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September 11 - 20, 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 exit any positions.

 

 

Questions

(Quotes from Ed in Red)

Answers

Thu, 20 Sep 2007

 

Father and Son Discuss Trading

 

Son to Father - 9/20/07


Today I lost $400 on Silver by carelessly entering a order for 10000 units instead of 100 units. I looked at the order form for 100 units closed it. Then reopened and entered a limit order between the bid and ask prices.

 

The problem was when you open an order book the default unit amount is 10000 units. I entered the order waited 15 seconds and then saw the order was filled ... at 10000 units it opened $435 down. I panicked and immediately market closed it out taking the loss.

 

I still believe the trade was the right trade to make based on my system and the chart but I felt horrible. I was f---ing furious at myself for my carelessness.

 

Embarrassed, I repeated the same mistake I'd made almost exactly 3 years ago. I can't remember being that mad in years. If I had not been at work I would have screamed as loud as I f---ing could. I wanted to fight someone right there.

 

Pretty funny now that I think about it. The worst part was letting my dad down 3 days after he trusted me with his money made me feel pretty stupid, I also have some guilt over trading money that's not mine because I feel like I have no emotional attachment to it and losing this money in such an idiotic way increased the guilt.

 

I may get back into the silver trade tomorrow but right now I feel I need to clear my head. I'm ready for the weekend. This was a good learning experience - I will triple check all orders and watch my unit size especially with commodities and have changed the default unit size to 100 units even though now thinking about that now it would still be insanely f---ing dangerous with gold. I'm ready for the weekend - cash the check and I'm sorry.

 

Father to Son 9/20/07


Thank you for sharing your feelings about this with me. Good job on feeling this. It is kind of like that story that Ed tells about the golfer that played in college with Tiger Woods who moves to Phoenix after being in the Incline Village tribe.

 

After about 6 months, he has become known as The guy to see if you need to get your psychology straight about your golf game. One day he is playing golf with the number one junior golfer in the world, and the kid bogeys the first hole. He tells the kid that if he can not resist but can fully experience all of the feelings associated with making a bogey then he will have an opportunity to shoot the best score of his life.

 

The kid ends up shooting a 63 for that round, one stroke off of the course record --- and the best round of his life. 


Love,


Dad

Thank you for sharing your process.

 

You might consider taking your feelings about <being furious> and <formalizing your agreements about dealing with errors> to your Tribe as  entry points.

 

 

 

Father and Son

 

passing the craft.

 

 

Clip: http://www.hbo.com/docs/programs/

fatherson/index.html

 

 

Thu, 20 Sep 2007

 

Learning to Trade - Wants to Add On to Position


Ed,


Today, I have another very big up day. My account, after just 4 weeks of trading (the first week I could not get my account open and I did not buy into the wheat move when I might have) is up very close to 200%. Amazing. And I know that it does not always happen like this, and I do know that it did happen like this this time. I am so pleased by this.
 

Tomorrow, I plan to study the charts and determine whether there is a good place for me to add on to any of my positions.

 

This, I think, is the area of study I like to explore next -- how to add on to positions to create huge winners.

Thank you for sharing your process.

 

A 200% gain is, by many standards, already a huge winner.

 

You might consider checking your risk numbers,

and back-testing your ideas before you try to medicate your feelings of invincibility and greed by employing the moron (more-on) rule.

 

For every more-on, there must eventually be an equal and opposite more-off.

Fri, 21 Sep 2007


Confirming Attendance To Workshop



Hi Ed,

I have mailed to you my registration details.

When you receive the above, could you please confirm my place at the Workshop via return email, together with any other relevant details.

As far as Peppermill's cuisine is concerned, please put me on the list for Vegetarian meals.

OK. that is all, . . . . see you on the 19th Oct. (and again on the 25th Oct. at the IV tribe meeting)

OK.

Thu, 20 Sep 2007

 

The Fed Acts

 

Ed,

 

What do you think about the recent Fed actions?

 

The Fed is implementing the medicinal response to the fear of a credit implosion: namely, applying even more of the credit drug.

 

Heroin addicts face systemic resistance to getting off the drug.  Our culture has an advancing credit addiction.

 

The pro-active response is to allow the economic system to cleanse itself and to support people in experiencing their feelings.

 

 

 

Bernanke Buck

 

Graph shows the dollar index.

 

In parts of the US

we are consuming capital

to meet operating expenses. 

 

In parts of the world,

people are saving money,

and creating capital.

 

Recent actions by the Fed

are accelerating a weakening

of the US dollar

against other assets.

 

 

Clip: http://www.telegraph.co.uk/money/

main.jhtml?xml=/money/2007/09/19/

bcnsaudi119.xml&CMP=ILC-mostviewedbox

Thu, 20 Sep 2007

 

Jurassic Park and Wall Street Follow-Up

see previous

 

Ed,

 

I do not see the reference that you mention.

 However, I can relate to your thinking in that my own personal inflation is more a function of expanding my food supply. Being industrious and productive tends to be deflationary.

Thanks for wondering how I interpret such a report into my trading. I simply accept and enjoy the fact that every moment of my life informs my trading.

All the best,

The item:

That meant that most of China's prodigious savings had to be exported or the nation's interest rate structure would have been under sustained downward pressure, which would have triggered inflation.

Thu, 20 Sep 2007

Trading Improvements


Hi Ed,

I want to share my trading experience over the last week or so. First, I now realize that I created a system and rules that allow me to have Drama.

 

It/me were great at that, but not profits. The system requires lots of intra-day maneuvers and was short-term. Before exposure to your FAQ and TTP processes I was breaking many rules and not following the system. This worked very well at drama creation and draw down.

In the time since I last wrote, I gained an awareness of this just by reading the web site and I have followed rules better. I am also reworking the system based on what I am learning with intent of drama-less profits. One pattern that I was repeating was to have an exit hit (stop loss usually) and then to just reenter with in a minute or so. The reentry almost always went against me and I would feel or try to feel a range of Feelings. Anger, Fear, Rage, Confusion, Contempt, Frustration …

Now I am following the system and feeling feelings and just noticing them without taking action other than to write about it in a journal.

 

I had 3 stops hit since I last wrote and I did not reenter any of them. When the 1st one happened I felt anger at first (“I wanted this to win, not be a loss, this makes me mad”) and an urge to reenter it, but I just took a breath picked up a pencil and wrote about feeling angry, then sad and then fearful it would move without me and then about feeling OK and then glad I was following my rules. The next few stops seemed about the same but easier. This feels great, I am so happy I found you and the TTP, thank you!


I know I have knots and medicine rocks to deal with and other system rules that I may need to follow better. Also if the knot is there and knot untied, I feel I will do similar things to create the drama. I just stepped onto the TTP path and started to move forward and intend to keep building momentum. Just wanted to share my first trading improvements since finding you and your tribe members.

I notice there is no question here, so is that OK?

Or, alternatively:

Which came first the chicken or the short-term trader? :-)

Some playing you may like by Bela Fleck

http://www.youtube.com/watch?v=FXHOyqHzupk&mode=related&search=

Thanks for all your work.

Thank you for sharing your process. 

 

Willingness to experience your feelings about your system without acting on them is essential to system trading.

 

Bela Fleck is the man.  Everyone else is a banjo wannabe.

 

 

The Flecktones

 

Clip: http://bassnews.co.uk/bela-fleck-

the-flecktones-uk-shows/

Thu, 20 Sep 2007

 

Financial Freedom Comment


Dear Ed:

On 17 Sep you wrote to someone: "You might also like to consider the definition you have for of "financial freedom." Janis Lyn Joplin sings: Freedom's just another word for nothing left to lose...you might interpret having no mortgage, or salaries to meet, or taxes to pay, or debts or money in the bank as a form of freedom from finance."

A friend reminded me of those words from Janis, when I said I wanted financial freedom. It gave me pause for thought, and I realized that ultimate freedom is death, or the giving up of everything. A connection and / or relationship with things is necessary for continued existence...for life. Even a bird is not free from eating, or from avoiding predators.

Thanks

OK.

Thu, 20 Sep 2007

 

Steve Jobs Speaks Out



Dear Ed,

This is Steve Jobs' Stanford Commencement Speech 2005. It gives me goose bumps.


http://www.youtube.com/watch?v=D1R-jKKp3NA

OK.

 

Sometimes a drop-out drops back in.

Wed, 19 Sep 2007

 

Learning to Trade - Rolling Forward


Ed,

Today I get a call from my broker saying that I must take delivery of October crude oil if I do not close out the position today. The last time this happens I squenched up so much I almost bit a whole in my shorts and got a knot in my stomach. Today, I calmly tell him I want to execute a spread trade to roll the position to November and he gives me a quote which I have him execute at market.

 

I also tell him I want to cancel my GTC stop sell order for the Oct crude and enter a stop loss for the Nov position. Last time, I did not know I needed to cancel my stop loss order and two days later I learned that it was hit and I had a short position with just two hours left to trade (another situation where I felt my fight / lawyer emotions kick into gear). I think I told you the analogy once of the guys I know that worked in the oilfields and lost fingers and digits. Well I feel pretty lucky to have only lost a fingernail or two -- everything I have lost seems to grow right back.

So, after all of that non-drama it should be no surprise that I experience another huge up day today. At this point my account is up over 150% at Day 3 of Week 5 of this experiment. Wow! Feels good. Really, really good. And I know that tomorrow may be a big down day, but today I am up.

Thank you for sharing your process. 

 

Sometimes almost everything trends at the same time.  Sometimes they don't.

 

You might check to see what kind of gain you have if the market takes out all your stops.

 

 

Fish Travel in Schools

 

A Barracuda

 

may notice a fish

that does not conform

to the pattern

 

as part of the process

of removing the sick fish

and strengthening the herd.

 

Clip: http://www.fisherycrisis.com/

CO2/predators.htm

Wed, 19 Sep 2007

 

Feeling the Fear Again  - and Letting it Go
 


Ed,

The day before the Fed rate cut, my fund (US stocks only) is in a drawdown of 25% from its previous high, which was the date of the all-time high on the Dow. Trend identification has been pretty good, though the dramatic quick downdrafts that occurred in July (long) and August (short squeeze from the cut in the discount rate) have been impossible to catch. I have been leveraged long the market since Sep 4 and basically treading water, following my system and executing a few recommended stop-out trades using end-of-day data.

On the day of the Fed meeting I woke up early and ran through a few mental scenarios: “If they don’t cut rates, the market is bound to take a big hit-maybe 300-500 points, which is happening with greater regularity now”; “If they cut 25 bp, the market will probably still take a hit of some degree in a “sell on the news” reaction, since 25bp has been talked up for weeks now”. “If they were to only cut the discount rate, the market takes a big hit”. What should I do?

 

The answer for me was to go to my simulations for a period of time that is similar to this one on the charts and in the type of economic scenario of a credit crisis; 1998. I compared my current drawdown to that time and also to my overall 10 years of simulations and determined that I was still (at 25%) well within my simulated yearly drawdown expectation and much less than the drawdown of the same period in 1998; in fact I was still under the annual average drawdown expectation.

But fear of being wrong this time had begun to exert itself. I thought of just selling out and sitting in cash to avoid further losses.

 

In the end, I held my positions throughout the day and did not tune in CNBC to watch the drama that must have been unfolding like the countdown to a prisoner execution (I felt the fear that a prisoner facing his final moments must have felt).

 

There are a few reasons I was able to do this: First, I completely understood the psychological significance of the value of back-testing my system and I placed high value on the time and effort that went into those many hours and months. I reflected on the positive results that following my system in my own account had yielded in the past year. I also knew that if I abandoned my system out of fear of failure, then I was indeed admitting even greater failure, whether or not any action that I took might prevent further financial loss in the fund.

 

In the end, I freed myself from the fear and relied on a few personal life experiences in which I have persevered under even greater pressure.

You see, I am a former Air Force pilot and survived several combat situations over North Vietnam under surface-to-air missile attack and have experienced near-death feelings. It was my combat experiences, my training and time in a flight simulator that helped get me through.

 

I also have experienced the loss of my 19 year old son to suicide. Fear in the markets, while very real for all of us from time to time, can also be worked through. We live on, and we will feel fear again and again on other days as we come to realize its positive intention.

Thanks, Ed. I am certainly no expert and have much to learn about the markets. My main goal is to continue to better understand myself and how and why I function.

 

Your FAQ, others who write, and the many books I have read about traders who suffered fear and loss in the markets, but did not give up, have been greatly helpful.

Thank you for sharing your process.

 

 

 

A positive intention of fear is risk control.

 

Unwillingness to experience fear is risky.

 

 

Clip: http://www.defensetech.org/images/pilot.jpg

Wed, 19 Sep 2007

 

October 19, 2007 TTP Workshop Intentions

Dear Ed:

Thank you very much for your email. I'm excited to participate on the TTP Workshop. I read your book and some of the FAQ's I share my intentions for the workshop with the [City] Tribe, they are below.


Workshop Intentions

1) Get in touch with my emotions. I'm able to recognize the signals that Fred sends. In the surface I seem calm but as my wife kids me "Still waters run deep". I am more aware of my emotions thru the hot seat work we do in the Trading Tribe. Presently I like to deal with anger and sadness. My intention is that the workshop will help me feel my feelings and not judge and not try to hide them. I want to be more transparent with my feelings.

2) Live with Intention. No more "show up and see what happens" - reaction. Ed asks me what my intention for the Workshop is, I discuss it with the Tribe (as he suggested). This generates a very good conversation regarding the benefits of having an Intention. Most of the time I just "show up" without an intention. As I recognize that Intention = Results it becomes clear that I need to have an Intention for the things I do. I like my intentions to have Clarity and Certainty.

3) Create snapshot of Right Livelihood. I'm in good place right now but I want to discover what is possible. I want to challenge myself. What am I suppose to do? What is my legacy?

4) Hardball process - dissolving between me and being great. This is related to point 3 but I feel it must be a separate item as it is a process I want to master.

5) Learn the Rock Process to share with the Tribe. I'm eager to contribute to the Tribe by learning and sharing this new process with the Tribe.

6) Learn to be a better father. I can become a better father by listening to my children's emotions. It's my intent that the workshop will help me to better relate to my children.

OK.

Tue, 18 Sep 2007

 

Back Testing Multiple Instruments


Hi Ed,

I am still long GLD. The trend is up, so I'm staying in. I am working on a few different methods for adding to my position. I will send you my plan once I feel that I think things through.

Now that my TSP EA is complete for trading one instrument, I intend to extend it to trade multiple instruments.

I have a multi-instrument equity strategy that I would like to test with this system. I am working through the issues of trading a multiple instrument system. I am trying to figure out how to aggregate positions with different instruments and determine bet size. I don't see a way to use core equity with the TSP EA as there is no pre-determined stop in this system, so I might try a fixed-fraction or the ATR position sizing method in the exercise.

I would appreciate any comments you have on multi-instrument back-tests.

Thank you for your support.

You seem to be asking the right questions.

Tue, 18 Sep 2007

 

Learning to Trade - Good Ones Pay The Freight

see previous A Big Up Day


Ed,


Today my Dow Jones short position hits its stop and takes me out of the market at 13500 for a loss of $1910. I have been stopped out of Dow Jones twice, wheat once and British Pound once. And still I experience another huge up day today.

 

At this point my account is up over 130% at Day 3 of Week 5 of this experiment in learning to trade. I understand how amazing this is -- one (or two) good ones pay for them all!

 

I also am coming to an understanding that this is the system -- ebb and flows, up and down. I recall a line from a poem from my youth by Rudyard Kipling called IF: If you can meet with triumph and disaster and treat these two imposters just the same." I feel pleased and optimistic -- and very aware that tomorrow may be a down day.

 

I am also reminded of the Sufi story of the man and the horse -- "maybe yes, maybe no, it is hard to say, all I know is that today I am up."

 

For tomorrow, my plan is to sit tight on my stops and see what happens.

OK.

Tue, 18 Sep 2007

 

TTP Video Recording


Ed,

Periodically I review the pollinator pages and learn something new every time I go through them. Ed, I find the following curious:

Ed Says (From Pollinator Page: How to Run a Tribe Meeting)

I am trying various ways to get the work out there - the web site FAQ and the Pollinator pages. I think we might have a discussion about our last Tribe meeting. Maybe some day I can record an actual Tribe meeting although I have some concerns about recording maybe inhibiting some parts of the process.


I wonder how fast TTP would grow world-wide after posting even 1 or 2 live TTP sessions to the net, possibly with a brief introduction by you providing a general overview of the process.

 

This may really start the ball rolling with the videos serving as inspiration for people to find out more. I feel that there is too much junk out on the net regarding self-help and "emotional work/control", and that there is an authenticity to your work that is unparalleled which will immediately catch on for the people that are ready for it.

I am curious about your concern about inhibiting parts of the process if the session goes on record. I visualize you asking permission from various TTP participants to perform a TTP session on record and any feelings of hesitation that come up regarding the actual recording element of the session itself simply goes through the TTP process in the session as well as anything else that comes up.

I feel good knowing the fact that you exist and hope to see your work start a worldwide emotional revolution to help us all grow up.

Thank you for your comments.

 

You might consider taking your feelings of <having TTP on  tape> to your Tribe as an entry point.

 

 

Some Of The Forms That Appear in TTP

 

are highly personal.

 

Clip: http://drzaius.ics.uci.edu/mt3.14/

johannab/archives/aids_girl.jpg

Tue, 18 Sep 2007

 

Maui Tribe

 

Hi Ed,

We have a tribe in Maui. We meet once a week and it is going well. Regular attendance - two, sometimes a third person drops in. We are practicing sending and receiving, according to the script you wrote for a beginning tribe - thoughts, feelings, forms. Forms are most fun for me, both receiving and sending.

Attached is the contact information for our group. We want more people to participate, between six and nine. We appreciate if you can post our contact on your website.

Thank you for starting this work, it makes a big difference. It is a great way of living - being true to feelings and receiving other people the way they are or are not. Proficiency comes with practice and that is what we are doing here.

Also, do you plan to organize a breath work meeting or workshop ?. I am very interested in participating if you want to do it.

See the link above for information on the upcoming Workshop.

Tue, 18 Sep 2007

 

Associate Program Feedback

see previous: Risk Management


Ed,

Thanks for your comments and the nudge into the right direction. I intend to clarify my thoughts on the system, risk management and revert soon.

Regards,

OK.

Mon, 17 Sep 2007

 

Learning to Trade - Big Up Day

see previous - A Big Down Day


Ed,


On Monday I experience a big up day.

 

I am up all I was down on Friday plus half again as much.

 

My stop on the pound is hit and I am out. But, gold and crude are up big time. I find that in the 4 short weeks of this experiment my little account is up over 80%. Amazing.

 

Truly amazing, because I have had my stops hit a few times and had some pretty big losses. The interesting thing is today I feel happy but in a more pleased relaxed kind of way, like this is the system and this is the way the system works. Some days up, some days down, which days I don't know just that today I am up.

 

Another interesting thing happens this morning. I am reviewing my account and see that I am not only out of the pound but that I am negative or short 1 contract. I think this is unusual so I call my broker. They tell me that I have executed on my stop loss for my Sept pound position. I remind them of our conversation last week when we rolled over the Sep for the Dec and set up a new stop loss for the Dec.

 

They say that I did not say cancel the stop loss for Sep when I roll out to Dec. At first I am a little upset and go into lawyer mode on them. Then I realize that this is their system and I calm down. I ask questions about my options at this point and get clarification for how much this costs me because I have sold short a contract that is expiring and stopping trading in minutes.

 

I learn that they will sell at market. That this will cost me some money but I go ahead. I then decide to investigate another brokerage. I can take responsibility for not double checking to see that my stop loss was cancelled, but still I do not like the level of customer service that would allow this to happen, so I decide to investigate and find a new brokerage. For tomorrow, my plan is to sit tight on my stops and see what happens.

Thank you for sharing your process.

 

 

 

Tue, 18 Sep 2007


IV Tribe Meeting Dates

Hi Ed,

Thanks kindly for the reply & the invite to attend the IV tribe meetings on the  4th & 25th Oct.

I will attend the Workshop on the 19th Oct. & the Tribe meeting on the 25th Oct.
 

Looking forward to seeing you (and others) once again.

. . . and now I'm off to visit my Travel agent.

Regards,

OK.

Mon, 17 Sep 2007

 

Financial Freedom #2

see previous Financial Freedom
 

Wow!!!

I say: I want financial freedom
I say: I look down upon those who are money-driven

Ed says: You might also like to consider the definition you have for of "financial freedom." Janis Lyn Joplin sings: Freedom's just another word for nothing left to lose.

All combined: Financially, I want to be at a state where I have nothing left to lose, as I look down upon those who are money-driven.

Shocking ...

Thanks Ed!

Yes, you might interpret having no mortgage, or salaries to meet, or taxes to pay, or debts or money in the bank as a form of freedom from finance.

 

 

 

Financial Freedom

 

 

Clip: http://www.treklens.com/gallery/Asia/

India/photo38494.htm

Mon, 17 Sep 2007

 

Relationship With Parents

 
Dear Ed,

Thank you so much for TTP and FAQ. Through your help I am becoming a better person.
 

I'd like to share with you a recent experience.
 

Last week I have returned home to stay a few days with my parents. Some friends of ours have come to stay with us during the week end. One morning I had a discussion with my father and after that we have not been talking to each other anymore. Most of all,

 

I am very upset because I think he is not considering my mother a lot. My father does not understand that he could help my mother a lot if only he stopped criticizing her. Instead he thinks to be right acting in this way. I think the depression my mother is living with is a consequence of not  being supported by a man who is willing to consider her feelings and  ideas.

 

Instead my father thinks the problem is my mother and her negative attitude towards life. He has never asked her who she is feeling. Also I feel sad because just before leaving, my mother was crying at the airport.

 

She was crying and said to me "I'm sorry". She said this because she knows that I am not happy when I see her crying. Hugging her I said her not to worry. I would have liked to be able to tell her that her crying was ok and encouraging her to cry more, but I was not able to do that.

Thank you for sharing your process.

 

Your mother and father are part of a system; their rocks fit together and they are familiar with how the system works.

 

The problem, if anything, is that you feel upset about what you see and you feel a need to medicate the symptoms.

 

You might consider taking your feeling of <upset about how your father treats your mother> to your Tribe as an entry point.

 

Your medicinal pattern is to tell your mother to not worry. You might consider a pro-active response such as validating your mother and her feelings by accepting her sadness and encouraging her to cry and talk it out.

 

 

 

Crying Arouses Sympathy

 

You may respond medicinally,

by advising some variation of

"There, there don't cry,"

 

You may also respond pro-actively

by acknowledging and encouraging

the sadness - until it produces an aha

that addresses the underlying situation.

 

 

Clip: http://dogbitelaw.com/PAGES/bystand.htm

Sun, 16 Sep 2007

 

Financial  Freedom


Hi Ed,

My experience with the Snapshot is that I envision a still picture that is emotionally vivid to me, that I can feel it in the present moment, and I share it with the Tribe. If I can communicate and radiate that to them on a feelings level, the intention is clear and I can commit to the process of achieving it.

I like the idea of commitments and working hard. I am on a mission to lose weight and get in shape. I have my Snapshot, and I work hard at it. I am seeing results and I feel good.

Like a lot of people, I want financial freedom and I dream for a day when I don't have to work for money.

 

And I truly wish I can have unlimited amount of money to help those in need. Sorta like a Santa Claus and help making others realizing their deeply-rooted dreams. I feel like the smiles on the others is one of the most gratifying, rewarding, and fulfilling feelings.

As I think about this, I have a frightening realization: I don't want to commit to making money!! I don't want to be money-driven!!

 

I lookdown upon those who are money-driven, as I always think that they are missing the point. They try to make money for their own pleasures or to show off, which I deem as unnecessary (e.g. fancy restaurants, designer's shoes / clothes...). As such, I just cannot imagine myself committing to a snapshot and make myself work hard to achieve something that has "making money" as an end-result.

And I don't like that either. I want financial freedom yet I don't want to commit to making money. I feel like I have conflicting feelings.

Does this sound familiar to you? I kind of feel that you seem to have seen a lot of cases where people have a negative view on being "money-driven", that subconsciously they don't want to work hard for money despite consciously wanting more of them.

Can you please share some of your experience or insights? Is this something the Rock Process may help?

You might consider taking your feelings about <working for money> and <having a fun job> to your Tribe as entry points.

 

You might also like to consider the definition you have for of "financial freedom."

 

 

 

Janis Lyn Joplin

(January 19, 1943 – October 4, 1970)

Me and Bobby McGee

by Kris Kristofferson

 

Freedom's just another word

for nothing left to lose,
Nothing don't mean nothing honey

if it ain't free, now now.
And feeling good was easy, Lord,

when he sang the blues,
You know feeling good

was good enough for me,
Good enough for me

and my Bobby McGee.

 

 

Clip: http://mog.com/music/Janis_Joplin

Sun, 16 Sep 2007

 

Learning to Trade - A Big Down Day

see previous - Less Emotional


Ed,
 

On Friday I experience a big down day. The pound gaps down in a big way. Also, gold and crude are down. The interesting thing is I do not panic or feel a lot of anxiety.

 

This may be because I look at risk on the basis of closed equity and not market equity. It seems I have the understanding that to make outsize returns I am also subject to some outsize losses (at least in terms of market equity).

 

Over all, I have gone from up 20% this month to up 6%. I realize that this is big drop, but my feelings about it are really pretty good -- it feels like it is just part of the game.

 

The good thing is that so far none of my stops have been hit (although DJ and Pound are now very close). For tomorrow, my plan is to sit tight on my stops and see what happens.

Thank you for sharing your process.

 

You may be coming around to holding trading as a system of many positions, rather than fighting with, or having to be right about, individual positions.

 

Note: 20% swings are fairly large by professional trading standards.  Some large funds may normally vary a few percent in a month. 

 

You might consider taking your feelings about <ups and downs> to your Tribe as entry points.

 

 

 

 

Bungee Jumping

like high-heat trading

 

can be fun and exhilarating

if you enjoy experiencing

the feelings

 

or painful

if you don't.

 

Clip: http://www.etribes.com/sites/etribes.com/

files/images/bbduringemily8.jpg

Sun, 16 Sep 2007 14:59:55 -

 

Living Life to the Fullest
 

Dear Ed,

One thing you say in the FAQ really touches me, "You thank me (and others) best by living your own life to the fullest."

May I ask how one can measure how "full" he is living his life?

Insights about right livelihood sometimes appear at Tribe Meetings during the Snapshot Process.

 

You might consider taking your feelings about <asking questions> to your tribe as an entry point.

 

 

 

The Klein Bottle

 

in the shape of a question mark

merges inside and outside

into one continuous side.

 

 

Clip: http://www.kleinbottle.com/

question_mark_klein_bottle.htm

Sun, 16 Sep 2007

 

Gliding Along

 

Dear Mr. Seykota, 

 

How are you? I hope you and your family are well. I hope you don't mind me enquiring, but do you have any plans to publish The Trader's Window yet?  The story from Market Wizards of the jade master has come to mean a great deal to me. I realized a while ago that i was the interrupting student, and sweeping the floor was sweeping out my feelings and beliefs and confronting them.

 

Your concept of everyone gets what they want from jade, sorry, the markets, has also had a profound effect on me. I now realize that the last two years i spent losing money in the markets, i too was getting what i wanted.

 

But since i accepted this belief, like the student of the master, i have been interrupting my teachers less and less, and now i have changed what i want from the markets, and am getting it as you said.

 

My trades glide effortlessly along until they either hit stop, in which case they sink gracefully into the abyss of forgotten history, or they hit a tightened stop, and gracefully glide down into my account as profits. This is what i want. In fact, i have surrendered so completely to learning, responding to my feelings, improving myself and leading a fulfilling life, that i am actually overcoming hurdles i have thought my whole life, were an irremovable part of who i am.

 

For instance, my girlfriend today sprang a day out with her parents on me at the last moment. i have never been relaxed in their company, even though they are nice people. I fear i won't know what to say, and that is exactly what i get most times. Not any more though.

 

Today i accepted these feelings, experienced them and discharged them of negative energy with rational thought. I asked myself, might they feel just as uncomfortable? Won't my girlfriend be there to do the talking if i can't? Won't being with her give me security if i do feel nervous or awkward? I reassured myself and had a very pleasant day out. My feelings did not cause me what i had previously feared because on all levels, i didn't want them to. I am actually looking forward to the next family outing.

You have taught me so much, with so few words, and i am so very grateful. I promise that if you do publish The Trader's Window, i will be a dedicated and open minded student.

Thank you for sharing your process.

 

 

 

 

Sun, 16 Sep 2007

 

Vincent Van Gogh

 

song & power point show

 

Note: If the song does not play,

try downloading it and saving it it first.

 

Nice presentation.
 

Vincent

by Don McLean

Starry starry night
paint your palette blue and grey
look out on a summer's day
with eyes that know the darkness in my soul.

 
Shadows on the hills
sketch the trees and the daffodils
catch the breeze and the winter chills
in colors on the snowy linen land.

 

And now I understand what you tried to say to me
how you suffered for your sanity
how you tried to set them free.
They would not listen
they did not know how
perhaps they'll listen now.

Starry starry night
flaming flowers that brightly blaze
swirling clouds in violet haze reflect in
Vincent's eyes of China blue.
 

Colors changing hue
morning fields of amber grain
weathered faces lined in pain
are soothed beneath the artist's loving hand.
 

And now I understand what you tried to say to me
how you suffered for your sanity
how you tried to set them free.
perhaps they'll listen now.
 

For they could not love you
but still your love was true
and when no hope was left in sight

on that starry starry night.
You took your life as lovers often do;
But I could have told you Vincent
this world was never meant for one
as beautiful as you.

Starry starry night
portraits hung in empty halls
frameless heads on nameless walls
with eyes that watch the world and can't forget.
 

Like the stranger that you've met
the ragged men in ragged clothes
the silver thorn of bloody rose
lie crushed and broken on the virgin snow.
 

And now I think I know what you tried to say to me
how you suffered for your sanity
how you tried to set them free.
They would not listen
they're not listening still
perhaps they never will.

Sun, 16 Sep 2007

 

Alan Speaks Out: It was About the Oil!


Observe what an intelligent person, no longer the influence of politics, says and does.

http://www.timesonline.co.uk/tol/

news/world/article2461214.ece

OK.

 

 

 

DUI

 

Directing Under the Influence

 

 

Clip: http://daryld.com/av/bernanke.jpg

Sat, 15 Sep 2007

 

Start Date Dependency


Hey Ed,

My equities trend following system is progressing nicely. I notice that the system becomes more and more in line with the way I like to do things and think about things.

 

Lately I think about the email you wrote to me regarding start date dependency. I wonder about the specific types of problems this can have for my research and I try to come up with solutions to get around this perplexing issue.

Ed Says:

When you begin trading, you quickly fill up your portfolio with stocks, so your results, for slow get-out systems has start-date dependency.

In the overall system of things, when you sell something and you can buy something new, your MAR may have more to do with your selection strategy than with your exit strategy.



Ed, I wonder if I can relieve the "start date dependency" for "slow get out systems" by varying the start date and the end date.

 

This seems to provide me with the type of "canvas" I need to run my optimization studies on. It seems that for every parameter set I test, I need to select the "average optimal set" from a subset of optimal sets that have different start dates. Is this what is done in the industry to solve this kind of problem? Thanks for your help.

As far as I know, fund managers do not have much interest in discussing and/or working on the issue of start-date dependency.

 

Your idea about back-testing over a range of start dates might determine the degree to which your system is start-date dependent.

Sat, 15 Sep 2007

 

Trading Experience


Hi, Ed

By chance I read Trend Following book and I found www.turtletrader.com & your website. I was so impressed with your way of investing.

KOSPI (Korea Composite Stock Price Index) of Jan 07 was in a 1300~1400 point range,
until July. Then it was up to 2015 point and went down during august to 1700.


I entered the market at Feb and out at August.
The rule "Trade with the trend, Ride Winners, Cut Losses, Manage risk" gave me a huge profit. Almost 50%.

Market was going down for August, I was out of the stock market and started to invest futures and commodities even if my whole money was only $14,467.

I thought I could take more risk because I earned 50% profit already for 6 months. So I was long Wheat 698-3/4 one contract. My loss cut point was 650. Entry risk was a $2,500. (almost 18%) I was short Soybean Oil, long 5 year T-notes, short Crude Oil, short British pound. A great amount of heat. 50% more. But I believed I could control my feeling.

After that, Wheat price went down to 663. (about -$1800) It was really hard to control my finger not to press 'sell' button before being arrived at loss cut point.

I was under a lot of pressure. That moment's feeling was like a stung by a giant wasp. It was a first time I saw the price chart in dream. Regret, hope, disappointment was going around in my mind.

Fortunately, I could make it and I sold wheat at 843, Sep 14. I hesitated whether to hold it or not, but I just sold it.  In other contract, I got -$587 in British pound, -$725 in Crude Oil, -$1,100 in Corn etc.

Total profit is $3755, total trading fee was $510. Net profit is $3245.

Even though I got a 22% profit, I'm not happy because I broke the rules many times. Trading for these 1 month's experiences was a terrible sufferings. I learned I can't take the entry risk more than 4~5%. More than that, my unstable feeling brings a loss. Before clearing of all contracts in Sep 14, I was short Mini Dow 13449, out of 13503 in 10 minutes and I was long wheat 857, out of 855.2 in 5 minutes.

So I quit to trade futures. After my money over to $80,000, I will trade it but NOT now. KOSPI point is 1800~1870 these day and I'm going to buy the stock again. I found 7 company that stock prices' trend up.
This time's entry risk will be 2~3%.

It's too bad I can't join the TTP workshop because I'm a university student, 23 years old, don't have enough time & money, need more time to practice to be good at English. :$

If I get opportunity to join the TTP workshop someday, it will be great.

Thank you for sharing your process.

 

You might consider taking your feelings about <a giant wasp sting> to your Tribe as an entry point.

 

 

 

 

Wasp Stings and Market Whipsaws

 

are essentially inevitable

 

and don't usually cause irreparable harm

unless you get too many of them

all at once.

 

Clip: http://trouble.philadelphiaweekly.com/

archives/2006/06/vivid_dream_the.html

Sat, 15 Sep 2007

 

Too Funny

see previous


Hi Ed,

re: You reply to FAQ dated 7th September 2007 - "Positive intention of Cycles".


What an absolute cracker!!


ROTFLMHO !!

Cheers,

 

-----

* ROTFLMHO

Rolling On the Floor Laughing My Head Off

Thank you for the encouragement.

 

 

 

 

Sat, 15 Sep 2007


IV Tribe Meeting Dates

Hi Ed,


Further to my FAQ dated Monday 23 Jul 2007 “Workshop / Incline Tribe Meeting Query” ,

I note your reply as follows;

“Workshop graduates qualify for admission to the Incline Village Tribe.”

I am a workshop graduate. Therefore, could you please confirm that the Incline Village tribe will meet on:

a) Thursday 11th October and again on Thursday 25th October (or)
b) Thursday 4th October and again on Thursday 18th October.

I will like to attend both meetings, as well as the 19th October Workshop in between (or after, as the case may be)

I want to make flight / hotel arrangements, therefore your advice re: the above will be much appreciated.

I am planning to host Tribe Meetings on October 4-th and 25-th.  You are welcome to attend either or both.

 

 

 

Wed, 15 Sep 2007

 

Jurassic Park & Wall Street


Ed,

I thought you might enjoy reading the enclosed journal from Don Coxe.

He does a great job of mixing his investment ideas and uncommon perspective in with stories of:
 

Mad scientists of Jurassic Park Avenue
Wiccans
Triskaidekaphobia
Eager Germans
Mick Jagger
Vasectomies
Physics and math
The global fool supply


He believes that the Fed should resist slashing rates and that the adjustment to a reduced role in the global economy for the US has not been priced into shares. It is an interesting and at the very least, an entertaining read.

Jurassic.pdf

While I can relate to much of his thinking, I do not see how inflation results from industrious, productive living; I feel inflation is more a function of expanding the money supply.

 

I wonder how you are interpreting this report into your trading.

Fri, 14 Sep 2007

 

Replacing a System


Ed,

 

Do you think that systems, however good they are, eventually lose their edge (positive mathematical expectancy to make profits) so they need to be regularly refreshed and even replaced from time to time?

 

I heard this from an author who sells courses on systems trading and building.

 

I wonder the fashion in which this process might occur, provided the system is really good: the trader reaches the uncle point and then "refreshes" his system parameters or rules; he proceeds to another uncle point and replaces the system; then he reaches another uncle point and the process starts all over again. Or what?

Your math is one of the essential components of your overall system; another is your willingness to follow it.

 

During draw downs, people may abandon their math and look for another system.

 

 

 

People With Problems

 

 in relationships

with people / trading systems

 

may give up their relationships

during hard times

only to discover similar problems

and similar hard times

appear in their next relationships

with people / trading systems

 

 

Clip: http://www.brisbanetimes.com.au/news/

relationships/breaking-up-is-easy/

2007/04/13/1175971312937.html

Date: Fri, 14 Sep 2007

 

Learning to Trade - Less Emotional

see previous Wheat Feelings


Ed,


Yesterday, I find out that I have taken delivery of wheat and then am able to get out at or near the opening. My contract of wheat sells at 841.25. I then initiate a forward roll for the Canadian and Pound positions. I am also entering an order for soybean oil.

OK.

 

You seem to be growing less emotional about your order entries and about the movements of the markets.

Fri, 14 Sep 2007

 

Greenspan Book

 

Ed,

 

Greenspan's new book Criticizes Bush and the Republicans - says "They Deserved to Lose."


Former Fed Chief Defends Pre-Bubble Rate Cuts
By Greg Ip and Emily Steel
September 15, 2007; Page A1, WSJ

In a withering critique of his fellow Republicans, former Federal Reserve Chairman Alan Greenspan says in his memoir that the party to which he has belonged all his life deserved to lose power last year for forsaking its small-government principles.




 

In his book, Mr. Greenspan defends the policy of cutting short-term interest to 1% in mid-2003 and keeping them there for a year by citing a desire to fight "corrosive" deflation.

 

Deflation increases the value of money and helps raise the standard of living for people who save; it penalizes those who borrow; it entrains low (even negative) interest rates.

 

 

x

 

"We wanted to shut down the possibility of corrosive deflation. We were willing to chance that by cutting rates we might foster a bubble, an inflationary boom of some sort, which we would subsequently have to address ... it was a decision done right."

 

Clip: Wall Street Journal

Fri, 14 Sep 2007

 

Humor and Lessons

see previous


Hi Ed,


I’m enjoying the latest postings of FAQ. Thanks for the humor and the lessons!

Now I need to add a few phone books to my trading toolset.

Best regards!

Thank you for the encouragement.

Fri, 14 Sep 2007

 

Associate Program - Risk Management

see previous

 

Hi Ed,

Thanks for your comments and helping me clarify my thoughts. I notice that I seem to jump the gun on this and perhaps run ahead of myself with the result of muddling up my thoughts. Hmm...one to think about :-) Please see my comments below.

1. The system trades one instrument, wheat, generic continuous contract, long and short.

The system trades a continuous contract of wheat futures (W). The system trades long and short positions.

2. The system trades 10% of the total equity on one position.

The system will trade a portfolio of 8/10 commodities and will allocate 10% of total equity per trade (fixed fraction bet).

Optimal % of equity/trade to be defined by further testing.

3. The system risk 2% of equity per trade.

A stop is placed at 2% of total equity per trade.

In the case of the 1st trade:

Starting Equity: $1,000,000
Equity allocated to trade: $100,000
Equity at risk/Stop: -$20,000

I do not see how to determine position size of (1) using (2) and (3).

Position size:

Starting Equity*FF Bet Size/Margin=Position Size

$1,000,000*0.1/$2,228=45 Wheat Contracts, $100,000 allocated to trade

Per your method,

N - number of contracts

E - equity

M - margin

R - risk per trade

r  - risk per contract

 

N = .1 * E / M  (per rule #2)

R = .02 * E  (per rule #3)

 

eliminating E, we have

 

N = .1 * [R / .02] / M

R/N = .02/.1 * M

r = .2 M

So your math sets your stop at 1/5 of the margin; you have margin-dependency in your risk management.  I see no mention of what you do with your positions if the exchange raises or lowers margins.

 

The current margin on CBOT wheat is about $2,000 per contract so you are risking about $400 or 8 cents per contract; you place your stop about 8 cents below your entry.

 

That seems a little close to me for long-term system trading. You might try some simulations to see how this works.  Let me know how it comes out.

 

Meanwhile, you might consider taking your feelings about <mastering the standard text books on risk management> to your Tribe as entry points.

 

 

 

Shooting Yourself In The Foot

 

Close stops

and close toes

 

are both pretty much

easy targets

for execution.

 

Clip: https://ww2.klatu.net/ecom/images/

ShootYour%20Foot.jpg

Fri, 14 Sep 2007

 

Hot-Headed Investors Make Better Decisions


Hi Ed,

Here is an interesting article that I read today. Thought you'd like it.

http://news.yahoo.com/s/nm/20070913/

bs_nm/markets_stocks_emotion_dc_2;_

ylt=Au8tHtKw5u3vm9.PX5c8QR0E1vAI

I find the article a little sparse on details about how they select their traders and how they measure their success.

Fri, 14 Sep 2007

 

Provocative

 
Ed,


You're very good at explaining, in great detail, the basics of trading. I see someone ask about rolling a contract, you talk about contract details and how the their order process might miss the move; yet you don't advise feeling the feelings around preparation.

You post a message after you visit Austin. You say you ask the traders association how many traders are long wheat, and no one is. I wonder if you ask that same question to the IV tribe and I wonder what the answer is.

I wonder if you help your tribe become more profitable traders, or if you just help them feel their feelings and play with rocks.

 

You say at the top of FAQ page Sept 11 - 20:

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 exit any positions.

Exit is redundant. Exit is implied in the buying or selling of something, just like entering, but the opposite.

You could be more redundant by changing the comment to:

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, exit, or enter any positions.
 

If you hold a spread position, say long September Wheat, short December Wheat, you might instruct your broker to "exit the spread." 

 

The orders, "buy the spread" and "sell the spread" might be ambiguous.

 

You might consider taking your feelings about <provoking and teasing> to your Tribe as entry points.

 

 

 

Sometimes People Tease

 

in order to engage other people

into a quarrel

that provides contact

without risking intimacy.

 

The teaser typically has

an intention = result

of provoking / alienating people

and then winding up lonely and bitter.

 

People who tease the markets

sometimes get a substantial,

impersonal and swift

tease-back in return.

 

 

Tease

Etymology: Middle English tesen, from Old English:

t[AE]san; akin to Old High German zeisan to tease
 

1 a : to disentangle and lay parallel by combing or carding
2 : to tear in pieces; especially : to shred (a tissue or specimen) for microscopic examination
3 a : to disturb or annoy by persistent irritating or provoking especially in a petty or mischievous way b : to annoy with petty persistent requests : pester; also : to obtain by repeated coaxing c : to persuade to acquiesce especially by persistent small efforts : coax d : to manipulate or influence as if by teasing e : to make fun of : kid
4 : to comb (hair) by taking hold of a strand and pushing the short hairs toward the scalp with the comb
5 : to tantalize especially by arousing desire or curiosity often without intending to satisfy it



Clip:

http://www.teaganpresley.com/

Definitions:

http://www.meriam-webster.com/dictionary/tease

Fri, 14 Sep 2007

 

Whom to Blame


Ed,

"He who blames others has a long way to go on his journey. He who blames himself is halfway there. He who blames no one has arrived."

Someone says the quote above is a Chinese proverb. I wonder as a Chinese guy how I don't know it. I wonder even if I grasp its meaning, can I practice it in real life?

You might consider taking your feeling of <I wonder if I grasp it> to your Tribe as an entry point.

Fri, 14 Sep 2007

 

Intention and Under-Fred

Hi Ed,

Here's an update TTID for our tribe. We have a meeting last night, and I can't help but feel gracious to get to know this group of committed members (one of them has signed up for the Oct Workshop). I feel that we are sharing a common bond, and I feel very good about it.

It's been a long journey. I started my own tribe in Feb 2006, and right when we were getting some momentum we have to call off the meetings in Aug 2006 because my office (even in the evening) is no longer an appropriate venue, and I can't find another place.

On and off we meet for two months, and I recall the last meeting in October where one of my snapshots includes "finding a place to hold tribe meetings." But it isn't easy, and for seven months I am going nowhere.

Then in May/June of this year, out of nowhere, one of the members held me accountable and asked me about my progress, and questioned my commitment to the Tribe. He even offered to help look for a place. At that moment, I look back at the result (still no meeting), and I realize my intention (or lack thereof). I feel disappointed at myself, even ashamed, about my lack of commitment, and about letting my matesdown. I've been complaining it's a "Catch-22", for I can't have a tribe unless I find a place, but I can't get a place unless I have a tribe. But at that moment, I realize those are all excuses. As reasonable as they may sound, the bottom line is, I am not really committed.

That's when it hits me. I *AM* going to do it. There is no more excuses. I am going to F_CKING do it. And once I have the clear intention to gather a group of committed and serious members for personal growth and genuine in sharing feelings, tons of ideas flow. I sent out emails to everyone who has inquired about the tribe over the last seven months, tell them about my plan (radiate my intention). I get back responses, and very soon we have our first meeting.

It has now been two months, and I am ever so glad!

The amazing thing is, one of the people who respond offers his office for our meetings. This solves a huge problem for me. Whereas I could have kept getting stuck in the "Catch-22" situation, surprisingly once my intention is clear, people out of nowhere show up and help me with a solution.

Fast forward. In the 8/22 FAQ (Causality), you told me, "One way for you to understand Under Fred is for you to intend to understand it."

I made a commitment to the Tribe that I am going to do three acts of service to other people over the next three weeks. The first week I didn't do much (typical procrastination); second week I did one. Then the third week, come Friday (our meeting is on Tuesday), knowing that I only have 4 more days left I started to feel the heat. On my way home I thought about the possibility of admitting to the tribe that I have failed my commitment.

And right there, right then, IMMEDIATELY, an old lady out of nowhere asked me to help her carry her cart down to the subway station. Wow. Talk about intention! I am stunned! (Of course I gladly help her)

So Monday morning, a day before the meeting I still need one more act of service to a stranger to fulfill my commitment. I am very well aware of it. As I was at the basketball court for my daily workout, an old man holding a large stick. This was 6:30am, and at this hour, usually only regulars would come. I've never seen this man before (and not since that encounter either), but he gave me the stick and signaled me to help him get the jumping rope (that is somehow stuck at the top of the basketball backboard). So again, I gladly helped him and fulfilled my commitment.

To this day, I am still in absolute awe: how on earth a jumping rope gets to the top of the backboard, and how on earth at 6:30am this stranger I've never seen before just shows up with a big stick and asks me for help?!?!? It's utterly amazing beyond words. People just show up!!!!

I share my experiences with the Tribe. This Under-Fred is amazing. As we look back at our intention on joining a Tribe, it seems that they've manifested the way they describe it. It becomes increasingly clear to me the importance of a clear intention. It also seems that, most people don't know consciously that they are running conflicting 'intentions' (which basically means it is unclear), and I think many times fear play a role - the fear to have a clear intention. For as long as it is unclear, we can always make excuses to justify our lack of commitment.

For me, I use the "F_ck it" test to determine whether my intention is clear. When I feel the feeling of "F_ck it I am gonna do it NO MATTER WHAT", it is definitely clear, and there is no question about the commitment.

I can't help but wonder though, how do I get to that "F_ck it" feeling in the first place?

In any case, I am still in awe about how people just show up. It is unbelievable. Thanks Ed.

Thank you for sharing your process.

Fri, 14 Sep 2007

 

Accurate
see previous

Dear Ed,

:-))))

Accurate! I have heard it already ...

So I sit there like ... I don't need to be accurate... I am the best and the greatest... etc. ppp. AHA.

Sometimes I get the impression that I got some money attached to me because I apparently need some money e.g. to visit your workshop :0)

I suppose I am really lucky I make the experience NOW.

Thanks a lot.

Thank you for sharing your process.

 

 

 

Accurate and Precise

 

 

 

Accurate and Imprecise

 

 

 

Inaccurate and Precise

 

 

 

Inaccurate and Imprecise

 

 

Clip: http://chemrightlabs.com/QA.htm

Fri, 14 Sep 2007

 

Feelings, Drawdowns and Heat
 

Hi Ed,

I read your comment:

"Beginning Trend Traders might do well to study this back-test and notice how they respond emotionally."

Your statement is a very interesting topic. When I run a back-test, I tend to focus on two numbers, the icagr and the max drawdown. However, I only see these as numbers. I cannot yet fully associate a number with my feelings. One of the things I intend to accomplish being long GLD it to build some connections between the numbers the back-tests produce and my feelings.

A 38% drawdown in my net equity in one day is probably much more than I would be comfortable with. The "puking-point" comes to mind! So I keep in mind the two topics you teach about managing risk:

1) individual instrument heat
2) portfolio diversification

In the TSP EA exercise, we only trade one instrument with a volatility adjusted (ATR) heat of 10%, which also makes the portfolio heat 10%. In order to improve my bliss function, perhaps I will reduce the instrument heat to something more manageable and/or diversify across several instruments.

In the Donchian system for which you display results on your chart server, the portfolio trades 4 instruments with a fixed-fraction bet size of 7%, but the max drawdown is only 34%. Although the Donchian back-test doesn't include data from 1987, the exercise shows me the benefits of diversifying across a few different instruments.

The key points I take away from this exercise is that trading a high instrument heat is not something I am comfortable with, but diversifying may allow me to trade a high portfolio heat.

I appreciate your guidance on such an important topic.

Your real trading system includes your math and your own willingness to experience your feelings about following your math.

 

Knowing how much heat you can handle is essential.

 

You might consider taking your feelings about <draw downs> to your Tribe as an entry point.

 

 

 

If you wish to engage with a Hottie ...

 

 

 

... you might consider

implementing a way to keep cool ...

 

 

 

... or at least have some knowledge

of the nature of heat.

 

 

Note: The plot units are

W/mK for heat conductance

and J/gK for specific heat capacity.

 

 

Clips:

 

http://www.leecountynightlife.com/

images/BikeNightHottie.jpg

 

http://www.popamericana.com/!/Hottie%2520is%2520right.jpg

 

http://blog.khymos.org/category/10-tips/

Fri, 14 Sep 2007

 

Game Over

see previous


Dear Ed,

I think: It's Christmas. We now trade a little bit in Gold, Corn and Wheat and then we all go to the workshop :0)

Reality: Third call with the "market-maker" of contracts for difference and discussion of half an hour finally turns out that I trade in a warped world. In my system I see only one-tenth of the actual futures price. One contract of wheat shows up with a price of $844 , I actually move $8,440 and also margin refers
to $8,440 .

I don't tell the further details of the venture!

I learn: Christmas is only on December 24 and a lot of other things.

New idea: I define a total portfolio risk and allocate the risk to the different positions.

- Money comes and goes, wealth stays -

But: A whole industry keeps up the image of the super trader meanwhile the compounding effect of a slower pace is not discussed in public.

Means: my ego likes to show a good yearly performance, risk or not.

We (Fred and CM) explore the issue further.

Thank you for your respect, support and patience.

PS: This is definitely the end of the discussion.

Thank you for sharing your process.

 

The price of CBOT Wheat is currently around $8.44 per bushel.  So $844.00 buys 100 bushels and $8,440.00 buys 1,000 bushels.

 

The standard CBOT contract is for 5,000 bushels and the Mini Wheat (not a breakfast cereal) contract is for 1,000 bushels.

 

For the minis, the move off the recent highs ($9.11-1/2 on 9/12) to your $8.44 is about 67-1/2 cents or about $667.50 per contract.

 

Christmas Eve appears on December 24 and Christmas appears on December 25.

 

You might consider taking your feelings about <accuracy> to your Tribe as an entry point.

 

 

 

Mr. Mini Wheats

 

may have trouble

delivering accurate hand signals

in the CBOT trading pits

with only four fingers.

 

Clip: http://www.egyptian.net/~mrch/cereal.html

Thu, 13 Sep 2007

 

Wheat Feelings

see previous


Ed,


Interesting feelings with trying to roll my wheat contract forward to December. I call my broker to set up a spread rolling forward trade and am told that I have a problem.

 

He tells me that the wheat was put to me last night by someone holding it as a short and that I have taken delivery of the wheat.

 

I feel a slight pucker in the sphincter and a little knot in the stomach as I calmly ask about what my options are.

 

He tells me that they are still trading the Sep Wheat and he will enter an order to get me out at market.

 
I then learn I can ask them to re-tender and then set up a spread to roll the position. By time I get through to him, he tells me that I am out at the market which at the time is 841.25.

 

As wheat proceeds to drop further during the day, I am feeling rather lucky to be out.


All in all, a rookie mistake that doesn't cost me too much. This is kind of like the guys I knew growing up that worked in the oil fields of Texas.

 

Most of them were missing a digit or a finger, but none of them were missing all of their fingers!

Thank you for sharing your process. 

 

You might consider taking your feelings about <pucker in the sphincter> to your Tribe as an entry point.

 

 

 

Sphincter

 

Essential in the process

of letting go.

 

 

 

Lauren Bacall

 

advises Humphrey Bogart

in the movie, Casablanca (1942)

 

Just pucker up and blow.

 

Clips:

http://apps.uwhealth.org/health/

adam/hie/2/9629.htm

http://www.worth1000.com/web/media/

22182/bacall.jpg

Thu, 13 Sep 2007

 

Workshop - Knowledge Requirement



Ed,

Trading is not my intention.

 

I am familiar with the Trading Tribe, Glossary Page and the Trading Tribe Process page. I read FAQ, but I can't claim that I am "familiar with the materials on the FAQ pages". For instance, I am not familiar with the process described below.

"You can enter a spread order by (1) specifying the differential as a limit or (1) at the market.
The broker executes both sides simultaneously. If you try to micro-manage the roll process by entering two limit orders, you run the risk, in a declining market, of doubling up on your position - and in a rising market of losing your position. Note: with limit orders, you may be unable and miss the move."


I understand "The participants determine the specific content of the course by the issues they bring to the workshop." In your experience, is an understanding of the trading process required to experience the specific content?

 

My intention is to attend the workshop.

People with a wide range of interests attend the Workshop. 

 

Recent attendees include a geologist, a college professor, a housewife, an advertising executive, a therapist, a programmer, a radiologist and, of course, many traders.

 

So far, no sweepers or strippers, although I am open to them.

 

 

 

Chimney Sweep

 

Cleaning up

in the markets and elsewhere.

 

 

 

Strippers

 

buy and sell a sequence of deliveries.

 

 

Clips:

http://www.sweep-dreams.co.uk/

http://blog.juliaallison.com/2007/01/

Wed, 12 Sep 2007

 

Learning to Trade - Rolling a Position


Ed,


Today, I get a call from my broker telling me that September Wheat expires on Friday and that I need to close out the trade. I put in orders to sell Sept Wheat and buy Dec wheat with a spread of 20. My orders are as follows:

Sell Limit Order 1 Sep Wheat at 840.0.
Buy Limit Order 1 Dec Wheat at 864.0.


My orders do not get filled before the market closes. I feel that I should have entered a market order. I feel a little apprehensive that I have not been able to roll this contract over. I am not sure how much more time I have to get this done and what happens when the market opens tomorrow. I was kind of excited talking with the broker about rolling, and now feel a little worried about getting this done right.

You can enter a spread order by (1) specifying the differential as a limit or (2) at the market.  The broker executes both sides simultaneously.

 

If you try to micro-manage the roll process by entering two limit orders, you run the risk, in a declining market, of doubling up on your position - and in a rising market of losing your position.

 

Note: with limit orders, you may be unable and miss the move.

 

 

 

Spreading Can Be Good Exercise

 

Practice and understanding

can help you to avoid

hurting yourself.

 

 

Clip: http://www.treeoffitness.com/Photos/

Evamarie_standing_splits.JPG

Wed, 12 Sep 2007

 

New Fuel?



Ed,

Wow?

http://www.youtube.com/watch?v=Tf4gOS8aoFk

http://www.cosmosmagazine.com/node/1578

 

-----

 

Jesse Can we really set fire to water?
Wednesday, 12 September 2007

by Carolyn Barry, Cosmos Online

Smoke and mirrors?: The extraordinary claims have sparked a frenzy of interest across the Internet.
 



A U.S. broadcast executive-turned-scientist has seemingly found a way to burn seawater. Though it has the air of a hoax, if true, it could be one of the biggest discoveries in chemistry in recent times.

John Kanzius, from Erie, Pennsylvania, blasted a test tube of salt water with high frequency radio waves, causing the water to burn like a candle, he told the Pittsburg Post-Gazette newspaper. Chemist Rustum Roy from Pennsylvania State University told the same newspaper that he had confirmed the phenomenon by replicating the experiment himself.

Though the technique and results have not yet been published in a peer-reviewed journal, they are sparking a frenzy of interest on the Internet, where video clips showing the technique are beginning to circulate.

The radio-wave energy you have to put into the process to separate the H2 from the O likely exceeds the heat energy you get back from the flame.

 

Otherwise, lakes, rivers, streams and bathtubs full of water would spontaneously burst into flame and vaporize.  No sign of this yet up here at Lake Tahoe.

 

Similarly, the amount of energy in a gallon of ethanol is generally less than the amount of energy it takes to produce the gallon of ethanol.

 

 

Wed, 12 Sep 2007

 

Black Monday Drawdown

see previous

 

Ed,

My equity log matches your test run of the TSP EA 150/15. On Friday 10/16/1987, net equity = 1,922,224.

 

The following Monday 10/19/2007 (Black Monday), net equity falls to 1,175,286. This one day change in net equity represents a 39% drawdown.

 

Sometimes drawdowns are slow, sometimes they aren't. I'm very curious to see how a multi-instrument portfolio fairs on Black Monday.

OK.

 

Beginning Trend Traders might do well to study this back-test and notice how they respond emotionally.

Wed, 12 Sep 2007

 


Tribe Helps Relieve Family Shame

see previous

 

Ed,



On August 17th FAQ page I read the post "an old familiar feeling" and your answer that guilt can entertain drama that stands between a person and prosperity.

 

Something struck a chord in me and I started thinking about it. I have had that "old familiar feeling" myself.

 

In fact if you followed me around and watched me in day to day situations you may come to the conclusion that I had done something terrible to feel guilty about.

 

This feeling has haunted me as long as I can remember. It is like a dark cloud that is almost always back there. After some thought I realized that the feeling was not guilt after all but shame. SHAME was the correct label to the feeling that is always back there.

 

Now why do I feel shame? Am I that bad a person, have I done the unpardonable sin, Am I unworthy of feeling good about myself, Where or what is generating this feeling?

 

I took this feeling to my tribe and after all this time I got relief. I feel free and clean.

 

I have come to realize that this shame was passed down to me by my parents. When I was a child I was criticized and put down just for being a kid. If I was happy and smiling I was rudely asked what I was smiling for, if I didn't do my chores perfectly I was berated and glared down, if I asked a simple question out of curiosity I was asked, not very nicely, why I need to know, if I made an innocent mistake I was punished.

 

I have come to view this as a generational thing that may have been passed down from one generation to the next. The mean part was mostly my fathers doing but when I think about my mother I have felt for some time that something is off, like something unsaid that runs in the background, some secret she is hiding or ashamed of. While I would like to make a difference in my family, I am not sure I have the tools to open up this can of worms right now. I don't know if there is an answer or even a question at this time, I just thought I would share my process.

Thank you for sharing your process.

Wed, 12 Sep 2007

 

Measuring Risk

Dear Ed,

Ed says (Aug 12, 2007): In either case, traders who are willing to experience their feelings tend to be able to treat trading as a business; those who have feelings in k-nots typically wind up using the markets as a theater in which to run dramas that invoke the feelings in the k-nots.

I suppose I start to understand it now.

Corn seems to have a break-out, at least in my software.

I don't go in, because I don't want to start another collection (I have already Wheat and Gold) and collections in the apartment and the portfolio of stocks. I wait for confirmation of the break-out.

Wheat has a blow-out.

I do calculation of percent risk of portfolio as proposed on Aug 30, 2007, Learning to Trade #5. I am grateful, that you two posted this hands-on-easy-to-learn discussion.

I put in a stop in the system and feel good about it.

This is the opposite of what you perceive in reading quite a lot of interviews about trading.

Thank you for sharing your process.

Wed, 12 Sep 2007

 

An Article About Fear


Ed,

Pros have different opinions about fear in this
article. The conclusion words, "The best antidote for
fear just may be fear itself.", attracts my eyes most.

 

 


Atricle: http://online.wsj.com/article/

SB118947349416123314.html

If you consider the various positive intentions of fear, you might not want to eliminate it.

Wed, 12 Sep 2007

 

Offensive

see previous

Dear Ed,

wow, I hope I didn't offend you. I definitely realize that my email is quite harsh and impolite.

You might consider taking your feelings about <offending people> and <having to be polite> to your Tribe as entry points.

Wed, 12 Sep 2007

 

Checking Markets During the Day - Distraction


Ed,

GLD rises with the price of gold. I feel pretty calm; no feelings of wanting to exit or move my stop. I feel like I have a plan and that gives me comfort. I just go with the flow. I feel the difference between back-testing and actually trading a strategy.

 

One thing I don't like is that I check the markets during the day and it distracts me from my research and programming.

 

I learn a lot about the daily process of trend trading. I intend to learn more about using stops as a tactic to enter / exit positions.

I think about different strategies for adding to my position if the market continues to rise. I intend to devise a formal plan so that my strategy is well defined.

I feel frustration that my system is not complete, but it encourages me to continue working hard. Late this evening, I finish my first trading system in C#. I attach screenshots of the TSP EA 150/15 and 325/85 exercises.

Thank you for your support,

You might take your feelings about <checking the markets and not liking checking the markets> and <wanting a plan that gives you comfort> to your Tribe as and entry points.

 

You might examine the precipitous drop in equity about 1/4 of the way through the run to see if that is an actual draw-down or an artifact of the computation.

 

 

 

Performance Graph

 

 

Wed, 12 Sep 2007

 

TSP question

Ed,

Thanks for FAQ and the TSP pages.

On this web page:

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

Compare/index.htm

there is the following example:

Now at the close on Thursday, the price is 20. We can create a new Three Point Average from {T=11, W=15, H=19} and that gives us 15. So Thursday's three point average is 15.

I'm not sure if there is a relationship between "Thursday, the price is 20" and "H=19."

Thanks.

Thank you for the catch !

The item now stands as:

Now at the close on Thursday, the price is 19.  We can create a new Three Point Average from {T=11, W=15, H=19} and that gives us 15.  So Thursday's three point average is 15.

Tue, 11 Sep 2007

 

Ed's FAQ Commitment


Ed,

It seems your commitment to writing FAQ is unrelenting lately; it is a beautiful gift of receiving and acknowledging all of us whom are ready to send. Please keep up the impeccable work with FAQ, your book projects and furthering TTP. Your work changes lives and helps guide all of humanity towards right livelihood one person at a time.

Thank you for receiving me.

Tue, 11 Sep 2007

 

Feelings About Trading


I turn on the computer this morning when I get to work to see that I am up almost 5% over night. I then watch it as it sinks to 2.5% up, but don't feel too bad about this since this is just part of the trend following game.

 

I then watch as the Dow Jones rises at the open (I am short the DJ) and I see that I am back to almost breakeven. I am still feeling OK. I look at this portfolio of trades I have on as a synthetic option that is waiting for one of the 7 markets I am in to break out in a big way and pay for all of the option premiums.

1900 to 1000 to 500 to 160 to 2300 to 2800. Crazy day. Gold went up a bunch and we have 2 contracts. Very excited about this. Wheat went down a little and hit my stop, so down to one contract there, but feel ok about everything. Canadian and Pound are up and I am excited about starting to make some money on these.

End the day up. Feel good, but a little wary knowing that tomorrow is as likely to be down as up.

No new trades set for tomorrow.

If you are sampling the market several times a day, and if you are having substantial emotional reactions to these measurements, you may find yourself synchronizing your trading frequency to your sampling rate.

 

Optimization studies on trend following systems indicate a trading frequency of a few times per year and less.  See TSP, above.

 

 

 

Essential Trading Equipment

 

Mostly, your best move

is to sit on your butt.

 

Clip: http://www.betterbuttocks.com/

betterbuttocks_idealbuttocks.htm

Tue, 11 Sep 2007


Free Capitalism


Dear Ed,

ffffft, booom ... dead. No, sore throat (???). Never had that the last 10 years.

This saves me from a lot, among others a lecture about Turtletrading ("Where is my stomach...") and an evening about investment opportunities in Eastern Europe - via derivatives - hosted by several banks (OH - MY - GOD).



-----

 

This gives room to follow the most interesting economic discussion.

Everybody can watch that the worth of human labor in our countries is steadily decreasing if computer, Chinese people, Indian people, robots etc. are doing the work. We get an offset by cheap Chinese goods which can be bought with little money.

Nevertheless, there are lots of people who lose the access to the workforce meanwhile people who hold workplaces have to work overtime because their power to negotiate the conditions of their offer of work vanishes when there are too many of them.

Free capitalism seems to be a solution since the money goes where the most intention is. This creates wealth.

But what do you do with the less able people like pregnant women, left by their guys, old people, ill people, orphans, etc.?

In free capitalism I miss the incentive to direct some money in that direction. Like Zimbabwe: the Chinese pay the party to get hold of the resources of the country, the wealth goes to some (Mugabe, a few workers) and not to the many in the population.

This is my problem with free capitalism.

In Europe there is an interesting discussion about a basic income: Give 1,000 ¤ to everybody and start the monopoly from there:

www.basicincome.org

Basic income is an income unconditionally granted to all on an individual basis, without means test or work requirement. It is a form of minimum income guarantee that differs from those that now exist in various European countries in three important ways:

- it is being paid to individuals rather than households;
- it is paid irrespective of any income from other sources;
- it is paid without requiring the performance of any work or the willingness to accept a job if offered.

Liberty and equality, efficiency and community, common ownership of the Earth and equal sharing in the benefits of technical progress, the flexibility of the labor market and the dignity of the poor, the fight against inhumane working conditions, against the desertification of the countryside and against interregional inequalities, the viability of cooperatives and the promotion of adult education, autonomy from bosses, husbands and bureaucrats, have all been invoked in its favor.

In Germany the idea is promoted by Götz W. Werner, an entrepreneur who built up a chain of drugstores from scratch and published several books about the idea of a basic income for everybody.

 

PS.

Thanks for your Inspiration!

The Minimum Income Guarantee violates the principles of freedom and respect for private property; you have to tax someone to provide the income.  This discourages industry and rewards sloth.

 

For an example of an economy that is about as free as you can get these days, see Somalia. The country currently operates without a central government.  Despite predictions that the country would disintegrate into chaos, the opposite is occurring.  The standard of living is increasing faster than in the surrounding countries.

 

 

 

Somalia

 

An pretty good example

of a free economy.

 

 

Clip: http://www.theodora.com/maps/

new9/somalia_physical_map.jpg

 

 

Tue, 11 Sep 2007


Associate Program - Money Management


Ed,

Thanks for your reply and comments. Please see attached the completed S&R System for your review. I have yet to match the dr-dn with the solution from the TSP. I may be missing something simple here!

With regards to progressing to the next step of the Associate Program, I am working on an idea to develop a Single Moving Average system similar to the TSP Crossover System which I seem to believe may prove to be a very simple and profitable system. My hypothesis is that a long EMA system (>200 days) with the use of sound risk management and stops may prove to be a robust system. I have observed this visually on numerous charts and would like to test this empirically.

I am interested in Ed's thoughts on this system and whether this is something that may be worthy of further research. I attach a file illustrating my thoughts on the system for Ed's comments.

Money management is also an are I find of interest however I will need to formulate a clear idea on which area I may focus on and revert with a further proposal.

I truly appreciate your time and attention for helping me with this. Thank you.

Regards,

I am not clear on what you mean by:

1. The system trades one instrument, wheat, generic continuous contract, long and short.

 

2. The system trades 10% of the total equity on one position.

 

3. The system risk is 2% of equity per trade.

I do not see how to determine position size of (1) using (2) and (3).