© Ed Seykota, 2003 - 2008 ... Write for permission to reprint.

Ed Seykota's

Frequently Asked Questions

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

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

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

TSP: Trading System Project  ...  Breathwork

Associates Program  ...  Chart Server  ...  Contact Us  ...  The Whipsaw Song

 

April 21 - 30, 2008

 

<==  Previous  |  Next  ==>

 

 

TTP Workshop !

 

July 18-20, Reno, Nevada

 

 

Questions

(Quotes from Ed in Red)

Answers

Wed, 30 Apr 2008

 

TTP Workshop Preparation - Parents Bullying Kids


Hi Ed,

I am sending my application for the workshop. I want to apply as a reviewer. I am attaching my essay with this e-mail.

I want to thank you for the work you do with TTP and for keeping FAQ posted. I recall reading FAQ’s for the first time in October 2005. Reading FAQ’s, I discover that if I am willing, I can change certain things in my life. I learn that I have to look inside me and work on myself. I also recall learning about Breathwork reading FAQs.

 

I recall your explanation about Breathwork during the Jan 07 workshop. Since then, I have four experiences with Breathwork. These experiences are very special for me. I hope to attend someday one of the Breathwork sessions you held at Incline Village.

In my area, I hold TTP meetings once in a while with some friends or relatives. I do not practice TTP as much as I wish. I find that not everybody is willing to work on themselves. This is ok with me now. I accept it.

I am applying to the Workshop to work on some issues. I specifically have one issue in mind. I feel that I have a Rock. My issue is that sometimes I allow certain people to pick on me and tease me constantly. I recall seeing this issue manifest enormously during my last years in high school. Even though, I feel uncomfortable, I can not tell the other person to stop. I freeze up. I can not react or move. I feel my legs shaking and a pressure on my chest. After the situation, I feel anger for not defending me the way I wish. I recall a situation a few months ago where I recall feeling the same physical symptoms.

Reading some rock process examples, I recall an incident.

I am 9 years old. I am playing fights with a friend. We are the same age. We are in my friend’s bedroom. I grab my friend around his neck. I am not doing anything wrong. I know that I am stronger than my friend.

 

I am just playing. Suddenly, I see that my friend is crying. It seems that I am pressing his neck to hard. I try to apologize. He runs away. He finds his dad who is having lunch in the dining room. He comes back with his dad. The dad tells me that I am abusing his son.

 

I see anger on his face. I feel fear. I say that I am sorry that we are just playing. He does not care about my explanations. He tells his son to do the same with me. The son grabs me around my neck and starts to press hard. I start to cry. I feel paralysis. I do not know what to do. I can not defend myself. The dad tells me to just accept it if I do not want him to intervene.

 

This friend’s parents are also my mother’s friend. The dad also tells me that even though he appreciates my mom, because of this incident he wants to break any relationship with my mother. I recall some of my feelings. I also recall thinking that I can not call or tell my dad about the incident. I feel powerless. (I live with my mother. My dad is out of town. I do not where he is. He leaves without saying goodbye.)

 

My friend’s grandmother, who also lives in the house, intervenes. She tells the dad to stop it that I am just a kid. I am in shock. I am crying. She takes me to her room and closes the door. She gives me some water. The dad keeps yelling at me. He stops after a while. After the incident, the dad drives my friend and me to a school presentation. I recall feeling very sad during the presentation.

 

After the presentation, he picks me up and drives me home. This time, my friend’s mom is also in the car. She tells me that she is sorry about the incident. He tells the dad to control his anger. She tells me that my behavior is also incorrect. When I get home, I see my mom working in the garden. I say hi and go to my room. I never talk to anybody about the incident. My friend’s parents also never tell my mother about the incident.

In my family, I see a similar pattern in my mother’s behavior. Sometimes, she allows certain people to cross her personal boundaries. I recall seeing this behavior especially with certain relatives or people she knows. Therefore, I do not know if I get the “rock” through her or during the incident that I am describing above. Anyhow, I want to change this behavior.

I list some proactive responses:



1) Look at the other person in the eyes, and tell him/her to stop. I mean it!

2) Ask for the other person intention.

3) Express my feelings.

4) Ask for the other person’s feeling.

5) Express my point of view.

Thank you for sharing your process.

 

You might consider ways in which you use the bully drama to distract yourself from implementing right livelihood.

 

 

 

 

Attracting Bullies

 

can be part

 

of a medicinal pattern.

 

http://www.brainpowerlearning.com/bully.jpg

Tue, 29 Apr 2008

 

Property Taxes


Here is an interesting statistic on property taxes. People are loosing jobs and homes yet stupid politicians in some states are raising taxes by up to 17% due to lagging property values.

Somehow government believes when people are in a depression it is OK to pour salt in the would because it is more important that government maintain or increase their income even when people are dropping by the wayside.

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

Tue, 29 Apr 2008

 

Trading System Project -

Exponential Average Crossover
 


Hello Ed -

I develop software in C++ and succeed in duplicating the TSP run to the penny for the simple Exponential Average Crossover system.

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

I match the trade log and equity log exactly. I produce these logs in exact same format as posted TSP files to allow use of file difference tool to compare them.

The ATR's and Exponential Lag values I calculate (stored in metrics log) occasionally differ in thousandths digit, but as others have noted on Reader Feedback, these are insignificant to trade
results.

I optimize by stepping through Slow Lag from 30 to 570 and Fast Lag values from 15 to 285 (Slow in steps of 30, Fast in steps of 15) and find that Slow = 330 and Fast = 90 provides "best" Bliss of 0.1916 for optimization run.

I filter out passes of optimization loop where Fast Lag is greater than or equal to Slow Lag, since I conclude cross-over logic won't work correctly in those cases.

I notice that Eq=<value> in metrics log is start of day equity.

I notice that using Fast Lag values of 45 or greater eliminate many less favorable Bliss values over the range tested.

I notice that this system results in profitable trading for wide range of Slow/Fast values.

I've attached results files.

Thank you for supporting this project.

Thank you for sharing your process.

Tue, 29 Apr 2008

 

Whipsaw Song
 

Ed,


BRAVO!!

enjoyed it a lot! thank you.

Thank you for your support.

Tue, 29 Apr 2008

 

Ed-ification

 
Ed,

Thank you for your commitment to the Trading Tribe Book. Thank you for your commitment to the Trading Tribe Website.


I get it "now".

OK.

Tue, 29 Apr 2008

 

Magic Cookie


Mr. Seykota-

Good day to you sir. I hope this correspondence finds you well. I recently read Trend Following books and I was hoping for your opinion.

I’ve always been a believer that following the trend is a viable strategy to a prosperous trading career. However, I continue to turn small piles of cash into smoke trying to prove this postulation.

 

Failure seems exponentially frustrating but my experience tells me emotion must be fleeting.

I spent the first part of my career in the rat race before going into business for myself. My efforts have been rewarding, but not without extensive physical hard work and many long hours.

 

As a General Contractor I have also been intimate with the risk / reward relationship. However, in Contracting, you stomach ALL the risk. By implementing some discipline, I now operate with a minute amount of risk compared to the life of a contractor. Of course, that minutia becomes infinite if I cannot keep my portfolio on the correct side of the equity curve.

My education, like you, is in engineering. I graduated from Purdue University with a BS in Civil Engineering. As an engineer, I embrace the mind over matter discipline. Having a rigid system that qualifies all signals is a much more reasonable approach than any emotional response that I can muster.

 

It’s just, where does one go from here? Lewis Carroll’s Cheshire cat says the road you take only matters if you know where you want to go. I know where I want to be, but I’m still in the due diligence process trying to sort out which road makes the most sense.

Everybody has an investment product they are willing to sell, yet, where is the managed funds hero for the little guy? Am I left without hope? Am I stuck with the financial pornography of the Barons and Jim Cramers of the world? I hope not.

I know this can be done. I can see that it is possible. I am now in the due diligence process to figure out the how. This guy wants $1,000, the next guy wants $6,000, somebody else wants $25,000 and I’d pay all three of those prices if any 1 of them helps me become as successful as Richard Dennis, John Henry, Bill Dunn, or you sir.

 

At some point, however, the capital has to be allocated to the market in order to capture more capital. These knowledge resource experiences are exhausting.

 

I feel like a light bulb that is a quarter turn short in its socket. I just needs a little bit of tightening for the light to come on.

I’m happy to invest in any product that helps facilitate my efforts in a prosperous trading career. I am, however, quite the skeptic. One guy is selling a course, yet he’s not a trader and never been a trader. Another guy is selling a course, recommends staying away from the other courses, and has made a name with what appears to be maybe a tasteless unethical approach. I don’t want to throw good money after bad. I also want to make a wise decision in my search for a mentor. What I have seen so far is that maybe the aforementioned cares less about my trading career and more about the products they sell.

I’m hoping for some seasoned advice that might point to some valuable resources opportunities. I know there is not a magic cookie that I can eat or investment product that I can buy that will turn my net worth into 8 figures. That will only come with extensive hard work and refined discipline.

 

The freedom of time that trading allows me is not something I am willing to give up easily on. However, it has been 6 months since I have made a dime. In fact, I’ve done a good bit of losing, whittling my starting budget down to less than half of its original sum. I have to be realistic about what I am doing and develop a plan that allows me to trade in perpetuity. I’m sure this is a familiar story to you but it is my livelihood to me and something I take very seriously.

Thank you for your consideration.

A Trend Following system consists of (1) some Trend Following math and (2) some resolve to follow the math.

 

You are likely strongest in the math department. 

 

Shakespeare might be able to help you find the the quarter turn you are seeking.

 

You might also consider taking your concerns to Tribe or to a Workshop.

 

 

 

Lady Macbeth


We fail!


But screw your courage

to the sticking-place,


And we'll not fail.

 

 

Clip:http://notexactlyrocketscience.files.

wordpress.com/2006/10/ellen_terry_at_

lady_macbeth.jpg

Mon, 28 Apr 2008

 

Trading Metaphors - Solving a Puzzle


Ed says (FAQ, Using 3-D Patterns / System Metaphors, 3/7/03), "Traders tend to personalize the relationships they have with their systems. Some might see an authority figure, all full of arbitrary rules, or one who punishes and invalidates ... Some might see a puzzle, that needs continual re-solving and tinkering.

I suggest you find out what metaphor you hold for your system, and then make sure it in alignment with stable and lasting adherence to sound trading principles."


This is quite interesting. The example you cite resonates with me. [Trading is a] puzzle that needs continual re-solving and tinkering.

Upon further pondering, my trading system feels like an intellectual challenge to me - like coming up with a master plan / constitution / mission statement that is applicable in all situations - on which I can rely to base my decisions. If this is my metaphor, then how do I make sure it is in alignment with stable and lasting adherence to sound trading principles?

I'd take that sound trading principles are:

1. Go with Trend,

2. Ride winners, and

3. Cut losers and

4. Manage Risk.

My trading metaphor seems to be unrelated to any.

I appreciate your suggestion. Thanks.

You might consider noticing if your trading is in line with right livelihood or if it merely provides medication for deeper issues.

 

 

 

Puzzle Pieces

 

You can assemble them

and then you can take them apart again.

 

That's pretty much it

for puzzles.

 

 

Clip: http://www.menudospeques.net/images/

recursos_infantiles/puzzles/puzzle2.jpg

Mon, 28 Apr 2008

 

Stop Using Stop Losses (Spam Ad)

Dear Investor,

If you’re tired of stop losses, learn how to adjust trades to turn losers into winners!

Let’s face it – even after conducting the most thorough analysis, sometimes your stock picks move in the wrong direction. Unfortunately most investors only know how to use stop losses or other “loss minimizing” strategies when that happens.

 

But what if there were a way to “adjust” your trades to actually turn those losing stock picks into winners?


We’re offering a FREE online webinar that will teach you how these and other strategies can help you profit in any market condition. In this free class you will learn:

Proven methods to pick the right stocks. How to adjust trades to turn losers into winners. How to average 50% ROI per trade. Your best investment may be 45 minutes of your time attending this valuable online class.

Attempts to adjust losers into winners accompany the path to even bigger losers.

 

If You Find Yourself

Going in the Wrong Direction

 

you might consider

 

getting off the train

and examining your options.

 

Clip: http://www.njshoppingmall.com/

bachmann-train-sets-bachmann-scale-train-sets

-c-15_17_19.html

Sun, 27 Apr 2008

 

Futility in Deterministic Approach


Ed says, "My own researches into fractals reinforce my belief in the futility of deterministic approaches." (FAQ, More on Beliefs, 3/7/03)

Can you please tell me more about how fractals reinforce your belief in the futility of deterministic approaches? Thanks.

Small perturbations in one part of a system can generate large swings in another.

Sun, 27 Apr 2008


Dancing and Fighting


Ed,


FAQ response of April 10, 2008:
Yin and Yang describe two interrelating aspects.
You might see them as fighting or dancing.


I submit that fighting is dancing (is trading).
"Protect yourselves at all times and come out dancing."

OK.

Fri, 25 Apr 2008

 

Whipsaw Song


Ed,

 

I sing the Whipsaw song to myself many times today. It feels like one of those Top 40 hits I would get stuck on when I was a teenager!

OK.

Fri, 25 Apr 2008


Pro-Crastinator



Hi Guys.

 

First I want to thank Ed for coming to [City], leading the meeting and sharing with us his ideas about what it takes to overcome blocks and have goals realized.

 

Thank you [Name] for hosting the meeting once again and thanks to every one else for attending and making the meeting happen. My mind was continually busy thinking about issues I have dealt with and am still dealing with as others shared both their issues and goals they want to see accomplished. I think this is one of the things that make TTP so powerful is that as others share we see our own struggles and also our own solutions in them.


I agreed to email [Name] Monday to set up a time to call him to discuss my system I am working on and as the day went on I found my self getting busier and busier.

 

I had planned to take my wife to the doctor for some tests she had scheduled on Tuesday and felt I had to get things organized before I left [work] Monday. I emailed him and let him know it would be Wednesday before I could call.

 

The same thing happened Wednesday where I was busy and I asked to call him after [work] that evening or Thursday. We agreed to Thursday and I did make the call.

 

We agreed to compare notes and ideas on what we are doing trading wise. I got to watch myself running around being busy, putting off the email, stressing and micro managing every little detail at work to have an excuse to put off the call.

 

After I finally took action and made the call all that "stuff" seemed to clear away and I feel very good about the possibility of success in finishing my system. Thank you again to everyone.

Thank you for sharing your process.

 

 

 

Getting Busy

 

is sometimes a good way

to put off

 

getting buys.

 

Clip: http://sameerdurrani.blogspot.com/

2007/08/last-curse-of-princess.html

Fri, 25 Apr 2008


PhD


Ed,

Today I did speak with a Professor with a PhD in Organizational Leadership / Behavior and a conflict resolution expert. I notice when I ask about experiencing feelings, not just describing them, he quickly describes more and sounds like a typical academic. I wonder if in this case PhD = Piled higher & Deeper? Any thoughts?

Sincerely,

Thank you for sharing your process.

 

 

 

 

Pontificating

 

can provide medication

as well as information

 

for both the sender

and the receiver.

 

Clip: http://www.merryswankster.com/

archives/commentary/

Fri, 25 Apr 2008

 

Wants USD / JPY Prediction



Dear Mr. Seykota,

I am an interested investor / trader from [Country]. I am working on a private basis.

Do you think that markets which rallied recently against trends are ready to crack again?

I am invested in the yen at this point. As the dollar counter-rallied against the falling dollar prices I could imagine it is time now to go down again. Would or do you invest in the yen currently against the dollar?

I am looking forward to hearing from you.

Best regards,

You might consider taking your feeling of <wanting someone else to tell you what to do> to Tribe.

 

 

 

Slaves

 

have the freedom

 

to take responsibility

for their condition.

 

 

Clip: http://www.latinamericanstudies.org/

Transatlantic.htm

Thu, 24 Apr 2008

 

Updating TTID


Hi Ed,

I enclose an updated TTID for our tribe as we just add two new members. They both take the hot seat on their first meeting, and get into their feelings within minutes. I feel tremendously grateful to be able to support them. I feel very good about the experience. It seems like once I get my mind together, the intention radiates, people just show up and we make new highs.

Thank you for sharing your process.

Thu, 24 Apr 2008

 

Do It Now


I like the thinking of do the things now because it creates and emphasizes focus. We are only ever doing things “now” by the way.

I wish to schedule a meeting of our team to create and inspire our best effort.

The meeting is both similar to, and different from, some of our other team meetings. This meeting will go farther in investigating the areas of each of our goals.

At the meeting we will take turns. One teammate will state his goal(s), then the rest of us will collectively investigate in a supportive way the stated goal. Then in the coming weeks and months, we will collectively hold each of us responsible for achieving our goals.

The meeting could take 3 hours. We can do it Friday evening, or we can make a special date for it sometime.

I ask for your trust, this is powerful stuff if we each contribute.

Thank you for sharing your process.

 

 

 

Struggle

 

can

advance you

toward right livelihood

 

and it can also

distract you

from deeper issues.

 

 

Clip: http://www.benyei.com/galleries/

commissions/struggle.jpg

Thu, 24 Apr 2008


Running the Marathon - Update


I have purchased a marathon training plan for the [City] Marathon. This plan lays out a training program which commences on Sept 18 and runs till the Marathon. This training plan assumes that I can run 6 miles comfortably when it begins. My primary goal for the summer is to be able to comfortably run 6 miles before Sept 18.

The schedule for my summer goal is to be able to run 1.5 miles by end of May, 3 by end June, 4.5 by end July and 6 miles by the end of August. In addition, my resources tell me that losing weight is important to achieving this goal. I will lose an average of 5 pounds per month so that I weigh less than 195 on Sept 18. I commit to sending out progress reports on these goals to everyone supporting me at then end of each month.

My plan for the first several days was to build my resources for this project. I have made commitments to my Tribe, I have found several websites and a local running store that have been useful, I have made a commitment to my friend who has run this marathon and enlisted his help. I have also had several conversations with my wife about motivations and goals, which segues into the next topic.

Risks


I see several risk in this undertaking, mostly involving potential dramas with my wife. Over the last several years, we have come to recognize dramas in our life and can talk about them (thanks Ed / tribe). My wife and I discussed these dramas (before I made my commitment). By recognizing them and being open about them to the point of writing them down, my wife and I hope to mostly avoid these cycles. The thought occurs to me that planning on running a Marathon is a great way to start several of these dramas.

Self Improvement Drama


There are several dramas in this area. They basically go 1. I improves my self. 2. I feel increasingly emboldened to try to get my wife to improve as well. 3. This is meets resistance (withdrawal, resentment, feelings of low self worth) 4. Wife/I both have anger / resentment from having our sense of fairness trodden on. This was a common drama for us several years ago but we rarely fall into it now.

Sabotage


My wife sabotages me. Maybe this is to head off self-improvement. Maybe it is to handle fears of abandonment by lowering my self image. Big note on this, I am concerned about this and may see it when it is not sabotage at all. Blaming a failed exercise plan on the wife buying Oreos would not be a new drama.

Thanks again to everyone for supporting me. On a related note, I have been making very nice progress on several other projects that were stuck. Even though I didn't make a commitment to improve these, I think it is not a coincidence that they became unstuck after the meeting.

Thank you for sharing your process -  and for noticing how your patterns come up.

Wed, 23 Apr 2008

 

Price Volatility System


How would you structure a transaction to take advantage of this anomaly.

"Futures, for example, are less reliable. They work as a hedge only if they fall due at a price that roughly matches prices in the cash market, where the grain is actually sold. Increasingly — for disputed reasons — grain futures are expiring at prices well above the cash-market price.

When that happens, farmers or elevator owners wind up owing more on their futures hedge than the crops are worth in the cash market."

It seems like a no risk deal. The worst that can happen is that futures price converge to cash price. Or am I missing something?

Futures markets typically allow delivery of physical grain against the contract - motivating a convergence of futures and cash prices at expiration.

 

You might consider examining the "reasons" in dispute. 

Tue, 22 Apr 2008


Commitment to Trade brings up Drama

Just entered my first trade since 2005! Feeling good! Took 0.8% risk (based on a stop) on my total IRA account stake based on several different and confirming analyses. Entered ten minutes before the close; the stock rallied into the close, covering my commission, for a net profit of $3.05. That feels good too, but the best feeling is busting the [slump].

On Monday, sure as s---, when I thought about making a trade, all my addictions came bubbling up out of the primordial mud. I engineered a major drama with my wife yesterday - worked very well as a distraction. I engaged in all sorts of other distracting and addictive activities as well, bringing myself down, and not getting a trade done. Started to do so today as well - still dealing with being in the dog house with the wife, and the universe engineered a major database problem on our site today.

But, I am pleased to report that with the virtual tribe in my head encouraging me and supporting me, I saw the close looming and I resolved to forge ahead towards my goal, addictions be damned.

Thank you all for your support of my commitment.

Thank you for sharing your process.

Tue, 22 Apr 2008

 

Defining Medication


Ed,


Thanks for coming to the tribe meeting. I got a lot out of it. Very powerful idea about the importance of clarifying an intention and the actions that support manifesting that intention. Here is a quote of yours that I wrote down: "Anything that diverts you from taking that right action in support of your intention is MEDICATION!"

I have copied all of the emails from the attendees to the meeting on this email.

Thanks again,

OK.

Tue, 22 Apr 2008

 

No Security Thread on Essentials Card


Hi Ed,

Yesterday i received the TT Essentials 'credit' card. Thank you kindly for that. It now lives in my wallet.

I'm a bit intrigued.

I notice that these cards don't seem to have much in the way of security features. (i.e. No security thread, No watermark, No special security window).


I was thinking that these might be very easy to copy, but then again the Federal Reserve already does that for you (in Spades!!), so why would you bother.

OK, once more, thanks ... When next we meet, it's beers 'on me' at the local pub.

OK.

Tue, 22 Apr 2008


Wants Trading Skill


Do you recommend any books on trading besides your own. Even if i have a good relationship between my conscious and my Fred and feel that i still need the skills to trade well. any recommendations.

You might consider starting with a book on basic grammar.

Tue, 22 Apr 2008

 

Diversification of Lag Parameters

Dear Ed,

Following our telephone conversation of 24 March...

My research plan is to find if combining different forms of trend following systems produces significant performance benefits – compared to running the systems alone.

The 3 types of systems used in this test are:

Donchian; as used in the Support/Resistance system project in the TSP pages. Two-Box; similar to the Support/Resistance system, except there is no separate trend definition; rather the system enters on a break of the farther look-back extreme and exits on a break of the nearer look-back extreme.


EMA Crossover; similar to the Exponential Crossover System on the TSP pages.


My previous research looks at combining identical S/R systems with different frequencies. My finding is that this produces a small performance gain – but not the standout gains we are looking for.

In this research I wish to investigate performance gain due only to the diversification across system types, not frequencies. Therefore I decide to use the same parameters across all 3 systems for each test. This does not guarantee the systems have the same frequency, as they each operate differently. However, when I inspect the test runs I see the maximum variation in the number of trades between the systems is 17%; therefore I am confident that the systems have similar frequency.

I decide to test combining the different systems for 3 separate frequencies. I select parameter pairs: 30/60 (high frequency), 60/120 (medium frequency) and 90/180 (low frequency). I limit the high frequency system to 30/60 in an effort to stop execution costs over running the performance.

My testing platform awards trades at the system price. I set the test to charge $85 slippage and commission on round turns, including rolls. I use a portfolio of the following 5 markets: Crude Oil, Gold, Live Cattle, Sugar and Wheat. The testing period is 1 January 1976 to 11 April 2008. Note Crude Oil does not start trading until 1983.

For each parameter set (frequency) I use the following procedure:

I run the 3 systems individually (in blue). I use a risk budget of 0.03. I calculate the MAR value for each run and take the average of these values. This gives a measure of how the systems perform individually.


To test the effect of combining the systems, I run 2-system combination tests (in brown). I run 3 tests; each of which combines 2 of the 3 systems (covering all possible combinations). Because the systems are being combined I reduce the risk budget for each component system to 0.015. I take the average of the 3 resulting MAR values. This gives a measure of how the 2-system combinations perform.
Finally I run a test which combines all 3 systems. I reduce the risk budget to 0.01. There is no need to average the resulting MAR value.
The results are presented below:


These do not show any significant performance gain from combining different types of systems that have similar frequencies; at least as measured by the MAR values.

From this research, and my previous research into diversifying across frequencies, I conclude that the gains achievable from diversifying across both system frequency and system type are small – particularly when compared with the gains resulting from diversifying across markets. This indicates research time may be more profitably spent looking at other methods of improving performance.

Diversifying across systems and frequencies may still have utility, especially in a CTA environment, as it has the following benefits: small performance gains are possible; the risk of selecting the worst performing parameters/system ahead of time is reduced; for large accounts the effect of splitting entries and exits over a range of prices may reduce slippage.

Prior to starting this research I completed a final parameter-diversification project that I was interested in, and had mentioned to you. This runs as follows:

I build a single parameter support/resistance system and test for 20 values of the look-back parameter, in this case 20, 30, 40, ...210. I calculate the average MAR value for the 20 trials. The next step combines two instances of the same system for each combination of the parameter values, e.g. 20/20, 20/30, ....20/210, 30/20, ....210/210, which results in 400 trials. I calculate the average MAR value for the 400 trials, and compare it with that for the 20 trials. My idea is that using an average over all the trials should remove any bias due to parameter selection, with the remaining difference in performance being due to the effects of parameter diversification.

The results are similar to those that I see through all this research; there is some performance gain, but it is small compared to that available from diversifying across markets.

I am happy to continue research on a new topic, or developments on this topic, if you have any suggestions.

Regards,

Thank you for sending this research.

 

It confirms my own conclusions.

 

Mon, 21 Apr 2008

 

Intention Requires Action


Ed,


After our TT meeting yesterday, I have been thinking about intention and manifesting of intention through actions. I Googled up "creation of reality through actions" and what I found was an article that had this in it:

"Manifesting and requesting ... comprise only half of proper living. The other half is personal effort and action ... You Create Your Own Reality is a popular new ager concept that promotes the idea that these two things are sufficient to create everything one needs, that no effort at all is necessary ... Its followers become armchair experiencers. Like spectators of television football games, they may be watching exercise happen, but they themselves become increasingly out of shape. Doing reality creation without putting forth personal effort leads to an analogous situation, spiritual stagnation."

I also wrote this down as a paraphrase of something you said yesterday: "Anything that diverts you from taking that right action in support of your intention is medication."

Thanks again,

Work applies applying force over a distance.

 

Exerting force and not moving is not work; neither is travelling a distance without exerting force.

 

 

No Work

 

The fellow in the picture at the right is holding up his end of that bit of pipe while the machine is holding up the other. Unless the pipe moves up or down, neither of them do any work.

 

Clip: http://www.mcasco.com/p1wke.html

Mon, 21 Apr 2008

 

Trends-Exercise


Dear Ed,

as I have access to historical stocks data now and I am currently writing a program to duplicate your Trends-Exercise-results I am wondering that your computation for the exponential lag in the trends-exercise is:

lag[0] = lag[1] + (price – la[1]) / timeconstant

whereas the computation in the exponential average system is:

lag[0] = lag[1] + (price – lag[1]) /

((timeconstant + 1) / 2)


Could you elaborate why you chose to use two different computation methods?

The conversion,

ETC = (MAD + 1) / 2

 

where

 

ETC = Exponential Time Constant

MAD = Moving Average Days

is an attempt to equalize the shapes of the exponential lag and moving average. 

 

This equalization only works for ramp response -in which prices increase or decrease at a constant rate.

Mon, 21 Apr 2008

 

Entry Signal

Dear Mr. Seykota,

in the night I see a report about psychiatric disorders in children. A young, intelligent woman with anorexia, a disease which intrigues me, says "by starving I could kill my feelings" (durch Hungern konnte ich meine Gefühle töten). Hmmm....

You wrote "I support you in continuing to find ways to enhance right-livelihood without resorting to
pharmacological remedies".

I thank you very much and accept your support. I realize that Tribe and myself have been moving asymptotically for several years. The lines crossed some weeks ago. In trend trading systems, this usually indicates an entry signal.

I commit to start and develop a Tribe in Berlin, Germany. I need your help and the support of other members to do the work.

 

Is attendance to a workshop a requisite to start a local Tribe? If not, I start as soon as I receive the Trading Tribe book and your authorization.

While Workshop attendance is not a requisite, it is likely to accelerate your progress.