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

Ed Seykota's

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Aug 15 - 31, 2005

 

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Questions

(Quotes from Ed in Red)

Answers

Wed, 31 Aug 2005

 

Trading a $5,000 Account


Hello Ed,

You recall my last email when I tell you my equity is $5,000 and I trade 0.1 lot of EUR/USD with every stop-loss set to $100 = 2% of equity?

Every stop-loss cost me $100, therefore when ever I get a stop loss I would pay it directly from my salary, so by adding $1,000 each month from salary; it would allow me to cover the losses of 0.2 lot more, may be 0.1 Crude oil and 0.1 Share CFD (Contract for Deference) so I would total to a big 0.3 lot.

We have a market maker here that allows trading Crude Oil and Shares on margin with small contact sizes, this market marker might not be very trustable in case I make a big killing, yet like Jesse Livermore says “The beauty of doing business with a crook is that he always forgives you for catching him, so long as you don’t stop doing business with him” and I know that my system has a statistical edge on the upside because I tested it a lot, it is very simple and it was always profitable in trending markets that come after sideway markets, it lost in long term sideway markets just like any other system but now I am diversified to 3 markets which suppose to decrease the effects of long term sideways when it happens.

The point is that markets can be traded even if you don’t have a the equity for it, one may pay the stop loss from his salary or from a business like a restaurant for example, if I make some money I would leave the market, start a business and bring its profits back to the market and so on, this would allow more stability and diversification.

If you can add $1,000 / month from your salary to your $5,000 trading account, you get a 20% increase in your account the first month and a 240% increase for the year - all with no drawdown.

 

Unless your trading compares favorably with a savings plan, you might consider postponing trading until your account can handle normal volatility.

 

Furthermore, a small account has implicit requirements to keep equity swings small and this can conflict with riding out normal ups and downs.

 

You might consider taking your feelings of impatience and to your Tribe as entry points.

 

 

 

Tree Farm Strategy

 

Feed the small ones

and harvest the big ones

 

Clip: http://showcase.netins.net/

web/morgan/

Tue, 30 Aug 2005

 

EA Trading System


Dear Ed,

Thank you for the Trading System Project.

I was able to duplicate your results using Excel down to the third decimal. From the fourth decimal my results are slightly different probably due to rounding.

I also optimized for Bliss. My optimal solution for Heat = 0.15 is Bliss = 0.255, at Slow EA = 800 and Fast EA = 25. However, CAGR is only 0.097. Also, this result is an outlier.

A better result may be Slow EA = 950 and Fast EA = 45 which gives Bliss = 0.2322. Please see the attached file for a 3D model of the results. I averaged the results from adjacent data points to come up with a more meaningful solution.

 

 

Nice job.  For more about EA Trading Systems, including reader contributions, see the link to TSP, above.

Mon, 29 Aug 2005

 

Verification


Hi Ed,

I am including an Excel spreadsheet that contains my verification of the test runs you recently post to the Trading System page.

See link to TSP, above.

Mon, 29 Aug 2005

 

Reading Futures / Trading Cash


Hi Ed,

I’ve been popping into the TSP area occasionally and have noticed either an oversight or an issue that, up to now has not gotten addressed.


As the test applies to a S&P 500 futures contract and not basing the testing on the futures data for then trading the cash.

See TSP, above for information on this and other questions.

Sat, 27 Aug 2005

 

Easy to Read


Dear Sir,

The book arrived this afternoon... 11:30 AM at local time. (GMT+2)(Saturday 27.08)

I like so much... It is easy to read ... But Some pages are not so easy to read. ..

I read and understand these pages with my brother in law. He is an English teacher at the university.

I know English to reading a little bit but I can't able to write.

On the other hand I am glad to hear you live at Lake Tahoe since the first book Market Wizards. So you didn't change your life, for exp. go to in a big city like New York.

It is very important to me. Because you are not only one of the best trader and master of the trading psychology for me but also you have a peaceful and calm life style at at Lake Tahoe.

Thanks your help so much.

OK.

 

 

Fri, 26 Aug 2005

 

IV Tribe Meeting of August 18

Ed,

Here is the report for FAQ. I enjoy writing it. My last hotseat is a tremendous experience for me with all that came up. I find the Incline Tribe such an amazing group of people and place for personal growth.

I found a new attorney after interviewing more. I keep my eye on the prize and let the drama arise and keep going all while fully feeling any resistance that arises. Now, I have an excellent attorney with a top firm in SF that specializes in hedge funds. My attorney specializes in executive compensation and taxation within hedge funds. I speak with him about the current version of my compensation agreement on Tuesday before I head to NY to negotiate further. I prep well with him before I go in. I don't sign anything in NY. I consult with him again. This is a really productive/protective path.

Below is what I write for FAQ. I update it as my process unfolds.

 

-----

 


Incline Hot Seat


I arrive at our tribe meeting without hotseat issues after a six week break from TTP after an intense breath work 42 days prior. In our pre-TTP meeting where we work on snapshots, important hotseat entry points arise as I review my progress with the “Board of Directors.”

 

Indeed, the members find and confront me on inconsistencies between what I say and what I do. This delta arises from the feelings I am unwilling to feel in my process to realize my snapshot. Members act as steel traps for BS as they help me find my hotseat issues. This process is fantastic.

Issues I take to the hotseat:



Difficulty saying “No!” forcefully

Difficulty asking for what I want

Blockage/Drama actually going to get what I really want

Question of “deserving/self worth”



TTP:

We have a smaller group than usual at our meeting. I have a very light dinner knowing I have a lot of work to do. It is nice that only one other person has an issue live for the evening.

 

I begin to talk about my issue for about ten seconds before I unconsciously begin shaking my hands.

 

Tribe members encourage me to get into the form and I do. A number of other forms begin to appear.

 

I really get into all of them as well with relentless validation from the tribe. When members begin to tease out feelings, they find one that centers around me begin able to say “No!” forcefully.

 

They encourage me to find the judgment around not liking it. I find it, feel it, and it passes. I get into the feeling of a forceful “No.” I begin saying it and tribe members encourage me to get louder and more forceful.

 

I fully commit until I am screaming it. One member notices that I only say “no” forcefully to the floor at the right and left side of my feet. I notice that I have real resistance to saying No at eye level or higher towards anyone in the room.

 

Tribe members help me locate the resistance, experience the negative judgment, and then feel the underlying resistance until it passes. In a little while I scream “No” towards everyone in the room at the top of my lungs and enjoy it.

I notice butterflies in my solar plexus area as I get closer to dealing with the issue of going for and getting something I really want. I get into this feeling and get to the point of feeling OK with the feeling.

 

I reach down and take a sip of water from my bottle on the floor. The project manager quickly notices this and ingeniously uses the bottle as a broader symbol or prop of me really getting what I want.

 

He suggests that I use the bottle and getting a drink of water as a symbol of me going for it with something I really want.

 

The bottle becomes the really great outcome which I go and get. Tribe members help tease out an outcome a number of levels higher than I choose that stirs more feelings. They set the bar higher which really activates my forms.

 

Someone places the bottle on the floor away from me and the PM suggests I fully experience the forms that arise when I walk over to get the bottle and return to my seat (as a surrogate for going out and getting something I really want and have deep emotional investment to obtain.)

 

Many forms arise as I go through this exercise. Feelings and forms arise before I can get off the seat, while I walk to the bottle and when I return to my seat.

The project manager has me put these forms together. I end up on the floor with my body knotted up, muscles contracting and grunting. I hear the PM suggest this is a classic and common yes/no double bind form.

 

While I experience the very strenuous physical form, I still notice that I have a blockage to just going and getting the bottle.

 

I experience frustration.

 

At first I don’t want to feel it. I feel the judgment and then get to the frustration. I let it come and intensify it. After a bit it passes and the thought of deserving to get the bottle pops into my head. I go back and forth just with the thought of deserving to have it or not without much feeling.

My body still remains bound and tense on the floor. Then everything melts away in one instant as an “aha” pops into my head, “Deserving or not deserving is completely subjective and whatever I make of it.” There is no truth in it other than what truth I give it.

 

This is an enormous insight.

 

The phrase “keep your eye on the prize” pops into my head. The resistance fades immediately. I fix my eye on the bottle. I purposefully get up walk to the bottle, pick it up, and walk back to my seat. I feel at peace, calm and at my zero point. The tribe goes through checkout. I marvel at my process and thank all my tribesmen for their relentless validation and support.

Things I notice take place after my Hot Seat:

I notice that I like the feeing of riding the edge or feeling the suspense before making an important, emotionally invested step that has the feeling of self worth involved. It is a cool feeling that I like. Now, I understand the reason it comes up a lot.

I notice that I notice the above drama. This is cool as before I didn’t have this level of detachment to observe.

I go along with this feeling but keep my eye on the prize and move forward toward the prize.

I notice less resistance to getting what I want and getting things done to get what I want.

I notice that moving through resistance is easier when I let the resistance come up and get into feeling it at the time it arises. Suppressing or avoiding the resistance blocks me, whereas going with it allows it to pass and gives me space to keep my eye on the prize and move forward.

I notice issues of self worth and deserving arise from time to time. I notice myself notice. This detachment is nice. It helps me side-step the drama. I just go with the feelings and notice them, sometimes even encouraging them myself. I remember that its drama instead of getting wrapped up in it.

 

I keep my eye on the prize and remember that ‘deserving” is purely subjective. Do I want it or not is the real question. Keep my eye on the prize.

I notice I gain an inner strength as I move through my resistance and go for what I want. It is a powerful feeling that I really, really like experiencing.

I notice that I find an excellent attorney after choosing to interview more than the few that I did previously. I find that I quickly gain help from other attorneys in the matching process that helps me find the one with the great fit.

I notice that this new process requires vigilance to become a natural habit that replaces my old way of being.

This is really cool.

Thank you for sharing your process. 

 

Your email illustrates some important and subtle aspects of TTP.

 

Congratulations on excellent work.

 

When you keep your eye on the prize and are willing to experience all the feelings that arise, the prize soon becomes yours.

 

 

 

 

Nobel Booby Prize

 

Clip: http://www.physics.brocku.ca/

~edik/dr.fun/nobel-prize.jpeg

 

Fri, 26 Aug 2005

 

TTP with Clients

Hi Ed !

At preliminary meetings with a new client I explain TTP, my perceptions of it as a profound new meta-technology to get clear expectations between client and portfolio manager. He understands that client feelings affect manager performance.

We engage in a hardball process, "What's standing between you and having
an equity surge in this account?" A number of strong feelings appear.

We commit to a hardball session every two weeks to continue the process.

OK.

Fri, 26 Aug 2005

 

Emotions Discovered in Finance


Chief!


I recently found this book. The importance of emotions is being 'discovered' by many researchers.

Emotions in Finance: Distrust and Uncertainty in Global Markets
by Jocelyn Pixley, Cambridge University Press, 2004


"Fear and greed are terms that make light of the uncertainty in the finance world. Huge global institutions rely on emotional relations of trust and distrust to suppress the uncertainties. Many financial firms develop policies towards risk, rather than accepting the reality of an uncertain future." - from the book jacket

"In finance uncertainty is masked (disguised as 'risk', not losses). It cannot be spoken, for it is the un-sayable. Since uncertainty about claims is always extreme, decisions rely on future-oriented emotions.

 

Competitive financial firms live and die upon predicting future outcomes which are unknowable, no matter how rational their calculations of past information.

 

Therefore, firms must project emotions and conventions about the unknowable future, and through strategies of a pseudo-rational kind, bring these conjectures back to the present in order to act.

 

The typical emotions are trust and distrust, whereas the typical convention is to assume that the future will resemble the past. These are the inevitably shaky, emotional foundations of finance." - from the 1st chapter "Global Markets or Social Relations of Money"

OK.

 

 

 

Wall Street

 

Many heads, thinking alike,

and all cut off from their body feelings.

 

Clip: http://www.natashatynes.com/

photos/uncategorized/barbie_head_1.jpg

 

Fri, 26 Aug 2005

 

Gracias Don Eduardo


Hi Mr. Seykota:

I am a 23 year old guy from Dominican Republic; I have a degree in business, I love trading and I love to learn. Perhaps my English is not the best one so please be patient.

I was born in a family where most of the members are pretty good at doing business, we have been a very united family, we have traveled almost the whole world together (26 members).

 

However, by reading TOXIC PARENTS I immediately realized that the price of being so attached to my family was costing me A LOT. As I kept reading I started to feel wounded, specially when I read the chapters: Verbal Abusers, Physical Abusers and Controllers. I did exactly what the book suggests me, I wrote a letter to my parents and my relationship has improved a little bit but the family system is still there intact. I am not saying that I am willing to change that but it hurts me a lot.

A year ago I started working for my uncle in a real estate business; it was a great opportunity for me to increase my capital as well as to do a good job. But my uncle is a very difficult person to work with; he not only made me feel ridicule with personal attacks and many other techniques, he even kept telling me advices like that the only way to have money is not to get married and it makes me interpret that it is a good idea to get rid of my 5 year old relationship with my girlfriend.

 

By the way she is an architect and she still working for my uncle and she going crazy.

The thing that really broke me inside was that when I decided to quit working for my uncle (by a psychologist suggestion), almost my entire family gave him all the support.

 

Maybe because he is the richest man in the family system, and he is being paying all the trips to almost everyone when we have traveled.

This letter I'm writing you is to thank you for all the support you give to people as well as to me and I know that if is weren't of you, I would never realized the problem that I have since I was born (perhaps before I was born. I strongly feel that if someone like you were part of my family, things would be very different and better.

As you might have notice I am full of K-nots. However, as soon as I finish the course I am going to make in Spain (Master in Statistics), I will attend one of your workshops.

Thanks a lot Mr. Seykota,

Thank you for sharing your process.  You en-courage others to take yet another step along the path.

Thu, 25 Aug 2005

 

Hawaii Freaks Out

Freakonomics, a best-selling book by Levitt and Dubner, has exposed a public fascination with economic explanations for real world events. We share this fascination. After all, that's why we became economists.

Yesterday, the state of Hawaii set off on a real time Freakonomics experiment.

 

The state has decided to cap wholesale gasoline prices for regular unleaded at $2.15 per gallon. As far as we can tell, there is no limit on what retailers (who add taxes and a markup to the price) may charge.

Price caps, when set below the cost of production, always lead to shortages. Caps have not been used in the US since the 1970s oil crisis, when they led to infamously long lines at gas station.

People create a lot of drama around their k-nots.

 

If people have an aversion to experiencing guilt, they tend to work dramas that involve hurting others.

 

People who are fully in touch with the positive intention of guilt generally want nothing to do with welfare or other governmental schemes for asset transfer such as price controls.

 

 

Gas Lines

 

Coming soon to an island near you.

 

Clip: http://www.sptimes.com/2004/

09/11/images/xlarge/

A_1_1awood_196149_0911.jpg

Thu, 25 Aug 2005

 

Receiving


Dear Ed,

After the last TT meeting I start thinking about the following. The hot seat starts talking, the receiver is looking for feelings and physical display (forms), says show me more of <specific form., the rest of us creates a field of acknowledgement.

 

Everything is going well and after the first round, the sender seems not complete. Now there are different philosophies how to proceed.

 

One receiver asks the sender to tell again about the issue and slowly get from there to reporting feelings. Slowly because he first addresses the conscious mind and encourages story telling.

 

On the other hand, as a receiver, I feel that asking about a feeling (that the sender just had expressed before) right away works better.

 

Example: Before you told me about that burning in your stomach. Can you still feel it?

 

The sender closes his eyes and starts slightly to move his upper body forward as he tries to sense if the feeling is still there. Rocking back and forth is a form that was strong before.

 

Immediately I sense that something must be still there, otherwise the body would not start with that motion even before the conscious mind makes up his mind.

 

So I ask him to show me more (show me more of that rocking?) and we are in the middle of a great physical display.

 

A first time participant felt that just encouraging a form without connecting it to an issue by talking about it, feels like "making it up" or "pretending" for him.

 

I argue that the feelings are there and by just repeating the form, all will come up anyway. It's like smiling at your mirror image for a couple of minutes. It might be pretending but just by doing it you cannot help but feel better.

Does your experience favor a certain approach?

All the best,

Once a sender goes into form, I generally keep communications with him on the level of encouraging forms.

 

I encourage the sender to dis-associate the form from the drama and deal with the form and the feelings.

 

Re-connecting the sender with the drama is likely to pull him back into his conscious mind.

 

You might suggest to the first time participant that he consider taking his feelings about pretending into the process as an entry point.

 

 

 

Pretending

 

is sometimes a good way

for us to find out

who we are.

 

Clip: http://www.gailnoglephoto.com/

images/play-doctor_239x195.jpg

 

 

Thu, 25 Aug 2005

 

Observation

Ed,


I notice after the May workshop and the July breath work how my feelings, especially the ones I don’t like, drive the decisions I make on a daily basis.

 

Looking back I see how this has controlled my life and career decisions to this point. I commit to experiencing all my feelings and attend all local TTP meetings.

 

Instead of resisting things and doing them my way I go with the flow. I do wonder though, if my perception of the flow is correct or is it what I perceive to be the flow really just the alternative option to feelings I am unwilling to experience or feelings I judge as bad.

 

As an example, say I am a money manager that is looking to raise capital for investment, the problem is I am uncomfortable speaking in front of people to sell my program. Do I take the uncomfortable feeling’s positive intention to mean:

a. This is not my right livelihood I need to find another line of work?

b. Get into the feeling of being uncomfortable and it’s positive intentions?

c. Go to the next tribe meeting, take the hot seat, experience the feeling and related forms with relentless validation and acknowledgement?

Thanks for all your support and your commitment to the Tribe.

Regards,

When your uncomfortable feeling is in a k-not it attracts drama.

 

When it is it not, it attracts right livelihood.

 

If you have a question about it, take it to your Tribe as an entry point.

 

 

 

To some, a k-not is

something to untie.

 

To those who view it

as something useful,

it simply disappears.

 

 

Clip: http://www.polocrosse.net/

aus/qld/images/knot.jpg

 

Thu, 25 Aug 2005

 

Physical Fitness Plan



Hi Ed!

In late July I start implementing a physical fitness plan that consists of reducing calorie consumption and increasing exercise. This is inspired in part by your own commitment to "Body in Shape" and in part by my breath work experience.

I am down about 30 pounds so far.

I notice that the level of awareness about my eating and exercise habits that I maintain in order to keep a detailed log of my progress supports me in sticking to my plan.

Thanks for your inspiration, and congratulations on your own "Body in Shape" progress!

OK.

Wed, 24 Aug 2005

 

Richmond Virginia Tribe

Hi Ed,

I am starting a tribe in Richmond, Va.

I have only attended a couple of meetings
in NYC prior to relocating, but enough to commit to the process.

Regards

 

 

Welcome

Richmond

Virginia

 

 

Wed, 24 Aug 2005

 

Another Growing Tribe


Ed,

Please can you update the details of [our] Tribe. We have 4 members and meet every fortnight (2 weeks). I also noticed that the number of world wide trading tribe members is approaching 150.


Congratulations.

OK.

Wed, 24 Aug 2005

 

System Testing

see Wants to Test


Dear Ed,


There you go with your clarity request again..... Very good idea.

First, I would like you to re-test my system (on a portfolio of 15 futures) for the usual win/loss ratios, total profit, equity curve growth and drawdowns etc. on “random” time frames of 2 - 5 years as far back as you have the data, just to verify that my test results using Trade Station are all valid and correct.


Secondly (and much more important) I would like to test for the ideal position sizing / risk for each of the futures contract, to determine the correct number of contracts to trade, basis the total amount of account equity.

Of course, I would like to have any other “tweaking” suggestions you might have on improving any component of my system as well ... FYI, the system is only up about 11% this year so far, in my actual trading.

Best regards,

Before you engage in testing, you might like to have some kind of objective function or, as I like to call it, a Bliss Function, so you can optimize your system.

 

 

Tue, 23 Aug 2005

 

Most Important Words


5 most important  - "I am proud of you."
4 Most important -  "What do you think?"
3 Most important  - "If you please."
2 Most important  - "Thank you."
1 Most important -  "You."

These words are mostly important for winning friends and influencing people.

 

To build intimate relationships, you might consider, I feel ...

Tue, 23 Aug 2005

 

Critical Thinking

Hello Ed,

Critical Thinking is what I meant when I told you about reprogramming our preferences by continuously thinking and understanding why things happen so we form a logical reaction instead of being driven by the fluency of our instinct which maybe corrupted during our life time, this kind of thinking leaves no place for bias and applies a wider understanding; because when thinking before acting we are able to cover more probabilities that we couldn’t when we just reacted by instinct.


Read more on Critical Thinking on: http://www.criticalthinking.org/

aboutCT/definingCT.shtml

You might consider using critical thinking to analyze the feeling of wanting to think critically.

 

 

 

Thinking

 

about thinking

 

about thinking

 

about thinking

 

...

 

 

Clip: http://www.itrc.ucf.edu/conferences/

fetc2004/images/thinking.jpg

 

Sat, 20 Aug 2005

 

Bruce Kovner -

George Soros's Right-Wing Twin



http://newyorkmetro.com/nymetro/

news/people/features/12353/index1.html

They don't seem like twins to me.

 

 

 

Bruce Kovner

 

 

George Soros

 

 

Clip: http://www.philanthropy

roundtable.org/images/am2004biopics/

Bruce%20Kovner.jpg

 

Clip: http://www.mindfully.org/WTO/

2003/George-Soros-Statesman2jun03.htm

Tue, 23 Aug 2005

 

The Joy of Losing



Hello Ed,

Greetings!

I trust you are well.

In your Market Wizards interview, Jack Schwager asks you: "Is the joy of winning as intense as the pain of losing?". And you reply: "The joy of winning and the pain of losing are right up there with the pain of winning and the joy of losing."

At the time of reading that interview - and for many years thereafter - I do not understand what you mean. However, that has now changed ...

During the last couple of months, my system gives me several signals - all of which I take. Many of those signals result in losses, and hence depletion of my Trading Capital (and that of my clients).

However, I have been true to my system. And I wish to share with you that for me LOSING MONEY NEVER FELT THIS GOOD!

It has taken me a long time, but I finally understand and experience THE JOY OF LOSING.

Thanks for another valuable lesson.

On another note - our Tribe continues to meet regularly, once every 2 weeks. We now have a 4th member. I request you to please update the Tribe Directory Page to reflect that information.

Ed - you continue to  be a huge source of inspiration to me and the others in the our Tribe. Thanks for sharing your fabulous work with all of us!

For some of my own joy-of-losing experience, see: Body-In-Shape

 

 

Tue, 23 Aug 2005

 

Wants to Test System

 

Hi Ed,

I would like you to back-test my trading system.  I am willing to fly to IV. 

 

Please also advise the costs

I'd like to know what you mean by trading system and back-test

Tue, 23 Aug 2005

 

Tribe in Kolkata India


hi Ed,


I would like to start a tribe in my city

 

 

Welcome

 

Kolkata,

India

 

Mon, 22 Aug 2005

 

Feedback from First IV TT Meeting


In a word – Surreal!

I arrive at the IV Tribe meeting and meet a friendly tribe member and then Ed, peace of mind feelings flow throughout as I get comfortable with the group.

My first exposure to the Snapshot process is a challenge. One member correctly points out that my snapshot lacks “feeling”. Generally I get defensive in such situations, but as I repeat my snapshot to the group I agree with him, my feelings are limp at best. I commit to work on my snapshot.

As other group members go through their snapshots I become impressed with the sincerity and openness of their narratives. The interaction is productive, as the group poses questions, members working on their snapshot unveil what is standing between them and their snapshot from a practical perspective. This leads to further refinement and of course clarity - simple but powerful stuff.

We break for dinner and then the fun begins. The beginning of the tribe meeting flows pretty much according to what I understand from the TT Web Site and Book. After check-in Ed selects a fellow member for the hot seat

For me, it’s un-natural and plain weird to see the sender go through his process. My mind finds it difficult to comprehend, so I just sit and receive the member on the hot seat. I get into a state of bewilderment and amazement as the sender begins to really dig into his feelings. As the sender gets deeper into the process the receivers encourage him …”more of this, more of that, okay, back to this one, and that one, okay, all together now, good, etc ...”. As the process continues and the sender dives deeper into his feelings, my “reasoning” mind just leaves the room. The sender concludes a strong session.

And then it’s my turn on the hot seat. In a word, Surreal! Ed tickles a feeling during snapshot that I take into the tribe meeting. I begin to use my hands to describe the feeling and a group member shouts out “do more of that…”. And then BAM, I’m gone. I feel my body moving and hear distance voices. I begin to sweat, lots of sweating. My body is going every which way, hands and feet fling, body flops, head spins, hair pulls, teeth grinds, eyes squints, and then more of the same. I lose track of my body, and perhaps my mind as well. And then I begin to cry. I have not cried in a long time.

An image of my mother flashes before me and I’m pulling my hair while crying and wanting to scream just as she does when she yells at me as a kid. Ed yells, “be your mom!”, and instantly an image of my dad flashes in front of me. My father is in his ultimate “judge” pose (cocked eyebrow, hand supporting chin, a look he’s famous for). Then my grandmother (in my conscious state, I label her the ‘mother of all judges’) and then a quick flash of her mother. (Expect for one picture, I never saw my great grandmother, but there is her image, right in front of me in Ed’s living room). I get a quick flash of my two older siblings in order of their births. And then more crying and sweating, don’t even know if my body is moving at this point. Crying and sweating stop just as fast as they showed up.

I get a sense of peace, stillness, I feel light headed and exhausted. Ed recommends I stop as this is my first time in the hot seat. The rest of the meeting is a fog, don’t recall much of it, we do a check out and I feel tired and sleepy.

I drive to the hotel and I am exhausted, I sense I can sleep forever. I check in and find my room. I get ready for bed and them BAM, I can’t sleep. I’m in bed wide awake, can’t even close my eyes, just like a drug induced high - can’t sleep. I become a feelings pump, like a busted oil well gushing feelings all over Texas, the more that gushes, the more awake I become. I lay awake until early in the morning, don’t think I even sleep, I just feel feelings all night long. The feeling are difficult to describe, they keep coming and coming. Next morning I get up and head to the airport, more feelings. On Friday, feelings, feelings and more feelings, Saturday is the same but with less volume. Things calm down on Sunday.

Ed, I don’t know where his is headed, so for NOW, I’ll just experience my feelings and go with the flow.

Thank you Ed and fellow tribe members for your effort and support, I greatly appreciate it all.

Thank you for sharing your experience with others. 

 

Your en-courage others to experience their own feelings.

Mon, 22 Aug 2005

 

Personality Types

See Typo Type

Sorry for the link error. I must be a Type 0 personality.

This works better:

 

http://www.wordspy.com/words/

typeTpersonality.asp

OK.

Mon, 22 Aug 2005

 

Very Accurate Diagnosis

Ed Says: You might check to see if any of your other projects are also stalling out. If so, you might consider taking your feelings about stalling out to one of the other Tribes.

Yes, All my projects are stalling. Your diagnosis is very accurate and put me to think a lot on how I create my own experiences. I commit to join a working and experienced Tribe as the opportunity arises.

Waiting for the opportunity to arise sounds like more of the stall.

 

 

 

Waiting Around

 

is just something else to do.

 

 

Clip: http://www.clifford.at/

funpic/waiting.jpg

Mon, 22 Aug 2005

 

Typo Personality Type

Hi Ed !

Here is a new development of personality type labeling.

i especially like Type O = those prone to make spelling errors.

http://www.wordspy.com/

Hmmm ... the URL does not seem to work.

Mon, 22 Aug 2005

 

Wants Guidance


Hello,

There is me and there is him.
I come from Moldova, country situated between Rumania and Ukraine, former USSR.

He comes from the US, owner of a Bar, where I go regularly.

Both now are on Cozumel Island, Mexico. Both in unison with the rest of the world want to succeed and make a living.

I cry or laugh as life goes.

He has been working on trade following for past 4 years. He tells me about it.

I read "Trade Following" by Michael Covel. Runs into the name Ed Seykota. Opens his web-site like opening a totally different world. Unknown but perceptible.

 

I am not afraid to face my issues. I need guidance. I appeal to Ed's help.

Awaiting a response,

You can help your guides by telling them where you want to go.

 

 

Taxi Driver

 

She moves

when you tell her what to do.

 

Clip: http://www.4halloweencostumes.com/

default.asp?group=1&Cat=A

Sun, 21 Aug 2005

 

Scarrry



Without a trading plan I feel: scared.

 




Credit: Software by http://www.apophysis.org/ 

Cool Fractal !

Sun, 21 Aug 2005

 

Go Figure


Ed,

I have not been able to figure this out and it is bugging me. You are the smartest guy I know of ...

The top figure is 32.5 square units in area, the bottom one is 31.5 square units. I have printed the diagram and used scissors to cut out the shapes to no avail ...

 

 

 

OK, let's take some measurements.

 

Shape

Base

Height

Area

Red

8

3

12

Blue

5

2

5

Orange

 

 

7

Green

 

 

8

Sum

 

 

32

 

 

 

 

Large

13

5

32.5

 

So something does not add up.

 

Notice that the triangle on the top is slightly concave on the top while the triangle on the bottom is slightly convex.  The top lines are slightly crooked.

 

On the top triangle, if you draw a true straight line from the tip of the red triangle to the tip of the blue one, the straight line lies above the crooked convex line. 

 

The area above the crooked lines and below the true line is a long thin triangle with area = 1/2 square.

 

The bottom triangle is 1/2 square short of the true triangle.

 

If you add the two halves together, you get the missing square.

Fri, 19 Aug 2005

 

Flying to the Moon

Hi Ed,

Have you ever thought about going to the moon?

http://biz.yahoo.com/

weekend/blastoff_1.html

I have less interest in flying to the moon than in riding markets that do.

 

 

 

Bull Market in Cows

 

Clip: http://www.lewrockwell.com/

rogers/diddle.jpg

Fri, 19 Aug 2005

 

Pascal & Mysticism


Blaise Pascal was a French mathematician, physicist, and religious philosopher. Pascal's earliest work was in the natural and applied sciences. His important contributions to these fields include the construction of mechanical calculators, the study of fluids, and clarification of concepts such as pressure and vacuum by expanding the work of Evangelista Torricelli.

 

Pascal also lent his pen to the defense of the scientific method. In mathematics, Pascal did groundwork in projective geometry, writing a significant treatise on the subject at the age of sixteen.

Following a mystical experience in late 1654, he fell away from mathematics and physics and devoted himself to reflection and writing about philosophy and theology. This period was characterized by the composition of his two most famous works, the Lettres provinciales and the Pensées.


---


Mysticism, from the Greek (mueo, "to conceal"), is the pursuit of achieving
communion with, or conscious awareness of ultimate reality, the divine, spiritual truth, or God through direct, personal experience (intuition or insight) rather than discursive thought; the belief in the existence of realities beyond perceptual or intellectual apprehension that are central to being and directly accessible through personal experience; or the belief that such experience is a genuine and important source of knowledge. In the Hellenistic world, 'mystical' referred to "secret" religious rituals.

Mysticism is to experience intuitive knowledge of transcendent dimensions,
beyond the phenomenal or material concrete objects of ordinary perception.

 

The mystic sees things that are not part of ordinary experience. William James used the words "ineffable" (which means that something cannot or should not be spoken) and "noetic" (from the Greek nous: "relating to consciousness or intuition'), to describe the mystical experience.

P.S. I work on my own game reflection forms NOW i.e. meditation, observation, opinion, imagination, speculation, study, thought, view ...

You might consider taking your longings for spiritual connection to your Tribe as an entry point.

 

 

 

Sometimes the Search

for something outside

 

ends by finding it

inside

 

 

Clip: http://www.monkeyview.net/id/

1092/default/struggle.vhtml

 

Fri, 19 Aug 2005

 

Thwarting Spammers


Hi Ed,

I would just like to point out that there are ways to eliminate the issue of spam via the trading tribe email contacts.

You can ask your webmaster to use images in place of text for the email addresses.

Just take a screen capture shot and save as an image file. Its very very easy and saves about 10000 junk mails a month to every contact on the page.

I am placing the addresses in a MS-Word Document File.  If that doesn't work, I can go to text image files.

 

 

 

Clip:  http://vafer.org/blog/tcurdt/

archives/20040331-no-spam.gif

Thu, 18 Aug 2005

 

Deadlines


Dear Ed,

What do you think of having some deadline dates set for the Trading System Project?

Deadlines are part of the goal setting process.  They are a function of non-existing time.  Clear visions are a part of the snapshot process.

 

The Trading System Project is following my vision of creating a complete trading system from scratch.

 

Yu might consider taking your feelings of impatience to your Tribe as an entry point.

 

I do not recall Thomas Edison setting a deadline for coming up with the vote counting machine, the phonograph, the light bulb ....

 

 

Edison with Phonograph

 

Inventors find a positive intention

for their feelings of impatience.

 

Clip: http://www.hfmgv.org/exhibits/

edison/ed_phone.jpg

Wed, 17 Aug 2005

 

Email Address Theft


I need to tell you that someone stole my email address ... which I'm going to change shortly.

 

I've come to the site and usually keep up to what is written. I don't trust many people so if you were sore at me with my former email it was not me.

Yeah, right!  I bet it's not really you  sending me this email.

 

 

 

Boo

 

It might be you in there

and it might not.

 

 

Clip: http://msgboard.snopes.com/

message/images/spook.gif

Wed, 17 Aug 2005

 

Crowds


Hi Ed,

I don't like being in a crowd. I find myself plenty of times in a group of people and I am very uncomfortable (almost miserable) while everyone else seems to have a good time.

Somehow it strikes me today that a lot of my discomfort comes from the k-not I have about how people see me.

 

I'm sensitive to what others think of me, especially when I cannot deny the many weaknesses that I have. I have relatively low self esteem and I'm trying to avoid appearing foolish but in so doing make me just that.

:-(

You might consider taking your feelings of wanting to avoid people to your Tribe as an entry point.

 

 

 

No Matter How Hard

you try to run away

 

you're always

still there.

 

 

Clip: http://www.cs.uoregon.edu/

~thornley/pics/running/mac50k.jpg

Wed, 17 Aug 2005


Stuck on Developing Forms

Ed:


We have three members in our Tribe. Our meetings are by-weekly.

 

All three members have read the Trading Tribe book. I loved the book and I think that’s great. I learned a lot. I think without the book or participating in a workshop it would be very difficult to start a tribe.

 

We do the exercises in the Trading Tribe Workbook (“what you are thinking now”, “what are you feeling now” with relative success), but we are struggling with developing forms.

 

It is very difficult. We are unsure how to create the field of acknowledgement and validation, and how to encourage the senders to feel their feeling, and show and develop forms. If you have any suggestions or guidance that would be helpful, we would be grateful.

Our Tribe is receiving the support of the Chief of [another] Tribe. I hope to go to participate in one meeting, or that he will be able to visit our Tribe soon.

In spite of our Tribe having difficulties in developing the forms, I want to share some improvements in my life since we started the Tribe, and since I’ve been reading the FAQ’s in the web page.

 

The first is Intentions = results. It’s amazing. I’ve been working in a brokerage house for one year and a half. After one year I asked my boss for a raise in my salary. He got really upset, nervous and angry. He started to complain about how I could ask for a raise. He asked me if I thought the others members also deserved a raise.

 

After our meeting, I received an invitation to join another brokerage house in less than two weeks. I did not accept and talked with my boss. He was very happy and he now wanted to raise my salary. And he really did raise it. Intentions = results.

Ed I would like to thank you for your guidance and help and I hope that our tribe keeps improving and development the whole process.

You might consider taking the feeling of struggling with forms into the process as a starting point.

 

Your receivers can cheer you on and encourage you to amplify your physical movements and mannerisms while you develop your form.

 

 

 

Developing the Form of Frustration

 

helps untie its k-not.

 

 

Clip: http://www.sccarlisle.com/

images/struggle/struggle-fist.jpg

 

 

 

 

Wed, 17 Aug 2005

 

Multiple Goals

Dear Ed,

I have a couple of questions on the Goals Process aka the Snapshot/Hardball process.

I infer (from the Website - FAQ's) that workshop participants have ONLY ONE snapshot operable or "open" at a time and do hardball on only that one snapshot or dream or goal.

From your book, I infer that perhaps multiple Goals could be "open" or in progress at the same time.

Our tribe is ramping up to do this process and I have a list of several items that I am writing up in proper "snapshot form" (describing different areas of life).


I would like to start executing the Goals / Hardball process on several items - one at a time, of course, when we are ready as a tribe. Some of them are long term goals.

What is your opinion on having more than one Goal or snapshot "executed or open", before any of them manifest?

Thanks for any thoughts on this,

You might consider getting one snapshot very clear before beginning the next.

 

Clarifying snapshots is typically hard work.

 

Starting a new snapshot might be a way to avoid the hard work of finishing the first one.

 

 

Sharing One Clear Vision

 

is more powerful

 

than trying to sell

a thousand murky ones.

 

 

Cli[: http://www.hlb.dk/mb/mbp/

kikkert238.jpg

Wed, 17 Aug 2005

 

Jesse Livermore

Fundamentalist or Trend Trader ?

 

Hi Ed,

Some quotes from the book "Reminiscences of a stock operator".

The moment I ceased to be satisfied with merely studying the tape I ceased to concern myself exclusively with the daily fluctuations in specific stocks, and when that happened I simply had to study the game from a different angle. I worked back from the quotation to first principles; from price fluctuations to basic conditions.

...The analysis of the week that had passed was less important to me than the forecast of the weeks that were to come.

Without faith in his own judgment no man can go very far in this game.


That is about all I have learned - to study general conditions, to take a position and stick to it...


Based on these quotes do you think Larry Livingston ( assumed to be Jesse
Livermore ) was a trend trader whose trading philosophy was to wait until the trend confirmed his appraisal of "fundamentals"?

 

In other words was he a technical or a fundamental trader ?

Did he try to forecast what would happen in future days/weeks in the market ?

What do you think he meant by "general conditions" ?

I have only read the book a couple of times. Maybe I am taking things too literally instead of reading "between the lines".

I would appreciate any insight on these questions.

Jesse Livermore's history shows alternation between various trading styles.

 

Livermore's legacy includes wild plunging in the markets, intense carousing about town, numerous incidences of gunfire by various family members and, ultimately, Jesse's suicide.

 

 

 

Jesse Livermore

 

 Trading is sometimes

just one part of a drama

circulating around k-nots

about risk and anxiety.

 

 

 

Clip: jesselivermore.com/ pics/

pics_pg2.html

 

Wed, 17 Aug 2005

 

Exposure

 

Hi Ed,

I am the new chief of our Tribe. My only hesitation of accepting is a feeling of having my details posted on your website, made me feel greater exposure, this causes me concern on taking role.

 

I agreed to take on the role and accept the greater exposure feeling in all its forms.

 

I have been getting lots of spam and I find it rather amusing.

All the best

OK.

 

I am changing the format of the Directory page to hide it from the spam robots.

 

 

 

"For a Good Time

email Sue@abc.com"

 

Technology advances.

People stay the same.

 

Clip: http://www.crazyweiler.com/

gdtime.jpg

Wed, 17 Aug 2005

 

URL not Connecting



Hi, Ed -

I hope you enjoyed a happy birthday last week, and that you will celebrate many more in the future.

Other bidness...

When I click on the "Breathwork" link at the top of this page:

http://www.seykota.com/tribe/

FAQ/2005_Aug/Aug_01/index.htm

My browser reports:

Page Not Found [etc.]

The URL for the page which doesn't exist is:

http://www.seykota.com/tribe/

Breathwork/index.htm

Thank you for the catch.

Tue, 16 Aug 2005

 

Quant Makes Good -

Considers going Long-Term


Thought you might find this of interest:


Renaissance's Man:
James Simons Does
The Math on Fund Returns


THE WALL STREET JOURNAL
July 1, 2005; Page C1

It is getting harder for hedge-fund managers to generate above-average returns when their funds grow too big, right?

Tell that to James Simons.

Mr. Simons, a world-class mathematician who runs Renaissance Technologies Corp., is creating a buzz in the hedge-fund world because he is about to launch a fund that he claims could handle $100 billion -- about 10% of all assets managed by hedge funds today. It will have a minimum investment of $20 million, and is aimed at institutional investors, according to early marketing materials.

Mr. Simons, whose net worth has been estimated at $2.5 billion, has seen Renaissance's $5 billion flagship Medallion hedge fund earn an average of 34% annually since it began in 1988, making it the most successful fund during the period. These returns, which are audited, come even after fees that now are -- get this -- 5% of assets and 44% of all investment gains. That is more than double what other hedge funds typically charge.

So far this year, Medallion is up about 12%, amid losses for the overall market. Mr. Simons has done it with computer - driven, short - term trading in various markets. The firm won't divulge details of its strategy, even to its own investors. Other funds use the same strategy but are far less successful.

The new fund will take a different approach: focusing on the U.S. stock market and holding investments for more than a year.

Medallion hasn't been open to new investors for 12 years, and Mr. Simons, 67 years old, has been returning money to existing investors, convinced that returns would suffer if the fund got too big. In fact, the firm is expected to return outside investors' remaining money at year's end, leaving Mr. Simons and his employees as Medallion's sole investors and the fund about as large as it is now. Dealing with few investors has helped the publicity-shy Mr. Simons stay below the radar screen.

Mr. Simons declined requests for comment. A Renaissance spokesman wouldn't comment on the new fund, which will be called the Renaissance Institutional Equities Fund.

The latest effort -- even if it never reaches the $100 billion mark -- would seem to run up against Renaissance's instincts to keep a lid on assets. Indeed, many managers have found that more money under management can put a crimp on results. Investors briefed on the new fund say it will differ from the existing Medallion hedge fund by aiming for tamer returns that would enable it to handle the greater sums.

The new fund marks the latest encroachment of hedge funds into the lucrative market of investing money for pension plans and other institutional investors, turf that traditional money-management firms like mutual funds have clung to.

 

The fund will use complex quantitative models, developed by the 60 or so mathematics and physics Ph.D.s on staff. The fund will aim to beat the returns of the Standard & Poor's 500-stock index but with lower volatility.

Though Mr. Simons isn't well known, even on Wall Street, his track record likely will spur strong interest in the fund, investors say. Renaissance's 34% annual average returns since 1988 top every other hedge fund in that time period, according to Antoine Bernheim, who publishes the U.S. Offshore Funds Directory, which tracks over 1,000 hedge funds. By comparison, George Soros's Quantum Fund has climbed about 22% annually since 1988, while the Standard & Poor's 500 rose 9.6% annually.

Medallion, which hasn't had a down month in the past two years, according to one investor, has distributed so much money to its investors over the years that they haven't been able to reinvest these gains to take advantage of the big returns -- likely whetting investor appetite for the new fund.

Though prior performance doesn't guarantee the new fund's success, it will share Medallion's scientific approach, and is based on Medallion's "technology," according to the marketing materials.

"Renaissance's returns are 10 percentage points higher than legendary investors such as [Bruce] Kovner, Soros, Paul Tudor Jones, [Louis] Bacon and [Mark] Kingdon," Mr. Bernheim says. "He's in a different class from everyone else."

But while Mr. Simons will levy lower fees, such as about 2% of assets, to attract interest in his new fund, he also may have to disclose more details about trades than he is accustomed to. That is because pension plans, and their consultants, usually require a full briefing about strategies of firms they invest with.

"It's pretty much a black box. People that work there are sworn to secrecy; it's a proprietary trading strategy," says Jeffrey Tarrant, president and chief investment officer of Protege Partners LLC, based in New York, an investor in Renaissance.

Mr. Simons began his career as a professor of mathematics, teaching at the Massachusetts Institute of Technology and Harvard University. He helped develop a geometry theorem, called Chern-Simons, that is a critical tool for theoretical physics.

"It's startling to see such a highly successful mathematician achieve success in another field," says Edward Witten, professor of physics at the Institute for Advanced Study in Princeton, N.J., and considered by many of his peers to be the most accomplished theoretical physicist alive.

After breaking military codes for the government during the Vietnam War, Mr. Simons turned to money management. He hires specialists in applied math, quantum physics and linguistics for Renaissance's office in East Setauket on New York's Long Island. Hardly any have a Wall Street background. The firm relies on a system to make thousands of rapid-fire, short-term trades daily to take advantage of small, fleeting anomalies in various markets.

OK.

 

 

 

Jim Simons

 

might be able to grow even faster

by slowing down

 

 

Clip: Wall Street Journal

Tue, 16 Aug 2005

 

Continuous Contracts & Spam

Dear Mr. Seykota,

I sometime find different contract months prices do not coincide in trend direction. They might even trade in opposite trend directions. Using synthetic continuous contracts might mean rolling an open position into a commodity (month) with the opposite trend.

Back testing many "rollovers" might cancel most of this effect in terms of profit but not in terms of volatility.

Also, if the email addresses on your site were change to a format such as: tt_95(at)yahoo(dot)com , I wonder if there would be a reduction in spam.

I thank you for your sharing your wisdom.

Best regards,

Yes.  Agricultural commodities often have one trend in the old crop deliveries and a different trend in the new crop deliveries.

 

In this way, you might view them as different commodities.

 

For more on Continuous Contracts, see Trading System Project, above.

 

 

Soybeans

 

famous for going in two directions

at the same time.

 

Clip: http://www.soils.agri.umn.edu/

research_old/ars/Images/

Photos/SOYBEANS.GIF

Mon, 15 Aug 2005

 

Letter to Dad's Ashes



Dear Ed,

Slowly but surely still reaping the benefits of the Reno Workshop. Here is a letter to my abusive father's ashes. Thank you again.

 

-----

Dear Dad,


I realize I am weary of thinking about you and spending emotional energy on you. Someone said I am letting you live rent free in my body.


Another person said I do not have to approve or accept in order to forgive and move on.



I don’t know how to forgive you for not doing or feeling what I wanted.


I don’t know how to forgive myself, but I feel I have some promise of that.

Here is why I resent myself:

I stopped being who I could be because you did not like what I said/did.

I did all kinds of uncomfortable things trying to please you.

I spent a lot of energy on you trying to make your life easier and caretaking.

I loaned you money.

I believed your lies.

I twisted the way I see, think and feel to meet your expectations.

I trusted you.

I believed you were smart, kind, generous, honest, and had integrity.

I stunted myself because you did not encourage or support me to explore.

I didn’t tell you to shut up.



I watched an interesting movie the other night about 4 generations of an estranged family coming together to mend their bloodline. Some major trauma happened in that family, and although it was just a movie, I thought, if they can get past that, then I can get past my past.

The lingering issue is what to do with your ashes. They have been sitting outside in the plastic box behind the garage where I don’t have to see them.

 

Frankly, I feel they belong in the dump and would take some pleasure in heaving them into the dump with a big scream. However, I don’t want to be responsible for any blip in the universe due to interrupting your life and death process, so I am considering throwing your ashes off into thin air from a cliff and getting you the hell out of my space.

 

As soon as I get clear on this, I am LETTING GO of you and your sorry ashes and reclaiming myself and my life.

You say you intend to let go as soon as you get clear.

 

I wonder if you might consider letting go now in order to get clear.

 

 

 

When You are Ready to Let Go

 

it's easy to find a way

to dispose of your problems.

 

Clip: http://www.plasticpipe.com.cn/

pics/sanitary/sanitary.jpg

 

Mon, 15 Aug 2005

 

Spam



Hi Ed,

Quick update for you. Our tribe ... picked up two new members so we are five now. We still meet every two weeks.


Also, I've been getting a bunch of emails from Nigeria saying I inherited $25 million; either I'm a very rich man or some bots are picking my email off your website.

Thanks for all your work with the tribe.

The Tribe directory no longer appears as a web page. It is now in a MS-Word document, hopefully out of scope for spam-bots.

 

 

I see you like our solution

to your Spam Problem

 

all your keys are now

delete keys.

 

 

Clip: http://www.glasbergen.com/

images/g756.gif

Mon, 15 Aug 2005


Prompt Reply

Dear Chief Seykota,

Just checked out FAQ's and saw the posted response to my email question.

Thanks for your prompt and courteous reply.

You get a prompt reply if you are the last FAQ before I publish.  If you are the first, the reply is not so prompt.

 

 

The Train Arrives Quickly

 

for those who show up

just in time.

 


Clip: http://www.smithsonianmag.com/

smithsonian/issues04/mar04/images/

bubley_platform_detail.jpg

Mon, 15 Aug 2005

 

Point-and-Figure Charts


You have replied with point and figure chart before but I didn’t know it was an actual chart that is already there.

This is crazy to me, someone had actually discounted time from trading, I thought I was crazy about this, I mean someone already created a chart based on price only which is called Point-and-Figure Chart.

You don’t know how happy I am right now, it is like getting credibility from someone, like finding someone who understands what you are talking about, I don’t know how to describe my feelings.

 

I have two feelings, I feel the logic behind the idea hitting me and I am thinking fast and I feel extreme happiness, maybe it’s a delayed Aha, see Ed I told you that regardless of my research being true or not about trading, it will for sure have a statistical edge because I am using only the price to trade regardless of time.

I think of: what happens in a sideway market? Sideway markets happen when the price moves up and moves down approx the same amount which restricts the price from moving in any direction, also the same thing happens in slowly developing trends, which means that if price moved from A to B in 10 days it would be faster than when it moved from A to B in 20 days, the delay in the 20 days example would be because the price moved from B to A many times along the way from A to B, therefore we can measure which side the price moved significantly out of that range (lets say in the last 300 point move) which may give us a more accurate identification of sideway markets and more accurate breakouts mean less losses, don’t get me wrong I am not against losses or sideway markets but when there is a way it must be explored even if it results in total failure or in 3% more profit, in both cases you will have a statistical edge and that is for sure benefit.

You are right; I will create a simulation and provide testing results, which is the only way to figure this out.

I Said: “The main benefit of this chart is that it will not register a new bar unless there is a reversal; this means that if we create two of this chart on the same security using two deferent interval measures and create a simple moving average for each, the moving average cross over will not happen in sideway markets because unless there is a big change in price this chart will not register it, therefore moving averages can run along without touching.”

Ed Replies: “I do not follow your argument about how your method avoids whipsaws.”

About avoiding whipsaws, there is no way to avoid whipsaws in a sideway market, what I meant is that by using a chart with bars made of price-frame intervals we can create 2 moving averages that don't get affected by time and can move in parallel without touching unless there is a significant reversal. We may run 2 moving averages along the same time frame, first one will be using a large price frame and the second one will use a smaller price frame, note that the smaller price frame will be more volatile because there will be more smaller bars created before a large bar gets created. Note that the X-axis would be a normal time frame, and the bars would span into multiple time frames. Point-and-Figure chart is not exactly what I mean, yet it is along the same lines.

I think this is all sounds vague to you; I will build a chart to demonstrate, just wait I will send it over.

Many people say you are a great trader, I don’t think that matters a bit or benefits people in any way, what we may learn from you is to remove the drama and think about things before feeling them, this will allow the feeling to reform in your benefit, because after understanding why things go wrong I don’t get frustrated, and when things go right I would have more appreciation, humans appreciate things that cause survival and hate things that threatens survival, when we think before we feel then we will always rebuild our feelings in the right way, patience is the act of thinking before attempting to feel.

In trading or any other business its not really hard to think about things and to figure them out, its only a physical effort in trial and error, my learning is automatic for when I see something I know its right or wrong and always keep no bias by knowing why that is.

 

The only restriction people face is that they don’t want to test systems and fail and fail until they develop a successful one, they prefer being told from someone and just do it and make money without having to think.

 

Its not bad to learn from someone but you may understand what you are learning and always develop it from where it stopped progressing by your own findings, I used to get emotional when my system used to return negative results all the time, I felt like it would never work but partial gains always reminded me that I am on my way to something, after approx 7 months now I am sure that I have an edge, even If my study had resulted to 0 benefits, I am still gained a lot of knowledge on what not to do and how trading works, from now on I don’t care about small losses or screw-ups because I know that anything good or bad teaches me something, for example if the idea of the price frame moving averages don’t work; then I will know why It didn’t work and invert it into something that works.

OK.

Mon, 15 Aug 2005 

 

Contribution to Trading Definition


Dear Ed,

I feel like contributing to TSP.

I make this little file (see attached file) for TSP and hope it gives some insight to the community.

 

-----

 

General definition:
The word trend has a number of possible meanings (dictionary of finance and others):

· In statistics, a trend is a long-term movement in time series (a series of values of a variable at successive times) data after other components have been accounted for.

· In technical analysis of financial markets, trend is the existing general direction of energy expressed as the relationship between prices. It is the discovery and monitoring of human nature that leads to the actions of speculators and investors.

· In behavioral finance, a trend is interpreted as a three-step market price upward or downward move due to the reactions of investors as a social group to known information: 1/ under reaction, 2/ adjustment, 3/ overreaction.


Trend = the general direction of the price of an asset or market.


I believe that Trend definition is an absolute requirement for accurate trading.


I need a trend to make money (no trend no profit).

Trends can be thought of in varying lengths including short, intermediate and long term. If one can identify a trend, it can be highly profitable as you will be able to trade with the trend.

From Turtle Trading site:


Question: "...how do I spot when the market is trending to a new level?"


Ed Seykota Answer: "A trend is a general direction in which something moves. To define a trend, pick a historical price, and subtract it from the current price. The difference tells you the direction and magnitude of the trend. A market has no inherent trend. It only has a price, now. A trend is a notion you bring to the market, depending on your own definition of trend."

This answer is : the best definition and a mixing of great insight and tremendous experience of a Market Trend.

OK.

 

The trend is your friend except at the end when it bends.

 

 

 

Some Trends

 

just seem to go on

and on

and on

...

 

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Mon, 15 Aug 2005


Cut Winners and Ride Losers

Thought you might get a laugh out of this
from the NY Times


-----


... He thinks that it is criminal for fund companies to allow popular funds to balloon in size, making it nearly impossible for the manager to beat the market. He hates the way the industry pushes exactly the wrong fund at the wrong time - Internet-oriented funds at the height of the bubble, for instance. (He has one example of a Schwab advertisement during the bubble that is simply devastating.) He notes, as others have before, that the vast majority of actively managed funds underperforms. He uses "invidious," "investor-damaging" and "dirty scheme" to describe the general behavior of the industry.

Even the mutual fund monitoring companies don't help even the odds. Mr. Swensen absolutely skewers Morningstar, the company that has built its reputation rating mutual funds. His data shows that, like Moody's belatedly downgrading a corporate bond, Morningstar downgrades this or that poorly performing mutual fund only after the damage has been done. His core point, though, is that the for-profit fund industry has a fundamental conflict between its desire for corporate profits and its fiduciary duty to its investors. And the profit motive wins out every time.

So does Mr. Swensen offer any hope at all? Some. He thinks we'd all be better off sticking with index funds, instead of trying to beat the market.

 

We should be disciplined in our approach, especially in rebalancing our portfolio to stick to our diversification targets. Of course, this invariably means paring back on winners and increasing our investment in laggards.

But as sensible, and, in truth, not particularly unconventional, as this advice is, how many of us will actually follow it? Human beings simply aren't hard-wired to be good investors. Think about it: how many of us, really, have the fortitude to pare back our winners and buy more of our losers? Most of us do just the opposite. Heck, so do most mutual fund managers, which is why they can't beat the market either.

Everything works sometimes.

 

The argument (left) against trend trading seems to lack statistical evidence.

 

 

 

Sure Things in the Market

 

seldom are.

 

 

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