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Ed
Seykota's FAQ
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January 01-31, 2017 <-- back | down | forward --> |
| Contributors Say | Ed Says | ||||
| Jan
31, 2017 No Matter What Ed, Two Years ago I commit to my first Trading Tribe. I commit to attend all of the Ten Tribe meetings. The day of the third meeting I feel sick, physically ill, my symptoms include nausea, intense stomach pain and headache. I call Chief to tell him I may be unable to attend the Tribe meeting that evening. Chief explains that these symptoms may be physical manifestations of ambivalence about proceeding with Tribe work. Chief suggests that if I commit to coming to Tribe no matter what the symptoms may dissipate. I commit to attending Tribe that evening no matter what and the symptoms subside. I still have some pain, It is manageable and I am able to fully participate in the Tribe meeting. Friday January 27 2017 I embark on a 3 day 375 mile bicycle ride around Puerto Rico. I feel unprepared, I have a doubts about whether I will be able to complete the ride. As day one goes on and on, my body hurts, I wonder why when buying the bicycle I requested the "more firm" saddle. My knee hurts, My back and shoulders ache I am extremely fatigued. I want to quit. I have five more hours of riding today and two more days after that. All the doubt is torturing me. If I am not going to finish I want to quit early, why suffer so much if I am not to finish. The pain is distracting, the seat feels like my personal dark age torture device. I wonder what my girlfriend will think if I quit, how she will feel if I complete the ride. I remember my experience with Trading Tribe and the pains that went away once I committed to "no matter what". I wonder if the ride will get easier if I stop torturing myself with doubts. I commit to completing the ride no matter what. The doubts still come and go. Pain comes, I acknowledge it, I mentally and sometimes verbally describe the pain, I commit to not letting it stop me. The pains seem to come and go. I am finally at the end of day one. I eat and rest. I stay committed to finishing the whole three day ride. I experience technical difficulties. My cycling shorts seem damaged, I have trouble keeping up with the group, I am tempted by the SAG wagons, my brakes keep causing trouble. I stay committed to finishing no matter what. My girlfriend sends encouraging texts, she talks me through some tough moments. She expresses her confidence in me and that I will finish. I stay committed to finishing. Day two is easier than day one, and the final day which I had feared, is easier still, ( thanks Advil!). At Sunset Sunday I arrive at the finish in Old San Juan. Triumph. It seems the "No matter what" rock really works. Thank you Trading Tribe. Thank you Chief.
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Thank
you for sharing your process and the photo of you celebrating your
success. |
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| Jan
28, 2017 No Doubt About It Ed, Through 2016 real money test , i knew my trend trading programmer can make money.i make around 40% but it can up to (80%) i use 3%of equity each trade but i did not trust my programmer sometime ! can you teach me HOW to believes it and no doubt about it. |
Thank
you for raising this issue. You might consider taking your feelings about <wanting to remove doubt> to Tribe as an entry point.
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| Jan
26, 2017 Wants System Rules Hi Ed, Are you willing to share the rules and maybe some of the trades of "buy the dip system" and "long only trend following system" ? Would love to built this in Trade station and monitor their performance. Thank you |
Thank
you for raising this issue. I provide the charts on a once-per-day basis to exemplify types of trading. In general, you might notice that, in the long run, buying on breakouts seems to work better than buying on dips. The charts do not constitute full trading systems as they have no positioning or money management components. I make no claim that any of these "systems" make money, or that anyone would have the temerity to follow them. I do not wish to have anyone vending them as systems I recommend. Please note the disclaimer on the TT_Chartbook page: I do not make or imply any kind of recommendation to buy, sell, hold or stay out of anything. |
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| Jan
25, 2017 Slippage and Holding Period Ed, I read in FAQs from Fri, 1 Oct 2004—“Transaction costs, such as commissions and slippage, become increasingly severe with increasing trading frequency.” I run two simulations to test that and the results are charted below. 1st chart is the effect of slippage with a one-month holding period—returns (Y-axis) vary from about 10% with 0% slippage (X-axis) to about -1½% with 50% slippage. 2nd chart is the effect of slippage with a six-month holding period—returns vary from about 10% with 0% slippage to about 8% with 50% slippage. I agree that slippage becomes less important as holding periods lengthen. |
Thank
you for corroborating my conclusions. |
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| Jan
23, 2017 Cutting Losses Mr. Seykota, These days I keep an eye open at the top and use the pyramid upside down to take profits. I don't use stops for gains in pursuit of the mother of all gains. Sometimes I listen the Whipsaw Song to remember to cut losses and I do it. Thank you ! |
Thank
you for sharing your process. |
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| Jan
22, 2017 Living in the Zone Hey Ed, I hope all is well with you. I spent several years in a Tribe and worked on myself / family. It's certainly contributed to becoming a conscious parent, living in the present, being grateful for the things in life, and continuing to work on myself. At a base level, I always seem to be looking for how things work. Anyway, I wanted to pass some cool technology back your way. I've been using "MBSR" or mind based stress relaxation for a few weeks with some pretty great results. It's really something that Kabat-zinn (non-self-promoting author) started to help people in tough situations (cancer, death, diseases, pain, etc) experience their emotions and live in the present. It's been iterated on enough to become a practical tool. MBSR reminds me of a combo between breath work / Tribe work in that healing proceeds as it does. In any case, after a few weeks of meditation, I noticed that As a child, I didn't receive validation / unconditional love as a kid home (ok - cool). As a result, my friends , jobs, etc were very much about looking for validation (ok - crazy). What is really important is my own validation (aha- moment). Honestly Ed, I don't think I've ever felt so "comfortable in own skin". My goal was to pass some cool technology back your way. The Moyers video is pretty awesome. I'm grateful for the path you started me and other friends on. There is no question my daughter is living in a zone where we model (not control or boss), set empathetic limits, and unconditionally love. We don't allow emotional or physical violence in raising of our daughter. Best to you my friend,
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Thank
you for sharing your process, your technology and the photo of your
daughter. |
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| Jan
20, 2017 Workshop Hi, I am very interested in participating in a Trading Tribe Workshop. Will there be one in 2017? I am based in Sydney, Australia, but would be willing to fly to the USA or anywhere else for the purpose of attending a workshop. Kind regards, |
Thank
you for expressing interest in a Workshop. I generally host
them in response to demand. |
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| Jan
19, 2017 Procrastination Ed, I wonder if there are TT retreats this year and if you are in Puerto Rico in June.️ I am creating software. I am also traveling to India for some time. I keep procrastinating with trading, there seems to be a "read more books before you trade" rock despite the daily visions I imagine of me being a successful trader. I thank you for replying the email. |
Thank
you for sharing your process and for raising this issue. You might consider taking your feelings about procrastination to Tribe as an entry point.
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| Jan
19, 2017 Heart Rock Hi Ed! I appreciate that you continue to update FAQ. I have a feeling of being connected with the experiences shared in Tribe whenever I read it. I experience a big smile and uplifting feeling in my chest as I read the first batch of 2017 FAQ submissions and your excellent responses. As usual, there are really impactful concepts and observations blended with humor and openness. It feels like Tribe. I would like to report that I continue to maintain regular contact with fellow Tribe members and that we continue to support each other. I also continue to use Heart Rock as my default approach to resolving issues. Heart Rock works significantly better for me than all the other rocks it replaces. My children are getting really good at using heart rock too. Since a parent can give their children rocks, I intend to give my children Heart Rock. Thank you for sharing the tools. |
Thank
you for sharing your process, and for acknowledging the work. |
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| Jan
18, 2017 Wants a Mantra Ed, I never realized how big of a roll that emotions played in trading. Looking back over my past 6 years as a trader it is starting to make sense. I seem to be more aware of my feelings and emotions with trading. This leads me to my first question I will pose to the Trading Tribe. In the mornings before the market opens I find myself anxious for the trading day to start. A swarm of thoughts and fears blended with some excitement fly through my head wondering what the trading day will bring. It envelops me so much that I can be distracted while getting ready for work. I find myself constantly checking pre-market quotes on my phone to see if my positions are moving in positive (whether i'm long or short) direction. I don't tend to relax until 20 minutes after the market has opened. Would you suggest any mantras or positive reinforcement thoughts to help make mornings a little calmer for me? All help is welcomed. Thank you for what you do. |
Thank
you for raising this issue. In some schools, you deal with feelings (such as market anxiety) by taking drugs or reciting calming mantras. In TTP we use such feelings as entry points to locate medicinal response patterns and to replace them with pro-active response patterns. You might consider taking your pre-market jitter feelings to Tribe. |
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| Jan
17, 2017 Why Ed, why did you choose trading? You had a good education when came in trading. But why, instead of a scientific career or classical service on a corporation, you become a trader? You will feel the poor and wanted to get rich quick, or did not want to serve others? Like freedom? You are lazy? It can be formed dependent on speculation, like a gambler? I'm a structural engineer by education. I came in trading, because I was born into a poor family, wanted to prove something to others. I also lazy. But in trading does not need a lot of work. Sometimes I think I'm a fool, choosing futures trading. I could be a good engineer. But when I read about how highly educated people, such as Simons, Eckhardt, Seykota, Shaw and others came in trading, donated scientific career, it does not feel like a fool. Why are so educated people choose trading, the case where there are no guarantees of success? Maybe the reason gambling human soul? Search for adventure and new experiences? |
Thank
you for raising this issue. In the Causal Model, we see things in terms of simple linear cause and effect; we see the light go on and we ask why. You get the answer, "The switch causes the light to go on." In the System Dynamic Model, we see things in terms on the dynamic interplay of elements and the policies for responding to each other. For example, you might say the light, as part of a servo-system, turns itself on and off to maintain an adequate level of lighting in the room. To accomplish this it uses a person to sense the light level and to move the switch. A requirement to know "why" can interfere with following a trading system. You might consider seeing if you can go for a week or two without asking why. |
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| Jan
17, 2017 Looking at Trading Hi, I am from Puerto Rico. I have read about you and how it has been of very good influence for other traders. I know you are a busy person, but I would like you to give me some advice so I can be a better trader. It has been difficult for me to have formal studies on this subject and I know that here in Puerto Rico there are many young people looking to be a trader too. I would love to be a person to help them. There are many courses that are very expensive and that is the reason why I have not been able to study. I am a young man with an immense thirst for wanting to be a trader and helping other people for free to achieve it too. Any reply will be very welcome. Thank you. |
Thank
you for reaching out to me. You might consider reading through the materials on this site and also The Trading Tribe. |
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| Jan
14, 2017 Integrity Jump-Start Kit Hi Ed, I'm wondering if you can support me in getting back some integrity. Or at least a jump start. |
Thank
you for raising this issue. You might consider implementing the Integrity Jump-Start Kit for a week to see how it goes - and then reporting back to FAQ with your experience. Integrity Jump-Start Kit: 1. Tell the truth. 2. Keep your agreements. |
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| Jan
13, 2017 Elliptical Equilibrium Dear Ed, i need some insights from you about your Govopoly model that is in elliptical equilibrium : - two phases of 41 days each - the first it your when duckweed fill the pond when exponential is leader - the second when clear water transform the pond in a mountain lake when logarithmic is leader and then starts from the beginning again. I need some insights about this thinking in order to build a system model regards |
Thank
you for raising these issues. I do not know what you mean by the term, Elliptical Equilibrium. You might consider developing some familiarity with the basic vocabulary and concepts of System Dynamics. For example, see: https://en.wikipedia.org/wiki/ System_dynamics |
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| Jan
12, 2017 Optimizing on Recent Kelly Dear Ed, I replicated both strategies of the Trading System Project to the penny. 1) I optimized the parameters of both systems for 25 commodities for the past 27 years (1990-2016). I back tested the Support-Resistance System with a portfolio of the 25 commodities using the optimized parameters for each. I used 2% risk per trade, 1,000,000 dollars as starting capital and a 0.5 skid fraction for executions in the portfolio backrest. Trading costs, fees and taxes were ignored in the test. The results of the backrest are: ICAGR: 17.67% Max DD: 42.03% MAR: 0.4204 2) I optimized the portfolio of 25 commodities using the same look-back periods.
I took the backrest with the optimal settings (optimal: Slow=160, Fast=110, applied on all the commodities). All other things unchanged, the results of the backrest are: ICAGR: 10.57% Max DD: 34.00% MAR: 0.3109 3) I also tested the portfolio using the Kelly criterion (K% = W-(1-W)/R) for position sizing instead of fixed fraction. The way I calculated K% was as follows: a) Individual back test for each commodity, trading one contract. b) I calculated ‘R’ from risk adjusted total profit/total loss. That means I divided every profit and loss with the initial dollar risk of that trade. This way I got total profit/total loss in terms (multiples) of risk. c) I created a theoretical portfolio that trades all those products that have positive individual K% (positive expectancy). This way the theoretical portfolio was dynamic. As time went by it selected positive K% products and left the ones with negative K%. All trades used one contract as position size. d) I calculated the portfolio K%, using all trades that were taken in the theoretical portfolio. I used individual optimum parameter settings (like in the first case). I used the calculated theoretical portfolio K% as the fraction for position sizing for the next trade in the ‘real' portfolio backrest. As in the case of the theoretical portfolio, trades were taken only in those commodities that showed positive individual K% in individual one contract tests. All other things unchanged, the portfolio gave the following results: ICAGR: 27.01% Max DD: 86.67% MAR: 0.3117 *Note: the closed balance of the account suffered a drawdown greater than 100% (103.76%) on one day. Entry signal was not issued on that day. A next day closing of another position pulled out the balance from negative territory. I tried to play with the risk parameters of this last test. a) I weighted the portfolio K% for the next trade with the K%-s in the individual tests, so more risk was taken for commodities performing better in the past. b) Tried to maximize the portfolio K% for the next trade. c) Tried different fractions of portfolio K%. All of the above reduced volatility, however reduced return as well, altogether ending up with lower MAR values. Considering the results above, I was wondering: 1) What is the difference between choosing individual optimums over choosing a single optimum for the whole portfolio? The robustness of the latter? Individual optimums were chosen based on robustness as well and this way the system produces better results. Is it the trader's preference? 2) Do you see any logical shortcomings of the way I calculated K%? 3) Does the Kelly criterion have any added value over fixed fraction bet sizing when speaking of trading? Under ‘added value’ I mean in terms of MAR. Ed, thank you for your time, as always. Best Regards, |
Thank
you for sharing
your research. Dynamically optimizing portfolio selection on recent performance may add considerable complexity to the system and may also risk missing moves that sometimes arise from long-dormant instruments. For example, your one-day 100% drawdown may indicate a glitch somewhere in your position sizing algorithm. You might consider taking your feelings about <searching for a perfect fit> to Tribe as an entry point.
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| Jan 9,
2017 Turtle Viability Hi Ed, Thanks for taking the time to read this email. I'm a 19-year old student from Canada who has been trading under my father's tutelage for the past 4 years (both of us would consider ourselves trend followers) with varying success. I recently stumbled upon this video back-testing Richard Dennis' Turtle Trading Strategy from 1983 to 2014, with the results showing poor performance for the past 6-7 years. With my very limited understanding of programming, the video's maker did seem to implement the trend-following strategy correctly. So what I'm basically trying to ask here is: Is the Turtle Trading Strategy no longer viable today? Did the video maker not implement it correctly? Why does trend-following as seen in the turtle strategy not appear to "work"? Thanks P.S. Huge fan of your excerpts in Trend Following and Market Wizards |
Thank
you for raising
this issue. I wonder exactly what you mean by "viable" and how you measure viability. You might also consider reading the article directly below. You might consider taking your feelings about uncertainty to Tribe as an entry point. |
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| Jan 9,
2017 Death of Trend Following (Again) Ed, It gets to a point where you just have to laugh. After two years of slow returns, the boo-birds are coming out again and investors are pulling money out of trend following funds. November saw the biggest monthly outflow in three years. I’m coining a phrase for this repeated investor irrationality when it comes to bailing out of trend following due to sluggish short-term performance - “Same Sh--, Different Drawdown”. Historical trend following performance speaks for itself. Saying it doesn’t work or it’s dead means you haven’t done any research or work. Sadly, many investors don’t do any work but simply chase short-term performance. Over the past couple of years, trend following has struggled so now they’re throwing a fit and pulling money out. Forget the long-term diversification benefits or outperformance of buy-and-hold. Short-term performance is the only thing that matters to most people. Fortunately, investor behavior can serve as a contrarian indicator. Right now, I believe it’s serving us, yet again, by signaling a buying opportunity for trend following. Excessive Negativity Serves as a Buying Opportunity Investors have withdrawn capital from trend following funds and have declared it dead many times over the past 15 years: mid-2000, early 2002, mid-2004, mid-2007, early 2010, late 2012 and early 2014. There are many examples of this before 2000, but I think you get the point. Whenever trend following, or any other investment for that matter, goes into a losing streak, people declare it dead and bail out - often, right near the bottom. It’s actually hilarious to me.
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Thank
you for sharing
your insights. For additional information on this topic, you might like to see this article. |
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| Jan 9,
2017 Seduction Dear Ed, I recall our talk about seducing women. I consider seduction a form of control, since one person tries to move another person to act in a certain way, according to his/her own interests. And in Tribe we do not control people. I remember having a hard time trying to integrate both. Maybe you can share your ideas about control and seduction in a TTP frame. As I write these lines I recall principles of Ericksonian hypnosis (fully accepting the client and their beliefs), and Kaa the snake from Jungle Book (trying to lunch Mowgli). Best regards, |
Thank
you for raising
this issue. In the TTP Intimacy-Centric model, we experience, share and receive feelings without trying to change them. We strive for connection, rapport and intimacy rather than for control. In the Control-Centric model, you try to bend another person to your will, typically through manipulation and gaining trust. For an example of Kaa working the Control-Centric model on Mowgli, see: https://www.youtube.com/ watch?v=J-pFfE4RFUU |
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