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December 1-14, 2007

 

<==  Previous  |  Next  ==>

 

 

Note: The intention of inclusion of charts in FAQ is to illustrate trading principles - The appearance of a chart does not imply any kind of indication or recommendation to buy, sell, hold or stay out of any positions.

 

Bonus Tongue Twister:

The sixth sick sheik's sixth sheep's sick.

 

Questions

(Quotes from Ed in Red)

Answers

Fri, 14 Dec 2007

 

Buying Dips / Selling Rallies

see previous

Thanks for FAQ. It's fantastic.


Note you might want to edit the subtitle of the most
recent entry to change from:

"One problem with buying dips is that

you might wind up selling the collapse;

one problem with selling rallies is that

you might wind up buying the blow-off."

to:

"One problem with buying dips is that

you might wind up buying the collapse;

one problem with selling rallies is that

you might wind up selling the blow-off."

Take care.

People who accumulate a position on the way down, by buying dips, and hold it through further price deterioration may wind up having to sell the whole position out during a collapse.

 

 

 

The Trouble With Buying Falling Things

 

is that they may very well

keep on falling.

 

 

Clip: http://www.usm.maine.edu/~lsavage/

UrbanGeographyProjects/Streetscapes%20Web/

portland_urban_renewal.htm

Fri, 14 Dec 2007
 

Classic Video



Ed,

Ray Charles, Jerry Lee Lewis, and Fats Domino are jamming with Paul Shaffer's band.

http://www.dailymotion.com/video/xe5w0_ray-Charles-Jerry-lee-Lewis

Thank you for the link.

Thu, 13 Dec 2007

 

Wants Data


Good Day Ed,

Do you know of any resources or sites (besides yahoo finance) that provide a historical listing of all stocks and their end-of-day data from the NYSE, NASDAQ, and AMEX. The reason I ask this is that when performing historical testing I want to be able to use stocks that would have traded during that particular year.

 

As you know, stocks can become delisted, change symbol name, merge, or be bought out entirely by a competitor and cease trading. I have found that when a company ceases trading the symbol is removed from the master list as though it never existed.


Any help is always appreciated.

FAQ does not endorse people or commercial products.  See Ground Rules.

 

Thu, 13 Dec 2007

 

Sadness

 

Dear Ed:

I start and delete e-mail after e-mail. They all seem like empty words. All I know for now is that I feel deep sadness. I take this sadness to a level I fear in the past. I feel it in the pit of my stomach; I keep it in a tight ball.

I sleep a lot. I go on long walks. I work out at the gym. I take really hot, long baths.

I think about all the people I hurt. I think about the people who hurt me.

I am seeing some patterns.

I know there is more pain to come. I feel it as I slowly allow the sadness to move to my heart. In the past, this is when I stop. I am trying my best not to stop now.

Thank you for sharing your process.

 

 

 

Sadness

 

One of its positive intentions

is to motivate action

to remedy loss and aloneness.

 

Clip: http://zindy.zone.dk/html/drawings/

ink/shattered_tears.html

Thu, 13 Dec 2007


Wants Specific Markets


Mr. Seykota,

I'd like to say how much I respect what you've accomplished from my readings in Market Wizards and that I look forward to receiving your book.

 

Out of personal curiosity do you still trade in the markets and if so, which ones? Thank you for your time.

FAQ does not or offer specific trading advice, or recommend specific trading system parameters. See Ground Rules.

 

Thu, 13 Dec 2007

 

Whipsaw Song on YouTube and Next Book
 

Ed,


I do not know where you stand on your 2 commitments since the last workshop in Reno

I feel disappointed and worried.

Sincerely,

Thank you for continuing to hold me accountable.

 

The book is currently in its fourth draft.  The video is currently in its second version.

 

You might consider taking your feelings about <disappointment and worry> to Tribe.

Thu, 13 Dec 2007

 

Zero Volatility #2

see previous



Hi Ed,


I simply compute the std dev of prices (5,6,7,8,9,10) in Excel;

 

I obtain a std dev equals to 0 if I consider the changes (1,1,1,1,1) but I don't understand the utility of this; better idea of actual volatility come taking in account the min and max value (5,10).

 

Do you agree ?


Thank you Ed for your passion.

You might consider:

 

1. Giving your "better idea" a name different from Standard Deviation, since that name already refers to an idea.

 

2. Consulting EXCEL about the difference between the STDEV and STDEVP methods.

 

3. Taking your feelings about <mastering standard procedure> to Tribe.

 

 

 

Thu, 13 Dec 2007


Pyramiding and Anxiety
 

Ed,


I notice that both fading the up-move and pyramiding on corrections that run counter to the underlying trend being traded - are inconsistent with the core principles of trend following.

 

The anxiety to control open heat by raising stops may result in premature exits, over trading and other related stresses - stuff that I can (and do) take to the hot seat.

Can you recommend ways to dealing with the "Happy" problem of price having run away in the direction of the trade and swelling open profits, but also dragging up position heat? I don't find specific responses to this aspect elsewhere in FAQ, but if this is already addressed, I'd appreciate the (list of) links.

Thanks for being here and for all the selfless work you do. Merry Christmas Ed, and here's wishing you and all fellow travelers, a fantastic 2008!

FAQ does not or offer specific trading advice,

or recommend specific trading system parameters.  See Ground Rules.

 

You might consider taking your feelings about <anxiety and stress> to Tribe - and reporting your insights to FAQ.

 

 

 

Steamroller

 

Some people try to deal with short-term market fluctuations by buying dips and selling rallies.

 

One problem with buying dips is that you might wind up selling the collapse; one problem with selling rallies is that you might wind up buying the blow-off.

 

Trend Traders refer to counter-trend strategies as trying to grab nickels in front of a steamroller.

 

Clip: http://www.mellcorealty.com/

display/index.html

Wed, 12 Dec 2007

 

Checkout

Ed,

I am not able to commit to consistently attend the IVTT meetings now. I plan not to attend regular IVTT meetings from now on.

You and TTP help me find my path to right livelihood. I am glad to join the TTP community. I plan to attend our local tribe meetings regularly and report my process to FAQ from time to time.

Thank you Ed. Your work on TTP to me is invaluable.


Life is a process.

Trading is a business.

Family is a blessing.

 

All the best to you.

Wed, 12 Dec 2007


Completions / Questions / Feeling Sad and Lonely


Hi Ed,

This post sits and sits on my PC for a long time. I notice I am afraid to send it. I read it and notice “I want to avoid” and “I am afraid” running though it. With the help of TTP I am feeling now; just noticing feelings without judgment is new and very helpful. I try to get the positive intent and act if necessary. So, I edit this and am grateful and thankful to be afraid.

I am reading the older FAQ's and feel they are a treasure trove. What a wonderful gift you and the Tribe give, thank you! Most of the questions and responses impact me. Some of the questions or posts are so germane; I feel I am the sender. I have a felling we are one, one sender. Could it be that we are one sender/receiver in the under Fred network?

 

Your response on Wed, 26 Mar 2003:

 

Ed says: Seems like you start something, get about half way and then start off in a new direction. That is consistent with your feeling of information overflow.

How about you resolve to pick one task, say eating an apple, and finish it completely, even the seeds and stem.

Trends come and go. Trend followers do too. Some stay longer than others.



This gives me an AHA. I have difficulty completing tasks. I go to the store pick out an apple and eat it completely, including the seeds and stem. I enjoy this completely. I am completing more tasks now.

Your response on Fri, 11 Apr 2003:

 

Ed says: Different schools justify different political structures. The Austrian School tends to justify Capitalism. None of these schools predict prices very well.

As you seem set on understanding and predicting things, I suggest a puzzle for you: write down a description of your own feelings about how come you want to predict things and send it to FAQ.

If you can't do it, you can stop trying to describe larger systems; if you can, the insight might set you free from your obsession to predict the future.

This gives me an AHA. I am living now, trading now, creating system now, and smearing the past and future all over myself. So here goes:

I ask questions about why because I want to predict. I want to predict things because if I could I would not feel the feeling of loss. I want to avoid loss because I want to avoid the feeling of anger that I feel if I lose. I want to avoid anger because I think it is bad and people that are angry all the time are bad.

 

My mother beat me as a child and is angry all the time. I judge her as a bad mother. I want to avoid anger because if I feel the anger and let it out I am like her. I want to avoid being like her because I think she is a sad and lonely person. I think she acts like a mistreated child. I want to avoid being like her because I want to avoid being sad and lonely. I want to avoid sad and lonely because I judge them as bad.

 

I want to stop this now. I want to stop this now because I feel stuck at sad and lonely. I feel stuck because I have a tendency to not complete tasks. I fail to complete tasks because I am afraid to fail. If my task is not complete I cannot judge it as a failure. I am afraid to fail because I judge my father as a failure. I am afraid to be like my father because he has a mental disorder. I judge his disorder as bad and socially unacceptable. I am afraid to be like my dad because people do not like him. I am afraid to be like my dad because he is sad and lonely.

 

I want to stop now because I judge sad and lonely. I am afraid to be like my dad because people will not like me. I am afraid if people do not like me I will be sad and lonely. I want to stop now because I am sad and lonely.

 

I want to force myself to push on.

 

I want to push on because I am curious of what is next after sad and lonely. I am curious of what is next because I am thinking about the future. I think about the future because

 

I am sad and lonely. I focus on right now. I am sad and lonely.

 

My hands are cold, my chest is feeling warm and I am at peace. I am breathing. I am feeling. I feel honest. I feel ready. I feel afraid. I feel avoid. I feel willing to be and to feel all. I feel sad and lonely.

Thank you again for FAQ!

Thank you for sharing your process.

 

You might consider taking your feelings of <sad and lonely> to Tribe.

 

 

 

 

 

 

 

 

 

Sad and Lonely

 

One of the positive intentions

of experiencing sad and lonely

 

is that the form

tends to attract people

 

to support you.

 

 

 

Clips:

 

http://www.pbase.com/accordsystems/

image/51701447

 

http://fanart.lionking.org/Artists/Kida/

LonelyNala2.jpg

 

http://www.goodephotography.com/

sadandlonely_2.jpg

 

http://image2.greetingcards.com/dgc/i/c/

shs_SadPuppy.jpg

Wed, 12 Dec 2007

 

Drama With Trading System #2

see previous



Hi Ed,

Thank you for your thought provoking reply to my FAQ dated Tue 11th Dec. 2007 – “Drama with a trading system”

I read your comments over and over. I think you are right on the button with what you ‘say’.

I recall being told, that as a baby, I am placed into a child/baby care facility for a few weeks(?)/months(?) since my Mother is unable to take care of me due to Post Natal Depression. My father works full time and long hours so he is not able to provide care either.

Apparently, (so I am told), I am visited on a regular basis (whatever that means) but my first few week(?)/months(?) of life are spent in childcare, sleeping alone(?)

I have no memory of this at all, this is simply what I am told happened way back then.

Your Rhesus Monkey terry-cloth and wire–mesh mother comments cause me to recall all of this.

I imagine that in a childcare facility back in those days there are many children / infants and few staff to provide affection. I also imagine that the staff would be not unlike the surrogate wire-mesh mother with the baby bottle. How else could they be? It’s a job for them and it's not their child.

I wonder if these first experiences in life affect my development and if so, how so?

However, becoming aware of all this ‘stuff’ is of small consequence in trying to deal with ‘why I am what I am’ and ‘why I do what I do’ today.

I acknowledge your advice with respect to creating community and relationship interactions.

If / when I get my tribe up and running again, I intend to tackle this issue. At this time however, I am unable to attract people who are really interested in the TT process hence my progress will be limited for the time being.

Once again, thank you for the reply. It hits home.

Kind regards

Thank you for sharing your process.

 

Your situation is likely to resonate with many people and to inspire them to address their own issues.

Tue, 11 Dec 2007

 

Attachment

 

see Drama


Ed,

 

Do you think that a craving for speculation is a kind of "medicinal attachment"?

When an activity becomes a craving, interferes with right livelihood and serves to cover up other feelings, it might be medicinal.

 

If the same activity contributes toward right livelihood, it may be productive.

Tue, 11 Dec 2007


Float vs. Daily Volume

Good Day Ed,

If a stock has very low daily volume but a high float is it possible to have your order filled for an amount greater than or equal to the daily volume.

 

For example, let's say that the average daily volume is 15,000 for a stock and its float is 100 million shares would it be possible to have an order filled for 15,000+ shares?

Thanks.

If you don't care about the price you get, there is no effective limit to the amount of stock you can buy or sell.

 

 

 

Open Outcry

on the Chicago Mercantile Exchange

 

Clip: http://www.pbs.org/itvs/openoutcry/

Tue, 11 Dec 2007

 

Drama With a Trading System

Hi Ed,

I hold a large quantity (for me) of a particular stock that I purchase back in year 2002.


My trading system gives me a signal, by the slightest of margins, to exit on Friday 7th Dec. to be auctioned on Monday at Market-on-open.


I hold this stock for nearly 6 years now and I watch it climb from very low levels to the point where if I close my position now it will result in a very large profit for me (nearly 15% of my entire account)


What could be simpler? I'm long, my system signals an exit, so I must get out.

Over the weekend (prior to Mondays open) I find myself agonizing on whether or not I should exit, whether of not I should wait a few more days (to observe the market action) and whether or not I should slightly change my system parameters so that the exit is not triggered.

I am fascinated by this behavior, yet I am unable to control the feelings arising from this.


Intellectually & logically, if I am following a system I need to get out on Monday, no questions asked. Yet on some other non-intellectual level I don't want to exit. I want to delay.


I look for signs that will confirm to me that I should stay in for a while longer. I find many.


I find support levels that I previously did not notice. I notice that the trend one degree higher that the one I'm operating with is definitively up. Other indicators say "stay in". The fact that my exit was signaled by the slightest of margins does not help my decision making process.


Regardless of all this I know that if I stay in beyond Monday, I'm not following my plan.


That is what it's all about, being disciplined enough to follow the plan no matter what.


I'm torn between the two options of getting out or staying a bit longer.


What to do?

I tell myself that I can always re-enter the stock but my system dictates that it will have to be at much higher levels and at a greatly reduced position size since the prices are now at much higher levels. I don't like this reentry option, I prefer to sit tight with what I have.

Very intense feelings come up with respect to the above and I am unable to take this to Tribe since our Tribe has stopped meeting.


I try to experience these feelings alone, but I only 'scratch the surface'

On Monday, I literally have to FORCE myself to exit and this is a very difficult decision for me. I don't like it at all.


I exit with a nice profit, yet I feel sad, I feel regret and I feel lost. My leverage is gone. I did not want to get out.


The fact that I now have a large realized profit offers little consolation.


I will add that I have no problems whatsoever exiting positions that have small losses or small/medium profits, yet with this particular situation (i.e. a very large profit) I experience these intense feelings.

As if to rub salt into the wound, the market confirms to me that I made the 'wrong' decision by opening at the lows of the day (where I exit) and closing at the highs on a very large range day (approx. 6% move up in a day)


This fact conflicts with what i perceive to be the 'right' decision (as a system follower) I made which was to exit at MOO.

It is this conflict and the associated feelings that I am unable to come to terms with at this time. This occurs regardless of the fact that I know (intellectually) I did the right thing.

Kind Regards,

Thank you for sharing your process.

 

You might consider exploring your feelings about <attachment> to the stock.

 

In the 1950's Harlow and Harlow give baby Rhesus Monkeys a choice between a surrogate terry cloth & foam rubber mother and a surrogate wire mesh mother with a milk bottle. 

 

This is to discover if babies prefer affection to food.  They do.

 

They also discover that the baby monkeys with the cloth mother later display a higher level of social and mental development than their wire mother counterparts.

 

In humans, emotional attachment seems to have many positive intentions. Dr. William Sears, a champion of Attachment Parenting recommends:

 

Preparation for Pregnancy, Birth and Parenting

 

Feed with Love and Respect

 

Respond with Sensitivity

 

Use Nurturing Touch

 

Engage in Nighttime Parenting

 

Provide Consistent Loving Care

 

Practice Positive Discipline

 

Strive for Balance in Personal and Family Life

Absent healthy attachments, we may develop craving for alternatives - medicinal attachments and drama: dysfunctional / cold relationships; preference for material goods over emotional connections; holding on to a long-term relationship with a stock; desire to change people to match our pictures; a vague sense that things are not quite right.

 

One way to detach from medicinal attachments might be to create communities and relationships in which we can practice caring for each other emotionally.  The TTP processes provide a starting point for structuring community interaction.

 

My wish for FAQ is that it support people who wish to engage this process.

 

 

 

 

 

Family

is the Essential Tribe

 

Parenting

is the Essential Task

 

Loving parents

are a priceless gift

to their children.

 

 

Clips:

 

http://yourparentingsolutions.com/

attachment-parenting-baby/

 

http://www.oznet.ksu.edu/sedgwick/

DesktopDefault.aspx?tabid=695

Mon, 10 Dec 2007

 

Zero Volatility

See Volatility #2


Hi Ed,

days ago you write:

"One popular measure of price volatility is the standard deviation of a series of price changes.

Curiously, this definition assigns a volatility of zero to a price that increases by the same amount every day.

In this way, you can have arbitrarily high ATR and zero volatility."

I have a price equal to 10; it increases by the same amount every day (1) for a total of 5 days; the set become: 5,6,7,8,9,10 and the standard deviation is not 0 but 1,87. I wonder if you can elaborate about the meaning of zero volatility in this case.

Thank you in advance and thank you again for the great work you're doing here.

Per your example:

 

The changes are {1,1,1,1,1}. 

The mean is 1.

The variations are {0,0,0,0,0}.

The standard deviation is zero. 

 

I wonder how you get 1,87.

 

I can get 1.87 as follows:

Series: {5,6,7,8,9,10}

Mean: 7.5.

Vars: {-2.5, -1.5, -.5, .5, 1.5, 2.5}

Sum of Squares: 17.5

Divide by 5: 3.5

Take Square Root: 1.87.

Replace delimiter: 1,87.

 

Mon, 10 Dec 2007

 

Radial Momentum

see Boyd

Mr. Seykota,

I like to use the T-38 because it is a simple airframe with a symmetrical wing. I agree with you, when a T-38 does a no-flap approach it gets it lift purely from angle of attack (AoA).

 

The forces to account for are relative wind, cord line, camber (=0 in this instance), AoA (alpha between relative wind and cord line), weight, thrust, and drag (parasite and induced).

 

My question is can one use radial momentum to better explain the interaction of these forces?

 

Please understand I have no attachment to either principle. I'm interested as an aviator. I'm also trying to see if there is a way for you to solve for radial momentum from the end users perspective, that may help you to further prove your case.

I will do more homework and see if I can figure out a different way to phrase the question. Possibly a different variable to solve for?

Radial Momentum applies to radially expanding fluid, such as in the Levitator Disk and  the Collapsing Cone.

 

It does not apply directly to airplane lift, except as a secondary effect just past the crest of the wing, where the air flow lines separate. 

Sun, 9 Dec 2007

 

Colonel Boyd

Mr. Seykota,

I've been going through some material on Colonel Boyd. From what I have read it sounds like you two may have been kindred souls.

I'm almost done with Air War College. I recognized the OODA Loop from past readings. I had no idea how huge a role Colonel Boyd played in the way wedo business. I'm going to Nellis AFB for a week in January and will stop by the Aggressor Squadron to take a look at the memorabilia. My curiosity is peaked. I like what I read about not fearing ambiguity I think it applies to all aspects of life (as do most of his concepts).

I was also skimming through your work on radial momentum. I have a basic understanding of aerodynamics and I'm curious how radial momentum effects the equation for lift,

 

L= (C sub l) (rho) (V squared) S?

 

To be honest, I'm not really sure how Bernoulli's Principle effects the equation for lift. Is one theory better than the other?

As usual I have more questions than answers. Just wanted to say thanks for helping me engage my brain.

My work on Bernoulli indicates that the "official" wing curvature explanation for lift (per high-school and college textbooks, NASA, etc.) contains a mis-application of Bernoulli's equation.

 

 

My work indicates airplane lift is mostly a function of angle of attack and that the "official" airfoil explanation showing in the illustration above does not apply.

 

For more information on Radial Momentum: 

 

www.seykota.com

 

For an inside view of an F-18 taking off:

 

http://alt.coxnewsweb.com/ajc/swf/

blueangels/blueangels.swf

 

 

Clip: http://www.boeing.com/companyoffices/

aboutus/wonder_of_flight/airfoil.html

Sat, 8 Dec 2007


Dear Ed:

 

thank you ed for all the support,i hope your shoulder doing well(aspirin) is the answer small quantity,thank you again,i promise my self i will come to see you and the trip members after i finish the three tsp projects,i am not good in excel and some of the support team i contacted having a problems getting the same results you got.i will keep trying one day the light will shine? thank you again and best regards.




 

Thank you for your support.

 

You might consider putting your letters through a spell / grammar checker before you send them.

 

 

 

Aerosol Spell Checker

 

Just spray a little

on your monitor.

 

Clip: http://www.worth1000.com/entries/

152500/152928INqm_w.jpg

Sat, 8 Dec 2007

 

FAQ Withdrawal


Dear Ed:

FAQ has not been update for one week now. I hope all is well with you.

Yes all is well and I am (up until now) enjoying a few days off from composing this column.

 

If you find my publication schedule unsatisfactory, please be sure and contact our subscription department for a full refund.

 

 

 

Hold My Calls

 

Clip: http://www.cslab.ece.ntua.gr/~jdros/

humor/Relax!.jpg

Fri, 7 Dec 2007


The Magazine Covers



Food makes headline in two large magazines, not very emotional though, I wonder what you think about these covers.

 

 

 


 

 

Clips:

 

http://www.economist.com/printedition/

 

http://www.economist.com/images/

20071208/20071208issuecovUS160.jpg

Thank you for reporting the covers.  I concur with your opinion that neither cover has much emotional juice. For more on magazine covers, see:

 

http://weblog.blogads.com/

comments/P1030_0_1_0/

Thu, 6 Dec 2007

 

Chaos and Angels

Ed,

I just stumbled upon your site, and note some
similarity in our trading paths.

First: I majored in Aerospace Engineering at BU, and started analyzing markets using "performance
envelopes".

You borrow a lot from Psychology, and from - is it Zen Buddhism? I've lived with these having gone through a decade of successful therapy. (My therapist was a Buddhist). I learned much about myself, and
subsequently, everybody else.

Now, I live and breathe mindfully.

One difference. I took the general principles of
chaos theory, (mostly how order emerges from apparent disorder), to formulate the methodology that I've been using for the past 17 years. It keeps getting simpler and simpler...

I'm entirely on my own. Have extremely prominent Angel. I am interested in talking to those with similar experiences. You seem to be one.

OK.

 

 

Extremely Prominent Angel

 

 

Clip: http://www.mccullagh.org/db9/

d30-14/nude-angel.jpg

Thu, 6 Dec 2007

 

Ex Wife with Sex Life


Ed,

I gave my ex wife cash in the divorce and now she is close to getting married and buying a house. The thought of the money I earned being used in this way is driving me mental - buying a house for my kids, her and another guy to live in with my cash. My feeling is that she deserves nothing. I wish she would disappear.

Thanks for listening,

Thank you for sharing your process.

 

You might consider taking your feelings about <wanting to control others> to Tribe.

 

 

Possessiveness and Jealousy

 

help up protect

our possessions.

 

They do not work so well

in trying to control

other people.

 

 

Clip: http://www.unclematty.com/training/

typeimages/possessive.gif

Thu, 6 Dec 2007

 

Diversification of Lag Parameters

see previous


Ed,

Here is a basic plan of research:

Take an optimal system from the Support/Resistance system (140/20); define this as S. Use this system because results are already on the web site.

Define the diversification system, T, as the same system with the Trading Metric held constant and the Trend Definition look back allowed to vary (x/20). This gives results down the column of the optimization table.

Use the existing GC data.

Split the $1M account into 2 $500K sub accounts.

Produce results for S(140/20) using 1 sub account, heat unchanged at 0.05.

Produce results for T(x/20) for x=20 to 420 Step 20 using other sub account, heat 0.05.

For each of the 21 pairs of S and T add the sub account equities for each day to give a combined equity run for each pair. From this calculate drawdown, ICAGR, and hence bliss.

Using sub accounts allows verification of the results of each system before the equities are combined. This makes for easy error checking.

 

However I see a problem with the normalization check (combination of S(140/20) and T(140/20): Splitting the account into sub accounts raises problems with contract granularity. For example each sub account may calculate a position size of 11.3 contracts, each rounding to 11, resulting in a combined position of 22 contracts across both systems. However in the full account datum run the position size is 22.6 contracts, rounding to 23. In this situation the normalization check does not produce identical results. I do not see an easy answer to this.

Given that we are starting with an optimal system any other system combined with it is sub optimal. This means the combined result may show no improvement in performance (bliss). However I am interested to see the results and they may lead to further research.

I welcome your comments.

If your research shows a significant diversification benefit, the granularity effect may turn out to be of second order magnitude.

 

Yes, given you are starting with a optimal (single lag set) system, you are unlikely to improve on it by substituting another single set.

 

By diversifying, however, the subsystem drawdowns might have different phase angles and cancel each other out.  This might produce an improvement in your MAR values.

Wed, 5 Dec 2007

 

New Resource for Negotiations


Ed,


While watching [name] on the hot seat, I get a tingle in my legs. I take this form into my process. I intensify the tingle. You ask me what this tingle wants me to do with my legs. I lift them up so that they are fully extended and it feels very painful. You ask, what are your legs doing? They're locked into a position. This immediately reminds me of a short position I have on.

 

I take this to mean that it hurts when you get locked into a position. I keep going with it and get more familiar with the form. You tell me to let my legs move without trying to control them. They float around and there is no pain. When I try to control them, the pain is intense and I have to release them. This leads to the insight, "when you try to control the market, it is painful."

I move on to another form, the feeling of being paralyzed when I look at how much risk I'm taking. I feel sick to my stomach, like I'm on a tight rope staring down at the ground far below. This leads to the insight, don't take more risk than I can stomach.

After tribe, my legs keep coming on and off as I move in and out of positions, but I become less certain as to what they are trying to tell me.

 

Then something interesting happens.

 

I'm in this dispute with a landlord who is taking advantage of me. I really want to fight them in court so that what they think they can collect from me is eaten up by legal fees, even though this will cost me more money. I have this huge resistance to just laying down and taking their abuse. They make a particularly egregious offer and my legs start acting up. I lay down and intensify it. It feels like I'm getting trampled. This make sense because my legs were acting up when we discovered [name]'s k-not. I go with it for a while and try to enjoy it. I really take it up and turn up the frequency. I start to see images of all the people who've taken advantage of me in the past. It was really helpful to see [Name] go through this, because I immediately see the positive intention of this feeling. It feels good to know I have this tool available to me.

Thank you for sharing your process.

 

 

 

Getting a Leg Up on the Competition

 

Clip: http://www.freakingnews.com/

pictures/29500/Hot-Legs--29614.jpg

Tue, 4 Dec 2007

 

Protest Meeting

 

 

GOLDMAN SACHS TRADERS GATHER

TO PROTEST AGAINST BONUS DROP
 

OK.

 

I wonder what kind of debt instruments they are using to float this fleet.

Tue, 4 Dec 2007

 

Telling Her My Feelings Works


Hi Ed,

I am dating this girl and after a few months I begin to feel things that are reminiscent of feelings I had in my former marriage that I hate. I feel like I am always taking the initiative, always initiating physical intimacy, always picking up the check, and generally under appreciated. I feel that it really sucks and what a fool I am to get involved with another girl that is going to treat me this way.

I begin to blow her off. Not taking calls, etc. I think, if she wants to talk she is going to have to take initiative. She does and we agree to meet at the Central park Zoo.

The morning of the day I am to meet her I am conversing with my friend telling him I have to get out of this losing relationship with the girl and it hits me.

 

If I blow her off I am just avoiding yet again all these feelings. Then I will just do this again and again.

 

I commit to myself to meet her and tell her my feelings.

 

I follow through on my commitment and meet her in the park and tell her the feelings I am having that I don't like and that I see things progressing lopsided and that I don't want that. I tell her I want her to make a plan for a date sometimes and make it happen and take me along. It takes a while as we are walking around the park for a few hours, and I am scared to be so frank, but I do it as I am not afraid for the whole thing to just go away anyway.

She listens. She does not judge my feelings. She thanks me. Ed, this girl has never heard of TTP and she validates my feelings without repercussion. We seem to get closer almost instantly and I feel now I can say anything.

 

She got tickets to a show for this Thursday and we are going to go support her friend who is in it.

All this time I thought I was honest.

Thank you for sharing your process.

 

 

 

So Ya Want Me More Aggressive

 

Be careful what you wish for.

 

Clip: http://www.bbc.co.uk/schools/gcsebitesize/

drama/images/expression/aggression3.jpg

 

 

Tue, 4 Dec 2007

 

Help, I'm Trying to Get Out of This Monitor


Dear Ed:

I trust all is well.  At our last tribe meeting I suggest to our Chief that all tribe members meet for dinner for a change on a day other than a regular TTP meeting day.

Yesterday, we meet for dinner at a Chinese restaurant in downtown. After we finish dinner the waiter brings the fortune cookies for all and we each pick one. One member reads his and makes a comment ... this actually belongs to you. The message is

 

"With all the good choices

you could make,

why choose to make a bad one?"

 

Members in my tribe know about my discretionary trading problem and they constantly look for ways to help me improve and this is one good example of our camaraderie at work.

I blow up the fortune cookie message 200% and attach it to my computer monitor on which I place my trades to remind me that I should only take system generated trades. Thanks to my Tribe members for being so thoughtful and helpful.

Thank you for sharing your process.

 

 

 

Gold Fortune Cookie

 

Just the thing

for the man

who runs his life

on cookie fortunes.

 

Clip: http://www.weddingthings.com/Merchant2/

graphics/oriental/gold_fortune_cookie_box300.jpg

Mon, 3 Dec 2007

 

Pride, Gluttony, and Wrath


Dear Mr. Seykota:

I hope you are well. I am writing today to ask sincerely for your insight because I feel I am stuck right now.

 

I searched everywhere on the site and I could not find the FAQ mentioning the positive intention of Pride, Gluttony, and Wrath.

 

I refer to the FAQ on Sat, 8 Sept 2007. My Aha is that I got a huge judgment on Pride along with Gluttony, Wrath and also demand for Respect.

 

Although I felt I handled the situation with humor, basically I encounter some drama last week which I believe originated from Pride and demand for Respect. As I write this I am not proud of this fact, and I even feel little shame. However I want to fix this problem and I feel I need help.

Below is the definition of pride from the seven deadly sins which I looked up on the Internet.

 

http://en.wikipedia.org/wiki/Seven_deadly_sins

#Pride_.28Latin.2C_superbia.29 

It says

"In almost every list Pride is considered the original and most serious of the seven deadly sins, and indeed the ultimate source from which the others arise. It is identified as a desire to be more important or attractive than others, failing to give compliments to others though they may be deserving of them, and excessive love of self"

I don't know if my Pride fits the definition above but some portion of it feels familiar. With the understanding of your busy schedule I sincerely ask for your insight on the positive intention of Pride, Gluttony and Wrath. I thank you for your attention and cooperation on this matter.

In TTP we hold that every feeling has a positive intention.

 

The article you cite seems to intermix feelings, desires and actions.

 

Some examples:

 

A positive intention of feeling pride might be to alert you of an impending fall.  See Proverbs 16: 18-19 (KJV) and similar warnings from many cultures.

 

A positive intention of feeling Gluttony might be to do some weight reduction exercises, like the push-away (from the table).

 

A positive intention of feeling Wrath might be to duck.

 

 

A Pride of Lions

 

Clip: http://www.steppestravel.co.uk/

botswana-page47.aspx

Mon, 3 Dec 2007

 

Monkey Business - Going Ape

Dear Ed,

Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkeys for $10.

The villagers seeing that there were many monkeys around, went out to the forest and started catching them.

The man bought thousands at $10 and as supply started to diminish, the villagers stopped their effort. He further announced that he would now buy at $20. This renewed the efforts of the villagers and they started catching monkeys again.

Soon the supply diminished even further and people started going back to their farms. The offer rate increased to $25 and the supply of monkeys became so little that it was an effort to even see a monkey!

The man now announced that he would buy monkeys at $50! However, since he had to go to the city on some business, his assistant would now buy on behalf of him.

In the absence of the man, the assistant told the villagers. Look at all these monkeys in the big cage that the man has collected. I will sell them to you at $35 and when the man returns from the city, you can sell it to him for $50."

The villagers squeezed up with all their savings and bought all the monkeys.

Then they never saw the man nor his assistant, only monkeys everywhere!!!

Welcome to the "Stock Market"!

OK.

 

 

 

The Price Per Pound

 

can also enter into the calculation.

 

Clip: http://3quarksdaily.blogs.com/

3quarksdaily/images/monkeys.jpg

Mon, 3 Dec 2007

 

MACD Chuckles

see previous



Dear Ed,

Loved your play on MACD - haven't laughed so hard in weeks !!

Thanks - I am still hooked on FAQ - and loving its recent momentum ...

OK.

Mon, 3 Dec 2007

 

Penny Wise


Hi, Ed

I attach my Excel solution to the EA Crossover 150/15 project, matched to the penny, along with matching ICAGR, Draw Down and Bliss. Some of the columns at the right are ugly, as I experiment with different ways to display the same information.

My next goal is to optimize Bliss by running the 325/85 values along with another twenty or so time frames, and build some graphics to display the results.

I am also searching for a way to examine Draw Down from Monthly, Quarterly and Yearly POV's. I believe these analyses can be generated from the already extant Daily Draw Down calculations, but I have yet to determine how to automate Excel to "restart the clock" for sorting each new accounting period. Naturally, I can visually inspect the worksheet for this information, but I wish to write some instructions and let the electrons do the magic. I am working with my mentor toward this end.

Muchas gracias por making this project available, Ed. Muy amable.

Congratulations !

Sun, 2 Dec 2007

 

Completed Modules


Ed,

I've reproduced the ending equity for 150/15 for the Exponential Average Crossover system to the penny. I've also reproduced the ending equity for the 140/20 for the Support and Resistance System.

I used the spreadsheet in the Open Office Suite www.openoffice.org  to do the calculations in probably 2 of the most horribly written spreadsheets ever produced. I'm going to brush up on C so I can use it for future modules.

Congratulations !

Sun, 2 Dec 2007

 

Thank You


Dear Ed

I want to thank you ... for your participation at our [City] tribe meeting. I feel we all learned from having you there and we will put what we learned to good use. One of our members wrote to FAQ about a problem with waiting and stated that he had addressed the issue in our tribe twice before and felt you were the only one who could help him.

 

As I read the post I got hooked by that statement and felt a little hurt and discounted as the member did not seem to be getting results from his participation in our tribe. I kept this feeling around for awhile and then remembered your coaching at the meeting where you said that if someone expresses a feeling and I have a problem with it , then it is not their problem but it is my problem.

 

While driving to the meeting I looked at that and realized I still have some issues around doing it right and effectiveness and he had touched that nerve again.

 

During the check in I expressed how I was feeling and the feeling seemed to go away once I expressed it. I then thanked the member for his post to FAQ because it brought these feeling up for me to look at and experience. It was timely advise for me. Thank you again for giving up your Sunday to be with us and help our tribe grow. You are welcome to come back at any time. I hope you and your family have a wonderful Christmas and a happy new year.

Thank you for your note.

At our last IV Tribe meeting, after several hours of all of us going around and around in circles, a visitor from your Tribe comes up with the solution to the k-not.

So in this case, one of your guys shows us a few tricks.

As far as I can tell, we are all in this together.

Sun, 2 Dec 2007

 

New to Programming


Ed Says,
 

You might consider mastering a book on Basic or C#.

Thanks Ed,

After your post, I quickly review my new copy of "C# for Beginners" book and find the description of "long" ie. "long integer".

 

Ed, the description in the System Math document may be cryptic for new comers to system trading and programming in particular, but then again I guess everyone eventually finds the information they really want to find. In my case, my confusion / curiosity eventually prompts me to ask you directly what the term (long) means at the risk of showing you my green side.

Yes.

 

The definitions for long, int, float, etc. may vary from language to language.

Sat, 1 Dec 2007

 

Missing FAQ


Hi Ed,

While reviewing the old FAQ, I come about to this one (June 20th, 2004, My Own Childbirth) that mentions about a FAQ on June 10th where you talk about childbirth and formative struggles. Unfortunately, none of the June 10th FAQ's are relating to childbirth. I then try to use "Search the site" about complications at childbirth but that is theonly reference in the entire site, so my guess is that you've taken out the original FAQ. I wonder if you may consider reposting that question.

I feel very grateful about the FAQ, and I feel I've learned a lot during these years reading the FAQ. Thank you for sharing. As I notice a lot of previous FAQ's are missing, I suddenly feel that I've been taking things for granted. Many thanks.

Occasionally, the author of an item requests revision or deletion of a submission.  See Ground Rules.

 

 

Some FAQ Items

 

wind up here.

 

Clip: http://img.alibaba.com/photo/

50972606/30L_Trash_Can.jpg

Sat, 1 Dec 2007

 

Anger & Bet Sizing


Ed:

Why when I win do I feel angry? On a small portfolio I was up over 1000% earlier this year but, when I thought about the success, I felt deeply angry (like at someone or something).

I then question whether my drawdown from there was medicinal (a boulder / or very large rock! ).

On another issue; all the recent posting's related to back-testing various parameter's on a system, seem's to be "passive predictive".

 

The testing presumes by it's very nature some sort of historical recurrence. If it didn't, it would be useless. Maybe instead:

1. Put your affection on portfolio selection
2. Performance keeps rising with proper bet sizing
3. Beside's all the chatter, nothing else matters.

FAQ does not answer "why" questions. See Ground Rules.

 

You might consider taking your feelings about <anger> and <winning> and <risk> to Tribe.

 

Yes, Trend-Following systems and the associating back-testing and optimizations all assume the recurrence of trending markets.

 

Your run-up and subsequent draw-down may indicate you might consider following your own rule #2.

 

 

Mad About Money

 

Clip: http://www.coloria.net/dig.art/kuvat/

06anger.jpg

Sat, 1 Dec 2007

 

New To Programming

 

Ed,

I complete the exponential lag system in the TSP. Surprisingly there were several workarounds that I had to implement in order to get the system up and running in [Commercial Software].

 

Performing this tutorial is refreshing, and I feel that I expand my knowledge through manually constructing exponential lags and figuring out how to implement the position granulator in my commercial testing software.

 

Ed, I also feel that the "Position Granulator" formula in your System Math document is ambiguous and may be missing a step.

Position Granulator
Quantity = Round_Lot *

(long) (Quantity / Round_Lot + 0.5)

Round_Lot = 250 (for example).

In particular, I do not understand what the (Long) variable means, is this suppose to say roundToNearest or perhaps asInteger.


Ed, Perhaps providing a step by step example of rounding using the formula's will serve new comers to the TSP. I see the steps as follows:

1. (Equity * Bet Size) / (ATR*ATRfactor) =

# of lots to buy
2. ((#of lots to buy / Round_Lot) + 0.5) = Real_Number_With_Decimals
3. Round up or down the "Real_Number_With_Decimals" to the nearest integer
4. Round_Lot * (Round Integer Number from Step 3.) = RoundQuantity

Ed, I also think the the use of Quantity twice in the formula: Quantity = Round_Lot * (long) (Quantity / Round_Lot + 0.5) is confusing since these numbers are not equal, do you mean something like this?: RoundLotQuantity = Round_Lot * (long) (Quantity/ Round_Lot + 0.5)

The notation is in pseudo code, easy to translate to Basic, Fortran, C, C++, C#, etc.

 

The casting operator (long) casts (Quantity / Round_Lot + 0.5) to a long integer - this is the key to the granulation process.

 

You normally use the same variable on both sides of an equation when you are processing a variable through a number of modifications.

 

Your step-by-step example engages a rather non-standard convention of placing the result on the right side of the equation.

 

You might consider mastering a book on Basic or C#.

 

 

Sat, 1 Dec 2007

 

Dynamic Portfolio Selection with MACD #2

see previous FAQ Wed, 28 Nov 2007


Dear Ed,

Your respond: My own optimization tests with MACD indicate it works best when it degenerates from a three-average to a two-average system.


Question:

When MACD has three parameters, you're comparing (EMA1 - EMA2) against itself smoothed by EMA3. However when MACD only has two parameters, you're looking at (EMA1 - EMA2). The difference between two moving averages.

In other words, an EMA crossover. ??????? So it has nothing to do with an MACD anymore??

http://www2.barchart.com/support/learning.asp?what=macdos&code=BSTK

Thank you for all your insight, help, support and hard work helping others.

I consider your web page as one of the greatest "open source" books ever written. Thank you.

Regards,

Yes, when back-testing indicates the optimal time constant for MA3 is zero, it incidentally indicates a double MA system works better than MACD.

 

The promise of MACD is that it can get you in and out of positions before the MA lines cross.

 

In practice, it gets you out of positions prematurely, necessitating whipsaw re-buys.

 

The primary function of MACD appears to be to medicate feelings of impatience and fear that commitment to a long-term trend excites.

 

see: http://en.wikipedia.org/wiki/MACD

 

 

 

Gerald Appel

 

author of MACD

Medication for Appel's Commitment Deficiency

 

also, incidentally,

Moving Average Convergence / Divergence

 

 

Clip: http://blog.tapuz.co.il/alerts/

images/958592_146.jpg

Sat, 1 Dec 2007

 

Exponential Lag Creator
 

Ed,

Who is the creator of the exponential lag?

Exponential lags occur in nature so they have no human creator. 

 

The same goes for distance, velocity and acceleration.

 

 

 

Leonhard Paul Euler (say Oiler)

April 15, 1707 – September 18, 1783

 

Euler, a pioneering Swiss mathematician and physicist, formulates the notion of the mathematical function:

y = f(x)

 

and also explores exponential and logarithmic functions.  The essential constant, e, carries his name.

 

The function,

y = et/TC
 

describes the natural exponential function, where e is Euler's constant, y is the result, TC is the time constant and t is time.

 

Note: Euler appears on the Swiss 10-Franc note. If the Swiss Government really wants to memorialize his image, they might consider putting him on a metal coin.

 

Clip: http://www2.physics.umd.edu/

~redish/Money/euler.jpg

Sat, 1 Dec 2007

 

Everything = Nothing

see previous


Hello Ed,

Ed Says: “Sometimes everything is nothing”.

I do not understand, could you please explain?

All energy and mass occurs as dipoles. 

 

We need two separate charges to register a potential; you cannot have a plus-only battery.

 

A price is a ratio of two values, the value of the commodity and the value of the underlying currency.

 

Hot does not exist without a reference of cold.

 

Mass is a collection of atoms, each comprising many proton / electron dipoles.

 

When you focus your consciousness so as to place it entirely at one pole, you lose the reference and everything disappears, leaving nothing.

 

In TTP when you move your place your consciousness on one feeling, it typically disappears.

 

 

TTP Aha

 

 

Clip: http://www.datair.com/dswin/default.htm

Sat, 1 Dec 2007

 

Tribe Report - Rip Off


Ed,

Hot Seat's issue is an angry ex-employee who wants money. The Tribe is briefed on the facts, then Ed assigns roles to the members: Agent  Girlfriend, Father, Employee.

 

We work an hour and a half to no avail, despite Hot Seat's willingness to re-enter the process with each new scenario the members improvise.

 

Finally Ed instructs Hot Seat to play the role of angry employee and Ed plays the role of Hot Seat. Still, the Tribe agrees, something just doesn't ring true.

 

We continue the search for an effective resolution when Hot Seat casually remarks something along the lines, "And this guy's not the only one." That's the clue we've been looking for.

 

I see a connection and announce it to the Tribe. The real issue is not a person but a pattern. Hot Seat is attracting people into his life to rip him off, but he is resistant to feeling the feelings of Being Ripped Off.

 

Fred keeps helping Hot Seat attract more rip off artists until the drama reaches critical mass. He makes numerous phone calls to friends and helpers, but doesn't zero in on the solution until the Tribe sees what Hot Seat doesn't. The entire process lasts about three hours. I am impressed with the tenacity of Hot Seat and the Tribe to see this thing through to the end.

Ed calls for two rounds of check out. In round one we check out in character. The agent expresses sorrow for the unnecessary trouble, it's nothing personal, just doing my job; Girlfriend feels closer and supportive; Father feels proud; Employee still feels angry and always will. Now Hot Seat releases us from our roles and welcomes us back as friends. We conclude with a check out as ourselves.

During the process, we hear Ed tell Hot Seat to Smile, Make Friends With That Feeling, You Like This Feeling, etc., but at the end of the day, Hot Seat still feels ripped off, and he doesn't like the way it feels. So did the Trading Tribe Process work?

What happens for me after this episode is that I refine my understanding of Fredian Psychology and TTP.

 

We don't like the way it feels to burn our fingers on a hot stove, but we like being able to feel the pain as it begins, and we instinctively know that the Positive Intention of pain is to protect us from danger.

 

I recall hearing (perhaps incorrectly) that when a leper wakes up in the morning missing another toe, it's not because the disease mysteriously causes bodily appendages to fall off at random, it's because a rat came along in the middle of the night and chewed This Little Piggy off at the knuckle, and the poor leper did not feel the pain, nor receive the Positive Intention of the pain, and took no action to protect herself from danger. She would like to make friends with the feeling of pain, but it is a gift denied.

The Trading Tribe Process works in Hot Seat's case, because Hot Seat makes friends with the feeling of Being Ripped Off and knows where it resides (stomach, here in the face, and in these shoulder scrunches) and the next time a rip off artist enters Hot Seat's orbit, those friendly but icky feelings will be recognized in time to prevent further danger and drama.

Yea, Fred. Yea, TTP.

Thank you for sharing how the TTP works in practice - and for illuminating the distinction between medicating feelings (making them go away) and coming to celebrate their positive intentions.

 

 

 

When You are Willing

 

to experience the "icky" feelings

of playing with rip-off artists,

 

you stop attracting them.

 

 

Clip: http://mrtransmissionsucks.com/