take on that role.

 

I would be happy to assist this process in anyway that you would deem necessary.
I look forward to hearing from you at your earliest convenience.

For Trend Traders, understanding the markets is typically optional, often counter-productive.

 

 

.

This Stylish Mellon Hat

 

may enhance understanding

 

and convert ordinary traders

into fundamentalists.

 

Clip: http://www.w3bdevil.com/

forums/Understand-CatMellon.jpg

Sat, 16 Apr 2005

 

Information



I have just come across your website and was so moved to send you this e-mail. I would very much like to know more about your organization and how to start a group in my area. I am also interested in knowing how one goes about speaking to you about money management and if I have enough money to qualify for your management. I have been researching investing in the forex market but don't know any traders or firms. Somehow your name and bio called to me and hence, my writing to you.

See the link to Tribe Directory, about for information about how to join and / or start a Tribe.

Wed, 20 Apr 2005

 

Two Corrections on Radial Momentum



Dear Ed,

On your Redial Momentum FAQ dated Tuesday, 17 June 2003 and titled “A University Physicist Responds” you may want to make these corrections.

Your comments were written in red. Two corrections are listed below.

Ed says:
The cavitation effect that I predicted and later noticed for water, is the direct result of radial momentum. So far, you have not produced any alternative explanations that account for the pressure and velocity profiles -- and that also have the have the correct interfaces at fluid entry and exit.

The words, "have the" … are written twice in the last sentence above.

 

-----



Ed says:
I see not such work that has been done … I have repeatedly asked you for a solution that explains the essential velocity, pressure and density profiles, so we may compare with my solutions. So far you have failed to produce such. I do not feel pain, so much as frustration and disappointment that a professor of physics would argue a point in physics without resorting to basic physics.


Use "no" instead of "not" in the third word of the first sentence above.

Good catch. 

 

 

 

Clip: http://www.freerepublic.com/focus/

f-news/1167945/posts

 

Wed, 20 Apr 2005

 

Add Your Book to Your Own List

 

Hi Ed,

I suggest that you add your Trading Tribe book to the books link under the resources link. I am sure it will be a favorite and helpful book of many faq visitors. Thanks for everything.

OK.

Wed, 20 Apr 2005

 

Price Breaks a High or Low

What Does it Mean?



Trend followers buy/sell when the price breaks a 20 days high/low (for example).

 

Does the previous high/low have any relationship with our current entry point? I think it doesn’t and it is only a comforting means of creating a comforting logical meaning to the entry signal.

Using price breaks is not wrong, it is right because the price really moves in the breakout direction but why should we relate it to the previous high / low using a time frame? We can just say that the price went up or down but then we will need some kind of measure to justify the meaning of breakout and this is why people find that justification using time while I think the justification should be the price its self.

Moving averages for example use time and that’s why they don’t work in sideways markets; because they start to get affected by small price moves and lose direction, so why don’t we create a moving average that stops moving when the price stops moving unless the price moves is logical interval distance which justifies a reversal or a continuing move.

Many trend followers systems must be successful but that is not due to entry and exit but it’s because the entry and exit are built on money management and that’s why they are successful.

I am a graphic designer at age 25. I never made profit in trading and I still haven’t, I stumbled over a trend following website because a friend was talking about trading futures in general and I just couldn’t stop reading that it was so entertaining because it really touches many non-related to trading issues from relationships, love to religion and food and even going to the gym and pyramiding weights in training.

The fact that trend following is intensively logical and numeric proves that profits can be made or lost even though it might not be obvious without carefully crunching the numbers with commitment to a system in trading or in any other business.

One of my dreams and what I am saving money for is to start a restaurant which serves grains with everything that people like to eat because not many people know how to cook grains properly and it is hard to cook dishes using oat, wheat and other many kinds of grains.

 

Now I have a deferent objective, why don’t I start a restaurant which serves food according to what is available in that specific geographic location under one brand which assures consistent commitment to not changing the quality of the food which people eat from long times at that specific geographic location but improve it so it stays healthy and become more fun.

Why I mentioned geographic location is because I think people should eat according to what is available at any place where they live because the human body adapts and survives best when we establish the cycle between the body and the environment around it.

 

For example if you go to Africa and eat African food your body will start adapting to that kind of environment and weather which is consistently sculpted through thousands of years so why should we defy it? Just go with the flow.

FAQ does not answer "why" questions or tell people what they "should" do.  See Ground Rules.

 

Making up meanings and justifying them sounds like fundamental analysis.

 

Trend Traders simply trade trends.

 

You might consider taking your feelings of wanting to be comfortable to a Tribe meeting.

 

 

If Your Dream

is to start a restaurant

 

TTP can help you remove

whatever is standing in your way.

 

Clip: http://www.tetamanuvillage.pf/

images/resto_3_la.jpg

 

Wed, 20 Apr 2005

 

Wants to Continue

to Form Another Question

 


Mr. Seykota, I wanted to personally thank you for information on your website.

I am a consulting hydrologist. One of my clients is [big trader]. Another of my clients is ... another famous trader, although not a Trend Follower.

I have read a few books (Trend Trading, Market Wizards, etc.) and understand firsthand how odds in poker work or even the office NCAA pool. I am more successful then the average at both. Trend trading has caught my interest for one reason only - because it is understandable. So I am looking for a few opportunities to learn. I recently found one on your website concerning Risk Management. While every book says to do it, they don't go into many quantifiable details. Your examples answered several questions and provided me a framework to apply and extend to my "studies".

It would be assumptive for me to say I want to develop a Trend Method that works, although I have said it to myself several times.

 

What I know I really want is to be able to continue to form another question and find a method for answering it.

 

If in the end this leads to a Trend Method I can develop and actually institute into practice for myself, then wonderful, it will be one of the most personal rewarding endeavors of my life. Even if I don't, the learning experience alone is worth the journey.

Thanks for your words, and yes I can't agree more - we all get what we want or need out of our lives. It is our responsibility to form a contact with our needs and shape them the best we can.

Forming questions is forming questions.

 

Trading is trading.

 

 

 

Clip: http://www.londonstimes.us/

toons/cartoons/questions.jpg

 

 

Tue, 19 Apr 2005

 

Looking for the Synthesis

Ed Says:

 

Your receivers are essential in assisting you to meet your feelings and to convert them from adversaries into allies.

Absent a Tribe of receivers, you are likely to continue skillfully avoiding your feelings.



Yes. In this respect, it's encouraging to know you're always there. Thank you.

Incidentally, have you already considered the issue of introversion? Do you consider it one more drama in itself? I mean, the universe seems to be divided into opposing forces or poles, like extrovert / introvert, right / left, capitalism / communism, emotion / logic, receivers / senders.

 

It looks like a lot of dramas revolve around finding the synthesis or AHA, as we're all inter-connected. I ask you as you yourself seem to be quite extrovert. I, on the other hand, admittedly am quite introvert.

 

Whatever, I might be just skillfully avoiding my feelings as you say. :)

We have two types of people:

 

Those who believe things divide into two groups.

Those who don't.

 

 

 

Penn and Teller

 

Some see them as two,

some as one.

 

It's like magic!

 

Clip: http://www.lasvegas-nv.com/

penn-and-teller.htm

Tue, 19 Apr 2005

 

MIT Engineer - Investor Goes Tribal


Ed,

I have been following the TT for about 2 years now. I am willing to receive and be in the hot seat.

Quick background - I am a yoga teacher / practitioner, Zen student, hedge fund manager, MIT Sloan graduate, Chemical Engineer undergraduate and been in trading / investments for the last 15 years.

Slowly - over the last ten plus years - I am becoming more more aware and interested in psychology, self discipline, self observation as a third party observer and trying to focus in the present.

 

I want to attend the IV workshop and subsequently start a Tribe.

Thank you for all the wonderful work on the site, the FAQs and motivation from afar. I lo0k forward to your guidance. Thank you.

To enroll in the Workshop, see the link on the FAQ Index page, above.

 

 

 

MIT Great Dome

 

with topping

 

 

Clip: http://hacks.mit.edu/Hacks/by_year/

1998/disney_buys_mit/

web.hacked.screenshot.large.gif