© Ed Seykota, 2003 - 2006 ... Write for permission to reprint.

Ed Seykota's

Frequently Asked Questions

FAQ Index & Ground Rules  ...  Tribe Directory - How to Join

TTP - The Trading Tribe Process  ...  Rocks  ...  Glossary

  TTP Workshop  ...  Resources  ...  Site Search  ...  The Trading Tribe Book

TSP: Trading System Project  ...  Breathwork

Associates Program  ...  Chart Server  ...  Contact Us

 

June 1 - 14, 2007

 

<==  Previous  |  Next  ==>

 

 

Questions

(Quotes from Ed in Red)

Answers

Thu, 14 Jun 2007

 

Merci!


Mr. Seykota,

I love your website! It's full of great information and I have only seemed to have touched the surface.

 

I have ordered 3 recommended readings and look forward to reading them.

 

I recently began a job day-trading and peruse your site during quiet lunch hours. I would like to become an expert, self-aware trader. Thanks for the inspiration!

Welcome!

 

Enjoy!

 

Per your day trading, see Warren Buffet, below.

Thu, 14 Jun 2007

 

Warren Buffet Video


Ed,

I think you might like this.

http://video.google.com/videoplay?

docid=-6231308980849895261&q=

genre3Abusiness&total=57536&start=0

&num=10&so=0&type=search&plindex=3

Notice Warren's super-long-term orientation.

 

 

Coca Cola [symbol: KO]

 

Warren hangs on to KO

through a decade of decline.

 

He cites the value of the brand,

the "moat" around the franchise

and his need to understand things.

 

Wed, 13 Jun 2007

 

Trading System for Beginners

Hi Ed,

First of all, it is a honor to send this humble mail and I know you should receive many mails every day, from many places in the world. I'm trying to develop a trading system with linear regression and moving average, but it's not working as I would like. I'd like to know what do you think about this kind of trading system and how to develop good trading systems.

You might consider having a look at the TSP and Associates links above.

Wed, 13 Jun 2007

 

The Trend


Mr. Seykota,


I have been searching far and wide for a trader who can define a trend. None have lived up to the task ...

I have read piles of books and none have been able to answer my question either.

So I turn to a legend, you sir are my last hope.

Part of the problem you may be having in defining a trend is that trends do not exist.

 

Like the past and the future, a trend is merely an idea.  There is no such thing in nature.  Trend is an idea about the overall average historical direction of prices; trend is a convenient way to view history; trends do not indicate the direction of prices in the moment of now, or even exist in the moment of now. 

 

Furthermore, The methods you use to define trend (to view history) are entirely up to you, so you get to define trend any way you wish; everyone may have a different idea of "the" trend.

 

Let's say you make a graph the volume of air in your lungs.  If you define trend by the one-second average, your air volume trend may change several times per minute.  If you define trend by a 90-day average, then your air volume trend may gradually increase for several decades and then decrease.

 

 

 

Lung Volume vs. Height

 

Clip: http://www.spirxpert.com/refvalueschild.htm

Wed, 13 Jun 2007
 

Tribe Meetings

Hello Ed,

Just wanted to let you know how beneficial I believe the [City] Tribe experience has been to me, even though I've only been to two meetings.

The snapshots really helped to clarify my vision / intention.

For example, at the first meeting I drew an unclear image and commitment for the "Fun" snapshot. The tribe brought this to my attention and "aha" this helped me clarify my intention.

Sounds simple enough; little hinges swing big doors.

I enjoy sharing my commitments as it really helps me be accountable and mindful of my intentions.

I envision greater growing awareness as I continue with the Tribe.

Thank you for all your efforts in bringing this process to our attention.

All the best,

Ps. Within days after the last Tribe's meeting a very nice piece of business presented itself to me.

Thank you for sharing your process.

Wed, 13 Jun 2007

 

The Jademaster

 

Ed,


Is the full length Jade master story in digital format? I find that thought provoking trading / life metaphors make things more interesting and fun. Your short story makes me feel like I am not alone and the path I am on has been traveled before and there are many lessons to learn which helps sustain my patience. Are you willing to post a copy of the full version to the trading tribe website?

I'm planning to include the story in my next book.

Wed, 13 Jun 2007

 

IV Tribe Meeting Feedback
 

Hi Ed,

Thank you to you and tribe for helping me realize the incongruent desires I had (calm/peace & trading a $100,000 account to live off of). I took your advice in acknowledging the following:


a.) I need more $ for this to be realistic.

b.) Instead of building a system that I find comfortable (the "if I build it and they will come" model) I should be "finding out what the market (investors) want" as far as a fund/investment vehicle is concerned; what risk/returns/correlations they desire.


This really landed with me because I relate to and believe in, having the end snapshot then working backwards to make it happen. Having a semi-specific idea about what people want and THEN building to suit feels right.

I took action and met with a friend who is a [brokerage house] advisor and asked him what "people want"? It was very productive and led to some other contacts.

p.s. had fun playing music with you …

Thank you for sharing your process.

Mon Jun 11, 9:50 AM ET

 

Positive Intention of Anger

 

Dear Chief Ed,

 

I enclose a link to an article that claims anger helps people make better choices.

Wesley Moons, a psychologist at the University of California at Santa Barbara, and his colleague Diana Mackie designed three experiments to determine how anger influences thinking—whether it makes people more analytical or careful about their decisions, or whether it leads people to make faster, rasher decisions.

... they found that the angry subjects were better able to discriminate between strong and weak arguments than the ones who were not angry—suggesting that anger can transform even those people who are, by disposition, not very analytical into more careful thinkers.
 

Link: http://news.yahoo.com/s/livescience/

20070611/sc_livescience/angerfuelsbetterdecisions

Anger is a strong feeling associating with a grievance.

 

One of the positive intentions of anger is to focus attention on the aggravating situation.

 

Therapists regularly prescribe drugs and anger management classes to "cure" anger by making it go away.

 

 

 

Anger

 

has a positive intention.

 

Clip: http://www.coalharbournhc.com/

images/anger.jpg

Mon, 11 Jun 2007

 

Byron Katie & TTP


Ed,



Our Tribe is extending our work by using Byron Katie's work.  I find this work compliments TTP and the combination is potentially very powerful. I view TTP/Rocks and this inquiry process as being different entry points into the same system.

 

Perhaps this approach attracts me because of the analytical nature of using inquiry to unravel my stressful thoughts. My experience is that inquiry provides a method for experiencing my feelings without resisting them.

 

I also notice that this process emphasizes the "now" and that it is done in SVO-p. I am considering installing the steps of this inquiry process as new resources in my next Rocks process.

 

Links: www.byronkatie.com

TTP is essentially empirical and it seems to work well in conjunction with other disciplines.

 

Please let me know how the combination works.

Sun, 10 Jun 2007

 

Banning Depression

Dear Ed,

I'm just reading a book in which the author describes something that sounds very much like how one creates a knot:

"Eight years ago, I'd been in a position where I felt depressed all the time ... Fortunately I got enough pain that I pulled myself out of that pit, and as a result I linked massive pain to depression. I began to believe that being depressed was the closest thing to being dead.


Because my brain associated such massive pain to the very concept of depression, without my even realizing it, I had automatically banned it from my vocabulary so that there was no way to represent or even feel it."

No way to even feel it?!??

In your experience, what do you think of this approach? Instead of fully feeling depression, he claims that by removing the word from the vocabulary, he can get rid of it:

"In one stroke I had purged my vocabulary of disempowering language and thus a feeling that can devastate even the stoutest of hearts."

Have you experimented with this idea, and does it work as the author suggests, or merely tighten the knot and in the process plant the seed for a bigger drama?

Depression is a state in which the subject feels inadequate and despondent.

 

For example, if your mate leaves you, you may feel inadequate and despondent and call the combination depression.

 

One of the positive intentions of depression is to get you to stop doing what is not working.

 

In our Tribe work, we encourage the sender to fully experience his feelings (including depression), to discover the positive intentions of his feelings and to support those intentions.

 

In the Rocks Process for Depression, we typically replace a Medicinal Rock such as withdrawing and cutting off communication, with a Pro-Active Rock such as inviting deeper emotional connection.

 

Professionals typically prescribe medication, such as Wellbutrin, Prozac, Zoloft, etc, to deaden the senses and prevent experiencing the underlying feelings.

 

A belief that depression is bad may interfere with gaining information about being on a non-productive path; the trading analog is engaging in Trend Following without using stops.

 

 

Depression

 

has a positive intention.

 

Chronic Depression

may indicate unwillingness

to experience feelings

of inadequacy.

 

 

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

jamaarchives/JAMA_Mental_Depression_

Depression_JPP_01.jpg

Thu, 7 Jun 2007

 

The Officer and The Marijuana

A Lesson in Risk Management


Hey Ed,

Here is the video I said I would send you at dinner. its really funny.

http://www.youtube.com/watch?v=dv2l1CzGQHU
 

One of the principles of risk management is to start off with a small position - and make sure you have the resources to take a big "hit."

 

 

 

Heavy Hitters

 

know what they can handle.

 

Clip: http://www.travelpod.com/users/

technotrekker/overland05.1130801640.17-toke.jpg

Thu, 7 Jun 2007

 

Donchian Today


Greetings Ed!

Here's a quote ... that I stumbled upon:
 

"Ed Seykota once told me he taught a college course in trading that lasted 10 weeks. He spent the first week of the class teaching basic information about trading. He then spent another week teaching the class Donchian's 5 & 20 trading system. However, he needed the remaining 8 weeks of the class to convince people to use the system he had taught - to get them to work on themselves enough to accept the losses that it would generate."


I first read this and thought 'how stupid of these people who can't follow a simple system'. Then the market came and knocked me off my high horse with a huge brick. I took a loss. Then I read the quote again and came up with a question:

Does the Donchian system and others still work today? I know the markets haven't changed because human nature hasn't changed therefore these system work right? I just wondered that by having the discipline to follow the rules would a Donchian 5 & 20 system work well?

I recall teaching the course in using a weekly-rule system at an adult education class at a high school.  I do not recall trying to convince anyone to do anything.

 

I do recall the class starting with about seven students and, by word of mouth, ending with about fifty.

 

If you want to see how the 5/20 system works, you can simulate it on a computer.

 

 

Date: Thu, 7 Jun 2007

 

Words of Wisdom

 

Ed,

 

Here is a twist on some standard advice.

 

http://www.frontiernet.net/~jimdandy/

specials/life/life.htm

OK.

Wed, 6 Jun 2007

 

Word Popularity

Hello Ed !

I find this website, and feel you might be interested in it.

Its easy to use!

You might like to read the below so you understand what the site does

I invite you to type in the word ‘feeling’ into the “find word” box and notice what words surround it, and sit next to it!

Enjoy!


 

Link: http://wordcount.org/main.php

OK.

Wed, 6 Jun 2007

 

Moved to Boat


Ed,

Part of my snapshot is living on my boat. I bought a boat, delivered it, and live on it.

Thanks for your help,

Thank you for sharing your process.

 

 

Popeye

 

eats a lot of spinach

and hardly ever gets on a boat.

 

 

Clip: http://www.autographsmovieposters.com/

Popeye_Collection.htm

Sat, 02 Jun 2007

 

The Morning After

Hi Ed,

this is after a home-TTP and a Tribe meeting.

Home-TTP alone is really a nerve-racking affair. But it worked!

Fred immediately recognizes keyboard of 20 May 2007 and starts being very sad. We do a lot of crying and movements which resolve in some sort of flying around like an airplane and Qigong movements.

I remember me playing piano as a kid. The piano teacher hit my hands and I stop playing the piano. As a teenager I take it up again. I gave it up when my school exams show up at the horizon. It is like an island, just the piano and me. Somehow I lost a part of me when I gave it up.

At the tribe meeting we discuss our k-nots about power and perfection. We have a wonderful meeting despite of the k-nots.

We also discuss the difference between snapshot and image. Fred produces an image instead of a snapshot if there are k-nots or rocks. The image draws CM and Fred in the old situation where the k-not is created. The body starts making movements and Fred and CM tune in.

I remember the situation and some of the feelings attached to the situation. My heart aches. I talk about it. It's not finished yet but it's a great relief to speak out that I didn't like it. I get more into the feeling that as a grown-up I can make my own decisions. Today I feel calm and settled.

We do note that things are improving.

Thank you for sharing your process.

Fri, 1 Jun 2007

 

The Positive Intention of Quitting

Hi Ed,

TTP isn’t a cure for unwillingness.

Only quitters quit and I am proud to be quitting something that I feel so many people find hard to.

It seems I am unwilling to feel the freedom that would be mine should I stop discretionary trading.

As you’ve pointed out to me over the last few months my drama driven system is medication that numbs the despair and sadness I feel when I reflect on how poorly I have used my life so far.

It seems that I know how strong that despair feels and how upset I am so I trade and trade to blank it out.

I exit my position and convert my non-base currency. I email asking that my account be closed.

I have a net worth of negative £170,000 with very high monthly bills and no job to go to but I know if I get out now I can rebuild my life.

Seeing it written down makes it seem easier to handle I need to grieve for that lost money then move on.

Thanks for helping me find the strength to be a quitter, I really fear where it might have gone if I hadn’t. Ended relationships and financial ruin we’re sure to have been on the way.

This is the best move I’ve made in ages and I am proud of it.

Thanks Ed

You might consider taking your feelings of despair and sadness to your Tribe.

 

 

 

Quitting is a Lot Easier

 

when you are not using the behavior

as medication.

 

 

Clip: http://www.webtree.ca/tree/gifs/

web_cartoons/quit.gif

Fri, 1 Jun 2007

 

John Henry

Ed,

I wondered if you saw the article about the demise of
John W. Henry in this week's Wall Street Journal. My
guess is that if we are seeing this type of article in
print, there are going to be some significant trends
in the near future.

Henry's peak seems to coincide with his shift of interest from trading to baseball. 

 

If you know about some future trends, I'd like to know how you know about them now.

 

 

Fri, 1 Jun 2007

 

Back to Trading

see: Back to Printing Money

Well Ed,

It looks like the manager found my replacement and my last day will be next Friday. I just don't think working 12 to 16 hour work days is the right livelihood with my family. (That is including my 1-3/4 hour commute each way. Total 2-3/4 to 4 hour commute each day).

I think I have pinpointed more closely when my excellent trading stopped. The "whittle" e-mail hit something that happened few years ago. I would like to talk about it but it is too long for an e-mail.

You might consider checking what is standing between you and writing the email - it is likely the same thing standing between you and trading.

 

 

Quick Cure for Writer's Block:

 

Write about the block.

 

 

Clip: http://www.lombardi.ws/literaryAspirations/

writing/writersblock.JPG

Fri, 1 Jun 2007

 

Impending Merger Predictions


Maybe I shouldn't give you some of these, but here goes: Investment tips for 2007 for all of you with any money left, be aware of the next expected mergers so that you can get in on the ground floor and make some BIG bucks.


1.) Hale Business Systems, Mary Kay Cosmetics, Fuller Brush, and W. R. Grace Co. Will merge and become:

     Hale, Mary, Fuller, Grace.

2.) Polygram Records, Warner Bros., and Zesta Crackers join forces and become:

     Poly, Warner Cracker.

3.) 3M will merge with Goodyear and become:

     MMMGood.

4. Zippo Manufacturing, Audi Motors, Dofasco, and Dakota Mining will merge and become:

     ZipAudiDoDa.

5. FedEx is expected to join its competitor, UPS, and become:

     FedUP.

6. Fairchild Electronics and Honeywell Computers will become:

     Fairwell Honeychild.

7. Grey Poupon and Docker Pants are expected to become:

     Poupon Pants.

8. Knotts Berry Farm and the National Organization of Women will become:

     Knott NOW!

And finally ...

9. Victoria 's Secret and Smith &Wesson will merge under the new name:

     Titty Titty Bang Bang

OK.

 

Hmmm ... OK, Gopher Resource Corporation + Da Kine restaurants + Goldman Sachs.

 

Gopher Da Gold, Man.

Fri, 1 Jun 2007

 

Back to Printing Money

see: Whittling 05/20/07


Hey Ed,



Yes, I did notice that I used the term "Whittle" when describing my trading and I did not like it. I felt like I did not want that word in the same paragraph where I describe my trading. I am remembering when I was virtually "Printing" money with my trading for about 7 years straight and I want to get back to that.

It looks like I may stay a little longer at my job. The manager seems to want me to stay and has not hired any one even though my notice time is up. I do not feel good about leaving him in this position when he helped me with a good job.

 

This way I can pack away and "build up" some more guaranteed money also. After all the traders I am supporting are helping me support my family even if it is not exactly what I want to do right now. I can sacrifice a little more time and plan out my "Trading" and possibly my "New Hedge Fund" meanwhile. I want to come for a visit when I get a break or the job is over.

I also feel nervous about being long stocks due to how far the market has moved such a short time.

 

The trend is so strong though! I feel like I am lucky I have a job while other people are getting laid off and the economy seems to be slowing.

You might consider recalling, back in the days of printing money, how you handle nervousness about big and fast moves.

 

 

 

You Can Build a Pretty Good Approximation

to a Nervous Trader ...

 

 

Use a trend-following system

with very close stops.

 

 

Clip: http://ideaseller.typepad.com/

photos/uncategorized/nervous.gif