July 1 - 14, 2007
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(Quotes from Ed in Red)
Sat, 14 Jul
It amazes me to see a "master commodity trader" (as if you weren't so
much more), teaching skills to lead a successful life touching upon
subjects r/t: philosophy, psychology, metaphysics, evolution, health,
If I didn't know better, I'd think the idea was crazy.
Instead, I've developed a snap shot of me continuing my education at the
October Workshop. Looking forward to seeing you.
The principles for Trend Trading seem to apply to all areas of life.
Go With the Trend
Stick with Winners
While the principles are simple, few
people seem willing to engage them consistently, particularly when they
hold them as advice or rules.
FAQ chronicles the lives of many brave
people as they strive to live by these principles; TTP and the Rocks
Process are methods for implementing these principles as automatic gut
Some of the things my "students"
teach me is that the "problem" is invariably mine, willingness is the essential
solution and that the best, perhaps only, way to teach
something is first to master it in my own life.
Mohandas Karamchand Gandhi Gandhi
October 2, 1869 -
January 30, 1948
A popular story about Gandhi has a woman travel several
days with her young son to get Gandhi to tell him to stop eating so much
sugar. Gandhi tells her to go home and come back in a month.
She does so. On the following visit, Gandhi receives the son and
then tells the mother that her son is now sugar free. When the mother
inquires about having to travel all the way home and back, Gandhi tells
her that he had to first give up sugar himself.
Sat, 14 Jul
see directly below
Yes. I feel it is rather difficult, tricky and stressful. As these
relatives were major "care givers" in my childhood and transferred a lot
of their rocks to me, I find it rather hard to deal with them. Yet I
also feel I have made some progress over the past few years. Your FAQ
mentoring and Pia Mellody's "Facing Codependence" have given me a lot of
material and insights to work with.
As an example I think that they still have some "control" over me. I
feel that my inner peace and balance is disrupted when I meet them or
talk or live with them.
The good news is that I do spot the process going on, but
I still don't have the complete inner freedom I wish to have. I confess
I do feel better if not having to deal with them and I tend to reject
Sometimes I do "lower the standards" in an effort to deal
with my own response patterns and also help them get in touch with their
Thank you for sharing your process.
You may be able to gain inner
freedom by advising your relatives only when they ask for your advice;
otherwise advise them by setting an example.
Teaching, Playing and Sharing the Joy
at the beach.
Sat, 14 Jul
Dealing With Rocky Relatives
Do you have any suggestion on how to deal with relatives
who seemingly live in a state of deep frustration, conflict and anger,
and who continuously try to install rocks on those they live or get in
Don't deal with them.
This may be difficult if you are
already carrying medicinal rocks that lock in to those of your
Your move, then, is to replace your
own medicinal rocks with pro-active ones.
In the Rocks Process, we replay a
critical incident and when the donor offers the rock, we refuse to take
it. We give it back to the donor.
We call this act "forgiving the
rock." In this way we can reject a response pattern and not a
person - and we do not have to lower standards for accountability.
In Trading and in Life
the best move
to simply walk away.
This may be difficult
if you have medicinal rocks
that lock you in to losing positions.
Fri, 13 Jul
I have a problem with my broker, about a stop for one
contract of sugar, and I don't know what to do.
Here is a letter from me to them and their reply:
I enter a buy stop order for Oct. Sugar at 9.88 on
July 12, 2007 before the market open. Today, July 13, 2007, the market
opens at 9.92 and stays between 9.92 and 9.95 for minutes, but I get a
fill of 10.02. I would like to have your explanation on this.
13 July 2007
Response from [Broker] at 2007/07/13 15:47 EST:
Sugar is totally illiquid. You were filled at the first offer price of
Hmmm ... Sugar seems liquid enough
to fill a one-lot order on the open.
The chart below indicates a fill
somewhere between the open, 9.92 and the high in the first five minutes,
You might consider asking your
broker for a "time and sales" report.
You might also consider taking your
feelings about deception to your Tribe as an entry point.
October 2007 Sugar
July 12 - July 13, 2007
Five-Minute Bars, PST
Thu, 12 Jul
see below: Love and Health
Dearest of all Eds,
Thank you so much for your help!
Fred worked on the picture already (LAUGHTER).
We are eager to work it out a little bit more in the tribe.
Thank you very much.
Pretty good medicine.
Wed, 11 Jul
Numbers in Snapshots
Thank you for the answer. I understand the importance of measurabilityin
the commitment process towards our snapshots (e.g. I commit to running 3
miles in under 30 minutes, 4 times a week for the next 2 weeks).
Do we encourage use of numbers in the snapshot?
I see that one
of your examples is "I weigh 185 lbs." If I recall correctly though, I
thought putting actual numbers (e.g. I make $1 million) may actually be
a hindrance, no?
Your Tribe can help you ensure your numbers contribute toward defining right livelihood.
One Way to Make a Million Dollars
is to wait until
$1M is a day's wage.
Wed, 11 Jul
Love and Health
see July 10,
2007: Back Ache
Your response seems true.
In my workplace three of five colleagues had to do
with slipped discs and I with this slipped vertebra.
I am really glad I am out there. Apparently, you need
months to recover your body and your spirit. But this is history,
actually. Yesterday I saw those brown eyes and wow this somebody says
that he thinks that in 20 years world will be ruled by love.
So I hope that this is not a silly question: Do I ask the foot where
the tingling pops up or the lumbar spine (slipped vertebra)?
Yes. Groups of people tend to
entrain the same behavioral patterns - even to the point of developing
similar back problems.
You might consider taking all your
symptoms to your Tribe as entry points. Your foot and your spine
may have subtle connections.
Foot Meets Back
Wed, 11 Jul
We have four new members to the tribe and we were doing snapshots in our
meeting last night. There are a couple of questions we have:
1. One member reports difficulty in bringing up emotions from a still
picture. He says if he "runs a 5-second clip" then he can get a much
better sense of how it feels. Therefore, he wonders if it is better for
him to use a movie clip rather than a still picture snapshot. Any
advantage / disadvantage for movie over still picture?
2. Another member uses a metaphor in his snapshot. He sees
himself with a tall, healthy, grown tree (which resembles his company),
and feeling deeply satisfying and even feeling goose bumps. While we all
understand that a snapshot does not have to be logical per se, other
members reflect that they need some conscious mind processing to get
connected to the snapshot, and wonder if a metaphor adds extra layers to
distance us to emotionally feel the snapshot - like they can't envision
how one can ever "realize" a metaphoric snapshot at all.
Can you please share your thoughts on them? Thanks.
Overall the snapshot process goes well and everyone seems to learn a lot
from it. We then set our commitments, and several members already report
getting a variety of feelings when they make the commitment (e.g. worry
about not able to keep it, or feeling a little frustrated that the
snapshot isn't even clearer). We acknowledge and validate those
feelings, and we plan to take those feelings to the hot seat in our next
1. A snapshot is measurable and
enables accountability; a moving target is generally more difficult to
I have a wife.
I weigh 185 lbs.
I'm long beans.
You might consider asking Hot Seat
to develop the form of "difficult to bring up emotions from a still
picture." This might lead to commitment issues.
2. Again, metaphors are inherently
The snapshot process is a way to
locate issues, emotions and forms that stand between you and right
livelihood. These are likely to be uncomfortable. In this
sense, making Hot Seat sweat a little may have a positive intention.
A Little Sweat
can help locate forms.
Tue, 10 Jul
It's been over 3 years now and I continue to look forward to the new FAQ
postings. It makes me feel good to know you're here mentoring me. Thank
you for the insight and direction.
Tue, 10 Jul
Wants a Trading Mentor
Dear Ed Seykota,
I recently joined a private investment club which I will benefit a lot
from but I want to learn and understand why things happens in the market
and see when to enter a trade and when to get out. I have a plan to day
trade for a living and have found out that day trading E-mini Futures
"S&P 500 E-mini" can give very good profits a day.
In my view, fundamental analysis and
day trading are generally both forms of medicinal behavior, the function
of which is to mask deep and painful feelings.
You might consider reading through
FAQ to get more details and examples of these notions.
A Nineteenth-Century Physician
administers chloroform prior to surgery
Ether is one of the earliest anesthetics. It
requires considerable skill as it typically induces choking. Recently,
anesthesiologists use thiopentone sodium; it acts within 30 seconds of
intravenous injection. To maintain unconsciousness they may then use
nitrous oxide, halothane, enflurane, and isoflurane - and / or a
combination of barbiturates, nitrous oxide, narcotics, and muscle
relaxants. Maintenance strategies are generally safer than
giving a one-time and very large dose.
Note: Humans do not need drugs to go unconscious.
They learn to use Medicinal Rocks (automatic response patterns) to
distract themselves from experiencing their feelings. Medicinal
Rocks also interfere with taking effective action to remedy the
underlying situation. In the Rocks Process, we supplement
medicinal strategies with a Pro-Active Rock so the subject instinctively
deals with the underlying situation as the effective way to relieve the
Tue, 10 Jul
I seem to recall that you once say that fatigue is just another feeling.
As such, instead of nagging about it, one can choose to experience
the feeling, enjoy it, and it tends to disappear.
Fatigue seems to serve a purpose in providing us information. It
sends a signal that says "Hey, your are over the limit of what you body
can handle. You need some rest." This is to protect us from
over-working. There are cases where football players die from exhaustion
But there seems to be another side of it. There are people who report
having "runner's high", where they push it and push it, and at some
point, that exhaustion transforms to some kind of "high" feeling. It
sounds like how you say about when one fully experiences the feeling,
they can come to celebrate it and get to the Zero Point.
So the two path seems very close, yet one leads to death while the other
leads to a "high" feeling. How does one distinguish which path he is
In particular, I am working on my conditioning and endurance. I am
running hard, and I feel winded. I am grasping for breath. I want to
keep running but all I can manage at that point is to drag myself.
I don't know how else to experience the feelings more
other than to keep grasping for breath, with a vague fear in mind that I
may collapse if I keep running. I don't "dislike" the experience per se
but I am not thrilled about it either. Definitely doesn't feel like a
You seem to have a unique talent in experiencing ALL feelings and
actually ENJOY them, including what many would classify as painful or
difficult. So how do you do that? Can you share some of your experience
of how you feel when you go on a strenuous workout? Thanks.
Getting to the zero point includes
identification and implementation of the positive intention of the
If you vigorously experience a
feeling, the feeling tends to dissipate. In this sense, you can
experience a feeling medicinally, to "make it go away" rather than to do
something about it.
In the Rocks Process, we locate and
amplify troublesome and recurring feelings in order to identify the
medicinal strategies the subject employs.
We then supplement the Medicinal
Rock with a Pro-Active Rock so the automatic response to these feelings
includes employing effective strategies for treating the underlying
A medicinal strategy to deal with
frustration and rejection might be to shut down, turn off, pout and turn
your back on your partner.
A pro-active strategy might be to
tell your partner how you feel and to ask your partner for what you
The Rocks Process implements the
pro-active strategies on a deep, automatic, reflexive level; the
pro-active responses occur naturally, well before the subject
becomes consciously aware of behaving differently.
Runners who Commit to Running Marathons
celebrate the burn.
Tue, 10 Jul
Anger and Frustration
Money as Medication
I see you hit the nail on the head.
I see actions I take are to distract myself from my feelings of
depression rather than address them (medicinal rather than pro-active).
Although I am not taking my trading medicine anymore I have found some
substitutes that do the same job and although my dramas arenít as
expensive as trading I they leave me feeling as depressed as I was
I wonder what might constitute a Ďproductive activityí as a lot of my
dramas result from my trying to Ďdo something productiveí:
1. Throwing myself into my new job seems to lead to me getting angry and
in turn frustrated and depressed.
2. Taking on lots of home improvement work in my new house seems to me
getting angry and depressed.
3. Trying to Ďhelpí other people leads me to take on their issues and
get dragged into the same anger and frustration.
4. Trying to Ďbe more relaxedí leads to short term relaxation followed
by frustration that Iím not Ďdoingí anything to get out of debt.
Maybe I need to accept I wonít achieve (financially) what I hoped I
would, perhaps I just donít want to be what I tell myself I do and this
is why I stop myself?
Iím struggling now; I hoped quitting trading would make me feel better
and the way to go would hit me as obvious.
Thank you for sharing your process.
You might consider taking your
feelings of frustration and depression to your Tribe as entry points.
Typical medicinal approaches to
frustration include shutting down and showing passive-aggressive
behavior; pro-active approaches include problem solving, sharing
feelings and cutting losses.
can help you
identify the problem.
Tue, 10 Jul
see June 26,
Thank you so much for your FAQ of Jun 26 with the great picture of a
young and healthy girl with a magnet. Fred likes the picture very much.
At the weekend somebody gave me an Audio-CD with an exact description of
the Law of Attraction. Looks like some theory that exactly fits your
processes. What a coincidence!
One day after the big upset I accepted the misery of family
constellation as part of my history. (It was more the misery of having
not in my life what I saw in other constellations as it was the process
itself which actually resembles TTP).
Coincidentally or not, my back ache is gone now. I have some
strange feelings left but the ongoing pain is gone. The osteopath
actually said to me that I have to accept that I am ill for the rest of
my life ... NOW the pain is gone but I still have those strange
feelings right NOW. What if it comes back? So I just hope that NOW
lasts longer than NOW (Laughter).
This is not exactly a tribal process but now we have the manpower to get
on with TTP :0)
I hope you survive this hot summer and all is well.
Thank you for sharing your process.
In our Tribal work, back pain may
indicate a lack of emotional support - someone holding back on
You might consider consulting your
"strange feelings" to find out what they are trying to tell you.
Aches and Pains
may indicate a desire
for human touch.
Mon, 9 Jul 2007
I have given some thought to what is standing in between
me and trading these systems.
Hereís whatís standing in between me and trading these
1. Lack of knowledge about systems and specifically
these system. As a trader I tend to make money by knowing what I
know and knowing what I donít know. As a trader I tend to make money by
NOT doing dumb things rather than doing really smart things.
So, as a trader with a strong desire to make money I can
tell you this: I canít (for the moment) determine what I know and donít
know about these systems. My intention to avoid mistakes is certainly
in between me and my and trading these markets.
Please understand that Iím not talking about doing
something that makes me look foolish. I do things that look awfully
silly sometimes. But this is quite different from acting without
adequate knowledge and preparation.
I donít know how to test these systems to determine if
they are good ones. I donít know what makes a system good. I donít know
if I currently possess the knowledge to make an informed judgment on a
system test someone else has done to these systems. Indeed I donít
even know if the test to test the systems really measures what it is
I have already begun to gain the knowledge needed to
analyze, test and trade these systems. I thought reading a few books
on the subject might help. I bought a dozen and read about half so
far. Iím working my way through ďEvidence Ė Based Technical Analysis:
Applying the Scientific Method and Statistical Inference to Trading
SignalsĒ by Aronson and BINGO Ė this guy has something say.
He walks us through the whole thought process: The role
of logic; the correct form for conditional syllogisms; sampling and
frequency distributions; the null hypothesis and data mining.
Iím beginning to understand the framework for
quantitative trading strategies. In his book of the same name Paul
Wilmott says that quantitative analysis is all about treating
financial quantities as random and then choosing the best models for
I can choose to use a strategy, model or system (and have
a very good chance of sticking to it) if I understand why it may work
(the idea behind it) and if there is empirical evidence to support it;
my opinion of price randomness notwithstanding.
2. I donít have a trading partner or group to work
with. Drafting and testing systems requires a lot of precision. I
learned this whilst following along in the Trading System Project. To
work in a group or with another to confirm results seems vital. I
thought asking other system traders if they want to work with me would
be helpful. I approached a private systems consultant and programmer.
It appears that he is only interested in working with me when he has the
spare time. I also asked a guy I met in one of the workshops but I
havenít heard back from him. Of course I appealed to you for entrance
into the associates program.
This brings me to the second part of this response.
Thank you for asking for my results and optimizations for
the Exponential Moving Average Systems for Nikkei and Dollar Index
futures. Attached is the code for software called Mecanica written by
Bob Spear, the trades and my bliss matrixes.
This last part is a summery of my trading style.
I believe my trading style can be broken down into two
parts: Market selection and operating plan.
1. Market Selection
Futures: Every expired futures contract has a contract
high and a contract low. I want to find the contract low. Impossible
you say. Well, maybe if Iím trying to find every contract low for every
commodity every year. But, maybe not if Iím trying to find a couple of
lows per year.
Letís say I am looking for the low in Chicago December
Wheat in the calendar year. Letís say that it is the last week in July
and the price of December Wheat made new contract lows 10 days ago - in
fact it closed down 9 consecutive days in a row at 20 year historical
lows. Letís say the cash price of wheat is 2 dollars over December and
rising fast and letís say that September wheat is gaining on December.
Further assume that Corn, Beans, Bean Meal and Oats are all in raging
bull markets. In light of all this I see that December Wheat has just
closed above 25 day highs. I look back in history over the last 30
years and find that when I see 25 day closing highs in December Wheat in
late July the price will move up the equivalent of 2 margins before
falling 2 margins far more than half the time. I also know that the
monthly average price of Cash Wheat has a very strong tendency to rise
after harvest and that this easily quantified.
Iíd say the odds of my picking the contract low in
July in this case are much greater than random chance. And this is
great for me because I want to know where the price wonít go. Now of
course the above situation may never happen. Yet more reasonable
versions of this model occur from time to time. And perhaps you
disagree as to whether my odds of picking a bottom have increased at
all. Nevertheless this is what I do.
Stocks: A stock can only go to zero. And the closer it
gets to zero the less it can drop. Or course everyone knows this. Iím
looking for the ones that wonít go to zero. Once again I am trying to
find out where the price wonít go.
Many stocks enter and stay in bear markets for quite a
long time. They find a bottom and stay there for a while. And then they
just fall again to a new level. They will stay there for while and then
fall again. Sooner or later the sock will hit zero or start to go up.
Stock are real. They are not derivatives. The assets and
income of a stock can be measured. And I stress can be measured.
I donít believe it is possible to measure all stocks. But out of the
thousands and thousands of stocks in the world many can be. Stock
screens can be used to calculate what the common ratios are. Further
winnowing can be achieved via ascertaining the current market value of
many things that the company owns. I think itís important to see if
the company is ďbleedingĒ or losing money. Further it is important to
prove that companyís management is not dishonest. But this can often be
done. I find that personal character at the extremes is rather easy to
identify; if thatís what Iím looking for. When the entire
capitalization of the company exceeds the quantifiable liquidation
assets of the company minus the debt by factor of 2 or more there is a
good chance the stock wonít go to zero.
In summery I look for extremes (on the downside) that are
just not tenable. Iím looking for markets that simply canít fall
anymore. I have similar ways at looking at many different futures
markets and individual stocks. For futures I have a library of trades
that I watch for at certain times of the year. Iím constantly looking to
add another trade to my library. The current markets in Sugar and the
Dollar are rather typical markets I looking for. Buying next yearís
delivery Sugar off contract lows in mid summer is petty routine.
Sugar could easily go down and take out contract low next month Ė
perhaps setting itself up for a second signal in August or September.
Anyone who has traded Sugar for the last 20 years knows this and even
the market knows this! The Dollar index is coming off contract lows
also. Itís not uncommon to see a change in trend in currency in
May. It seem less likely that contact low for the $ will be taken out.
If it does happen I doubt we will have a 2nd signal to buy
again for a long long time. My Operating Plan (more on this later) will
specifically address these types of scenarios which clearly exist only
in my imagination.
Iím not currently interested in a market like
Soybeans. They may go to the moon tomorrow but they simply donít
register very high on my market selection criteria. I canít trade it off
the contract low.
For stocks I have a watch list. Iím constantly
searching for stocks to put on my watch list. I recently added a few
spin offs that could fall in half soon setting themselves up for me to
trade one day. I am wary of anytime I go outside of my library or watch
list to make a financial commitment. My risk of doing something really
dumb goes up dramatically. My past winners have almost always come from
something Iím already acquainted with that sets itself up for my style
of trade. Remember I told you that I was looking to make the same trade
over and over again? This game (to my mind) works only on the
downside. There is a wall on the downside that does not exist on the
upside. I believe I can use this wall to great advantage. I believe
much of what I discussed can be quantified. My current models are more
Main Street and common sense than higher math and abstract risk
analysis. (Yet Iím not against getting this quantitative stuff into my
Now once a good candidate is identified I will make a
time and financial commitment to trade it long. Iíll write down my
commitment: (for example) Trade this market long risking x percent of
you capital as per the operating plan until Christmas next year or
until it moves 80% of its 15 year average contract range or until your
operating plan tells you to quit.
2. Operating Plan
Unlike Market Selection I am looking to use little to no
judgment in my operating plan. Ideally I write it all before I begin.
I just tell myself what Iím going to do and address as many
contingencies as possible. I try to answer all the hard questions.
I trade off signals and 85% of the time I use the same
signal. It a 25 day closing high. (give or take a couple of days-
which is the other 15%) The older I get the more homogenous my plans
have become. Hereís a typical example:
Buy 1 unit after 1st signal. Set stop below
contract low. If stop loss hit reenter at 1st close above
highest high during trade.
Buy 1 unit after 1st signal in the next
calendar month. Set stop below contact low. If stop loss hit reenter
at 1st close above highest high during trade.
If $2500 profit on both units then move up stop to
breakeven. Put on your seatbelt and just watch until have $5000 per unit
profit or are stopped out at breakeven.
If stopped out on breakeven trade - begin again with
reentry using $1500 per unit stops. Repeat original entry technique
If you are stopped out again Ė just give it up - you have
just lost 15% of your allocated trading capital. If at any time you
lose 15% or more of youíre money allocated to this deal just get out and
leave it alone.
If by October or before you have $5,000 per unit profit
move up stop so as not to give back more than half of your gains
while you attempt to hold until delivery month or November or whatever.
If still long in November and profit excursion reached $5000 or more per
unit then move up stop to not give back more than 25% of open profits.
Well you get the idea. I give myself very little wiggle room.
Iíll often include some subtle reminders like:
DO NOT ADD TO YOUR POSITION AFTER YOUR SECOND PURCHASE.
RISK NO OPEN PROFIT IN ANY OTHER DEALS
In summary I take my Selected Market Commitment and just
wait for my signal. If my signal never comes I donít do anything. If
it does I start to work my Operating Plan which is basically scaling
into my line on the way up, gradually moving up the stop to break even.
I have well defined reentry instructions. I define when and how much to
move up my stop to lock in profit. My method of getting on board usually
works better in stocks than futures. I always trade the most deferred
future I can find with even just a little bit of liquidity. In stocks
for an objective I usually have an action point which is a price level
where new risk reward bracket are implemented.
I have a very good idea as to how much money will be in
the investment at each stage of the operating plan. Since Iím involved
with very few deals at once Iím not too worried about any hidden
correlation risk. Most of my sleepless nights are spent waiting for my 1st
signal when I ďknow itís going to go up anyway!Ē As with any trading
venture I may lose 15% (or whatever my commitment is) of my allocated
trading capital but Iíll know exactly how I did it. And if I followed my
plan and didnít do anything incorrectly or break my own rules I can
accept it. Iím a trader. This is what I do.
Thank you very much for your help. And thanks for
listening to me. I very very much appreciate it!
You seem to like:
1. To have
a good understanding of the markets before you trade.
To pick bottoms.
anticipate a change in trend.
Your Trend Trading system (buy
25-day highs) seems incongruent with the above: using fundamentals,
buying on dips and anticipating trends.
Even if you succeed in back-testing
a Trend Trading Trading System, you may have conflicting feelings
about following it.
You might consider taking your
feelings about Trend Trading to your Tribe as entry points.
Bottom Picker - Standard Trading Position
Mon, 9 Jul
Reasons to Trade
I have seen a lot of reasons why not to pursue trading for a living in
this FAQ, mostly related to unresolved emotional issues from the past.
Are there any good reasons to take the risk and go for it?
FAQ does not tell people what to do
- see ground rules.
Some people may see FAQ as
discouraging trading; others may see it as a path to developing
You seem to want some encouragement
and / or permission to trade.
You might consider taking your
feelings of wanting encouragement and / or permission to your Tribe as
You might also try an experiment:
When you feel like asking for permission, to ask for parmesan or
Mon, 9 Jul
see June 18,
to One or Two
Re: my posting 18 Jun 2007, thanks for your suggestion of exploring my
feelings about dilemmas.
[Country] is far from a tribe. I have searched the FAQ archives for
notes on dealing with dilemmas, but found none. Any other resources you
can recommend for implementing your suggestion, apart from starting a
You might consider examining your
feelings about commitment.
I am planning a Workshop for October
Mťnage Š Trois
provides many opportunities
to explore feelings
Sat, 7 Jul
First, my goal if accepted into the IVTT is grow personally and be part
of a win-win group in which I can both give and receive feedback. I
believe I'm at a pivotal stage of my life in which I am ready and open
to change and want nothing more than to grow as an individual. I believe
you can read many "personal growth" books but nothing beats being
exposed to an environment with real people, real situations and
witnessing positive transformations firsthand.
I have been to your website numerous times and have gone through the
different sections and read several of the FAQ's. I will do whatever you
request of me which I believe would be to do the following: Order your
book, "The Trading Tribe" ASAP Attend a workshop, if you have any
availability since I have never been to one Read through all the FAQ
section of your website as well as all other sections In terms of my
experience with personal growth methods, this may sound odd but I did
set the "curve" back in college in my psychology class (i.e. although it
was just PSYCH 101). I have always been interested in improving myself
and know that ultimately I control my own destiny through either
productive habits or destructive habits. However, other than reading a
couple Tony Robbins books, I would say that I'm definitely not a veteran
with regards to personal growth methods. On a side note, I have to say
that the section of your website titled, "Going it alone or Joining A
Tribe" hits close to home for me personally.
Please let me know how you'd like me to proceed from here.
Watch for an announcement for the
October 2007 Workshop.
Fri, 6 Jul
I ran some initial tests (attached) trying 2 different portfolio
first come first serve basis of price breakouts and trade the
opportunities with highest % above 200EMA.
2. Rank daily breakouts by (Price today - Price 200 days ago) /
price 200 Days ago.
On a database
of 1000 Canadian Stocks from 1996-06, seems to suggest that portfolio
selection is way more important than I originally thought!!! The system
that uses the #1 method had one of the worst MARs (.83)
The next strategy I am trying before testing out my expo stop /
opportunity cost of money idea is to rank the entire list of North
American equities on a daily basis using the above #2 selection method,
filter out the bottom 80% of stocks, then purchase breakouts that occur
in the top 20% and see how this goes.
Running these tests gives a really nice intuitive feel for the real
issues that affect the nature of returns and risk. I now realize that I
initially looked at only the breakouts that occur on some particular
day, then sort this small "breakout list" for strength and pick the
strongest breakout which quickly fills uses up all my equity like you
stated. I think to myself, just because a stock is breaking out
today doesn't mean it is trending the strongest historically on a
relative basis compared to other stocks. What about all the other stocks
that are trending way faster but may breakout the next day and are much
higher in strength rank in the total list of equities!
After testing the above, I am planning to apply your Lake Ratio directly
to individual stocks after filtering out the bottom 80% of the stock
list and see how this affects MAR.
all North American Equities by price strength over 200 days.
2. Filter out the bottom 80%
3. Filter out stocks that are not breaking out today.
4. Apply Lake Ratio to stocks that are in the top 20% and breaking
PS. Do you
know of anyone that has applied a systematic long term trend following
system to the entire world's 30,000 equities? This is the mission I am
on! Time to get a quad core PC.
Thanks for all your help Ed.
Yes, many theoretical stock market
tests (and actual stock fund managers) tend to engage most of the
trading capital soon after start-up.
In this way, performance is likely
to show start-date dependency.
Furthermore, absent a purge
strategy, the fund may then depend upon attracting a new crop of
investors in order to buy anything fresh.
Charles Ponzi (1882-1949)
Proponent of the eponymous scheme.
The basic scheme
relies on a continuing new crop of investors
to keep performance rolling along.
Fri, 6 Jul
Please find my research proposal attached. Please let me know if this is
a topic you would like to advise. If so, please let me know if there are
any changes you would make to the issues I want to explore.
Thank you for your continuing support,
As I work to develop my system in C#, I am wondering what the minimum
amount of investment capital that I will need to begin trading might be.
feel that one of the more important topics in developing systems is
managing risk. Understanding equity and margin limits is integral to
On your website, I notice several emails on the ďReader FeedbackĒ
section are discussing Equity and Margin issues. I also notice, in light
grey, that the next topic on your TSP webpage is ďAcknowledging Limits:
Equity and Margin.Ē I think understanding equity and margin limits is a
very interesting topic.
I might start my research by finding out what the margining requirements
are for various contracts. I also know that there are granularity issues
about rounding position sizes that are too small, so perhaps I should
further investigate this issue. I hope my research will lead me to
determine a minimum contract size for positions.
Complicating the issue is cross-margining. Since the systems I intend to
trade are long / short / flat systems, there will be times when I am
long and short different instruments and this should affect the amount
of margin that I am required to post. I am choosing [Brokerage Firm] to
execute orders. I will get in touch with them to determine how they
margin futures contracts. One problem may be that they use margining
rules that are different from other brokerages.
To begin this research project, the topics I intend to investigate are:
1) Margin requirements for each contract I might trade
2) Cross-margining issues
3) Minimum position size
As I determine the possible answers to these questions, I will be able
to further develop the other questions which require consideration in
determining minimum capital requirements. I feel that this is a general
topic that would be of interest to many people and might turn into an
article for publication.
Yes, this topic seems worthwhile.
My work indicates that if you trade
anywhere near full margin, even if you have the stomach for it, your
trading tends to become more volatile and less profitable.
You might consider optimizing a
trading system and then producing a graph to show the trading
performance and the percentage of margin you use. You can then
increase the heat of the system by 25% and show the same graph.
Same for a 25% reduction in heat.
has to do with
maintaining an optimal
level of risk
which might not mean
trading at full margin.
Fri, 6 Jul
Right on Target
Your seem to have very good intuition.
prediction of a 2% success rate seems to be right on target!!! ;-)
Guessing a card is a 2% kind of
Predicting that the distribution for
thousands of card guesses is around 2% is more of a "sure thing."
Having to be "right" on a single
trade is iffy.
Being right on the aggregate of a
large number of system trades is easier.
You Can't Predict
the position and velocity
of any of the air molecules
inside the balloon.
You can predict the balloon
maintaining a round shape,
and not going flat
one one side or on the top.
Fri, 6 Jul
I do not understand what all the fuss is about with this Rocks process,
in my experience, it is just MAGIC!
Ed, thank you for running this amazingly powerful process. [Name], thank
you for such a comprehensive write up and for your contributions during
Here is [Name]'s draft of the Rocks experience to which I make just a
few edits -- putting the resources in first person and adding a couple
of resources. Like [Name], I have some difficulty in recalling what all
happened. One of the things that I do recall is being almost
physically unable to give up my medicine rock. And when I set it down,
feeling lost and blank, not knowing how to act or almost who I was.
This medicine rock feels like a deep part of my survival strategy.
I do know that people now seem different in a way that I cannot
explain. I know that I am the one that is different, but it sure
seems to me that it is those around me that are changed. People are
nicer to me. I say what I want and I get it. Amazing!
I understand that I socialize people to react to me but since this
happens below the level of my consciousness, I do not know of any other
way to directly modify myself other than Rocks.
For years I
hear that for things to change I must change. And after every Rocks
session I have direct evidence of this working. Within 24 hours of this
session in which I work on issues with an ex-girlfriend, I run into her
for the first time in almost a year! Amazing!
Write Up by
Interesting Tribe meeting last night. Only 3 people attend Ė Ed, Q, and
After the meeting, it is my intention to submit a detailed write-up for
FAQ's. But as with every other Rocks session, when itís over Iím not
sure quite what happened, and this is particularly true tonight,
since the Hot Seatís issue resonates soundly with me. Iím left only with
strong impressions that are difficult to articulate.
We start with snapshots. Q is the first Hot Seat, and presents a picture
of his dream home and ideal relationship. The issue that quickly emerges
is, he doubts heíll ever be able to get what he wants.
Ed process-manages, sometimes questioning the Hot Seat, other times
encouraging forms, at all times drawing out emotions and deep-seated
Hot Seat recognizes that he sets up dramas and enters into relationships
that ensure he doesnít get what he wants.
During the life review, it becomes clear that he even enlists an
anti-support team to deprive himself of joy: ďThe love of my life ... I
pushed her away ... I sought advice from someone who didnít support me
in getting what I want.Ē
One way or another, he gets what he wants ... by making sure he
doesnít get what he wants.
(As I sit at a coffee shop composing this, the song ďYou Can Get it If
You Really WantĒ plays in the background.)
The Hot Seat says, ďSomething feels right about keeping myself stuck.Ē
You canít get what you want,
but you can hope for it,
and think about the future.
Make the best of it
Hope is the core medicine
Imagine a great future.
is to leave the Now, go into the future and imagine that it is great, it
is all going to be wonderful.
Ed checks for willingness. The Hot Seat wants to change, but finds it
almost impossible to part with the medicine Rock. The Rock runs his
life, and has served him well. Hot Seat finds it frightening and
physically painful to relinquish it. When he finally drops the medicine
Rock, he is a blank slate with no identity. At this point, the Hot Seat
is in a deep, glassy-eyed trance, waiting to be reprogrammed.
Ed serves as PM and Messenger. He also participates in role play both as
the giver of the Medicine Rock, and later, as the father.
We run a number of role plays. At various times, I play the father,
grandfather, ex-girlfriend, current girlfriend, and myself.
The process is robust. Despite the fact that Ed and I assume multiple
roles, this does not confuse the Hot Seat in the least, and each role
play proceeds with clarity and authenticity. Because the issues hit so
close to home, Iím drawn into the process, and even though itís not
my Hot Seat, I receive the benefits by osmosis. Itís a little hard to
When it comes time to build new resources, neither the Hot Seat or I are
in a position to contribute much, so Ed leads the way.
Here are the new Resources:
- Share my
feelings about what I want.
- Ask for what I want.
- Ask for support and encouragement.
- Recruit a good support team - get really good support people Ė to
help me get what I want.
- Accept pleasure. Feel the pleasure and joy, and stay in the now
with the pleasure.
- Take a deep breath, and think of cool things to do, to get what I
- Be on the lookout for ways to help other people get what they
- 5% of the time, when confronted with danger: shut down (withdraw),
think about the future, and hope for it (this is the old Medicine
install the new Pro-Active Rock, we rerun the role plays. They are
dramatically different this time around, and with much more satisfactory
The new resources kick in automatically, and with great authority. It
is an amazing transformation. The Hot Seat is learning to actually enjoy
getting what he wants. Before long, he is completely comfortable
experiencing pleasure and joy. Now, he likes getting what he wants.
I get a major Aha when Ed has us note that at the subconscious level, we
dictate the way the people around us behave.
Ed further memorializes the new Rock: ďEvery time you use this new Rock,
it becomes more and more useful ... as the child delivers it to the
adult thatís here in the moment of now ... and notice that now in 2007
youíre the creator of this process, and you bring a lifetime of
experience to the adult in this room. Around and around ... the circle
of life continues ... ouíre used to this, this is your history. You know
this well ... this is your past, this is your now ... this is how you
run your life.
We check out, and the Hot Seat releases us from our roles. Then, we do a
final check out.
This is a powerful session.
Ed, thanks for working with us, and sharing your knowledge and wisdom.
Thank you for sharing your
Your reports inspire others to move
along the path.
is pretty much
anything we don't understand.
Thu, 5 Jul
I have a funny story for you.
years ago I emailed you the following email:
Most of my
trend following knowledge has come from trading literature and courses.
I wonder if you could share some of your knowledge because I am sure
your database of knowledge from 35+ years of 'Very Successful' trading
and teaching experience is extraordinary.
I believe that building from established and proven principles can
create an excellent foundation and accelerate the learning process.
I was coming
from 4 years of day trading.
This was your
response to me:
1. Trade with the trend.
2. Ride winners and cut losers.
3. Manage risk.
4. Keep mind and spirit clear.
You might like what Old Turkey has to say in Reminiscences of a
last few months I have basically arrived at the same conclusion,
then yesterday I found your response from Feb 2003 - you basically gave
me the answer but I had no clue what you really meant - or was not ready
to listen. It's truly amazing that I was given the answer I was looking
for over 4.5 years ago and I didn't have a clue
Thank you for sharing your process.
The positive intention
is risk control.
Wed, 4 Jul
I notice a bizarre and paradoxical phenomenon at the moment.
On the one hand people shouting from the rooftops about the coming
"credit crunch". These kind of alarmist stories are increasingly in the
high quality press. Here is an example today from the UK's national
Daily Telegraph: 'Credit crunch will shred investment portfolios to
On the other hand, prices just keep going up. And you have taught us,
quite rightly, to sit on our hands at times like this.
You've been in the market a lot longer than most of us. My questions
1. have you seen this kind of paradoxical situation before? e.g.
during the 1970s or 80s rallies, or is it a strange as it looks.
2. do you have a perspective on these super-bearish headlines. (I
know that you are interested in magazine covers, etc. as
Sometimes analysts say one thing and
the market does another. I do not consider this to be a paradox;
it merely indicates the results you are likely to get following analysts'
Prediction (responding before
the event) - unreliable and inaccurate.
Postdiction (responding after
the event) - more actuate and not timely.
during the event) - gives you a fighting chance. You can implement
simuldiction with Trend Trading.
includes learning to yawn
with the market.
Mon, 2 Jul 2007
I just wanted to see if you were ok with the
My wife's uncle works with the post office in South Lake Tahoe and they
through ok although some friends lost their homes.
I hope you and your friends made it through unscathed.
Thank you for your concern. So
far I do not notice my home, myself or any of my friends on fire.
A number of people who now own
charcoal homes are experiencing the results of the test between:
Environmentalist Method: Cut no tree to preserve nature.
The Fire Chief's Method: Thin the forest pro-actively before mother
nature does it. Metric: leave ten feet between tree crowns.
wealth of evidence that The Fire Chief's Method prevents forest
fires and protects wildlife, homes and the lake, the Environmentalist
Method, finds enthusiastic support in many heavily medicinal
Sometimes You Kill Things
by being unwilling
to experience the feeling
of letting them go.
Mon, 2 Jul 2007
Dear Mr. Seykota,
You state, and please forgive me if I paraphrase incorrectly, that
traders cannot accurately predict future market movements because the
future does not "exist."
Instead, trend-followers advocate "going with
the flow," i.e. waiting for the trend to become evident and playing it.
However, a question comes to me: Why would the intuition that comes with
trading experience - albeit of varying degrees among traders - not be
considered predictive of future price movements?
This intuition involves
determining the trend before it occurs rather than waiting for the trend
to become evident. Moreover, if a trader develops a reliable intuition,
s/he could outperform a trend-following system where entry/exit rules
rely on evident trends that are determined by moving averages and other
Or does it go that with time the trader
incorporates his/her intuition into the trend-following system, where
the rules for determining a trend are governed by intuition?
Perhaps, I overestimate the power of such intuition. Also, I know very
little about the technical indicators used for transaction signals so
that maybe my idea of an "evident trend" is inaccurate.
As an accompanying thought, intuition that predicts future price
movements is not inconsistent with your idea that the future does not
"exist." Intuition is a sophisticated product of the unconscious mind
where past, present, and future are all enfolded in one.
unconscious and conscious minds are attuned, a premonition of the future
can manifest in the present. You may already be familiar with this.
I would greatly appreciate your thoughts.
In the system model, we have no
Non-existence of the future does not "cause" anything,
including trader inability to predict.
Traders, analysts and commentators
can and do indeed predict market movements. Some use charts, some use
fundamentals, some use intuition, some use tea lives, some use stellar
Some occasionally get it right, at
least for a while.
Curiously, I do not know of even one
case of a predictor compiling a track record of all his predictions, his
subsequent use of them to manage an account and a computation of
attendant performance metrics.
non-existence of even one such track record is consistent with the
suspicion that "guess-a-mental" trading is little more than medicinal
Your self-fulfilling premise, that a
trader can develop "reliable intuition" defines that he has a unique
ability to outguess the markets.
Even with guess-ability, the
trader still has to ride profits, cut losses, manage risk and trade in
the direction of the trend.
My guess (intuition) is that you
find these basic Trend Trading requirements emotionally difficult
and you are looking for a way to avoid your feelings of having to buy
high, sell low and deal with "mistakes."
You might consider taking your
feelings about sticking with Trend Trading principles to your Tribe as
an entry point.
for Testing and Developing Intuition
2. Make a
prediction and write it down.
3. Pick a
card and examine it carefully.
from step 1, 5200 times.
the number of correct predictions.
with Ed's "prediction" that you get about 100 correct, averaging about one in
the whole process 100 times and use all your intuition and inner
wisdom and thinking of ways to succeed until you can get closer to
this with Ed's prediction that no mater how long you keep doing
this, you still get about 2% right (about one in 52).
A Mechanical System
can improve your chances.