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April 13-19, 2003

 

Questions

Answers

Sat, 19 Apr 2003

 

Pressure Drop Prediction


Dear Ed,

I was wondering if you would be so kind and please help me. I was searching the web and ran across an article that you had written and it seems to be closely related to the problem I am trying to figure out. As seen in this diagram attached, I am trying to predict the pressure drop between two orifices ...

Your problem is like trying to blow up a balloon with a hole in it - or trying to take living expenses out of your trading account.  In both cases, the less you withdraw, the better you float.  See Physics FAQ page on www.radialmomentum.com .

 

 

Pressure Gauge

 

Clip: http://auto.howstuffworks.com

Sat, 19 Apr 2003

 

Jinx

 

Hi Ed,

Whenever I am doing well with my trading, I tend to avoid letting people know I am doing well because I jinx my own performance. So nowadays, I just hush because after I do well, I get a drawdown. Is this because of complacency & feeling good about yourself (feeling of importance concept - by Dale Carnegie)? Or is it a psychological thing, as if I want to self destruct … as if I don’t want to win whenever I am ahead (like Mr. Livermore’s multiple bankruptcies … but I DO want to win.

I notice this in other aspects of my life. Relationships etc. I tend to sabotage things to make situations bad when things are going good you know. How can I help myself? I recognized this and slowly changing on the personal side of my life (relationships). My relationship with my mother has never been better now. Before, I fuss at the smallest little things.

I know this has something to do with my trading and way of life ... connected to my psychology of sabotaging things. I want to remedy this. Any thoughts?

The Trading Tribe takes the view that you are successful in creating a result that elevates your feelings up to the point you notice them.

 

By locating and finding the positive intention for your feelings directly, you might not need to create dramas in your trading.

 

 

 

Intentional Sabotage

 

One way to sabotage machinery is to throw a pair of wooden shoes (sabots) into the gears.

Sat, 19 Apr 2003

 

Crash Discipline

Dear Ed,

Dieters who try to lose weight as fast as possible (through fasting, for example) usually gain the weight back pretty quickly -- otherwise known as "yo-yo" dieting. By contrast, those who slowly change their eating habits tend to keep the weight off with more consistency.

Likewise, do you think traders with discipline problems are better off working slowly through their issues, rather than suddenly assuming stringent rules without question? In other words, is "crash discipline" no better than "crash dieting"?

Sometimes people eat, drink or indulge in other activities to excess, in order to make their feelings go away.

 

When they learn to accept, allow, even celebrate their feelings the need for distractions and soporifics goes away instead.

 

The Trading Tribe works toward location and expression of underlying feelings. This tends to dissolve them. Sometimes trying to solve a problem, only adds mass.

 

Miles Darden (Not Shown)

DARDEN, Miles, giant, born in North Carolina in 1798; died in Henderson County, Tennessee, 23 January 1857. He was seven feet six inches in height, and at his death weighed more than one thousand pounds. Until 1853 he was active, energetic, and able to labor, but from that time was obliged to remain at home, or be moved about in a wagon.

Text: www.famousamericans.net

Clip: www.weirdlinks.com

Fri, 18 Apr 2003

 

Do the Markets Change?


Chief Ed:

Is it true that today's markets are different from 20 or 30 years ago and, as a result, techniques from those days won't work anymore?

These days people are showing a lot of concern that markets are different and trend following methods no longer work.

 

I recall, in the old days, people showing a lot of concern that markets are different and trend following methods no longer work.

 

 

January, 1900 Pronouncement:

The Markets Seem Different Now

 

 

http://elfwood.lysator.liu.se/

loth/b/y/byytorr/time.jpg.html

 

 

Fri, 18 Apr 2003


Crowd


Chief Ed:

When do you go with the crowd?

Go with the crowd while it wins.

 

Sometimes the crowd goes for P/E ratios, earnings, momentum, concept space and sometimes the wind trade.

 

Trend following accommodates a wide variety of crowd behavior.

 

 

Tulipmania 1630-1637

When the middle classes began to realize how much money the upper classes spent on tulip bulbs they sensed a fool-proof get rich quick opportunity.

All one had to do to become rich was to plant and wait. The buying and selling of a product as invisible as un-sprouted flowers came to be called the "wind trade."

People were desperate to cash in on the bulb-trading frenzy! Small businesses were sold and family jewels were traded.

Local governments tried unsuccessfully to outlaw this commerce. But like any profit boom, trade was legislated by economics, not government.

The bottom fell out of the market during 1637, when a gathering of bulb merchants could not get the usual prices for their bulbs. Word quickly spread, and the market crashed.

 

Clip: http://www.picturesof.net/_gallery/_Plants/

_PAGES/pink_tulip_photos_00204101724.html 

 

Fri, 18 Apr 2003


Cycle of Feelings


Mr. Seykota:


I have experienced a severe drawdown in equity, and I am sensing a tremendous amount of fear. Fear of the uncertainty of the future, fear of whether or not I can contain the drawdown and exhibit discipline in the face of such uncertainty. I haven't experienced such a drawdown in many, many years.

Previously, you mentioned everyone gets what they receive, or their actions are played out by their true intentions. Mr. Seykota, this drawdown was not my intentions, nor was it what I wanted. The feeling I receive when I write that is one of conviction, I can say and write it and know there are no other feelings or thoughts that may be influencing me.

I am a proven, veteran trader, but the fear of recouping such significant money is right in my gut. It is the time, of a slow methodical and steady process which was so evident in my trading until my bold moves which caused this drawdown and the subsequent out of control, not "stopping" trading that resulted thereafter.

 

I am currently examining my feelings and thoughts to try to understand what may have caused the drastic change from conservative to extremely aggressive.

In hindsight, I should have stopped. But I could care less about the past, I am trying to locate the feelings inside me now that will drive my actions now.

This feeling of fear is extraordinary. It seems to be fear of the uncertainty of my plan to recoup the losses, the fear of my skills, the fear in staying with the plan, and the fear that it might not be enough.

My plan is simple, it is straightforward, and I can and will implement it. But the feelings that are being generated are so strong.

Have you every been through such an experience, and could you share with us how you managed your day to day feelings of fear, frustration and that lack of confidence until somehow events changed to get you back on track.

The Trading Tribe holds that we are  responsible for our results, and that results indicate intentions.

 

Sometimes, in response to increases or decreases in equity, traders change their methods. One way to begin to stabilize a method, is to examine the feelings about changing it.

 

The Trading Tribe holds that we set up dramas in order to experience  feelings, and that when we are willing to experience feelings directly, we do not have to set up dramatic excuses to do so.

 

 

Jesse Livermore, a handsome and powerful man cherishes his secrecy and his private life. He moves in silence and mystery and is like catnip to women.

 

 

Jesse Livermore, the legendary "Boy Plunger" and "Great Bear of Wall Street" in his office in 1929 just after the "Crash" when he goes short the market and makes over 100 million dollars. His powers are at their highest. His life slides downhill from here ten years later he kills himself.

 

 

Jesse Livermore "The Boy Plunger" of Wall Street and his wife of twenty months set sail to Europe on the S.S. Rex after his 1934 bankruptcy. Before boarding Livermore says, "I hope to relieve my mind of some of my troubles."

 

 

Livermore is subject to deep black depressions all his adult life, during success or failure. This photo of November 26, 1940, shows Livermore two days before "The Great Bear" of Wall Street takes his own life.

 

 

Jesse Livermore and his wife Harriet on November 27, 1940, at the Stork Club, Livermore’s favorite night club. Looking distant, pale and wan, he  commits suicide the next day.

 

Clips: http://www.jesselivermore.com/pics

Date: Sat, 12 Apr 2003


As simple as possible, but no simpler.

Dear Mr. Seykota:

I enjoy reading The Trading Tribe website and the comments.

I wish to summarize "trading" from my point of view and see if I can, by making things simple, help along other traders that are behind me in their learning path. I would like very much if an experienced and successful trader as you would comment on the different points. Here we go:

1-I view "trading" as a game of chance in which the objective is to make money. Basically a sequence of bets, some profitable, some not, that will produce in the "long term" an ending equity much bigger than the starting equity. The difference with other games of chance is that one needs to decide when to start the bet and when to end it, transforming one's market participation into a series of discretized events out of what is a continuous non-linear process (the markets).

2-As Markets are the result of many inputs (buyer's and seller's decisions), the process of price  generation is non-linear, chaotic, and therefore the distribution of price variations is leptokurtotic (i.e. more fat-tailed than a normal distribution). This indicates that one way to profit from the market is by trend-following strategies, in what will result in a sequence of many small losses and a few very large gains. This allows from the creation of a myriad of trading strategies in different time frames.

3-Once a positive expectation strategy, with enough opportunity is created or found, then one would use "money management" techniques to increase/decrease one's bet size. For this purpose, the study of Kelly's Criterion, Vince's Optimal f, and other models is very useful in order to settle upon a bet sizing strategy that allows the achievement of one's objectives with a tolerable level of drawdown in equity, and leaving enough room for possible catastrophic events, etc.

4-Once the above points are settled upon, the execution of the plan becomes a psychological issue: One either follows it or not. One would also need to verify that the "system" performs as planned and/or within a statistically expected range.

I thank you in advance for the comments that you could make to the above.

Best Regards.

You theory sounds about right.

 

In theory there is no difference between theory and practice, in practice, there is.

 

 

 

In Theory, a Bumblebee can't Fly

 

Clip: http://wiscinfo.doit.wisc.edu

Fri, 18 Apr 2003

 

Reconciling Psychology and Religion

The opening lines of the Dhammapada by
Gotama Buddha, some 2500 years ago:


Mind is the forerunner of all conditions.
Mind is their chief, and they are mind-made.


If, with an impure mind, one speaks or acts, Then suffering follows one. Even as the cart wheel follows the hoof of the ox.

If, with a pure mind, one speaks or acts,
Then happiness follows one like a never-departing shadow.

Traditional spiritual teachings tend to emphasize purification as a basic requirement of spiritual practice.

 

They regard any activity that reinforces individuality, and such feelings as hate going against the principle of selflessness.

 

Traditional psychologists, on the other hand, may regard spiritual discipline as an avoidance of personal responsibility and relationship and an escape from the demands of living in the world.

 

Since, I started following this forum, I've come to reconcile these differences.

 

Healthy personal growth depends on a process of individuation, becoming one's own authority, and exercising freedom of choice, releasing negative emotions, honoring such feelings as fear, greed, hope, and guilt, which are valuable for both personal and spiritual work.

 

I've found, both psychotherapy and spiritual practice can contribute to liberation from limiting self-concepts, freeing one from fear and delusion, from the past, and the future. By facilitating awareness of limiting beliefs,

 

I've found psychotherapy can accelerate and assist the process of attaining contentment for the trader as well as spiritual development.

Spiritualists contemplate good and evil,  psychologists,  sickness and health.

 

Both agree that beliefs determine quality of life. Both know joy and pain. Both teach that when you commit to sharing your gifts with others, you find yourself.

 

The basic principles of trading work for spiritualists and psychologists, on stocks, bonds, futures and marbles.

 

 

Rare Popeye with Ox Blood

 

looking for two cat eyes and a pee-wee

 

http://users.townsqr.com/rsilva/

Thu, 17 Apr 2003

All that Jazz

Ed,

I am a green pea just learning. I read the post about trading and Jazz and wanted to express what I was thinking and maybe get your feed back.

1A) Jazz is a fluid highly improvised form of art,
1B) The Markets are fluid and there is an art to trading

2A) Good players don't over play
2B) Good traders don't over trade

3A) Rule of thumb in Jazz "when in doubt lay out"
3B) Rule of thumb in Trading "when in doubt lay out"

4A) Good players understand to power of silence
4B) Good players understand to power of not trading

5A) Good players are extremely intelligent. there are no dumb good players
5B) good traders have above average intelligence

6A) good players are incredible fast thinkers able to think harmonically and
melodically while time progresses.
6B) good traders need to think and react with lightening speed when they
have to.

7A) Good players all always exploring new ways to play over old tunes. New
fingerings, voicings etc
7B) Good Traders are always in the exploring mode

8A) good player often hate to here themselves play but do it anyway because
self examination where as painful is also profitable
8B) good traders are always exploring themselves and human nature to better
gauge the psychology of the markets

Just some thoughts off the top of my head. Is my education as a musician a
good fit for developing as a trader?

Thanks and Best Regards

Your personal trading metaphor shows up in your language, thoughts and feelings. It guides your actions and accounts for your results. Your metaphor might be a warrior, pilot, dancer, chef or even a musician.

Dizzy Gillespie's style as a musician just happens to include a lot of risk-taking.

 

 

John Birks (Dizzy) Gillespie

 

John earns the nickname "Dizzy" for his comical stage antics. Cab Calloway finds Dizzy's style too risky and calls it "Chinese music."

 

 

http://www.geocities.com/

BourbonStreet/8446/

Date: Thu, 17 Apr 2003

Beginner Trader

Dear Mr. Seykota,

I am still a beginner part-time stock trader trying hard to go full-time. Thank you for setting up FAQ for helping us out. Here are my questions:

1) How should one deal with long losing streak? Although I cut my losses quickly, they seems to cloud my decision more and more subconsciously.


2) I am learning to develop trading system. After some initial playing around, I build a simple sentiment oscillator based on the idea of each day's candlestick range be treated as a casting vote. I am hoping for something less lagging than the moving average. Is it true in general that sentiment indicators are less lagging or is it my mind playing trick on me? But worst, I don't think it is very tradable because there are much noise. Is there anyway to fix this by filtering with other type of indicators?


3) What are the more important areas of learning I should focus on? Other people's work I should be aware of?

Thank you very much.

Drawdowns: Make sure you inform your clients (including yourself) about how you manage risk, so you don't incur unexpected drawdowns.

Keep your risk in line with what you can handle.

 

Some traders prefer a low risk approach with gentle drawdowns and gentle returns. Their drawdowns do not rock the boat, so they can stick to their systems in a very consistent, business like manner.

 

Some traders prefer a high risk approach. They occasionally get spectacular returns and spectacular drawdowns. They may have to implement circuit breakers or vacations to maintain their spirits.

I recommend you find your own unique approach that fits your own personality.

 

Lagging: If you want something less lagging, you might look at what feelings come up when you have to sit still and wait. The best part of a move often occurs late in the cycle, so getting in early is not necessarily the best move.

 

Other Important Areas: everything.

 

 

The 4:15 Always Leaves on Time

 

Being impatient means you have to wait.

Impatient Trader, wanting to get in on the move early, shows up at 1:45. Two hours later, at 3:45, the maintenance crew tells him he has to get off so they can clean the cars.

 

Clip: www.winetrain.com

Thu, 17 Apr 2003

 

The Red Baron

Dear Mr. Seykota:

Manfred Von Richtofen ,The Red Baron, flew his Albatrosses and Fokker DR-1's for close to three years in the First World War. While the average life expectancy for a pilot on the western front was less than one month, he shot down eighty British and French planes and became a "veteran" while still in his mid-20's.

 

He formulated rules of engagement to maximize enemy casualties and to minimize his men's casualties.

 

Only until he was virtually assured of hitting the target did he pull the trigger. When he shot his own guns, the plane fell; and as it fell, Von Richtofen said he saw a forlorn look of utter surprise on the BE 2 observer's face. That, he noted, is how the "trick" is done to shoot down an enemy intent on killing you in this dirty game.

It is sobering and instructive to note that Von Richtofen himself was shot down and killed. But you must realize that he was "betting" his life every day. He had no alternative.

The Red Baron demonstrates focus, commitment and other winning qualities and attitudes. He is aware of his own feelings and seems to enjoy pulling the trigger at the right time.

 

The Red Baron, in his Own Words,

the First One ...

 

Apparently he was no beginner, for he knew exactly that his last hour had arrived at the moment when I got at the back of him. At that time I had not yet the conviction "He must fall!" which I have now on such occasions, but on the contrary, I was curious to see whether he would fall. There is a great difference between the two feelings. When one has shot down one's first, second or third opponent, then one begins to find out how the trick is done.

-- From The Red Fighter Pilot by Manfred Von Richthofen

 

Clip: www.richthofen.com/index.htm

Thu, 17 Apr 2003

 
Feeling Rehabilitation


Hi,

Clarity of you responses is amazing , hits right on the spot. Thanks.

What you wrote makes sense and feels good. Feelings are the buried part of our psyche.

 

I feel hope (is hope a feeling?) What is the fastest or efficient way to start feeling more? Or do we feel anyway and it is just a matter of awareness of what we feel? Can someone do it on their own or assistance is necessary? Do you follow all your feelings or just experience them and let them pass? I mean, when you are angry , do you react to whatever caused it or you do something else?

Rehabilitating the ability to connect feelings and logic is an important part of the work of the Trading Tribe.

 

Other important work is to model and adopt healthy winning attitudes that fit your underlying patterns.

 

 

 Tim Montgomery Sets a World Record

 in the 100 Meters, 9.78 Seconds



PARIS (AP) 9/14/2002 ... "I knew something special was in me," Montgomery said. "I can say I'm the fastest man to ever run the 100 meters."

"At 30 meters, I felt like no one was beside me, so I said, 'I'm going to dig in a bit harder.' And I just dug down, and kept running, and kept running, and kept running, to put as much distance on Dwain Chambers as possible. And the world record came."

Clip: www.usatoday.com/sports/

olympics/summer/track/

2002-09-14-montgomery_x.htm

Thu, 17 Apr 2003

 

Feel the feelings

Chief Ed said: "Feel the fear of missing out. When that disappears, continue on and feel the deeper pain. When that disappears, Dark Horse can run with the markets."

Brother Dark Horse said: "When the pain of missing out the move becomes greater than the fear of losing, you become profitable."

I see convergence. Would you like some tea?

If you enter a trade when pain surpasses fear, you have a moving pain-o-phobia crossover system.

When traders experience their pains and fears and let them go, they can trade the markets painlessly and fearlessly.

Pain-o-Phobia Crossover System

Thu, 17 Apr 2003

 

Report from Meeting


Hi Ed,

I recently attended my first meeting.  It is my pleasure to work with our Chief and the rest of our group. I am committed to being "one of the Indians". Our group had made excellent progress in helping our fellow trader who occupied the hot seat. The others in the group, I believe, had also "got something" from this meeting. I know I did!

When our coordinator decided to start closing the meeting, he suggested the group members offer some final thoughts. I had stated that I really liked the idea ... the structure of the group ... that I believe it has huge potential and that we can all help each other and learn from each other - - along the journey of trading and of Life!

Thank you for engineering this!

Yes !

Thu, 17 Apr 2003

 

Report on  Meeting


Hi Ed,

I am truly gaining an appreciation for the Trading Tribe process. Our last meeting went very well. As we are all learning the process, we experimented with breaking into two groups to ensure that everyone would have the opportunity to participate and learn. While it was an effective teaching tool to help everyone understand the process, I think it is best if we all work in one group in the future.

Here are some first-hand reports:

-----

I can still feel the relief and see the look on this trader's face when the fear was mirrored perfectly. Neat.

-----

It is absolutely amazing but I still feel the physical changes which occurred directly after [xxx] mirrored my fear.

-----

Hot Seat opened by saying,
"When I receive a signal I feel anger and overwhelming, paralyzing fear."

With some work, I was able to get what I thought was a pretty good reflection of the trader's fear. However, I was having a challenge feeling the anger. While the trader spent more time explaining the fear to the group, I was interested in reflecting the anger.

The fear was not yet mirrored correctly. Another member in the group who was clearly feeling empathy with the trader was trying to communicate the feeling of fear and not quite getting it right.

However, a few minutes later, this same member in about two sentences clearly described the fear that he was feeling and the trader in the hot seat physically changed and said YES!

Yes !

Thu, 17 Apr 2003

 

Analogy of Weight Loss Program

Mr. Seykota,

Do you feel that even if you were giving away a good trading system, people
might not profit because their internal system may be incompatible?

One analogy I can think of is the desire to lose weight. Most people understand that exercise and diet are probably the solution. But even if the master tells us exactly how he did it (e.g. run 5 miles a day, and eat 3 apples a day), we will not be successful if we don't have the belief, determination and persistence to follow through. On the other hand, if we work on and eventually succeed in those internal virtues, the right exercise and diet for us will evolve.

Is this somewhat along the line of the Jade Master and FAQ approach? Appreciate your comments. Thanks.

That's pretty much the thick and the thin of it.

 

 

Jack Sprat

Could eat no fat,

His wife could eat no lean;

And so, betwixt them both,

They licked the platter clean

This poem celebrates Charles I of England and his wife, Henrietta Maria. Parliament refused to finance Charles’ war with Spain and left him “lean,” so he turned the tables and dissolved Parliament. He and his wife imposed a war tax and forced the common people to house their troops.

 

http://www.bygosh.com/

MotherGoose/JackSprat.htm

Thu, 17 Apr 2003

It was done to me.


Hi Ed,


In regards to my question April 14 on the importance of the dictionary please allow me an explanation. I once went to the Jademaster to learn about jade and he handed me a broom. I picked it up and began to sweep. Deep down and quite forgotten there was a lot of emotional conflict that needed to be swept away before I could even begin to deal with the realities of trading. I needed the broom.

I was taught that a humble man suffers no pain". In regards to trading, what do you think of humility as a necessary trait and how would you explain emotional pain as a teacher of humility. Thanks for the broom.
PS. I notice my suggestion of the dictionary now appears on your favorite list of books.

"I was taught" is passive. It hides the identity of the guy who taught you and it minimizes your own role and responsibility in the matter.

Pain seems to reveal the lesson once you develop a willingness to feel it.

 

 

Broom - Many Ways to Use It

 

Clip: www.longshadowstrading.com/

Brooms/BroomsLimited.html

Thu, 17 Apr 2003

 

Redundant Questions

Mr. Seykota,

I continue to read the FAQ and enjoy your perspective. I notice that you are continually asked for advice that if given would imply that you are a supernatural being.

My question: Do you tire of being asked questions from people who want you to give them the "secret"? I may or may not imply that you are a supernatural being. You have to receive the message and perceive it for yourself.

My observation is that we all hold the "secret". It is in application that makes us different.

Be careful about implications, like the one about people only writing in to get secrets.  FAQ contributors generally provide thought provoking questions and information. See the Ground Rules.

 

I consider myself a student.  FAQ contributors help to educate me and each other by the Socratic method of asking questions.

 

 

Socrates

 Wonder, Hypothesis and Elenchus

appear several times per day

from contributors.

 

Clip: www.bronzeart.com/sn289.html

Thu, 17 Apr 2003

 

Objectivity


Hi Ed:

One of the greatest obstacles I had to confront was the realization (the market made it real) that success in trading requires complete objectivity. I am an object and the market is a different object. The market has no emotions, feelings, sympathy or kindness. It's just a data stream. Therefore, to enable any type of meaningful interaction required one of us to change;

I figured it was easier for me to change. Now I just process the data stream and react according to imbedded algorhythms.

I don't feel good or bad, happy or sad; but then again the market and I really interact and communicate. Here's a picture of me leaving my trading office. My wife is always telling me I'm cold and impersonal, but she's not a trend trader like me!

Robo Trader

You have an interesting trading metaphor. I wonder what kind of relationship you have with the person who oils your hinges or the ones who sit on your lap before bed time.

 

 

 

Tin Man

 

The Tin man wants a heart

and doesn't know how he manages

to feel that longing.

 

 

Clip: www.costumezone.com

Thu, 17 Apr 2003

Approaching Programming II

So the question become: what's an old programming language ? no C++ because of C, no C because of Assembly, no ... everything you desire ! There always be something before: timelines are a wonderful stuff !

A mature programming language is one with lots of followers, books on how to learn it, examples of useful code and access to technical support.

In selecting software, as in selecting markets to trade, wait for a trend to form - also, don't wait too long.

 

Abacus

The Latin word for pebble, calculus, is the origin of the modern term calculate.

In its earliest form, the abacus is a board with parallel grooves. The operator slides pebbles back and forth in the grooves. In a later development, beads slide on wires or thin strips of bamboo, reducing "crashes."

Clip: http://www.ee.ryerson.ca:8080/

~elf/abacus/intro.html

Thu, 17 Apr 2003

 

Personality and Trading Style

Dr. Ed -

If my personality is suited for day trading, do I have a better chance of:

overcoming the bid/ask spread, and commissions or

changing my personality to be more suitable for intermediate and long term trend following.

If you are a content and prosperous day trader, ride your winner.

If not, you might start by noticing the payoffs that keep you in your position.

 

If you want to try something new, go to the floor and study successful scalpers - or get some data and software and develop a system. 

 

 

IPE Floor

 

Clip: http://www.ipe.uk.com/about/floor.asp

Thu, 17 Apr 2003

 

Quit Work and Day-Trade

Enclosed are the following people who successfully day trade. Maybe be you could forward this to the gentleman who asked that question

FAQ does not endorse products or traders. See Ground Rules.

FAQ is open to hear directly from an off-floor day trader, successful for years, who wants to talk about the issues he confronts.

Thu, 17 Apr 2003

 

Group in England

Dear Ed

Are there any interests to start a group in England?

See Directory.

Thu, 17 Apr 2003

 

Day Trading - Is It Really so Terrible


Dear Sir,


It is not an exaggeration to say that your interview in market wizards changed my world view if not my world.

I have been a moderately successful trader for 10 years for institutions (in every sense of the word) and 5 years on my own account. My life so far has been a journey of incomplete self discovery using the processes of the markets and chronic substance abuse.

Just when I thought I had the cunning plan to solve all ills, I return to the jade master and see his day trader chair empty.

My fund is 75% weighted to term positions - but I'd hoped that 'day' trading was a valid outlet of creative tension/frustration/action.

The bad stuff has to be directed somewhere - as we know from common bodily function. As an ex-local on the sadly redundant LIFFE floor I'm partially certain that with an edge (having stops), day trading can provide a revenue stream and keep a chap from messing with the higher expectancy term trades.

I hate to use the word 'fractal' but now I've done so - with appropriate execution and slippage costs - can't the same principles apply - a day trade duckling can always mature into a term positioned swan?
your site is fantastic and thank you for it.
Regards.

As trading frequency increases, the profit to cost ratio deteriorates.  Note: some brokerage houses offer "free" commissions and make it up in the spread. Still, almost everything works sometimes.

 

On-floor scalping requires skill, experience and self discipline. Scalpers provide liquidity against market imbalances.

 

 

Providing Liquidity - And Receiving It

 

Sometimes scalping can be like trying to take a drink from a fire hose.

 

Clip:http://hacks.mit.edu/Hacks/by_year/

1991/fire_hydrant/

Wed, 16 Apr 2003

 

How to Start a Group

Hi Ed,

I read FAQ pages, and I think it's a great idea if I come to an Incline Village meeting first before I even think about a San Jose, CA group. What do you think of the idea, and if it is a good idea, how can I join your meetings there? Also, when is the appropriate time to start a group here, and how do we select a coordinator?

Thanks,

To join a group, or to start one, see the Directory.

Wed, 16 Apr 2003

 

Pain Avoid Dance

Brother dark horse says: "If something is going in your direction, pain avoidance comes in the fear of missing out on what's in front of your face."

Chief Ed says: "Go with the flow and experience your feelings, just the way you are. You might come to know their positive intentions."

Dark Horse is contrarian, chief Ed is trend follower.

Pax!

If you are using fear of missing out to avoid deeper pain, you risk setting up a lot of trading dramas.

 

Alternative: Feel the fear of missing out. When that disappears, continue on and feel the deeper pain. When that disappears, Dark Horse can run with the markets.

 

Dark Horse

 

Galloping in an up-trend.

 

http://www.usgifts.to/products/479.6.html

Wed, 16 Apr 2003

 

Experiment and a Question


Hello,


Thank you for the quick response to my question on your physics page.

I did not know, that the lift is generated mainly near the entry orifice. If so, then everything looks fine.

By the way your web site rocks, FAQ are entertaining and educational. Sometimes I laugh pretty hard. I understand you spend your time and expertise in the most meaningful way, offering people more than they are asking for, even if sometimes it is not exactly what they are asking for. Thanks for doing that.


I have a dilemma , maybe you can help clarifying it for me: sometimes I am asked for something that I know will not help anyone in the long run, but will bring relief. What is the best course of action?

 

Give them what they want knowing it is only temporary and will bring more suffering later, but let them experience the possible pain?

 

Or stick to my experiences and offer only what I believe is worthy?

 

The answer seems pretty obvious that it is better to stand by your values, but different people are ready for different stuff in different stages of their lives ... If you do not help them at the beginning they may never ask for help again ... Do we have to go step by step and experience "all of it" through our lifetimes or can we jump in our growth?

When they ask for medicine, show interest in their feelings. When they ask for poison, show interest in their feelings.

 

When they experience their feeling, they forget about medicines and poisons.

 

You might look at your agreements. Dependency on clients' problems might interfere with solving them.

 

Strong Medicine

 

Day trading can provide activity and excitement, distract the mind and cover up deeper issues. When traders deal with deeper issues, the urge to engage in relentless and frenetic activity subsides.

 

Clip: www.avma.com

Wed, 16 Apr 2003

 

Goals

Dear Ed,

Thanks to your FAQ pages, I am starting to really understand the keys to success with trading (although, like you, I am still a rank beginner ;)

Given the emphasis on living/trading in the present/now, how do you set goals, which are by nature future-focused?

Most (all?) highly successful people set and achieve aggressive personal or professional goals. Although Tiger Woods "lives in the now" when swinging his golf club, he is widely known to have set a goal of beating all of Jack Nicklaus' records as a boy, and has structured his life around achieving that goal.

Note that I am not talking about a plan, which may or may not have a goal attached to it (most trading plans are simply planned responses to market action) Even several "Market Wizards" described their failures when they set specific dollar or rate of return goals.

Thanks for listening.

A  goal defines a direction. Goals and plans exist in the present. 

 

If your goal is to build character, you can stay on task every day.

 

If your goal is to obtain an object, playing may dissipate character, and winning may erase your purpose.

 

Tiger's goal is deeper than wanting to improve on Jack. That sounds more like Jack's goal.

 

 

The Golden Bear

 

In the land of Sharks and Tigers

Ckip: www.nicklaus.com

Thu, 17 Apr 2003

Approaching Programming

Hi Ed, this is [xxx] from Italy. I read your FAQ Ground Rules and Policies and I think it's not a mistake to mention something that it's free and public. I'm not a professional programmer, so, looking for as easy tool, I find a powerful and elegant language that I suppose could be a solution for people who need to learn programming and don't desire to spend an entire life in the task. It's [XXX] and it can be downloaded for free. Just my 2 cents. ciao

Professional programmers rarely use new programming languages ... unless they like spending their lives talking with powerful and elegant technical support people.

Tech Support Guy - Mr. Popular

 

Your new best friend ... is also everybody else's new best friend ... plan to be on hold for hours at a time.

Wed, 16 Apr 2003

 

Quit Work and Day-Trade

 

Ed,

I have a full time job but I really love trading. I am thinking to quit my job and become a day trader. What do you think? Please advise. Thanks.

Best Regards,

Before you give up your day gig, you might want to talk to some other people who support themselves by day-trading.

 

Short-term trends have small moves, so the rewards are small. Costs, such as commissions, spreads and slippage on stops, do not decrease in proportion.

 

Scalping, trading against large orders, to provide liquidity, requires skill and experience and close proximity to the action, such as a seat on the floor.

 

 

Successful Day-Trader

 

Scalpers have seats on the floor.

 

Clip: www.beekenparsons.com

Wed, 16 Apr 2003

 

Pre-Nuptial Hunch

Dr. Ed -

Something that may be of use to your readers.

Whenever I have a position going my way and then it REALLY goes in my favor, I am overcome with a warm feeling of love. I literally say, " I love the financial markets!!!". Invariably the position starts going against me in a big way RIGHT AFTER. After many of these experiences, I have been able to overcome my feelings of betraying this position and manage to sell when I have this emotion.

Keep up the great work,

When you can celebrate the feeling of being a sold-out bull in a big bull market, you can handle the risk selling out on the way up.

 

 

Fractal Heart

 

New implantable organ for traders, part silicon and part carbon, combines feeling and logic in optimal proportion. Gets you in at the bottom, out at the top, with no worries.

 

http://computerart.org/a0028-2.html

Wed, 16 Apr 2003

 

Investing

Hi Ed,

You have a great site, very stimulating. I'm
curious to your thoughts on "investing." Do you "recognize" this word and/or does the action even exist?
Also, do you trade futures commodities exclusively? If so, is it because it "fits" your  personality & system? Thanks for putting in so much effort with the site. Regards,

A Trader exchanges things, usually by buying and selling.

 

A Speculator (from Latin: speculare, to observe) meditates and ponders over possible outcomes.

 

An Investor (from vest, to clothe) endows an operation with money, time or other capital.

 

A Gambler bets on the outcome of a game.

 

A Broker acts as agent for a trader and charges a fee.

 

A Dealer buys and sells for his own account.

 

A Fundamentalist looks at a situation and makes predictions about the future.

 

A Trend Follower figures prices to keep going in the same direction, by momentum.

 

A Chartist looks at price patterns, expecting them to repeat. A

 

Contrarian bets against the crowd.

 

A Day Trader makes short term trades.

 

A Scalper trades on the floor, to provide liquidity.

 

A Position Trader stays in for the major move.

 

 

Scrooge McDuck

Sits on Gold, Metals, Cash


Teh Planet's richest waterfowl amasses one of the world's largest collections of gold coins and paper currency, keeps in giant money bin atop hill in native Duckburg.

 

He enjoys swimming in money. He moves to American West from native Scotland, amassing a fortune from gold and copper mines. No longer invests - keeps everything in cash. Never gives to charity; never marries. Lives in mansion with three great-nephews, Huey, Dewey and Louie.

 

Clip: http://www.forbes.com/2002/09/13/

400fictional_5.html

Wed, 16 Apr 2003

 

Economists in Action

Ed,

After recently discovering the links on your great website, I came across an
amusing one today I thought you might appreciate.

www.foulds2000.freeserve.co.uk/

economists.htm

I also read your interview in Market Wizards again last night, and agree that people will get what they truly want from their chosen pursuit, regardless of their level of self awareness. As a new trader, this idea is continually helpful for grounding myself in reality.

Thanks for the inspiration.

I notice they seem to get a bit nervous when the price gets to 11 and below.

 

 

Adam Smith (1723 - 1790)

 

Economist and Philosopher

 

Virtue is more to be feared than vice,
because its excesses are not subject to
the regulation of conscience.

                                 

 

Clip: The Warren J. Samuels Portrait Collection at Duke University www.econ.duke.edu/Economists/

Wed, 16 Apr 2003

 

John's  Smith


Ed,

I wonder what it would feel like to have written some of the most open, honest, & recognizable lyrics ever - and still be anonymous?

www.farmdogs.com/bernie.html  

I suppose you could ask him how it feels. My guess is he has it set up the way he likes it.  He is part of one of the best teams ever.

 

Some people like designing systems, some like marketing and some like trading.  Right livelihood is about finding your niche.

 

 

Bernie Taupin

 

"I write the Songs"1 for Elton John

Bernie Taupin is  one of the most prolific lyricists of the 20th century. Taupin's 27 year collaboration with Elton John rivals Lennon and McCartney. Taupin's perceptive lyrics appear on over 100 million records including the latest Rocket/Island release "Made in England" and the albums "The One", "Elton John", "Goodbye Yellow Brick Road" and "Captain Fantastic and the Brown Dirt Cowboy". His hits include "Your Song", "Goodbye Yellow Brick Road", "Daniel", "Candle In The Wind" and "The One".

-----

1. by Barry Manilow / Bruce Johnson

Tue, 15 Apr 2003

 

To Know the Trend

Chief Ed:

How do you acknowledge there is a trend?

I don't know what a trend is. I do not follow her. Instead, she takes me where she wants to. I just respond to her. Yet, I do not know her.

The part of her you do not know is the feeling of your own longing to be with her. 

 

You find out about that part when you sing it to her.

 

It's a little bit funny, this feeling inside.

I'm not one of those who can easily hide.

I don't have much money, but boy if I did

I'd buy a big house where we both could live.

 

If I was a sculptor, but then again no,

or a man who makes potions for a traveling show ...

Well I know it's not much, but it's the best I can do.

My gift is my song and this one's for you ...

Your Song by Elton John

lyrics:  Bernie Taupin

 

Click here for a good place to go long ...

http://www.geocities.com/faroefantasy/

Date: Tue, 15 Apr

 

An Antidote for Monkey Mind?

Dear Ed,

I really like your site and your visuals. As my fifteen year old might say, it feels "pretty chilled". Like many of your visitors, I find it challenging to sustain being in the moment, although I certainly had no difficulty when I was a little child.

 

Sometimes, if I am called upon to make hard decisions such as what to trade and when, I get an attack of what many yogis call "monkey mind". My mind swings from past to future all the while gibbering away about "what ifs" and "shoulds."

 

Occasionally I can remedy this pathetic mental state by taking a few slow deep breaths and on each inhale saying to myself "Be", and then, on the exhale, saying to myself "Still". "Monkey mind", like SARS, seems to be highly contagious, and I was just wondering if you, like the CDC, had any insights on an antidote or even what this condition might look like.


Warm Regards,

If you worm your way far enough into the apple, you come right out the other side.

 

So when you find yourself in Monkey Mind, grab a banana and gibber to the max. Also, while it lasts, take advantage of the opportunity to experience the feelings of (1) being in monkey mind and (2) not wanting to be in monkey mind.

 

When you experience these feelings directly, the drama dissolves. Sharing helps too. You might find yourself another little monkey to mind.

 

 

Monkeying Around

 

Sometimes Doting Beats Antidoting.

 

Photo: (c) Tudor Hulubei tudor@hulubei.net

Tue, 15 Apr 2003

Hope and Fear - In the Future

Ed,

In your response you mentioned, not thinking about the future or the past. I looked up the definitions of two common words/emotions associated investing and trading. Interesting that they both deal with the concept of not staying in the now.

hope noun - something good that you want to happen in the future, or a confident feeling about what will happen in the future:

fear noun - an unpleasant emotion or thought that you have when you are frightened or worried by something dangerous, painful or bad that is happening or might happen:

Some traders seem to like hope better than to fear even though hope can keep you in a losing position and fear can get you out of danger.

The Trading Tribe looks for the positive intentions for feelings.

 

 

Fear Anticipates Danger

 

Clip: members.aol

Tue, 15 Apr 2003

 

Aha Moment

"MS Bookshelf 2000 defines "Why" as the intention underlying an action or situation; The Trading Tribe holds that intention equals results; so the word why is meaningless. Attempts to use it are inherently ambiguous. Note: "Why" is central to fundamental analysis."

Aha moment: I found the above very powerful. Studying myself, I can see I've been asking 'why'. That has always been the root of all my troubles. How ironic I've been asking 'why' to facilitate efficiency, yet I've been adding mass. A restless mind is a dangerous mind. 'Doing nothing,' and sitting tight, I find is the toughest thing to do. Maybe ... I'll pick up golf.

----------------


An unrelated question:


Eastern and Western religious and/or philosophical thoughts have different conceptions of fear, greed, and hope, etc. In your experience, in the trading arena, does ones spiritual "beliefs" effect the experience and magnitude of these primal emotions?


For example, most Eastern religions and philosophies see all changes in nature as manifestations of the dynamic interplay between the polar opposites: yin and yang, and thus they believe any pair of opposites constitutes a polar relationship where each of the two poles is dynamically linked to the other.

 

A person with such mind set might easily be more accepting of losses and higher heat levels. For the Western mind, this idea of the implicit unity of all opposites is extremely difficult to accept.

 

It would seem paradoxical, to Westerners, that contrary aspects of reality are actually aspects of the same thing. Such a mind set might be more resistant to losses, and trends. It seems, such a mind set would also experience the above emotions on a deeper level as well.

Trends are markets having aha moments.

 

What you believe is true for you.

 

In futures trading, the short and long position define each other.

 

 

 Van Gogh: Starry Starry Night

 

Discerning art aficionados may be able to detect the subtle Eastern Influences in Van Gogh's work.

 

 

Clip: www.vangoghgallery.com/

visitors/007.htm

 

Moves to: www.vggallery.com  

Tue, 15 Apr 2003

 

Trading and Jazz



I trade to make a living, but also am a jazz musician and have been for 15 years. Playing jazz is a lot like trading trends, in that the future is unknown, unless you are pretending and just repeating yourself and mapping out your solo. Wanting to be right in trading accuracy is the same as wanting to sound good in music. It wrecks everything. Making you play things you don't want to.

#1 How do you dissolve the need to play well and just play? A great player suggested to try and play as bad as possible, but that doesn't seem to work for me. I ask it more for music, but trading parallels as well. I've only had a taste of the truly free playing state in my years of playing, and it is truly an incredible feeling, but very fleeting.

#2 When you are trading trends, you are following the wave. When you are playing music, what are you following? Your feeling? Alas, in trading we are lucky, we have account statements to tell us when we are losing, but in music there is no gauge to tell us if we are playing from our heads.

# 1 Get the needy feeling, give it to your group and make some jam.

 

# 2 Follow the feelings in the room.

 

# 2-b The gauge of being out of the  groove ... is that you are looking for a gauge, instead of grooving.

 

# E7-th Stay on the EDG#E.

 

 

Miles Davis (1926-1991)

 

Miles Davis' music and style incorporates modes rather than standard chord changes. Miles' experiments with modal playing reaches its apotheosis in 1959 with his recording of Kind of Blue. During his career, Miles acts as inspirational overseer to many great improvisers and nurtures them and their ideas.

 

Clip: http://croz.fm/img/miles_davis.jpg

Tue, 15 Apr 2003

 

Useless

see Economics

Gentlemen

Thank you for your answer.Sorry ,but answer of Mr.Seykota useless for me ,as not adressed group of persons with specific objective's risk profil ,social and educational background ,to which belong autor of this e-mail .

Sounds pretty much like you are getting the hang of fundamental analysis.

 

 

Another Economist Gets his Stripes

 

Clip: www.murphyrobes.com

Tue, 15 Apr 2003

Zero Divided by Zero

Hi Ed,

 

What is (are) zero divided by zero in trading?
Thanks.

Using SVO-p, that becomes ...

 

 Zero divides Zero

 

So your zero becomes two zeroes.

 

Doubling your equity is another way to add zeroes to your account

 

-----

Mitosis:http://www.accessexcellence.org/

AB/GG/mitosis.html 

Mon, Apr 14


Chief and Chef

Greetings Mr. Seykota ~

I am a big (as in attitude, not girth) fan of your Trading Tribe site and story in Market Wizards book. I understand you do consulting for certain requests? I am a trader who would like to increase his success (very easy to do at this point; nowhere to go but up) and would like to hire you for the following consult:

1. to assist me in constructing a trading system similar to the one that brought you much success - that would give signals upon daily input of prices. This system would leave out all emotional decision-making, and would target high returns on the reinvestment of funds.

2. I'd pay extra if it could bake me some brownies.

In all seriousness, though, would you be willing to help me develop such a system? I have the Turtle Trader system already but haven't used it yet, in the outside chance I could tweak it with your advice or even reconstruct one better suited to my psychology and dreams of being a successful trader.

If you are interested, can you give an estimate of time required? I am willing to drive to your location. I can't guess the future, nor do I handle discretionary trading well. But I do like chocolate brownies.

When you commit to do the part you know about, the rest comes.

 

 

The Ultimate Brownie

8 (1 oz.) squares of unsweetened chocolate
1 cup butter
5 eggs
3 cups sugar
1 Tablespoon vanilla
1-1/2 cups flour
2-1/2 cups chopped pecans, toasted

Preheat oven to 375 degrees F. Melt chocolate and butter in a saucepan over low heat; set aside. In a mixer, beat eggs, sugar and vanilla at high speed for 10 minutes. Blend in chocolate and flour until just mixed. Stir in the nuts. Pour into a greased 9 X 13 inch pan. Bake for 35-40 minutes. (Don't over bake.) Cool and frost if desired, but that is not necessary.

 

Recipe:

http://baking.about.com/library/

weekly/aa022900.htm

Mon, 14 Apr 2003

Life Lessons


Dear Mr. Seykota,

I don’t know who you are but from the content of your site, you know an awful lot about life. But more importantly you know yourself ... a state I aim to reach during my lifetime. The market teaches one about life and one’s self; money is just icing on the cake.

It seems to me the most successful persons in life are the ones who get what they want. And the happiest person wants what they get. You seem to represent both.

I appreciate the purpose of your teachings.

Kids are the best teachers. They are particularly good at teaching adults how to balance what's really important.

Teeter-totter, bread and water

 Wash your face in dirty water

 

Water doesn't really rhyme with water. The alternative, bread and butter, doesn't rhyme either. Kids know that none of that really matters.

 

Clip: www.geocities.com/hit2net/

playground/39591.html

Mon, 14 Apr 2003


Subscriptions

Hello,

I saw the link here from Turtle Trader's daily mail - is there a way to subscribe to this, or is it web-based only?

Currently by web delivery only.

Little Miss Muffett

Experiences Delivery by the Web


Miss Patience Muffett receives her famous bite, perhaps as part of a research project. Her father, Dr. Muffett writes about using insects and spiders as food and medicine in 16-th century England.

Clip: http://www.rochedalss.qld.edu.au/

spider/spider9.htm

Mon, 14 Apr 2003


Miami


Dear Mr. Seykota,

After reading your FAQ’s I got a feeling that your philosophy is similar to the philosophy I am trying to foster.

Self-discovery. I know this is the key to success and happiness in any undertaking. I would like to request if you can give permission for me to start a group in Miami FL. I really like these open minded discussions of psychology, philosophy, and other studies that attempts to advance a person mentally, physically, socially, emotionally, and spiritually. Harmony in all aspects of life is what brings happiness and success. Like I said before, success is getting what you want and happiness is wanting what you get.

Miami !

 

Welcome! 

You are in the Directory.

 

 

Miami, FL

 

Map: www.yahoo.com

Mon, 14 Apr 2003

 

Fear

 

see Change and No Change

The central question of my being is WHY do I fear? FEAR asks me a question I do not answer at ease. HE asks me: "I can give you what your heart longs for. Do you ACCEPT it?" Pax!

Fear anticipates danger.  Look for strings.

 

 

 

 

Clip: www.home.eznet.net/

~stevemd/stringar.html

Mon, 14 Apr 2003

 

San Jose Group

Hi Ed,

Are there still only two people interested in starting a San Jose, CA group? Count me in as the third! I want to have a group started in our area, because Lake Tahoe is too far to travel to bi-weekly on Thursday nights.

As much as I'd like to generate interest in our area, I wonder if the desire to make a commitment to meetings is more powerful if people discovered and requested to join a group, rather than us promoting and getting more people to join?

Come to think of it, I just answered the question myself just now ..

Let me know what else I can do.

The Incline Trading Tribe comprises members from Los Angeles, San Francisco, Atlanta, Houghton, MI ...

San Jose could use a coordinator.

Mon, 14 Apr 2003

 

First Meeting of the Manhattan Group

Hi Ed,

I am pleased to report that the Manhattan group has had tremendous interest. I would like to announce that our first meeting will take place on Thursday May-8th!

I was wondering if you could kindly update your web site and include the date of our first meeting like you have for the Toronto group.

 

Manhattan

May 8, 2003

Mon, 14 Apr 2003

 

Remove the Feelings


I was wondering what you thought of these websites. They deal with emotions. You said stuff about the limbic system, this man claims emotions are just memories that can easily be removed. Here are the sites: [XXX] Thanks.

FAQ does not endorse or review products. See Ground Rules.

Be sure you fully understand the positive intentions of your body parts before you decide to remove them.

 

No More Aches and Pains

on, 14 Apr 2003


Golf and Trading

Ed,

I was wondering if you caught Tiger Woods and his interview after his miraculous play on Saturday afternoon? When asked if he knew what number he needed to score in order to win the tournament the next day, he laughed and responded that he had no idea. But most interestingly he said that in days when he hits incredibly low scores its usually not days in which he goes out trying to hit a 64 but instead days in which "he gets out of his own way." As soon as he said this I thought of trading as well as your site and some of your comments.

I have found that my moments of success in trading, golfing or when I played pro basketball appeared when I have no feelings, neither excitement nor fear. If anything this void in emotions would create a calm inside. I have found that getting out of my own way usually takes the form of having no concerns about this shot (trade) or the next (shot) or the previous shot (trade), almost to the point of indifferent ... but in a positive way. I guess recognizing this is half the battle.

 

However, creating that internal environment consistently, that's a whole different story ... any advice??

Thanks again for your site or shall I say book.

Being in the Zone is natural, at least according to Tiger.

 

Staying out of the Zone seems to require effort, although there are some ways that seem to work:

 

bullet

hide your feelings

bullet

ignore other's feelings

bullet

blame others

bullet

think about past and future

bullet

avoid the now

bullet

ask Why

 

 Just Stay Out of this Tiger's Zone

 

Clip: www.colchester-zoo.co.uk

Mon, 14 Apr 2003

 

Where to Look

see True Beliefs


Hi Ed,


My beliefs are true when I see another standard that agrees with me. The issue comes when I compare my standard with those standards and they show me wrong. Where should I look?

Look in the mirror.

 

 

Agreement Reflector

 

Item: www.drugstore.com

Mon, 14 Apr 2003

 

Dictionary

Hi Ed,

Several years ago at a seminar in Toronto, I asked you what was the most important influential book you had ever read. Your response was "the dictionary" and you went on to explain. My question is why it has not made your favourite list of books?


Would you please explain in the Q&A as to the importance of why the dictionary is so important to read and understand.


The dictionary contains the contract we have with each other about what words mean; it holds our collective consciousness, including unresolved issues and confusion.

 

For an example of trying to use non-standard English, see the FAQ directly below.

 

For another, consider the "why" in your question. It's ambiguous:

 

bullet

you want it on the list

bullet

you want to point out my omission

bullet

you want to show your perspicacity

bullet

something else entirely

bullet

 

The Trading Tribe avoids "why."

 

 

Verbal Contract Reference Library

 

MS Bookshelf 2000 defines "Why" as the intention underlying an action or situation; The Trading Tribe holds that intention equals results; so the word why is meaningless. Attempts to use it are inherently ambiguous. Note: "Why" is central to fundamental analysis.

Mon, 14 Apr 2003


Economics

 

Diversification vs. conzetration for intraday trader

Gentlemen
 
In he's coin simulation Mr. Seykota stated result for simulation of portofolio with 5 different positions. 5 positions vs. 3 positions can give lower drawdown, if quality of all trades are equal. But clear, that with 5 positions trader need make more trades as with 3. Some must be loosed - Conzetration and folloving quality of trade or intensity of trades in closed time interval. For intraday trader that can be important. If for each of five position control full market depth for atleast 3 ECN (INCA,ISLD,ARCA)than for five positions 15 windows must be controlled .
 
Clear that best quality can be received with one position ,but only in case ideal conditions without Risk of unexpected slippage, trading stop (short selling in high volatile market  -30-40%)
 
Exist publication to this case? What are advantage and dissadvantage for intraday trader for 1,2,3,4,5 positions ?  Or for non fixed number of postions from 1 until 5 dependent from market conditions ?

Exist statistic simulation ?

You might consider a career in economics. With a little more effort you could be writing things like this:

 

Identification with averaged data and implications for hedonic regression studies by J.A.F. Machado (Faculdade de Economia, Universidade Nova de Lisboa) and J.M.C. Santos Silva (ISEG, Universidade de Lisboa)   

Abstract: In the estimation of models with averaged data, weighted least squares is often used and recommended as a way of improving the efficiency of the estimator. However, if the size of the different groups is not conditionally independent of the regressand, consistent estimation may not be possible at all. It is argued that in the case of some leading examples of averaged data regression, consistent estimation is possible using the usual weighted estimator. Contact: jmcss@iseg.utl.pt

 

Or, with a lot more effort you might be able to distil it down to something like this:

 

In retrospect it becomes clear

that hindsight is definitely overrated!

-- Alfred E. Nurman

 

 

Alfred E. Neuman, Economist Analyzer (c) Mad Magazine

Mon, 14 Apr 2003

Pyramiding

Dear Ed Seykota,

In one of your answers you said that "Pyramiding may prohibit capital formation". Can you please elaborate this idea. Regards.

Too much pyramiding can result in large drawdowns.

Mon, 14 Apr 2003 09:42:16 EDT

Suggested Reading

Dear Ed,

For readers of FAQ who wish to pursue mindfulness in all aspects of their life, may I be so bold as to suggest [XXX]. For, whatever the nature of the discussion, trading or parenting, the message is quite the same, wouldn't you say? Nothing special.

FAQ does not endorse products or publish contributor endorsements. See Ground Rules. You may submit questions from your own experience.

 

Mon, 14 Apr 2003

Washington, DC


Dear Ed,

I would like to begin a group in the Washington, DC area.

Living in a town primarily populated by lawyers, lobbyists and politicians I receive more correct opinions than I find at any news kiosk! Despite this noise, Washington is a wonderful city in which to live and think.

Thank you.

DC !

 

Welcome! 

You are in the Directory.

 

 

Washington DC

 

Map: www.yahoo.com

Mon, 14 Apr 2003

Pyramiding Trends

Hey Ed,

When one pyramids as the trend continues, since one is trying to increase one's position with a smaller bet each time, (literally like a pyramid), there comes to a point where one is buying or shorting just one contract. then, the trend continues to rage on, if so, I wonder if it would be in keeping with the principles of trend following to keep on adding single contracts, or just keep on adding small bets anyway.

This seems to make sense, since, the longer a trend lasts, the probability of the trend continuing on diminishes more (or is this view is too fundamentalist?), thus, pyramiding makes sense since one is making a smaller bet each time. So, when one reaches the stage where one is adding a single contract, it probably would make sense for one to watch one's equity level, as long as the positions added form increasingly smaller proportions as compared to total equity.

Please tell me your opinion on this, if it's not a good idea to continue to pyramid with single contracts, then what do you think is better?

Cheers

Paul

So if I have this right, on one hand you say the trend just rages on and on, and on the other hand, you say it's probably over.

 

Sounds like you like to worry about the future, even outguess it.

 

To tune up your future guessing skills, you can use a deck of cards; flip them over, one at a time and keep track of your score. You can even get playing cards with your favorite heroes on them.

 

 

Future Fuel Futures Trader

 

"I have a hunch, Scotty, Di-Lithium is about to turn around. Tell Spock to Buy 500 May Di-Lithium Crystals at the market. I think we can squeeze the Klingons."

 

"How do you know that, Captain?"

 

"The Ferengi tell me the Klinons are way short, in over their heads, and selling more just to keep it from going up more."

 

"But Captain, the Ferengi are from Deep Space 9 ... that's a later TV series ... we aren't even supposed to know about the Ferengi."

 

"That's why I'm the Captain, Scotty."

 

Clip: http://members.aol.com/ataraxiarl/

blgupc/startrek/deck.htm

Sun, 13 Apr 2003

 

Change and No Change


Chief Ed:

Things are changing,
but nothing changes.
Still, there are changes.
Le roi est mort, vive le roi!


-- Michael Cretu, Enigma

The urge for novelty distorts my perception. I see what does not exist.

Pax!

The popularity of fundamental analysis ensures the profitability of trend following.

 

The feeling of wanting things novel might be a novel thing for you to feel.

 

 

Enigma's Michael Cretu

Poetic Fundamentalist

 

The central question of our being is not to be or not to be, but WHY?

Sun, 13 Apr 2003

 

Speaking of Speaking

Hey Ed!

Today would be a great day to talk ... however my voice has chosen not to work due to laryngitis (sore throat last week) ...
feeling fine just waiting for the vocal chords to kick back in ...

You might check if other parts of your body also choose not to work.

 

 

My Voice Has Chosen Not to Work

 

Clip: www.school.discovery.com/clipart

Sun, 13 Apr 2003

 

Thinking Results

 

Dear Ed,


It's been a while since I don't send you my ideas. I was developing some thoughts about my system and how to improve it. I heard something that described my experience, something that I felt but couldn't put in words and therefore I couldn't state it to myself and solve the problems that were affecting my state of mind. I really would like to share these words with traders that had a similar experience (start winning but at some point begin to lose and feel impotent to identify the causes):


"The curious anomaly of trading is that, if you start with a winning trade, you will automatically experience the kind of carefree mind-set that is a by-product of a winning attitude, without having developed the attitude itself."


I was winning but there was no mind-set to support that winning. When I began to lose, my self-confidence plunged. That just can't work. Now, I'm working and re-thinking my way of understanding my system, so I set a favorable mental environment to plant the seeds of a "winning attitude tree".

The result is that I will harvest consistency from a healthy mental development as a person and as a trader. Thank you for your support. Best regards,

When your results effect your attitude and your attitude effects your results, you have positive feedback.

 

Positive feedback is unstable.

Within the confines of a cylinder,   unstable combustion can produce very useful work.

 

 

Ignition

 

Clip: http://www.eng.warwick.ac.uk/

~espbc/courses/engine/Otto.jpg

Sun, 13 Apr 2003


Not Good

Hi Ed,

I trade for over 6 years on only one futures market (regulations in an Eastern European country, changing fortunately). I know my theory but am emotionally green and young (well, maybe I'm "patient", but that's it).

 

Cannot control my fear of not earning cash...angry for loosing previously, help! Angry again for not forgiving myself for breaking my own rules, help! I'm greedy when it comes to winning, chicken when loosing. People skills suck, I just keep constantly thinking about how to improve, man I haven't [xxx] for 2 months!

 

Feel depressed, worthless and so on. If a wake up too early in the morning I just keep thinking and thinking, cannot sleep. Tried meditation but it made me think even more due to the awareness phenomenon.

 

Sometimes I feel I live in my own world of illusion (the sort of illusion which isn't shared with anybody else's' illusion) Just tell me I'm normal and I'll be fine, I guess. I'm new to this site, maybe there is a thread I could join? Best regards,

Fighting feelings, controlling fears, and otherwise interfering with the process doesn't work.

 

Go with the flow and experience your feelings, just the way you are. You might come to know their positive intentions.

 

 

Anger

 

Consider the Positive Intention

 

Clip: members.aol

Sun, 13 Apr 2003

 

Remote Groups


Hello Ed,

Regarding Remote groups, I am glad you put a disclaimer that Participation in a group does not imply that Ed Seykota certifies or even knows a trader.

As a contact person for one of the groups, in my conversations with potential group members, it was becoming very apparent that they were expecting Ed Seykota clones. However when I looked at myself in the mirror, much to my dismay despite being a group coordinator I failed to metamorphose into Ed Seykota.

I feel setting up groups is an excellent idea, every city should have one. As you state meetings provide opportunities to resolve personal issues around trading. Along with the deep  transformational work undertaken in tribe meetings of raising the subconscious agendas to the conscious level, and to facilitate a healthy interrelationship between feelings and thoughts; I believe just the check-in process, and monitoring of feelings and emotions between meetings could be very useful.

In the past I joined other groups, one of them was a Buddhist self inquiry group. I found that just by meeting on a regular basis gave me a yardstick to measure the progress (or lack of progress) of my journey. I would use the meetings as bookends if you will, during the week I would observe myself and then discuss the events in a group setting with other likeminded people.

"When we try to investigate our mind through introspection, we find it tends to be dominated by discursive thoughts or by feelings and sensations" -- His Holiness The Dalai Lama.

FAQ encourages personal growth as well as vocational competence.

 

 

 

Bookends

Up here, a pair of pears appears

 

Clip: www.myvictoriantreasures.com

 

Sun, 13 Apr 2003

Fear of Knowing

Dear Ed,

I am a failed trader who is finally beginning to realize why he doesn't want to succeed.

After years of studying the markets, I believe I have finally developed a system with a proven edge. I know exactly how much I will risk on each trade, and it is but a fraction of the average gain per trade. I know that on average, I will receive a signal to trade only three or four times per week (being raised on day trading, 10-20 trades/day was my norm), yet each trade has a high possibility of yielding a relatively large return in a short period of time. I know if I trade only the signals I receive from this system, I will be able to continuously compound my account beyond my greatest expectations. I know that to succeed in trading, I must trade only when I have an edge, and to refrain from trading at all other times.

Yet, even having been convinced of the viability of my system for the last 6 months, I've yet to stick to my ground rules for more than a few weeks. I go through endless cycles of successful implementation of my plan (often yielding results far better than I'd planned), followed invariably by quick decimation of my previous gains, and more. The triggers for initiating my self-destructive phase are garden variety (inability to stay mentally focused following drawdowns, blowing stops, revenge trading, etc), and they quickly lead to "mini-blowouts" that cause me to cease trading, whereupon after a few days of refocusing my will and spirit to "do better this time", I begin again with newfound determination -- only to fall into another cycle of success/sabotage.

 

This has been the pattern of my trading efforts for so long that I've come to accept my addiction for failure, yet I've never really understood why it was that I could not follow a few simple rules, even if I knew that great gains could be the end result of my discipline.

After stumbling upon your FAQ following a particularly destructive bout of trading and getting a bit of inspiration from the somewhat oblique Q&A format, I started to really investigate my own psychological makeup, trying to dig into what it was that prevented me from executing what was needed for success. Why was it so hard for me, even when all the rules were laid out before me like a simple checklist? If the "prize" was right there in front of my face, why could I not simply reach out and take it?

Suddenly an image-thought entered my mind -- that of a man who suspected he might be sick with a fatal illness, who was too afraid to visit his doctor.

Even though the likelihood of him being diagnosed with the disease were slim, he preferred to live a half-life under a condition of uncertainty, rather than take that chance of knowing inevitable doom.


The analog to my history with trading struck me in an instant: the reason I was could not execute my plan was that I was afraid of realizing whether or not my system was truly a success, and constantly strove to avoid that confrontation. As long as I veered from my game plan, I could always point to the fact that it was my failure to stick with the system which caused the inevitable losses, and not the system itself.

 

So long as this continued, I always had that last chance for redemption, a reason to hope, and therefore consigned myself to an endless cycle of gains and losses, just so I wouldn't have to face the possibility that after all my years of study, effort, and pain -- my "edge" might not really be there at all.

I sacrificed my own emotional and financial well-being just to maintain that illusion of hopeful possibility, to preserve the "sanctity" (immortality?) of the system, saving it from both randomness and certitude, thereby keeping the mystery (of death?) alive.

I believe I'm finally sick of running away from knowing -- I'm ready to find out what it is I have . . .

My sincerest thanks.

Experiencing your feelings with others seems to accelerate the process. 

 

While it might seem a bit awkward at first, with a little practice it might become quite natural and organic.

 

 

 

Sharing a Flower

 

Art: www.zivicstudio.com