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Ed Seykota's FAQ

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May 1- 14, 2010

 

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Contributors Say

(Quotes from Ed in Red)

Ed Says

Saturday, May 15, 2010


Wants to Promote the Book


Hi Ed,

I just saw that you've moved to Austin. Congrats! I hope it works out well for you. The average IQ of Nevada must have dropped precipitously since you moved - I believe your living there skewed the averages higher.

I've been to Dallas a bunch of times and I generally like Texas a lot.

How's the second book going? I can help you promote it when it's ready. I've been doing book reviews and recording some interviews with the authors and making them available as podcasts. They are a lot of fun and I've been reading some great books on decision making and risk management. I provide them for free, there's no charge to have access.

I have several online classes at UCLA, in addition to the ones I teach on the ground. One of them is a Psychology-based course as it relates to trading.

As promised, I haven't mentioned anything about Trading Tribe or anything about you or your Intellectual Property. Nor have I mentioned anything that would betray any of my former tribe members' confidences. I only have used myself and my own experiences as a trader and my personal growth story, which I think students will be able to identify with.

Let me know how you're doing and what you might be up for in promoting your book. I'd be happy to help you and it would be great to catch up.

Thank you for your offer.

Saturday, May 15, 2010


Silk Acrobatics

Dear Ed,

A friend of mine is an aerial silk acrobat. Last night I get to see her perform. She climbs a 30-foot silk ribbon with ease on slim yet powerful arms. She drops 6 feet then snaps to a stop, suspended by a subtle wrap of silk around one ankle. The audience gasps. She lays horizontal in mid-air, demonstrating a contortionists' flexibility, then rolls herself back up even higher as the ribbon wraps around her waist. She continues to perform what appear to be exhausting aerobic feats for 20 minutes with no visible strain. There is just one woman on stage and a pair of long silk ribbons, yet with each passing minute the audience response in “oohs” and “aahs” and “uhhhs” increases. It is an astonishing performance.

After the show she returns to the stage to take audience questions. One man asks how she works without a safety line. She says "you are not allowed to fall." I surmise that if she falls her acrobatic career may be over. She does not mention, but I note, that she always has two points of attachment to the ribbon (a wrist and an ankle, for example).

This artist and her art are a metaphor for trading, in my mind. She uses what physical resources she has (slim yet strong physique, flexibility, mental focus and a high pain threshold), maximizing them through years of practice and training. She uses stops, manages risk, cuts losses, "rides the ribbon" and sticks to her system. The result is high entertainment for the audience yet minimal drama for her.

I seek to improve my trading by imagining that I am an aerial silk acrobat maximizing the effectiveness of my resources, attending to safety and not deviating from my system. If the acrobat’s entertainment value is analogous to wealth, then it is clear that one can build wealth with only strong determination, a eye to safety and a commitment to succeed, despite starting with limited resources and experiencing (non-fatal) setbacks along the way. My new mantra is “you are not allowed to fall!” This helps keep Fred aligned with my goals.

My friend, the aerial silk acrobat, is a very successful trader. Now I understand why.

You can find video of similar acrobats on YouTube. Search for "aerial silk."

Thank you for your report.

 

I wonder how you intend implement the you-are-not-allowed-to-fall order in trading - particularly if you have a notion of using it to boss the markets.

 

 

You can Scold the Gold

 

If you get too bold and hold

you might have to fold.

 

 

 

 

 

 

 

 

 

Clip: http://www.econopundit.com/

tedgreatnewsphoto.jpg

 

Saturday, May 15, 2010
 

Teacher


Dear Ed,

Here's something I wrote ...

 

An Apprentice Trader asked his Master,

"How do I become the best trader on earth?


His Master replied,

"Do nothing, See nothing, Feel nothing.


The Apprentice Trader puzzled,

"Doesn't nothing yields nothing?" 
 

Master said,

"You must clean up you mind, like water.

Stay pure in ripples or in waves."
 

Apprentice said,

"I still don't get it."


Master said,

"The water does not seek."

Thank you for the parable.

 

You might consider taking your feelings about <feeling everything>, <being unclean>, and <being impure> to Tribe.

 

 

Sometimes Creativity

 

can be a little messy.

 

 

Clip: http://farm1.static.flickr.com/180/

472530740_0c1ffb42b1.jpg

 

Friday, May 14, 2010

Wants an Interview


Hi Mr. Seykota,

I am a writer for AOL Finance and would LOVE for the opportunity to do a feature interview with you. Any topics burning a hole in your mind?!

You are a legend in every sense of the word and I have followed your successful career over the years. I particularly enjoy the whipsaw song.

Please let me know if you have time as it would be an honor!

Warm regards.

You can find an interview with me in Market Wizards by Jack Schwager in which I lay out the basics.  If I think of anything to say that's new or different, I can let you know - maybe around the time I release my book.

Friday, May 14, 2010
 

Working TSP


Dear Ed,


I'm an Italian electronic engineer; I read something of you from an Italian trading book (by Renato di Lorenzo) and then I discovered your site few months ago. This year I started learning C# (it wasn't an hard task as I learned Ansi C from university) and now I have completed the test program on EMA exercise.


Attached you can find the Metrics, Trades and Equity Log plus Excel drawings of Bliss=f(FastLAG, SlowLAG) and DrDn=f(FastLAG, SlowLAG) for the following system:

Fast Lag=15
Slow Lag=150
Nr. Trades=29
ICAGR=0.0514
DrDn=0.609
Bliss=0.0844

Finding an optimal solution the result matches yours:

Fast Lag=85
Slow Lag=325
Nr. Trades=7
ICAGR=0.1121
DrDn=0.5335
Bliss=0.2101

I calculated DrDn=f(FastLAG, SlowLAG) in order to check if there was a solution with small draw down, but the minimum is about 25%, for a short term system, Fast Lag=15, Slow Lag=55.


My next intention is to work on S-R exercise.


Thank you very much for the TSP and for the FAQ as well, for everything you say and also everything you don't say.


Do you think TSP project will go on covering the others steps?

Thank you for sharing your process.

 

I don't have a way to predict the future of TSP.

Friday, May 14, 2010
 

Wants to Know More

 

Greetings Ed,

I am a big fan of yours based on my reading about you online and through various books. I am interested in learning more about the trading tribe and potentially working with you. Let me know how best to proceed.

You can start by browsing around on this site.

Friday, May 14, 2010
 

Commandments and Essentials


Hi Ed,

I am sporadically reviewing FAQs and getting a feel of the place, as I am doing for several months now.
 

Tonight I read post:
Monday, January 25, 2010
Up Against the Wall
 

and take notice of your reply.
You use the 'ten commandments' as a metaphor to illustrate how hard it is, as a fallible emotive human being, to follow simple rules.

I recognize the 'essentials' as the simple rules I find difficult to follow, as part of being human.

I feel I have made an obvious insight, which, inextricably, I had not grasped until now.

The 'essentials' take on a new feeling for me.

A new context?

Thank you for sharing your process.

Friday, May 14, 2010
 

Acceptance & Commitment


Dear Ed,
 

Regarding the April 16th FAQ


Thank you very much for your response.


Reading it and re-reading my e-mail, helps me understand that despite all my pronouncements to the contrary I'm still trying to figure out things and people instead of accepting them as they are.


My parents recently decided to start a new business. Instead of supporting them, I argue that it's not the right time and that the economy is not going to get any better. Then I realize they have supported me when I decided to create my fund and even committed money to it. I feel shame and embarrassment, I start to support them and help them prepare the English version of their company presentation. I commit to further support them and wish they succeed.


Even if my fund is performing fairly well (up 12% YTD), I feel anger as I'm making stupid mistakes. My former "funny-mentalist" approach still influences me now and then and I notice I'm still trying to anticipate market movements. Obviously the best trades are the ones done when there is a clear pattern in the chart and when I'm not concerned with the future, the worst ones originate from poor technicals and "the desire for action", as Jesse put it. I also feel I'm staging a drama with one of my partners in the business, who's hell-bent on figuring out the "whys" of the market: I let his opinions interfere with my trading, so as to be able to still engage in a "funny-mentalist" approach without having to assume responsibility for it, as I place the blame on him.


I commit to let this drama disappear and to move further in the direction of a purely technical/no "whys" trading style, which I feel is the best one, both in terms of results and in terms of feelings enjoyed in the process.


Regarding the girl of the last mail, I say to her I'm not interested in a friendship but in a serious relationship, she says she's not and we part ways. I feel sadness, but also relief, as I'm not forced to play a role that doesn't fit me.


Now I want to make some clear commitments, as I've found that openly expressing them helps me in remaining focused on them:

-I commit to serve others by successfully managing my fund, protecting and growing the capital that has been entrusted to me;

-I commit to accept things and people as they are, without trying to figure them out or change them;

-I commit to enjoy my feelings and help others enjoy theirs;

-I commit to report to FAQ regularly, twice a month;

-I commit to attend a workshop, if and when Ed decides to hold one, as I feel this could be a great chance to work on those deep issues that are not easily dealt with "normal" processes or cannot be solved on my own.

Thank you for sharing your process.

Friday, May 14, 2010


Healing


Ed,


I have recently come out of the other side from a divorce with my business partner who is also my brother.


It has taken nearly 5 yrs to conclude with a near 3 year legal battle. He didn't really ever want it to happen............. he is older and I instigated it.
 

We have never really agreed on the way forward and when I suspected him of dishonesty I wanted out.

I believe I have felt all the feelings possible.
 

Feelings from jubilation after the closure to sadness, frustration, disappointment and even violence toward him during the legal battles (never acted out but certainly felt).

Being a Tribe member and going to the hot seat during the divorce was a great help.

I am now a very happy person with a wonderful wife and 2 wonderful kids. The divorce is fast becoming a distant memory.

I am now in the process of becoming better trader.

Thank you for sharing your process.

Thursday, May 13, 2010


Doesn't Know Love


Dear Ed,

In the book of Jack D. Schwager entitled "Market Wizards" you got the following question:

What traits do you look for to identify the winning trader personality?

Your answer:

1. He/she loves to trade; and
2. He/she loves to win.

The answer of question 1 I do totally understand.

The answer of the second question I do not understand fully.

Could you elaborate your answer? What do you mean by love to win; could you give an example.

Thanks!

Thank you for your question.

 

You might consider taking your feelings about <loving what you do> to Tribe.

Thursday, May 13, 2010


A Keeper

 

Dear Ed,

 



 

Now here's a keeper. Gotta be between 18" and 27" to keep.

We had him over for dinner :-)

Having a ball in Florida while it snows in Tahoe.

Thank you for the update.

 

I wonder who's the guy holding you.

Thursday, May 13, 2010


Ex-Wife Beats the Kids

Chief,
 

My ex-wife shouts at my children, punishes them, prohibits them to do things that they enjoy, sets limits without discussing it with them. I feel that I cannot intervene, since I don't live there anymore. I am worried about the children, feel pain for them, and not know what to do.

The next day I have a phone talk with a Tribesman and friend. He is very interested in how I am doing after the separation. I tell him the story with my wife controlling the children and punishing them, and my anger and confusion about it...

 

As I do, the feelings flow and I suddenly realize what to do: simply tell my wife that I know that she is overwhelmed by the situation and that she uses control to cope with it, and ask her if she wants to share her feelings about it with me. Maybe she is open for it and to find another, more satisfactory way to handle problems.

This stuff is awesome…

Thank you for sharing your process.

 

If you ex-wife is actually harming your children, you can report her to the authorities.

 

If she is merely exercising her preferences in parenting styles, you might consider taking your feelings about <wanting to control your ex-wife> to Tribe.

Wednesday, May 12, 2010


Apocryphal Code


Dear Ed,

I was astounded to see the returns generated by your system but could not decompose the following things on [software] regarding position sizing and would be grateful if you could share as to how it is done.

ATR_multi = Optimize("ATP Multi", 5, 3, 9, 2);

ATR0 = EMA0(tr, 20);
 

Risk_Per_Share = Ref(ATR0, -1) * ATR_multi;

Heat = Optimize("Heat", 0.05, 0.01, 0.21, 0.02);
BuyPrice = (H+O)/2;
SellPrice = (L+O)/2;

PosSize = Heat * BuyPrice/ Risk_Per_Share * 100; // percentage of equity

PSAdjust = 0.45; // the additional ~0.4% is used to simulate Ed's rounding to "nearest 50" instead of rounding down.
SetPositionSize(PosSize + PSAdjust, spsPercentOfEquity);

How the position size is calculated is necessary to know in order to have a proper risk management system in place.

I do not recognize this code or know what you mean by my returns on my system.

 

If someone is implying that he has  some of my code, or that it represents any of my trading, you might question his honesty and ethics.

 

I wonder if you can tell me the source of all this information so I can pursue legal remedies and also give him some publicity in my column.

 

 

Wednesday, May 12, 2010


Wants to Open Accounts

Dear Ed,

Hope this message finds that you are well. Your Website FAQ mentions a recent move to Texas.


I assume you find your new home state to be quite satisfactory. Best wishes. Texas is a great State!

While visiting your website recently, I thought I'd check out the various Tribe meetings. I realized email addresses of Tribe Leader's were indicated on your site and thought I'd ask if you have an objection to my contacting the Tribe Point Person by email in an attempt to solicit our FCM's trade execution capability.

 

Of course this contact with be anonymous with no mention whatsoever of your site … unless a person asks - if a conversation were to progress to this level of communication (5% possibility, in my opinion).

Thank you for your consideration in this regard.

With all the dynamic changes in our industry - with markets, regulation and corporate responsibility - please do not hesitate to re-consider our firm, with our ongoing capability for trade execution. Let me know if you have any questions.

People post their names and email addresses to this site as a way for people to connect and form Tribes.

 

You might consider joining a Tribe.

 

You might also consider training your staff to bring them up to full-on professional capability before trying to market them.

Monday, May 10, 2010


Exogenous Shocks


Dear Ed Seykota,

When I go through my day, I sometimes experience exogenous shocks which change my demeanor significantly.

 

After experiencing a series of very traumatic events Friday, May 7, I have been begun a relentless self talk, reflection, and breathing whenever I feel I need to realign myself towards a comfortable, relaxed and amicable personality - the way I am when happy and comfortable.

 

Today, I experienced one of these exogenous shocks, which immediately triggered my positive self-talk intended to relax me and gain proper perspective. I managed to control the anger, but continued my activities for the next 30 minutes whilst modestly shaking at times and generally just not being in fully functional state. The feeling relaxed somewhat once I came home and created "a little drama". At this point I went into a yoga position on my bed and tried to relax and breathe. I realized that I was hoping for that person to respond to my dramatic action, and thus beginning to enter this state where I want to create drama and conflict to ease something in my mind. Since this is the source of the traumatic events which I have decided would occur for the final time last Friday, I stopped myself and asked what was causing me create this conflict. I could not figure it out, and I thus write to you in search of some direction or guidance on this matter.

All the best wishes, believe me.

Thank you for sharing your process.

 

You might consider taking your feelings about <wanting to be peaceful> to Tribe.

 

 

The Ultimate Peacefulness

 

 

 

 

 

Clip: http://saysomethingfunny.files.

wordpress.com/2009/01/

rest-in-peace.jpg

 

Monday, May 10, 2010


Wants Information on Donchian

Hi Mr. Seykota,

I was hoping you could assist me. I know from reading about your trading that some of your trading systems have been based on Richard Donchian's work. I have searched high and low, but apart from a brief set of 20 rules have not been able to discover anything he has actually written on his approach to developing trading systems. Are you aware of any material that I could either buy or access through some source that would allow me to study his work first hand? I am somewhat cautious about relying on third-hand sources claiming what Donchian's systems were.

Many thanks in anticipation, and thank you for writing the Trading Tribe book.

The TSP project on this site has some examples of Donchian systems.

Sunday, May 9, 2010


Wants to Work


Dear Sir,

I want to work for you, if please you give me a chance to work for you.

You might consider telling me what kind of work you might like to do.

 

Absent a clue from you as to your skill set,  I can assign you a job: namely, your job is to send me lots of money every day.

Sunday, May 9, 2010


Wants to Join a Tribe


Hi Ed,

I just got to know the Tribes and like the idea. I checked the Tribe web site and did not see Tribes in [County and City Name]. Do you know any traders who is interested in forming a Tribe in [County, State]? I'd like to practice TTP with other participants.
 

Also when is the next workshop?
 

I am seeing a divergence forming on my trading career, for the eventual reversal. While my equity line is making lower lows, my understanding and attitude is making higher lows. |=) TTP may help me on the most important missing part.

Check the TTP directory link above.  If you do not find a Tribe in your area, you can start one.

 

I generally schedule Workshops in response to demand.

Saturday, May 8, 2010
 

Counter-Trend


Howdy Ed !

The Thursday, April 15, 2010 Counter Trend Indications FAQ indicating end of uptrend, appears to work pretty well.

The trend changed the following week.

Thank you for teaching me your "Butcher, Baker, Candlestick Maker" rule.

You are welcome.

Saturday, May 8, 2010

 

Truth in Relating

 

Dear Ed,

 

You say:

"Thank you for sharing your process and your research.

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

From your letter I might guess that what you want is to complain about your current girl friend and to do some research to find a replacement.

You might consider telling your current girlfriend what you want in a relationship and also ask her what she wants."


Thank you. I guess I am not able to be really honest with myself as well. I like the sex we have and yet I do not feel that deep, romantic bond and trust I look for in a relationship. I wonder that perhaps this is just part of the process of dating and looking for the (ideal?) mate...

Thank you for sharing your process.

 

You might consider showing your girlfriend this item in FAQ.

 

The truth is likely to set you both free to find your callings.  Perhaps she feels the same way as you and is happy as is.

Thursday, May 6, 2010


Uncertainty and Progress


Dear Ed,

In my trading, I seem to always bump into an unwillingness to embrace uncertainty. Different systems, different methodologies, same results.

I have taken this issue into the hot seat several times but no significant progress is being made in this domain.

I've tried many different techniques and practices to create a breakthrough here, yet I haven't be able to do it.

Hmmm

I feel this lies at the heart of successful trading and yet many traders struggle with this, including me.

I was wondering if you would like to share some thoughts on this.

Thank you for sharing your process.

 

You might consider taking your feelings about <making no progress> to Tribe.

Thursday, May 6, 2010


TTP and Separation

Chief,

For many guys, separation is a tragedy full of fights, financial worries, vulture lawyers and anger. During the separation I feel very sad. I accept it, even enjoy the feeling. I make a commitment to experience and accept all my feelings.

- My relationship to my ex-wife is excellent. She invites me to lunch, is more considerate to me than before the separation.

- I wake up in the morning thinking “I have more expenses, I could need some 1000 € more a month”. I am not worried or afraid about the money, I just think “it would be better”. One hour later I receive a phone call. A guy invites me to hold a lecture. I get an honorarium of 1000 €.

- I ask my boss for more money. He says “yes, you deserve it”. My salary increases by about 20%.

- I re-start playing guitar. By word of mouth I soon have a band and a first show. More people talk about it. A second show follows. A representative of my Hospital attends it and proposes me to play at the party for the 300 years of the Institution, an open-air event for some…15.000 people.

- I decide to look for a woman who is good for me. I know one, maybe two new women weekly. One day I think “no, it is wrong to look for a woman who is good for me: I rather look for a woman whom I am good for”. After that, I start knowing about one or two new women not weekly, but daily.

I get more and more experienced with TTP. I don't try to fix people anymore. Instead, during the processes I just let people experience their forms until they realize that they are just fighting against, being afraid of, suppressing a, feeling. Then, I just tell them “great, you see what you are doing! You can keep on doing that, I give you all my support. And you can also stop fighting against the feeling. I can also support you in doing that. What do you prefer to do?” Some people prefer to keep on fighting, most prefer to experience the feeling. The standard duration of a process falls from some 45 to about 15 minutes…

And I am only a beginner with this stuff.

Thank you for sharing your process.

 

 

 

In Surfing as in TTP

 

mastery has a lot to do with

 

going with the flow.

 

 

 

 

 

 

 

 

 

 

 

Clip: http://www.jaunted.com/files/admin/

hawaii_surfing_nut.jpg

Thursday, May 6, 2010


Austin


Mr. Seykota,

I have been big fan of you over the years and I was very happy to hear that you have moved to my hometown of Austin, Texas. I hope you grow to love it as much as the rest of us do.

One, I wanted to ask you if you have any plans to do a workshop in Austin? How much does it cost to participate?

Two, I was wondering if you might be willing to meet me sometime for coffee. I saw you give a speech at Austin Association of Financial traders a few years ago. It impress me so much and truly changed the way that I have thought about trading.

 

In fact, it really opened my eyes to how many years I have wasted trying to intraday trade. I felt foolish, but hopeful for the future.

 

I hope that I might have the opportunity to share my trading story with you and seek you advice regarding my career. I realize this a long shot to make such a request. However, with you in same city, I thought I would at least give it a try.

Thank you for your time. I really appreciate it.

Thank you for sharing your process - and your reformation from day-trading to trend-trading.

 

I host workshops from time to time as demand appears. I am thinking of hosting one in Austin. 

 

I'm not much of a coffee drinker although I might trade it from time to time.  Perhaps you might like to bring your guitar out to Artz Rib House some Sunday afternoon for the bluegrass jam.

 

 

 

Bluegrass Jam at Artz Rib House

South Lamar, Austin, TX

 

Clip: homepage.mac.com/ravnhaus/

BBQ/joints/artz.html

Wednesday, May 5, 2010

Progress Report


Dear Support Team,

Below is my status report for this month. Thank you all very much for your support.
 

Trading
Process: I clearly define system; Stick to the system; Improve system through R&D

Progress: I complete system design; Monitor my adherence to system; R&D ongoing

Psychology Process:
- Practice TTP regularly; Work through K-Nots; Read FAQ
- Replace medicinal behaviors with deliberate practices, and experience the feelings.

Progress:
- I start a local tribe.
- I adopt mindset geared toward improvement through deliberate practices.

Compliance, Legal, Accounting & Brokerage
Process: Identify proper structure, meet requirements & set-up business.

Progress:
-Investment Management Company created.
-Researching structure options: Fund vs. Managed Accounts; RIA vs. Private Placement.
(I’m not sure how to best structure investment at this point)

Marketing/ Fund Raising
Process:
-Improve sales and networking skills.
-Align myself with people who are really good at raising money for hedge fund investments; Create marketing team and package.
-Raise money.

Progress:
-I receive an investor commitment.
-First draft of marking document complete.
-Setup meeting with friend who owns a “fund of funds” business.

Commitments
I commit to the following:
-Stick to my Trading System.
-Spend 3 hours/ workday further coding System until Entry and Exits are automatable.
-Attend Toast Masters’ meetings regularly.
-By August 1, 2010- Go live with Fund/ Investment Program
-By December 31, 2011- Raise $10mm USD

Thank you for sharing your progress.

 

 

 

Toastmasters

 

Can provide support in mastering

the art and science

of public speaking.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Clip: http://www.squawkfox.com/wp-content/

uploads/2008/03/toastmasters_blog1.JPG

Monday, May 3, 2010


Ottawa Tribe

Hello Ed,

 

Thanks for getting back to me. I submit a new TTID for Ottawa.

Have a great evening.

OK.

Monday, May 3, 2010

 

Austin Tribe


Ed,

Is it true you are now an Austenite? I have been an Austin based trader for over two years. Upon moving here I made several attempts to contact the leader of the Austin Tribe, but was unsuccessful.

 

The Dallas Tribe seemed to think that the Austin group had disbanded, and the last known whereabouts for [Name] were in Chicago...

Will you be starting a new tribe in Austin? Welcome to town!

Yes, I plan to host a Tribe in Austin (Sunset Valley) starting this month.

Monday, May 3, 2010


From Control to Intimacy

Dear Ed,

In the last months I observe how several people who resort to control and manipulation (employees, friends) decide to leave me.

 

An old and good friend, the most manipulative and controlling person that I recall, tells me yesterday, after a - in my opinion - very minor thing (I delete a comment from him from my Facebook page) that he does not want to hear from me anymore.

 

In the evening I visit my children. My wife starts telling me about her feelings of inadequacy and “being a bad person”. I don't recall her speaking about her feelings in the now before. I receive her and thank her for her openness. Sometimes I think that I am on the right road to intimacy, sometimes I doubt about myself.

Thank you for being there.

Thank you for sharing your process.

 

As you journey from Control-Centric relating toward Intimacy-Centric relating you might expect some relationships to dwindle away while others transform and while other new ones appear.

 

 

The Path From Control

 

 

To Intimacy

 

transforms you

 

and those around you

 

 

Clips: http://safeliving.files.wordpress.com/2008/

03/main-control-room.jpg

 

http://www.ungka.com/savemarriagestopdivorce

/wp-content/uploads/2010/01/

Whatisintimacy01.jpg

Sunday, May 2, 2010


System Testing


Ed,

 

I have performed a walk forward analysis on the S&P 500 using the EAS system you showed us in the TSP. The following were the steps I followed and what I noticed.

1) Download S&P data from 1950 to the end of 2009 and spot check it for accuracy.

2) Perform an optimization on the data from 1950 to the end of 1969. The optimal parameters are 105/150. These parameters may be somewhat “off” since the 105 was the low boundary on the values I tested.

3) Do a walk forward of 5 years from 1970 to the end of 1974 using the optimal values calculated in step 2 and record the results.

4) Add the 5 years of data from step three and re-optimize the parameters from 1950 to the end of 1974.

5) Perform another walk forward using the latest optimized values on the data from 1974 to the end of 1979.

6) Repeat the process until I have walked through all of the data.


What I have noticed is the parameters have not changed through out the test. They remain 105/150. The system performs well over the long term, but I notice a few trades where the loss on the trade significantly exceeded the initial 10% risk parameter. For example the trade entered on Jan 4, 1960 resulted in an over $400k loss or more than 4 times the initial risk of the trade. This seems to run contra to the motto cut your losses quickly and let your winners run. Perhaps the system can be modified to cut losses quicker.

I am also working on some studies regarding diversification and plan to provide some additional feedback.

Thank you for sharing your research. 

 

Trend-following systems do not predict the profit or loss on any one trade.  The overall performance arises from an aggregate of many trades.

Saturday May 1, 2010

Dear Ed,

I form an intentional community.

Welcome

Florham Park

New Jersey

Saturday, May 1, 2010


Law to Trading


Dear Mr. Seykota:

Can you please tell me if you still provide private coaching for traders. I am in awe of your bio and would scream at the opportunity to be trained by you.

 

As a little background on myself, after getting a law degree and a Master's in Law and practicing at the best firms [City] has to offer along with also having government prosecution experience and successfully trying over 30 cases, I gave up the law for trading.

 

Yep, that is what I did. I did so because my true passion lies for trading and not for the law although I wish someone told me that before all the student loans. Toward the end of my legal days, I found myself looking at the charts more than my legal files to the point that it got obsessive. After that, I knew I had to go before malpractice took its course. In any event, thank you in advance for any advice that you may be able to provide. I really hope that you reply to this e-mail.

Occasionally I work with an associate or two.

 

You might consider sending me a brief expressing your views on the Causal Model per the definition of "causality" in Black's Legal Dictionary.

 

 

 

Blacks is Curiously Sparse

 

on a definition for causality

 

especially since

the causal model is essential

to guilt, blame

 

and the legal system in general.

 

 

Clip: http://u.kaskus.us/2/mnrxfavl.gif

Saturday, May 1, 2010

Economics

 

Dear Ed,


Finally, a economist that might get it!

William White, the former chief economist at the Bank of International Settlements (BIS) gave an important speech at George Soros’ Inaugural Institute of New Economic Thinking (INET) conference in Cambridge.

 

While everyone is casting about for the one magic bullet solution which would have prevented this and future crises, he placed the blame for the credit crisis on short-termism, pointing the finger most notably at economists and their models. White said that the models almost all economists use are ‘flow’ models which leave no room for ’stocks’ and thus completely miss unsustainable secular trends.

The current crop of confusing, ambiguous and misleading models might provide some benefit to those wishing to justify current economic policies.

 

 

 

 

Saturday, May 1, 2010


Setting and Following Rules

 

Dear Ed,


I have this feeling two months ago.

 

It is about my 2010 snapshot.
 

I create my snapshot . I put it as the background of my computer desktop. My intention is to see my snapshot everyday.
 

In my snapshot :-
- I am standing with my two arms crossed ( There is eyes contact if I look at the snapshot). I have realize my snapshot. I feel happy and confidence. I have a chart of a stock trending up and end up 300% percent in profits. I put a sentence under the chart " Yes, I have 100% - 300% profit ! I follow the trend."
- I have a picture of my family members, we are happy and healthy.
- I declare my big wave in the snapshot - I deliver my commitment. I practice right livelihood. I manage risk.
- Finally, I have a title for this snapshot : I achieve [xxx amount of profits] in 2010.


I see this snapshot everyday. I try to locate the feelings which stand between me and this snapshot.
One day when I study my snapshot, I have a feeling of panic. I feel uncomfortable and chess tightness. I keep walking around the house. I have a worry that I am going to die.


This remind me the exact feelings I have a few years ago when my father was in the hospital with serious illness. Compare these feelings to the feelings few years ago, these feelings is mild.
I remind myself to validate the feelings without any judgments.


Then, I have an idea that this feeling is trying to tell me that the title of my snapshot is not suitable. This year market conditions might not warrant such profits.


I go on the computer and I change the title to "My 2010 Snapshot". I say to myself, as long as I follow the trend and deliver my commitment, I should take whatever the market is giving.


The new snapshot relief some of my panic. I still can feel the panic. Again, I remind myself to validate my feelings without any judgments.


An hour later, I go to a grocery shop to get some stuffs. On the way home, I have an Aha. I say, why I link these feelings to the feelings a few years ago ? Why all these years, I always link some feelings to this serious feelings I have a few years ago.


I laugh ! This time, the panic recede completely and I feel calm.

--------

Hi Ed,

 

would you please help me with this questions ?
 

1. I share my above mentioned feeling with tribe members. Tribe members would like to know is it appropriate to state a specific amount of profits in their snapshot ?


2. So far, we do not have any hot seat session during our tribe meetings. Most of the time, we focus on snapshot and reporting progress. We have discuss hot seat matter during our last meeting. Cultural differences is our main concern. Our Asian culture is indeed different from the Western culture. It is not easy for someone to open up and discuss about his/her issue in front of others. So I decide to follow the trend of each member. If he/she is ready for the hot seat , then he/she takes the hot seat. I tell them I am committed and I am ready for the hot seat. Members who decide they want to take the hot seat have to deliver their commitment - attend the meeting regularly and willing to take the hot seat. No trying or wait and see. This is to ensure everybody have the opportunity to practice receiving and sending. Ed, is it appropriate to ask the tribe members to deliver their commitment ?

Wishing you all the best.

Thank you for sharing your process.

 

I generally encourage the omission of dollar amounts from snapshots.

 

Recent events in Zimbabwe indicate that having a million dollars might become little more that a mild inconvenience when other common notes in circulation have a $ 100 Trillion face value.

 

You might consider taking your feelings about <setting and following  rules> to Tribe.

 

 

Systematic Traders

 

are typically the rule makers

and also the rule followers.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Clip: http://www.marriedtothesea.com/041308/

american-rules-darts.gif

Saturday, May 1, 2010


Young, Hungry and Dying


Mr. Seykota,

Do you have any room at your company for a young, hungry, and ambitious young individual, who is dying to learn the ins and outs of trading? I was thinking you might be interested in mentoring your next prodigy and I could be that person.

 

Thank you for your time and I look forward to hearing from you.

Thank you for your inquiry.

 

You might consider stating what you might like to accomplish and how your mission might contribute to others.

Saturday, May 1, 2010


Helicopter Ben at the Wheel

 




 

Just wondering what kind of Valve is that? Sluice, Butterfly, Ball type? Is it a NRV (non-return Valve)?

 

Clip: www.marketwatch.com/trading-strategies

 

This particular valve, unlike many others, seems to have no housing to contain the valve works.  As such it is likely to have little to no effect on the flow.

 

You might keep an eye on Germany, Greece, and the Fed to get a "handle" on the current valve situation.

Saturday, May 1, 2010



Hi Ed

Thank you for your suggestion on how to retire my debts.

Learning to save,

Wed, February 10, 2010

Ed writes: “One simple plan for getting solvent is to take 10% off the top of what you make and use that to retire your debts. Thereafter, buy only things you can afford without borrowing.”

I believe you mean this to be 10%.

I understand the importance of this. I calculate this to be $605 every month.

It’s going to be very tough.

I don’t have a good start to retiring the debts.

We have just come back from holiday. I have taken my wife and children camping for a week in the Coromandel.

We do modest priced things and are do not spend excessive amounts.

We cook most of our own meals and don’t spend much

We pan for gold in the river, swim in the waterfalls. We go on various tourist tours in the region that are educational and entertaining for the family.

The most expensive activity is taking the boys fishing on a charter boat at $130 for the 3 of us. This is the highlight of the holiday for the boys.

I have spend approx $1,500.00 on accommodations and activities during the week long holiday which is now new debt.

I don’t feel guilty about this new debt as the family deserved the holiday and I feel it is my right livelihood to give them a holiday.

I review my budget.

I stand by my commitment to retire my debts.

Thank you for your support.

You might consider taking your feelings about <staying within budget> to Tribe.

 

 

 

 

To Some, Living Within Budget

 

means going deeper in debt.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Clip: http://www.mindfully.org/Reform/2005/

Bush-Budget-Cuts26oct05.htm

 

 

 

Saturday, May 1, 2010


Whys Guy


Hi Ed,

I was thinking of you today and I stopped by your website....where I saw that you are mooooving to Austin, Texas!

 

Why Austin?

 

And why leave the beautiful Incline Village?

The only answer I know for a "why" question is the venerable "why not" reply.

Back to the future