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November 17-30, 2007


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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.




(Quotes from Ed in Red)


Fri, 30 Nov 2007



I go to mostly cash about 3 weeks ago. I close my 2 remaining short positions 3 days ago because I do not have a system. I want to complete the TSP and feel the market is a distraction at this time. I want to focus my efforts on TSP and developing my own system.

I am in the now with my 2 sons this morning. I turn on the TV for my son. I peak in on CNBC. I see the market is up for the 4th day in a row. I start to feel anxious about <missed opportunity>.

My wife takes the boys to play group. I have an opportunity to explore <missed opportunity>. The AHA comes when I realize that <missed opportunity> is <envy> in disguise. I am envious because I project that everyone else is making money while I am standing on the side lines.

I see in the past that envy has caused me to trade compulsively. I lose money because "I don't want to miss the move." Losing money causes more envy. Repeat the process.

Because I have been denying / unwilling to feel envy, I create a drama (losing money), which demands that I feel more envy.

Looking back through my life I realize that one of my biggest allies has been persistence. In believe persistence comes from envy. The positive intention of envy has been to make me work for that which I desire.

I would rather feel envy and use its positive intentions to complete the TSP. Someday I will experience its form.

Thank you for sharing your process.


To explore and find out how to apply your theory, you might consider taking your issue to Tribe.






In some circles it's one of the

seven deadly sins.



like all our feelings,

it has a positive intention.



Clip: http://digitalart.org/art/41311/


Fri, 30 Nov 2007


Exponential Moving Averages



After sending my previous email, I read up on your "comparing exponential and moving averages" TSP section. You state in this section the (N+1)/2 convention equates a simple moving average to an exponential one in the rare circumstances of a steady ramping price series.


A trading system that uses a dual exponential crossover and ATR volatility position sizing on the SP500 does not seem like one of these rare circumstances. Ed, is this an oversight, or am I missing something?

The TC = (EAT + 1) / 2 convention is an attempt to achieve a measure of equivalence between two different operators, namely the exponential lag and the moving average.


The N-day moving average is one N-th of the sum of the last N day's values.


The exponential lag with a time constant of N moves one N-th of the way toward the target (latest price) in every interval.


The word "Average" in the phrase "Exponential Average" is a misnomer. EA is not an average of anything in particular.  It is exactly a lag, with a precise meaning in science and engineering. The math that supports the exponential lag includes natural logarithms and Euler's constant, e.  You cannot compute EA by summing up some historical price and then dividing.  You do this to compute MA.


EA and MA rarely have the same value.


The exception is in the case of a ramping market, one that rises (or falls) by the same amount each day. In this case, EA and MA can track each other.


Even in this case, an exponential lag with a time constant of N tracks about 1/2 as fast as a moving average of N days.


To further extend, justify and memorialize the misnomer, we can actually find a value for TC such that the EA(TC) tracks MA(EAT) in ramping markets. This is the convention above.


TC = (EAT + 1) / 2


The motivation for the convention seems to be a patch to try to make some sense of calling an exponential lag an exponential average.


In actual practice, we rarely mix exponential lags with moving averages 


As long as you stay with one or the other, and if you define what you mean, the conversion convention rarely comes into play except as a curiosity and example of the kind of mis-communication that can occur between traders and scientists.


Note: when you review some one else's back-test results, be sure to find out the exact definitions for the operators the programmer employs.

Fri, 30 Nov 2007


TT Workshop Follow-Up

Dear Ed:


Thank you for the work you do.


In the few months I'm involved with a Tribe and the Workshop thinks go incredibly well.


The Fund I manage is up substantially compared against my benchmark and my peers.


My relationship with my kids is much better as well.


We successfully complete 2 Rock process in our Tribe meetings. I want to share an interesting story. This month (November) I made good money being short the markets. The week of Thanksgiving I created a drama which made me decide to close all my positions. I'm in cash for the rest of the month as the market rallies. Net result, I have a very good month. I guess Intentions = Results.

Thanks again Ed.

Thank you for sharing your process.

Fri, 30 Nov, 2007


Errors in TSP



As I start working through the TSP, I believe I notice a discrepancy with how you compute the Time Constant for an exponential lag.

The text directly below is copied from your "System Math" word document that shows the convention of adding 1 to the moving average time and dividing by 2 to get the time constant. Hehe, now that I notice it, there also seems to be a spelling mistake in the word exponential below: : )


Also: Delay, Low-Pass Filter, Exponential "Average"

Lag t = Lag t-1 +

(Price t – Lag t-1) / ExponentialTimeConstant;

ExponentiualTimeConstant =

(MovingAverageTime + 1 ) / 2

The following is from your http://www.seykota.com/tribe/


tutorial page:

Say you compute your 10-day Exponential average once per day. That makes dt = 1 day and TC = 10 days.

Nice catch !


Thank you for spotting the spelling issue and the ambiguity in the definition of EA TC.


I am making the following adjustments.


Exponentuial ==> Exponential.

10-day ==> 10-day TC.


I also add some notes for clarification.


Please check the items to confirm them are now clear.

Thu, 29 Nov 2007

System Math



I am having difficulty understanding the following formula:

Instantaneously Compounding Annual Growth Rate

ICAGR = ln(Ratio)/ DateRangeInYears

Ratio = EndValue / StartValue

DateRangeInYears = (EndDate – StartDate) / 365.25

For an account that goes from $1,000.00 to $1,210.00 in two years:

ICAGR = ln(1.21) / 2 = .19062036 / 2 ~ 9.531 %

The part I am having difficulty with is how the 1n(1.21) = .19062036. I don’t understand how the “1n” is being used in the equation. Could you elaborate further? Thanks.

The natural logarithm of 1.21 is .19062036.


The abbreviation for natural logarithm is ln.


ln(1.21) = .19062036.

Thu, 29 Nov 2007


Issue Cover for Dec 1st 2007

see previous: Der Spiegel



I'll never forget your lesson on reading magazines. We went to your Incline village post office box and picked up a cardboard box full of your accumulated mail. "I'll show you how I read magazines." You pulled each issue out, tore off the cover and threw the bulk of the book into another pile destined for the trash and kept the covers.

Here's one for you...

The Economist: Issue Cover for Dec  1st 2007


Clip: http://economist.com/printedition/



Thank you for the catch.




December 2007 Euro Currency




March 2008 Dollar Index


Red Circles

indicate the appearance

of dollar covers

on Der Spiegel

and on The Economist


Thu, 29 Nov 2007


Experience of Waiting - Helps Trading

see previous: Wants to Attend

Dear Ed:

Thank you for your most recent reply. The day after I receive your answer to my first e-mail I start to think about the positive intentions of waiting.


I get several AHA’s along the way. One has to wait for good things in life. The process from birth to death is one long wait. Our parents wait for us to be born then train us from childhood to become good citizens and thereafter wait for twenty plus years to determine the outcome of their leadership at home.


Keeping a relaxed atmosphere at home and waiting / allowing the child to grow helps the child attain right livelihood as an adult. One has to wait for the right person to get married to otherwise it can lead to a rocky relationship. After getting a ticket this year for running a red light at a photo enforced traffic signal, I now wait at traffic signals religiously because that is the right thing to do and also saves money.

Yesterday, I used the idea of waiting for the right setup to trade profitably.


Stock indexes gapped higher and the risk of buying at the open was huge but during the day the 15-min chart gave a nice low volatility upside breakout trade with the trend that worked well. Your advice to feel the feelings about waiting kept my urge to take discretionary trades in check all day. Indeed, the idea of waiting for something makes it more exciting.

What a brilliant recommendation to solve my problem

Ed. Thank you.

Thank you for sharing your process.




A Mermaid


is a girl

worth wading for.



Clip: http://myfishysite.vegard2.no/mermaid.jpg

Thu, 29 Nov 2007

Goldman and Gold, Man

Hi Ed,

This might interest you, Goldman are circulating their Top trades for 2008.

You might notice # 3 to sell Gold Short (I note that no indication of where to stop out is made).

TRADE #3: Go short Gold (in US$), in order to fade the escalation in financial risks (and benefit from a stabilization in the US $). Expected return: +15-20%
As our readers may recall, we went long Gold in our Top 10 list for 2006. At the time, gold was trading at around US$500, and ended the year at US$650. We would now use a short exposure in Gold, expressed in US Dollars, to capitalize on a gradual relaxation of credit concerns in the financial sector over the coming months, and as an avenue to benefit from the prospect of a stabilization in the US Dollar, supported by a front-loaded Fed easing campaign (which would lower the chances of recession), and further improvement of the trade balance.


May I point out I am not endorsing this strategy, I wondered if this sort of Investment bank marketing material was useful in gauging the stage we are in the psychological environment (see attached from your site) in the Gold trend.

Thank you for the information.


I notice the recommendation rests on fundamental analysis and attempts to predict the future, not on trend-following. 


I also notice the recommendation does not mention a protective stop above the market.

Wed, 28 Nov 2007


Dynamic Portfolio Selection with MACD


Hello Ed,

A very amazing aspect of human learning is it is very much like asking a question into a crystal ball (or the ether, or the collective consciousness).

I seem to always have a knack for answering my own questions, as long as I keep asking and then patiently waiting for the answer to come.

Asking the questions seems easy, patience is usually the controlling factor.

I put a piece of the puzzle together concerning the Dynamic Portfolio module. Interestingly, I have read about this technique many times but never put 2 and 2 together.

One possible method is the use of a filter “signal” running against all of your possible markets.

This filter signal would have two states – “GREEN” and “RED”.

When the filter signal is in a “GREEN” state, if the “child” strategy entry signal fires, this market is entered,

When the filter signal is in a “RED” state, if the “child” strategy entry signal fires, this signal is always ignored.

The simplest example is a MACD dynamic portfolio manager.

Let’s say you wanted to have a short frequency trend following system only enter when a longer period trend appears to be in motion.

Make the MACD averages longer then your look-back period for a breakout system.

Only enter long strategy signals when the fast moving average (MACD Portfolio Manager) is above the slow moving average and in a diverging state. The reverse for a short entry.

There are other possibilities.

In theory, this now limits how many markets you are actually “in” from a margin requirement standpoint, and preferentially guides your returns so you do not “dilute” your returns with less than ideal trades.

Where do you think Einstein received his E=MC2 AHA’s from? Is it the Collective Unconscious? Or is there still yet another “provider”?

Someday I would like to work to uncover a new, unique trading idea. I hope to share it with you and you call it your own.

You might consider running your MACD system to see how it works.


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


That is, the attempt to "predict" the crossover relies on using a third average and this average acts to delay, rather than predict the signal information.

Wed, 28 Nov 2007



see previous: Day Trading



Upon reading the other contributor's report about his impatience to wait, I reflect on my experience with discretionary trading. I find it makes a lot more sense to trade always in the direction of the long term trend.


In order to have an idea of the prevailing trend, I look at long term charts, beginning with the monthly, then the weekly. The daily chart I use for entry / exit timing. Well, that's the basic plan.


In real trading, however, there are the emotional issues such as 1) impatience to wait for a good setup in the "intermediate" trend, which could be the weekly charts, for instance; 2) the tendency of being "sucked in" by emotional swings out of short term price action, such as in the daily chart; 3) the desire to predict market direction when, in reality, "the trend is your friend, until it ends" always, every time, for every trade.

Thank you for sharing your process.

Wed, 28 Nov 2007

Post Workshop Observations

Recovers after Whipsaw

Greetings Ed,

I have mentioned in a previous post that I seem to get less agitated and less grumpy these days when certain annoying situations arise.

Partly, I would think, due to my experiences at the recent Reno Workshop. As an example of the above please refer to NG.

I am long this stock and unfortunately on this occasion things don't go my way and I experience huge huge slippage in attempting an exit.

Of course it is upsetting for me to lose money on this one, but I don't freak out about it (or kick the dog)
I acknowledge that these thing happen from time to time and I'm cool.

Fortunately for me my investment in NG is a small fraction of my trading account and although it is a small setback, I'm not out of the game.

The thing that I note is that back in the 'olden days' I would get really pissed off that i took this hit.
Now my attitude is, "ok, I don't like what has happened but it has happened so I move on."





Thank you for sharing your process.






Wed, 28 Nov 2007

On Diversification of Lag parameters

within the EA Crossover System

Hi Ed,

Thank you for posting the very interesting & most fascinating FAQ's re: "Associates Program-Diversification of Lag parameters" (Tues. 27 Nov. 2007 and Tues. 27 Nov. 2007 again).

Although I am not a member of the associates program, I will have a crack at it anyway as I want to see for myself whether this sort of diversification does indeed lead to improvements. Basically these FAQ posts have me intrigued so I want to have a 'go'.

Some time back I complete the original TSP diversification study on HG copper & Crude oil using the 2 different systems (i.e. EMA and S/R systems) and I am able to confirm to myself that doing this adds considerable value.

QUESTION: Can I get the same 'added-value' when I diversify amongst parameters within the SAME system?

My attempt to solve this question is shown below;

Firstly before I present any results and comments, I want to include my attempt at the TSP EA crossover system, for the reasons given below.

My results for this are contained in the attached file named "325_85 Results SP500 only.zip"

From the results file I am able to match exactly your entry/exit dates & entry/exit prices and I am able to match your profit and loss figures as well as your trade position sizes in every case except the last one, where due to slight rounding errors my code trades 56 lots of S&P500 whereas your coding trades 55 lots of S&P500.


Everything else is correct. (I'm not using Excel to program, hence the slight variation . . . I guess)
I include the above to show that my coding is in line with yours (rounding errors not withstanding) and there are no major errors.

o.k. back to the original question.

To test this out I will select the same system parameters and the same risk parameters as per your TSP for the S&P

These parameters are:
a) System 1
Risk per trade=10%
ATR multiplier=5
ATR averging time=20

b) System 2
Risk per trade=10%
ATR multiplier=5
ATR averging time=20

Instead of applying these systems to the S&P, I will instead select a broadly diversified (and to my mind, non-correlated) group of 12 commodities which I will call portfolio A.

I will trade long only, keeping in line with the TSP
I will test these systems on back-adjusted continuous contracts (as per TSP) from 1980 up until end of 2006. (i.e. no new entries are allowed beyond end 2006, however if a trade is open at the end of 2006 I will allow it to continue until it is exited via the normal system logic)

The test Portfolio A consists of;

British Pound
Crude Oil
Japanese Yen
Live cattle
US T-Bonds

I will use the same risk parameters as above but I will start with an initial account size of $2,000,000.00. I do this since when I test the two systems above traded together as one system I want to make sure all trades are taken since each system when traded together will be risking 5% per trade (i.e. 2 systems at 5% each is the same as one system at 10%).

So just so there is no confusion, I test System1 at 10% risk then another test using System2 at 10% risk and then another, third, test of a combined System 1 and 2 at 5% risk EACH.

My detailed results & graphs for these 3 tests are attached in zip files. (please refer to these if you wish)



To simply summarize the test results;

a) System 1 results (@10% risk per trade)
Profit=$673 million
CLOSED equity drawdown = 69.4%

MAR (i.e. bliss) = 0.34

b) System 2 results (@10% risk per trade)
Profit=$993 million
CLOSED equity drawdown = 56.3%

MAR (i.e. bliss) = 0.44

c) Combo System 1 & System 2 results (@5% risk per trade for each system)
Profit=$1558 million (i.e. $1.558 billion)
CLOSED equity drawdown = 45.9%

MAR (i.e. bliss) = 0.59


So from my results, I am able to conclude that by simply trading a combo of two systems with different Lag parameters at half the risk per system I can greatly improve the results, especially the risk adjusted results, when compared to trading either one of the systems by themselves.

I suspect that adding another one or two extra systems each with different parameters to the two already shown above will improve results again. (i.e. trade 4 systems each with different lag parameters but with 2.5% risk each). I will look into this further.

I also suspect that the above procedure could be implemented with the S/R system for improved results as well. I will look into this further.

I suspect the ultimate combo would be 4 (or whatever) EMA systems traded in combination with 4 (whatever) S/R systems and traded with . . . . etc etc etc. I will also look into this further. (of course the limitation is enough money to be able to take all trades . . . . "Hey brother can you spare a . . . . few million bucks?")

My comments and observations re: the above are as follows;

a) No allowance has been made for initial margin costs. Naturally when these costs are taken into account there will be less money available in the account & hence position size will be much less, leading to more conservative results figures.

b) I have allowed for a maximum position size limit of 5000 lots per commodity traded. Of course this is unrealistic since with this kind of size you would be moving the market considerably as you tried to get in and out ( I suspect in Coffee, Cattle & Palladium you would BE the market)

c) No short trades were taken, had shorts been taken in addition to Longs I suspect Profits would have been greater but drawdowns (maybe) more so. (Another one for me to test)

d) Personally, the risk used (i.e. 10%) is far too great for me. I wouldn't be operating anywhere near these levels. I would be more comfortable somewhere around the 1% mark. So, this is a definitely a psychological aspect that could be studied further by me.

e) My preferred account size for trading a diversified group of futures is $2million. This allows me to take all trades on offer and to minimise the risk of ruin (provided risk is contained at the 1% or less level of course)

f) My total Portfolio heat for these tests is 100%, meaning that at certain times 100% of my account is in play and at risk. My personal preference is around the 30-50% mark. This is another psychological aspect that could be studied further by me.

g) Note that the average annual returns over a 26 year period are around the mid 20% mark.
This is why I find it difficult to believe trade magazine adverts promising 100%+ returns year in year out.
My current belief system supports the idea that an average 20-25% return per annum on entire account (year in year out, ON AVERAGE) is a d--n good return.
I am open to the possibility that I'm placing a hard limit in front of me though.

h) There has been no attempt made to optimize (curve fit?) for the best parameters for Portfolio A. I have simply chosen the 2 parameter sets as found in the TSP exercises for the EA crossover system and gone with these. Obviously different (better?) results would be found using the optimization process.



Thanks again Ed for the excellent FAQ posts and the opportunity for me to get off my derrière and get something done & to learn something new


PS. Further to my previous post I have decided to make some realistic assumptions regarding trading 2 versions of the same EMA system, but with different lag parameters for each system

My new assumptions are;

1) Allow initial margin to be $5000.00 per commodity.

2) Allow risk per trade to be 2% (i.e. System 1 will trade at 2% risk, system 2 will also trade at 2% risk and Combined System 1 & 2 will trade at 1% each for a total of 2% total)

3) Allow portfolio heat to be maximum 50% (which I would never cross BTW since portfolio A consists of 12 commodities at 2% risk per trade = 24% total portfolio heat max). It means I could add a few more different commodities into the mix and still be under my heat levels. Another test for another time.

4) Allow the maximum position size to NOT exceed 100 lots (ie contracts) per commodity

5) Trading long only

6) Trading Portfolio A (as per previous post)

7) Test period stays the same i.e. 1980-2006

8) Initial account size remains the same at $2 million



To summarize the new more conservative test results;

a) System 1 results (@2% risk per trade)
Profit=$19.12 million
CLOSED equity drawdown = 20.3%
MAR (i.e. bliss) = 0.44

b) System 2 results (@2% risk per trade)
Profit=$26.01 million
CLOSED equity drawdown = 20.23%
MAR (i.e. bliss) = 0.49

c) Combo System 1 & System 2 results (@1% risk per trade for each system)
Profit=$29.44 million
CLOSED equity drawdown = 11.85%
MAR (i.e. bliss) = 0.88 (nice!! . . . for me that is)


Once again I am able to conclude that by simply trading a combo of two systems with different Lag parameters at half the risk per system I can greatly improve the results when compared to trading either one of the systems by themselves.

Once again there has been no attempt made to optimize (curve fit?) for the best parameters for Portfolio A. I have simply chosen the 2 parameter sets as found in the TSP exercises for the EA crossover system

Personally I would trade the short side as well, so that’s yet another test for me to do.

Cheers once again,

Nice Job !


Thank you for sharing your research into Lag Parameter Diversification.

Wed, 28 Nov 2007

Portfolio Optimization / Filtering

Good Day Ed,

After reviewing and programming a few trend following systems I have realized that, above all else, the portfolio you use for selecting stock picks from is crucial.


You say it yourself in one of your TSP pages. I know you do not provide specifics surrounding trading systems; however, what concepts could I apply to selecting a portfolio of US equities?

I think what I mean to say is that I need a way to filter trade entry signals. If, for example, my trading system is based on all liquid US equities with $1,000,000 daily cash flow and it generates 100+ signals in a given trading day you have to select a subset of the overall candidates. What concepts could you provide me with that would assist me in this all important task?

Some of my ideas of trade signal filtering:

1. price today - N days (or months) ago price.
2. If an ema system, select the highest N ranked % yearly roc signals.
3. lowest volatility (Have you seen any correlation between periods of low volatility and smooth price trending either up or down?)

Your feedback is greatly appreciated.

You might consider running some tests on various ways to pre-screen trades and reporting back to FAQ.

Wed, 28 Nov 2007


Whipsaw Song

Dear Mr. Seykota,

wishfully waiting for an public audio/video version of the "Whipsaw Song", I take comfort in this:


Do you like it?

Perhaps we are seeing the birth of a genre.

28 Nov 2007

E8 - Theory of Everything


This may interest you:





Surfer dude stuns physicists

with theory of everything

Sometimes everything is nothing.

Wed, 28 Nov 2007

Original Research Results

TSP SR with ATR Overlay

Hi Ed,

Please find two excel worksheets as attachments with the results of my research. This simulation is the TSP SR with an ATR-multiple as a stop for open positions.

Graph 1 shows how MAR changes over different ATR-multiples and heats.

Graph 2 shows the performance of the system with the optimal ATR-multiple and heat.



Graph 1




Graph 2


Nice Job !


You might consider annotating your equity curve chart (not showing) with a system description and a list of what instruments you are trading.


I notice your Bliss Function comes in at around 0.17.  This is approximately the same MAR you get with a buy and hold strategy on an index fund.


Your MAR = f(ATR) curve shows the addition of the ATR fast get-out rule decreases performance for ATR values below 6.  Six ATR gives a relatively distant stop, so the experiment indicates the ATR rule works best when it does not kick in.


For values between 6 and 10 I observe a small improvement in MAR.  I suspect this follows from one or two special situation trades.  You might consider identifying these special situations.


The MAR = f (Heat) curve shows a fairly smooth curve with a optimal zone between .03 and .06.  The lower end of this range likely delivers much less volatility so you might consider pitching your trading nearer the lower end.


I'd like to see more information about how you select what is in the portfolio and how you define Heat.




Wed, 28 Nov 2007


Turtle System Test - Using ATR

see previous

In my system, stop loss distance for sizing contracts is 2 * 20-day ATR. Stop loss actually changes as the units of risk change with the pyramiding.

This is all very similar to sizing algorithms in the TSP modules for the Exponential and Breakout strategies.

I have also programmed this into [softward] and run this against a host of markets. I have taken the results of all the markets and calculated a Bliss function using the MAR Equation (ACAGR/PDD).

Without slippage, this looks like a great strategy. With slippage this is a losing or poor strategy when run on the host markets over a long duration.


Coincidentally, the 1980’s (Turtle Era) is when this performs the best!

I am unsure as to why I would want to trade this on only the strategies that appear to give the best results. The reason is even losing markets have periods of profit or good MAR. This is a deep issue, one that crosses many things. I don’t expect an answer here, this is at least a 2 hour conversation for me!

I have not tried to optimize this, because I am not really ready yet. This requires me to acquire or develop a testing system that allows me to optimize against a host of markets all at the same time.

Also, I feel there is more to this than just optimizing this strategy. Part of the 2-hour (or 2-day) conversation is I believe that it is not particularly useful to get too far down a singular calculation / optimization.

One must decide which markets the optimization should be conducted against. Should it be a “stress” type test against every data source one has, or should it be a “trading” specific test against the markets one wants to actually trade. I feel both.

Then the problem gets more complex. What if one has two strategies and each has a set of markets that are going to be traded against. How should this be optimized? Individually and then only the % of Fund allocation to each strategy changed. Or collectively, both strategies parameters being cycled and the % Fund allocation varied as well to see the MAR of the FUND? Again, I think both to see the results and then decide. This is a lot of work and takes some software that I do not have yet.

Other “Tasks” I have completed. (I Use the word “I” here loosely, this is actually a combined effort of mine and ... my brother.)

I have written a “Genetic Optimization” program that can take multiple strategies and multiple markets and compute MAR of a Fund by varying both the percent allocation of each market (within a strategy) and the percent allocation of each strategy (within a Fund). I am not advocating this is even a wise thing to do. It was a fun and thoughtful exercise to learn about portfolio diversification. It is also rewarding to see Propagation, Mutation, and Random Selection work inside a computer to find an optimal solution testing only 15% of the brute force possibilities while still finding the correct answer.

I have a “Test Results” database system that can take the results of many strategy / market performance tests and print / compare / roll up the results. These are trade level entries. The system is both operational and parts still under development. The Charts ... come from it. Attached is another sample report. Don’t believe the results just yet.

I also have developed a “Price Database”. The price database acquires daily prices of many markets and constructs continuous contracts. The Price Database can be linked to the “Test Results” database. Now, the Test Results database can compile / model Daily Equity Change and MAR of a Fund using Daily change (Realized and Unrealized). The Price Database also feeds the “Operational Trading” system with the continuous contract data.

I also have developed an “Operational Database” where daily signals are issued by an Operational Trading System and the trade is sized according to allocation rules, an order is created for a broker, “synthetic” orders are also created, and a history of trades is collected. The system has “Clients” and a full accounting process that “pools” orders, distributes profits / losses accordingly to each account, calculates / tracks performance fees, etc. and can also print monthly statements by account. It logs all trades for any post-mortem analysis one wishes to conduct.

[My brother] and I are both proficient in relational database design / programming so this is an explanation of why we did this.


It is an exercise in trying to understand all aspects of a trading business before trying to trade.


I think the trading system design may be the easiest part of a trading business, but the one that seems to attract all the focus, attention, agony and glory. We had a very rewarding experience visiting with [trader] in his office and seeing all the individual parts in action. He [uses commercial accounting software] ... he also had his own custom parts that handled price data, strategy operation, etc. I get good satisfaction from realizing that we figured it out by thinking / talking over a 4 year period, and mostly in a vacuum of real traders / CTAs.

Suffice it to say I am not your “normal” or typical Tribe member. It matters little to me whether I am, I just get up each day and do what I feel I need to do, or hopefully, want to do. ALL of the work above was partly inspired by the TSP program or the Resources Section. I really thank you.

Besides this work, there are more fundamental, and hence more important issues involved. For these, I REALLY thank you.

I feel my background / experience as a business owner, as a consultant in a highly emotional and volatile field, and as a cancer patient provide me with certain capabilities that may be helpful to you and the TSP program.


I fully admit I am not always the most easiest or fun person to be around (I am working on it for those that need it and I wish to help with their / my needs).


I feel there is a chance we may develop an even more mutually beneficial relationship. I know this chance is pretty rare in my life. The best way for this chance to bare fruit is for me to visit with you face to face. There are a few more issues of intention, trust and understanding that I must reach before I can really commit. If your mulling leads you to the same conclusion, please let me know where I can meet you. I will gladly come to Incline Village or anywhere else you prefer to meet.

You might consider taking your feelings about <uncertainty> to Tribe.


I am open for you to visit me in Incline.  I have software that can back-test / optimize a system on a portfolio level.



Graphic Illustrating Uncertainty


inadvertently defines

the "expected price"

of crude oil

is $18.00


Clip: http://www.puc-rio.br/marco.ind/


Wed, 28 Nov 2007


Junk Mail Recommendation

We know that it's the big announcements that make small cap companies move. Many of these issues are so Tightly Held that when Buzz starts to build they can see 100% appreciation in a very short time.

We have our eye on one company that is set to make just such a splash: DAVN

Currrent Prrice:          $0.30
Shorrt-Terrm Tarrget: $0.65
Long-Terrm Tarrget:   $0.90

I wonder if the double rr's in your junk mail indicate trrepidation.





The tout piece

neglects to mention

the price drop from $2,400.00

to $0.30.


Wed, 28 Nov 2007


Wants to Attend Incline Village Tribe Meeting

see Day Trading, below

Dear Ed:

I trust all is well. At our Trading Tribe meeting today, I expressed to our Chief a desire to attend the December 13, 2007 meeting at Incline Village. He did recommend that I could go to the meeting. Hence, I seek your permission to attend that meeting.

I would appreciate your thoughts on this matter.

See the requirements for attending IVTT as a visitor on the Tribe Directory page, link above.


You might further prepare by writing FAQ with a description of your experience of waiting.

Tue, 27 Nov 2007


Day Trading

Dear Ed:

I feel privileged to have met you at the [City] Tribe meeting last Sunday. I was very impressed with your tremendous all round knowledge and humble appearance.

It's unfortunate that there was not enough time for you to address my discretionary trading problem and offer solutions to get rid of them completely. I saw you work so skillfully with [Names] and they seemed to be at ease after their hot seat was over.

Discretionary trading has taken away $[amount] of my day trading profits this year. I am still up $[amount].

I am running my system at 20% efficiency and mixing it with discretionary trading and still winning more than I could ever imagine. I am the typical trader who gets rid of winning positions quickly and let's losses run.

I need to locate that devil within me that makes me do all the bad things in trading.


Once I fix myself and follow my system exclusively I can reach the financial freedom and earn a livelihood that will allow me to take vacations with my family which has been missing from my life. You see I am the owner / operator of a tax and account service, check cashing and ... money transfer outfit for over 20 years and have found it very difficult to find time for vacations or attend to my godly parents in [Country] when they were dying. I forcibly made time to travel back home to perform their last rites. Trading for a living does give you the flexibility to take off whenever you want.

My business did give me the free time I needed to study markets and buy robust market indicators that work well in real time.

I feel you are the only person who can fix me and would be grateful if you can provide any further guidance in this matter. I have addressed my problem in Tribe meetings twice already and have taken the hot seat but my ... Tribe members are not as experienced in TTP as you are and it could take several meetings to locate my problem and being a day trader I find it hard to wait that long.

Once again I thank you and [Name] for driving down from [City] and showing us how to effectively conduct a Trading Tribe meeting.

Best Regards,

Thank you  for sharing your process.


You might consider taking your feelings about <waiting> to Tribe.







Ways to Wait















Tue, 27 Nov 2007


TT Site Hard to Navigate



I notice that your site is somewhat hard to navigate. For example, some pages have links to the Associates Program, others don't. I have found things on the site in the non-existing past that I am unable to find a few months later. There is some really interesting stuff about rocks processes that describe members' experiences, FAQ style, that disappeared. Maybe Ed removes them, maybe I'm dense. Right now (it's always right now, isn't it?) I click Search This Site, whose title page lists three links that I don't find on the Home Page: Risk Management, Fractals & Borderlines and Pollinators.

The principle reason I go to Search This Site is to look for the application form you ask me to complete. No joy.

Please support me in telling me that I'm not really a stupid, ignorant, incompetent, illiterate, bass-ackwards, aging, dilapidated, dysfunctional, unworthy, unlovable, loathsome, miserable, insufferable, foolish waste of God's green protoplasm who can't get the VCR to stop blinking 12:00 and who do I think I am yammering on about VCRs when everyone else has TIVO in this digital age, yada yada, and so what if Microsoft says Click Start To Turn Off Computer, what did you think they'd say, Click Stop???

But I digress. Is there really a link to the form?


Thank you for reporting ways to improve the site.


Please check it again and tell me any specific problems that remain.

Tue, 27 Nov 2007


TT Associates Research Project

Back-Testing a Turtle System



This is a trading strategy I programmed last summer. I found a document that described this strategy on the Internet. It is a "version" of the original Turtle strategy (20-day breakout with alternating profit test, 55-day breakout failsafe) including the 4 "levels" of scaling / pyramiding. It does not include slippage :) .

I find it is sometimes helpful to program my strategies in both Excel and whatever other simulation software in order to "match to the penny" and know I have it programmed correctly in my operational or simulation software.

Thank you for your work on this project

As I go over your spreadsheet and graph, I am not clear on a some things. Perhaps you can help me understand.

The exponentially increasing graph seems to indicate some degree of compounding.  When I look at the spreadsheet, I see positions stay within a range from -4 to +4 contracts.

I wonder if you have a computation for Bliss or for MAR or some measure of risk-normal return.

I wonder if you are running some tests with different values of the key parameters to find optimal values.

I wonder what effect you might find if you include some form of transaction cost / skid.

Tue, 27 Nov 2007


Cape Town Tribe


Dear Ed,

Attached is my Trading Tribe Information Document.



Welcome !


Cape Town

South Africa


Mon, 26 Nov 2007

[City] Tribe Report

Accessing the Dark Side with Virtual Drugs




This is a summary of my process at [City[ Tribe.

Ed makes his first visit to the [City] tribe and upon request of the local Chief, agrees to take over the leadership role for this meeting, so the hosting tribe can see how it's done at the IV tribe.

Ed mentions that The Setup is key, in tribe as in trading, and toward that end he probes each of us more deeply during the check in than we might be used to, looking for who's hot and who's not.

When it's my turn I begin the litany of complaints with my signature "I Don't Know" routine, with emphasis this week on not knowing how to navigate the techno-overload of today's Brave New World, feeling stupid about it, feeling incompetent to manage ever the "simple" affairs of life, like weight control, having just regained twenty pounds of a hard won forty pound loss. Ed asks when the weight gain started and I say three months ago. We go back and forth a little about "who says" I need to lose weight, how do I know I'm not at my perfect weight right now, etc., and I reply that my weight is not the issue; lack of control is the issue. He looks for a possible connection between my eating and the break up with my anorexic ex-girlfriend and I claim no connection, the "ex" factor having occurred months before the binge begins.

I resume my whining. I feel that I've wasted my life with non-productivity and aimless drifting. I say I'd like to try the Rocks Process but I don't feel "qualified," I'm not sure I'm hot enough, I don't know if I've done enough tribe prep work to be "ready" for the next level. I suggest that this has been a life-long pattern, staying in my comfort zone, holding myself in check instead of climbing Maslow's Hierarchy of Needs all the way to Self-Actualization, that I'd really like to push through to a life of greater spirituality, but I'm afraid of the dark side of Spirit. I talk about the dangers of the Ouiji Board, the occult, the "demonic possession" of a State certified schizophrenic aunt, the influence of religious instruction in my youth RE: Satan and his power. I claim that my drug experimentation in the seventies, which was supposed to lead to spiritual enlightenment, left me paralyzed with fear of the dark spirits at the periphery of my psyche instead. It has been almost a forty year battle now to keep the poltergeists from getting in and taking over, but with each passing year there are fewer and fewer attempts by the demons to possess me. The last "near-miss" was three months ago.

About the time I started eating medicinally again, Ed observes. He asks me to describe the feeling of attempted take over by the bad guys. The closest I can come is to say it's like getting butterflies in my stomach before going on stage. Eating stuffs the feelings associated with the fear.

I say it's my intent to attend Ed's next Breath Workshop but I know from reading Grof that the process induces LSD-like episodes and those are the very episodes I have spent four decades trying to hold at bay. I say I don't care anymore; I want to go there and confront the paralyzing paranoia.

Ed speaks of his association with Grof, of the major differences they have in their respective approaches to breath work, and asks me if I am willing to feel the dark side.

At this moment I feel the same cold, electric, ball-shrinking tingle of risk and apprehension that I felt that night in 1970 when I began my final mescaline / hashish-through-a-Pink Cataba-waterpipe disappearing act. I say I'm willing.

Ed tells me to ingest a virtual (imaginary) serving of mescaline. I swallow the virtual hit and begin the process. Ed asks me to go into the feeling of the dark side. I try to induce the butterflies but they don't come. I start to do a couple of minor forms and the tribe encourages me to get into it. I rock a little bit and when they say More of that, I get more animated but I announce that paranoia paralyzes, and this is not paralysis. I freeze the motion and squeeze my head in a hand vice, trying to simultaneously force the dark side to the surface and yet to subdue its power. Ed says More of that and I squeeze till I'm red in the face with effort. The blood in my head, the maximum squinting of my eyes and the pressure of the vice changes the color of my inner world to darkness and I take this as a proxy for the Invasion of the Body Snatchers and let myself feel the dark. This leads back to the rocking. With each upward thrust, light comes in; with each downward plunge, dark returns. At one point the dark takes on a different hue. I become subdued and announce that it's very dark inside now, but I feel safe with unknown, willing to explore. I deliberately stroke the edges of the wooden chair I sit on. This has specific meaning for me and requires explanation. I tell the tribe that as a fighter pilot in the seventies, I would become gripped with fear when the Dark One started to take over my mind in the cockpit. I knew that ejecting supersonic had a 98% fatality expectation, and, of course, like the moth to the flame, the more I tried not to think about it, the more I thought about it.

Ed tells me to go through the ejection procedure. I pull the handles and squeeze the triggers. "Do it again." Pull, squeeze; pull squeeze. Now the tribe piles on and I'm pulling and squeezing like the out of control crazy man I've always been afraid I'll become. Ed says Take it all the way. When the ache of exercise is carried to full term I convert the movement into one of slinging the energy off my fingers like so much slimy snot. Ed says Smile! Enjoy the Dark Side! I make my lips pretend to like it and pretty soon the slinging becomes the Butterfly Stroke and I'm pulling myself through Mach 1, Mach 2, now I'm surfing through the unknown at Warp 8, grinning, gurgling with laughter, digging the Brilliance. The Butterfly evolves from rapid strokes into deep pulls whose intent is merely to sustain the trip. I know I've broken through to the zero point now and I sit still but keep my eyes closed and tell the tribe that I'm done but that I want to stay in the moment and enjoy the glide back in.

When I open my eyes Ed asks me what the positive intention of the dark side is. I say it's to protect me from Danger that lurks in the Unknown. I say Life is a process: day becomes night becomes day; dark becomes light becomes dark. It's okay, even fun, exciting and rewarding to go into the dark. Fear is just another morsel in the Smorgasbord of emotions, there to be tasted, enjoyed, savored as part of the feast, part of the process.

Thanks for your help Ed. Thanks, [City].

Thank you for sharing your process.





is the main active ingredient

in peyote, a small, grey-brown cactus

that grows in Mexico and Texas.


Note: The US Comprehensive Drug Abuse Prevention and Control Act, the Canadian Controlled Drugs and Substances Act and the international Convention on Psychotropic Substances all prohibit the use of Mescaline as a Schedule hallucinogen.


At this point there is no prohibition against imagining using it.


Clip: http://toxquebec.com/livre_drogues/


Tue, 27 Nov 2007




Why do we experience anxiety? Why is it that high anxiety can make people physically sick?

FAQ does not answer "why" questions. See ground rules.


You might consider sharing your own process with anxiety and physical illness.

Tue, 27 Nov 2007


Associates Program

Diversification of Lag Parameters

see previous


My own research with diversifying time frames across break out systems shows results similar to those you mention.

My research shows performance drop off with short time frames, as execution costs start to dominate the results. I see interesting results with very long time frames.

I view the phase shift and cancellation of component waves as not dissimilar to that achieved by diversifying across markets.

I intend to get the research underway and, when I have something to discuss, confer with you.

This may take a week or two, as I schedule it around my other activities.

I appreciate your encouragement.

Thank you for participating in the Associate Program.

Tue, 27 Nov 2007


Changes Life with Small Tribe

Hi Ed!

Time goes fast. It was a long time since I last wrote to FAQ. I print out and read every post on TTP FAQ so I rather write to you once in a while.

I have really changed my life the last year.


The problems I had with sticking to something are now changed into more will power. At the same time I experience the feeling "boring" much more often nowadays. I just accept it like everything else.


I recall one of the statements on the "resources"-page regarding how it feels to live in the now. I think it was ... something like - "boring it's not ... and continued with a couple of examples of how it is to live with observation on a high level. I think it can be really boring but I don't have a problem with it, but it is an unusual feeling for me. Before I was digging deep into my fridgebefore I felt that.


No more food medication.

I also stay on track on my trading models. Some are loosing while others are doing just fine. If feels good to have several. My own feedback of wanting to override the rules are good indicators of seeing over the system.

We are still only two persons in our tribe. I am so happy that I have a friend who is looking for development as much as I am. We have seen each other for two years now (every month) and it's still only the two of us.


That is something to think about for those who have a hard time starting a tribe. It works even though you're only two.


We are looking for more people but nobody has shown up yet. I wonder if they are equally dedicated their systems as they are with showing up. We are still curious of how it would work if more people joined.

Many of my feelings are nowadays regarding how it feels to live a life without much flexibility. To work hard, exercise, stay on the path, take care of the family, try to enjoy the everyday life as much as I can. I can feel it is getting easier to enjoy the now moment and different situations. I am more open to speak about our tribe techniques and what it has given to me. I am really advertising.

Thanks for listening.

Thank you for sharing your process.






who are open to growth

can form a small tribe.



Clip: http://img.123greetings.com/eventsnew/


Tue, 27 Nov 2007


TT Associate - Original Research

Diversification of Lag Parameters

Hello Ed,

Yes this makes sense.

My understanding of the normalization check is that inspecting if {S&T}(L0) = {S}L0 allows us to be sure the system, and system heat, is not altered.

I believe it follows that the position size for each component (S & T) is ½ of that for S alone.

I am willing to proceed ...

I thank you for the TT web site, I find it a valuable, and unique, resource.

Thank you for contributing to TSP.

I think you are on to something and I think you have a good grasp of the situation.

My own researches show some improvement in Bliss by splitting the account into sub accounts and then diversifying the sub accounts by fanning out the the moving average averaging times, exponential average time constants, Support / Resistance line lengths, etc.

The profits tend to be about the same while the drawdowns become less severe due to phase shift & cancellation of the component waves.

I'd like you to consider presenting the research in a format such that I can post it to TSP as another module that extends the knowledge base.

Mon, 26 Nov 2007


Tribe Meeting - Making Decisions
Ed Visits [City] Tribe 11/25/07


First, I thank you for visiting the [City] Tribe on Sunday 25 November. During your visit, I enjoy learning from your example how better to process manage, encouraging others in the processes you manage for them, and experiencing the processes you manage for me.

Second, I thank you for demonstrating for our Tribe the Decision Process.

As you may recall, at check-in, you help me experience my confusion regarding which career best accords with my right livelihood: writing, trading, both, or neither. Later in the meeting, I volunteer to work the Decision Process between writing and trading.

To begin, you ask me to hold out my hands and I do so. You ask me to choose one hand as a basket for writing and the other for trading. I deliberate, then decide trading belongs in my left hand and writing in my right.

You then ask me to charge my right hand with everything about writing, pleasant or unpleasant, that is stored in my body. You continue a patter (" ... constructing characters plots ... ") while I do so. I see pages of text in my word processor screen and I feel the hesitations I feel many days before I start to work, along with the joy of peak working moments when a sense of flow filled me.

After a time, you ask, "Is everything about writing in your right hand?"

I close my eyes. "Yes. I feel a pleasant tingle in it."

You repeat the question. My reply the second time is simply, "Yes."

You then ask me to close my right hand. I do so, loosely.

You then ask me to charge my left hand with everything about trading, pleasant or unpleasant, that is stored in my body. You continue a patter (" ... margins leverage ... ") while I do so. I see my broker's internet interface and I recall my father's unsuccessful trading ventures and my unwillingness to experience my wife's occasional annoyance that I have committed money to trade. I feel pride and certainty that I have found a system that back-tested well and that works in live, real-time trading.

After a time, you ask, "Is everything about trading in your left hand?"

I close my eyes. "Yes. My fingers feel stiff."

You repeat the question. My reply the second time is simply, "Yes."

You then ask me to close my left hand. I do so, loosely.

You say, "Now hold your hands in front of you, like this." I open my eyes. You hold your hands open in front of you about two feet apart, palms facing each other and fingers wide. "Now move your hands together, slowly. Is there any pressure or resistance?"

"No." My hands move easily toward each other. I wonder if I am doing something wrong. My hands interdigitate.

You ask, "Is everything about writing and trading in your hands?"

"Yes. I feel a warmth circulating in the third and fourth fingers of both hands."

You repeat the question. My reply the second time is simply, "Yes."

You then ask me to keep my hands interdigitated, bring them to my chest, and hold them there. I experience a pleasant feeling in my chest.

You ask, "Do you enjoy this? Are you willing to smile?"

The corners of my mouth lift and the muscles around my eyes tighten in a smile, but my attention is mostly on my hands and chest. You ask again and smile more fully.

You ask, "Are you a writer or a trader?"

Still smiling, I reply, "I'm both."

Finally, you ask me to separate my hands and return all the things about writing and trading that I charged into my hands to their normal storage places in my body. I do so. We then check out.

Later, after the meeting, I meet my wife and my mother for dinner and then at a grocery store. I feel things in my subconscious have shifted, perhaps like an ice pack breaking up. My wife asks, "Are you okay? You're staring into space."

"I'm still processing the meeting," I tell her.

The biggest change I have noticed so far today is that I have chosen not to check my trading positions and equity yet today. In the past, I have typically checked my trading positions and equity two or three times a day prior to implementing my system in the early evening. I will observe myself to see if I continue to choose not to check my trading positions and equity and what feelings come up in choosing to check or not check.

Third, I thank you for describing the Rocks Process. In the meeting, as you describe the Rocks Process, I feel irritation that you spend time discussing something that I have read on FAQ and other pages of your site. I then realize that others in my Tribe may not have read about the Rocks Process and the irritation fades away.

As you may recall, in the meeting a number of us recognize that even if our conscious minds know something to be true, our sub consciousnesses may not have integrated it into our complete personalities.

Last night, I dream. I am in the grocery store and faced with a decision between two products (two types of olive oil, one with a white label, the other with a yellow label). Under the dream's ground rules, I have a Medicinal Rock which urges me to choose the white label olive oil. Instead, I reach for a bottle of the yellow label olive oil and I feel a moment of unease as the pent-up energy of the Medicinal Rock tries to ground itself.

In reality, in the grocery store about eleven hours before I dream, I choose the yellow label olive oil with no unease at all.

Thank you for sharing your process.






may reduce day-trading.



Clip: http://moblog.co.uk/blogs/306/thumbs/




Mon, 26 Nov 2007


US Dollar #2

see previous

Hi Ed,

I notice quite a bit of ‘TV coverage’ on the dollar story this morning on this side of the water, please see below.



Thank you for the URL.

Mon, 26 Nov 2007


Trading with Smaller Accounts

Hi Ed,

In recent years, what's the minimum trading capital requirements to get decent risk / reward ratios ?

In the US, the minimum account might be one cent.  Decency is up to you to define.




How to make 10,000 %


The trader trades his penny

and gets a toothpick in return.


He then finds a man

with some popcorn between his teeth

and trades the toothpick

for a $1.01.


The round turn nets him

a profit of $1.00

or 100 times his initial capital

for a 10,000% profit.






is typically a reflection

of the judgments

of the beholder.










Sun, 25 Nov 2007


Medicating Sadness

Hi Ed,

Reading some of the FAQs regarding the rock process, it seems a lot of our gut reaction has to do with "medicating sadness."

From observation, it also seems that happiness and sadness are two ends of the spectrum, that it is innate to us to 1) pursue happiness and 2) avoid sadness.

It seems that in vast majority of cases, we learn ineffective ways to deal with sadness from our childhood. Now we get older, we try to use the Rock Process to reprogram such that we can deal with sadness more effectively.

I wonder if it is more efficient if we can learn the effective ways in the first place, so that we don't need the Rock Process later on to "unlearn" it. If so, can you suggest some ways we may learn how to deal with sadness effectively? Or if it is too late as an adult, what are some ways to help a child learn how to deal with sadness effectively?

You might consider taking your own issues about <sadness> to Tribe.


When you come to know the positive intentions of sadness and when you come to develop pro-active resources for responding to sadness, you automatically become a role model for your child.




Three Sisters


mourn the loss of their brother.



Clip: http://sabbah.biz/mt/archives/2005/


Sun, 25 Nov 2007


Studying Oneself

Ed says, "If you wish to trade for a living you might consider studying yourself."

Can you please provide some ways to do so?

One way is per the illustration below. Another is to take your questions to Tribe.




Self Examination


by the DIM

(Do It Myself)



As iron sharpens iron,

so one man sharpens another.
Proverbs 27:17 (NIV)


Clip: http://www.bbc.co.uk/radio1/


Sun, 25 Nov 2007


Associate Program - A couple AHA's.

1) General - a mentor does not know the answer to everything, but a mentor is able to listen to a mentee and understand the block. A successful mentor is then able to help the mentee unblock and maybe even have their own "aha."

2) Personal - I admit I am a funny mentalist at heart. I love to discover "surpriseamentals" and make great profits. I became aware of a fantastic supriseamental opportunity in 2005 known as "the global real estate / credit bubble."

I finally make huge profits this September, October, and November (2007) when the surpriseamentals become widely recognized by other market participants. But I lost even greater money trying to guess when the surpriseamentals would become recognized by the "crowd" between 2005 and 2007.

I have a horrifying "aha" this afternoon, where I realize that a simple technical system following price in the particular "supriseamental prone" securities (100+) I have been tracking since 2005 could have done the work for me.

I become more fearful when I realize that I took greater enjoyment from "predicting" these surpriseamentals than I did from making the "huge" profits that came as a result. My AHA is to ask myself what game am I playing? And am I playing to "win"?

Thank you for sharing your process.


Helping others typically rewards the helper in surprising ways.

Sun, 25 Nov 2007


Looking for Something #2

see previous




Ed Says: At this point, your ideal mate, reflecting you, might be somewhere out there, looking for (and being careful not to find) you.

Things doesn't happen the way I wish to when I find an "ideal" mate, or otherwise the ideal mate finds me. I am not sure about what my role is in this setup, other than languishing in loneliness, and complaining to others and writing FAQ about it. I cannot and I don't want to control somebody who is looking for (and being careful not to find) me.

P.S.: How could you get it? You've indeed become a "wizard".

You might consider joining or forming a Tribe so you can implement TTP.

Sun, 25 Nov 2007


TT Associate - Diversifying Across Lags

Defining an Original Research Project



I see there is a TSP module that discusses diversification across markets.

How about diversification across time frames of a system? For example run a simple system with parameters a and b. Concurrently run the same system with parameters c and d, such that each system tends to capture trends in different time frames.

There may be a connection with the proposed module “Optimizing a Trend System”. However the difference is that rather than trying to find the optimal parameters we are investigating combining (possibly) sub-optimal parameters to see if it improves performance over a single parameter result. The optimal parameters are only known with hindsight.

If this is not suitable I am open to an idea of your choice.

Thank you for your interest in TSP.


Note: see links above for information on TSP and the Associates Program.

I like your idea: diversify a portfolio by creating sub-systems with various values for the system response lag.

To demonstrate the lag-diversification principle,
you might consider taking an optimal system, S from TSP - and then diversifying it with another test system T.

You can then try various values for one of the lags in T, say L. Then you can examine the contour of bliss results for values of L to see if any B{S&T}(L) surpasses B{S}(L0) by itself.

As a normalization check for inadvertent alteration of the system, check that the solution for L = L0 duplicates the original optimal S solution. In this case you are running the sum of two identical half-systems.

Let me know if this makes sense to you
and if you are willing to proceed.

If so, I would suggest we communicate by phone
or in person to further define the testing plan.

Sat, 24 Nov 2007


Looking for Something

Ed, I was watching this movie at




and thinking about something I have been looking for: a pretty, receptive, friendly and easy-going girl. I also would like her to be a bit introverted: I like introverted women.

But then, watching this video reminds me of events in the past and that also tell me something about the present time: there is something between me and my desire.


Perhaps it could be lack of entitlement ... Whatever I notice wishing to have or be someone is not the same as having or being what we desire.


Do you think this tension of not having or being what we wish to is part of the creation process?

Thank you for sharing your process.


You might consider taking your feelings about <looking for something> to Tribe.


At this point, your ideal mate, reflecting you, might be somewhere out there, looking for (and being careful not to find) you. 

Sat, 24 Nov 2007


The Dollar Might be Ready to Turn

Hallo Ed,


Dies ist die wichtigste wöchentliche Zeitschrift in Deutschland.

Noch eine Woche und dann steigt der Dollar?



The Dive of the Dollar


Thank you for sending me the cover, the first such on a major weekly about the recent dollar decline. 


When the move is near full discount you might see similar covers appearing on The Economist, Forbes, US News, People Magazine, Rolling Stone, etc.




The Rise in the Euro


Thu, 22 Nov 2007


Happy Thanksgiving Day


I am thankful for your work and support.

Happy Thanksgiving Day to you and your family.

Thank you for your encouragement.

Fri, 23 Nov 2007


How to Become a Millionaire

Hi Ed,

In my younger days I used to actively collect coins & to a much much lesser extent, Banknotes.

I still have an interest in numismatics even to this day.

I mention this because upon seeing your nice collection of German Weimar Republic Banknotes (at the Workshop) I was prompted to start a small collection of Banknotes (for my own interest and amusement) focusing strictly on the Banknotes associated with Countries that have gone through a Hyper-Inflationary phase during the last 100 years or so.

To my surprise, I have found that at least 30 different countries have had the experience of serious triple digit (or more) Hyper-Inflation - and this is in the 20th century only! (so much for a small collection).

My favorite notes are the 500 Billion Dinara note from Yugoslavia (1993) which, at the time, could have bought you a nice lunch (but only if you were frugal) and, wait for it, the 100 Million Billion Pengo note from Hungary (1945).




Yugoslavian 500 B Dinara Note



Hungarian 100 M B Pengo Note


See http://www.milliondollarbabies.com/  for further info.

Who says you can’t be a millionaire, or billionaire or trillionaire?

I note that the current trend in the Money Supply figures in many of today's Countries (especially the Anglo countries & China) seems to be on the up.

I therefore anticipate, in the next few years, adding some of these 21st Century Banknotes to my collection as well.

Thank you for your notes.


Paper currency rests on agreements that people make about its value.  When people question that agreement, the value can change.




Yogi Berra (May 12, 1925 - )


Yogi says:


 a verbal contract

isn't worth the paper it's written on.



Clip: http://redbirdnation.blogspot.com/


Wed, 21 Nov 2007

Tight Rope #2


see previous

Hi Ed,

Our equity curve makes an all-time high and I feel my walking on a tight rope form.


I go with it. I start to see that my habitual response to this is to fall, that way I don't have to feel the uncertainty that goes along with a profession like trading.


I go with it some more. I see that the positive intention is to remind me that there's risk out there that I need to navigate. In fact, my job as a discretionary trader is a tight rope walker. That's what I get paid to do.


I go with it some more. I'm going from one building to another, navigating the uncertainty in between. I notice that my head is arced back, looking at the sky. What's this? I don't want to see the uncertainty. I immediately drop everything and determine my risk on all of my open positions. Its a lot, almost 1/3 of my equity. I freeze up. Now I'm walking the rope but only looking down. I feel paralyzed.


I decide to reframe it. Now I'm walking the rope, with my eyes on the other building, well aware of my downside. I'm no longer afraid of the risk because I see that its worth it and these are well thought out positions. For the first time I actually see myself getting to the other side. It feels great.

Thank you for sharing your process.


You might consider taking your feelings of <paralysis> to Tribe.




Sometimes the Eyes Lead


and the body follows.



Clip: http://reformingstudents.files.wordpress.com/


Wed, 21 Nov 2007

Right Livelihood & Juggling


Is it possible to find Right Livelihood as a juggler?





Thank you for sending the URL.


This juggler seems to have some talent as a percussionist.

Wed, 21 Nov 2007


Funny-Mental Trading & Inner Knowing

Hi Ed,

Let me share a recent experience.

I was fully in one stock. I knew I shouldn't have been but I couldn't help be believe all the hype. The technical looked great as well. I justified to my-self I should be fully loaded up one this stock going into earnings.

I had a dream one night. The stock gapped down. I had this awful feeling in my gut the morning after and wondered if my subconscious was trying to tell me something. Whilst driving a little voice kept telling me to lighten my position. I kept justifying being 100% in to my-self and told my-self to ignore this little voice. I knew I was doing wrong but I refused to listen to logic. I guess greed was a bigger factor?

Everyone was convinced the stock was going to gap up on earning and be up 50% in three months. People were telling others what they were going to buy with the profits. This was another red flag to me. Again the voice told me if everyone was so overly bullish get out … or at least lighten your position. I knew I should have done this but again I refused to listen to my common sense.

The stock gapped down 20% before it opened the next day on missed earnings. I felt sick. How could I have been so stupid? I thought I was above this. I get out at the open and licked my wounds. Whilst it was painful loss … I felt I was taught a big lesson. I was gambling and whilst I took a 15% loss on my total portfolio that one day at least I live to fight another day. I hope I have learned my lesson and I NEVER repeat this again in my investing career.

There really is no such thing as a sure thing in the stock market. I knew this, yet I acted like this was the one exception. Lesson learnt.

Thank you for sharing your process.


You might consider taking your feelings about <loading up> to Tribe.


If you still have a k-not about any of the feelings that relate to this incident, you might still have a tendency to repeat the cycle.


Getting clear may help you to distinguish between intuition and into-wishing.




FRE Fall


Wed, 21 Nov 2007


Volatility #2

see: volatility


Ed Says: 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 high ATR and zero volatility.

When you say, "You can have a 'high ATR'", do you mean a "high ATR" if we are comparing several securities and their respective ATR/Price ratio? I feel that in order to classify an ATR as "High" we need to compare the ATR to something in order to define it as "High".

PS. Standard deviation never sat well with my gut. For me, the ATR/Price ratio seems to more easily lend itself to gut understanding of a security's volatility. I tend to think in terms of "The ATR/Price ratio is telling me this security is going up and down by 5% of its price on average (IE. using a basis of N days)."

PPS. Do you ever chat with Mr. Sharpe about his ratio and its merits as a risk/reward measure?

I see a number of issues with the Black-Scholes Model.


One is that you can have arbitrarily high ATR and zero volatility.


Another is that, by using the 20 day moving average, you can register a volatility event today from an expiring price spike twenty days ago.

Tue, 20 Nov 2007


My Experience with TSP modules

Hi Ed:

I am calm now, but will try my best to recall what
happens when I work on the Trading Systems Project.

I am a beginner in the Associates Program. Many times I click on the TSP link,



with a goal of completing the Resources section.

I look through the first two Word documents on math. I know these; read them many times; even print and file them so it is official I start the program.

Next, I click on Exponential Lags, and read. Again, I am here many times; the words make sense; I have a car bumper; I know what you mean.

Then, I see the formula and I get angry. It reminds me of being little when I am at school, and I see something for the first time that I don't understand. I get tense, then angry, and often cry because I know other kids get it and I don't. I try not to cry; I do my best to hold back; this always makes it worse as I finally break down in sobs.

I look at the formula again and again. I tell myself to calm down; I tell myself, "I can do this." I actually say these words out loud.

Then, I get angry, really, really mad. I think, "Why can't he just speak English, so I can get this?!"

All other times, I quit right here. I allow myself to wait and try again later. But, today is different. I feel like if I can't finish the TSP modules, then I might as well quit trading and forget all this stuff.

I allow myself to cry; sob like a little child. This is how I know it reminds me of when I was little. A light bulb comes on because I recall getting older, and braver, and able to accomplish many difficult things.

I go back to the formula and write it down on paper.
I then go to the spreadsheet (Spreadsheet Computation for Exponential Average) and stare at the numbers. I just focus on the numbers until I finally see a pattern. It is only after seeing the pattern does the formula make sense. I plug the numbers in, and YES the formula works!

I am happy I get it, but a deep sadness rushes over me. I wonder why I have to make my life so difficult.

Thank you for all the work you do, and for creating the materials and atmosphere to help me learn so much about myself.

Thank you for sharing your process.




People Who Take Math

an / or programming issues

to Tribe


typically discover


that once their feelings come out,


they magically know the solution.



Just For Fun









Mon, 19 Nov 2007


Father and Son (II)

see previous


Thank you for posting the link to a touching story of
Father and Son. A 65 father and a 43 son stick to
their life principles and work together to make their
life better. I feel moved and my eyes get wet.



Video Link: http://bluesequoia.multiply.com/




Mon, 19 Nov 2007


Right Livelihood and Cutting Losses


I own and operate a successful [retail franchise] for 3 years and I have the business up for sale for approximately 11 months now. My knowledge and passion of trading grows everyday while my disdain and disgust at being the franchisee of a person I learn is quite a shameful, dishonest, stifling franchisor, makes me sick to my stomach.


My involvement with the daily operations of this business feels like a thorn in my mind as I delve deeper into system development and research.

Since my Father is the guarantor of the franchise, I feel as if I am in a trap. I cannot simply walk away since my family is my highest priority and will suffer drastic financial consequences if I let the business fail, and I also feel that I cannot continue full steam ahead with my trading research or personal life for that matter. I am 25 years old and feel as though I am wasting my youth on unproductive activities that are not in alignment with my right livelihood.

This franchise experience aids in my growth tremendously and has made me a better business person. But I feel a need to move on now, and it seems that I cannot do this swiftly enough for my needs.

AHA, after writing the above, it seems as though I may not be willing to experience the emotions of dropping the sale price for the store enough to entrain a swift sale!!!


Hmmm, seems like trend following at its finest: take a small loss on the sale price, and do more of what's working and feels like right livelihood.

Thank you for sharing your process and for your insights about changing careers..


Many people seem to get an aha that solves their problem while they write to FAQ.




Ideas Flow


out of the willingness

to experience your feelings

about your problem.


Clip: http://www.binary-infotech.com/blog/


Mon, 19 Nov 2007


Tight Rope

So I switched from selling the ES to the ER2 for the trade I told you about last week. I'm still riding the majority. This is currently one of my best trades of the year. That brings up a scary thought.

I have a very strong intuitive feel for the markets that I watch. However, I haven't even started to work through my k-nots. I feel that the combination gives me a highly effective ability to blow myself up if the drama of the week calls for it. I feel that as a discretionary trader, I'm walking on a tight rope. I'll have to bring <walking on a tight rope> to the tribe.

Thank you for being so willing to share the process. If there's anyway I can help you broadcast it to the world, please let me know.

PS - walking on a tight rope form comes on viciously. I recognize that I feel this often without being aware of it.


Thank you for sharing your process.




Willingness to Experience


being on the tightrope

assists in traversing the path.



Clip: http://homepage.psy.utexas.edu/


Mon, 19 Nov 2007



Hi Ed!

I would like to share some thoughts with you I am experiencing throughout today.

You may recall in some of our earlier conversions that it is my intention to take much of the wisdom, insights and knowledge I get in our relationship and “pass it on.” 


I want to clarify I do not mean the any of the actual contents or subjects of our conversations but the way in which you have show me to receive, commit, support and to listen.

I am currently “actively” mentoring an individual based on my experiences with you, he seems to be experiencing greater clarity, awareness and happiness, he also enjoys incredible career progress since we started.


The relationship is very similar in that he knows he can contact me 24/7 and I am willing receive whatever comes up.

I notice one of your remarkable gifts is to simplify processes with clarity. In trading you once responded to a question about your trading rules the answer still resonates around global trading houses (Cut Losses, Ride Winners, Keep bets small, Follow rules without question, know when to break the rules).

I wonder if you might share any clarity on successful mentoring processes, you appear to have mentored many wonderful people whom have gone on to achieve incredible successes both in business and personally, I am most interested in any insights you might have on successful mentoring.

Right now I recall you saying you don’t tell people what they should or should not do many times in our conversations, you also work with those whom show “willing” and pass on the ones whom are unwilling.

Thank you for sharing your process.


Mentoring others is an excellent way to keep learning.




In the Mentoring Process


sometimes you lift

sometimes you climb

and sometimes you are the star.


Clip: http://www.pwcs.edu/curriculum/


Mon, 19 Nov 2007


Breath Work


A couple of years ago I had a great opportunity to take part in a breath work seminar with 4 other people I worked with it was a great experience.


Since than I have had many good things happen in my life buy getting rid of some of the guilt feelings and releasing some old negative thoughts. I would like to be able to do the breath work again also my wife Tracy is interested too.

Do you have any upcoming dates for a breath work class?

I host a Breath Work Weekend from time to time, generally in response to demand.




Secret to a Long Life


Keep Breathing


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


Sat, 17 Nov 2007


Passive Aggressive

Hi Ed,

I am passive-aggressive all my life. Of course, I came across this idea many times before, but now for some reason, I have no doubt that this is me all the way. When I look back and realize what I actually did so many times (being p/a) instead of what I thought I was doing (doing the right thing), I see my behavior clearly and the symptoms cry out loud: “passive aggressive”. How did I managed to escape the realization and the impact I made on others with my illusions of self? It’s crazy.

This is the truth about me and it terrifies me – especially the fact that I missed this feeling/insight earlier.

I pray to God so I can heal one day.

Speaking of God – God bless you for helping others.

Thank you for sharing your process.


Passive-Aggressive is not a feeling.  It is a set of Rock responses that may medicate deeper feelings.


You might consider taking your feelings of <terror> to Tribe.



Terror-Proof Travel


Clip: http://plancksconstant.org/blog1/image2/


Sat, 17 Nov 2007



Dear Ed,

What is volatility?

Does a High ATR value mean that price is volatile?


Volatility refers to the amount of change per time period.


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.

Sat, 17 Nov 2007


Tribe Meeting at Incline Village


Who needs Valium when they've got TTP? Thank you for going to the hot seat, for feeling your feelings publicly, for holding yourself out as an example, and for accepting the Process Manager's, and the Tribe's, support.


You might enjoy remembering that we support you in your successes as well as in your frustrations.

Thank you for your integrity as Process Manager during the snapshot episode.

Thank you for inviting the surprise mystery guest to attend the meeting.

Thank you for your selfless service.

Thank you for your encouragement.


In TTP, the Tribe leader's active participation on the hot seat is particularly essential.



The Hot Seat


It's the place to be,

with no ifs ands or butts.





Hot Seat


for people who are going places.









Tue, 09 Oct 2007




I see a is a quote attributed to you and I wonder if it is real.

The legendary trader Ed Seykota once claimed he could decide to purchase an asset by sticking the chart on the wall and looking at it from across the room. If the uptrend was apparent from that far away, it was strong enough to buy. As our three-year chart of Monsanto shows, the grain rally is one of those "I can see it from across the room" charts.

I recall saying you can stand the chart up against the back of a chair. The Stick-it-on-the-wall idea is a modification that would seem to give similar results.