Ed's FAQ May 11-20, 2016

Contributors Say

Ed Says

May 19, 2016

Science of Drawdowns

Dear Ed,

I find this to be a very interesting piece on the reality of drawdowns. It is from Robert Frey, PhD, who in the past works with James Simmons of Renaissance. Here’s some select statements from the presentation relating to owning U.S. stocks for the last 180 years:

·         “Most of the time even when we are in a good investment, we are in a state of regret….

·         “You are going to bed with an upset stomach because you have lost money most of the time and do not know what is going to happen….

·         You are in a drawdown state 80% of the time and of that, you are in a severe drawdown state (greater than -20%) 67% of the time….

·         “Most of the time an investor is facing a market of regret….”

https://www.youtube.com/watch?v=27x632vOjXk

Sincerely,

Thank you for reporting on this work.

People who sell trading "secrets" (see below) rarely talk about the essential experience of trading, including managing feelings about drawdowns,

May 18, 2016

Virtual Tribe Report

Hi Ed,

Last night our Virtual Tribe meets and successfully completes a Rocks Process.

At the beginning of the meeting, we tinker with the video resolution settings. We opt for slightly lower definition video and see improvement in audio clarity and a significant reduction of lag and other glitches. As a result the meeting feels smoother and more natural.

After a few minutes of tinkering we check in then move on to a Hot Seat and Rocks Process.

Instead of physically exchanging Rocks, we Donate and Fore-give Rocks by making the gestures of giving and receiving. Most other aspects of our process including Process Management and Role Play follow the steps and format of an in-person Rocks Process.

At the beginning of our Rocks Process we encourage Hot seat to develop his form. As Hot Seat intensifies his form the limitations of the virtual format seem apparent to everyone: physical distance and limited visibility.

I worry that Hot seat will get stuck and that our encouragement and support may not come through clearly enough. Fortunately we all seem to accept the format as is and just keep going anyway. I fully engage in the process and I forget that we are not meting in person. It feels just like an in person meeting.

We continue through to Rocks Process.

In the Role play, I play the role of an unresponsive father that shuts down and is even outwardly unresponsive to Heart Rock. I feel hollow aching feelings in my chest and abdomen: worry, pain and guilt. When my children address me I close my eyes and cover my face. I imagine I'm in a long dark tunnel with black sweating walls - like a long steel pipe. It feels wet, warm and humid with soft edges. The sounds from outside seem far away coming from the opening at the end. I notice that I can feel impulses coming from Hot Seat as he reaches out to me. When he reaches out to me I see and feel a blink of light at the end of the tunnel connecting with the empty spot in my gut. It feels muffled. My eyes remain closed. I barely respond to direct questions. When I do respond I feel worse and I have my own questions. The tunnel walls become thicker. I feel further away and more insulated from the outside the more I interact.

We check out in role.

I share that in the Father role, my connection to others feels stronger while Hot seat uses Heart Rock. I tune in to Hot Seat's conversation with his sister and feel like "he gets it". The thought provides a feeling of relief. When Hot set addresses me using Heart Rock, I remain unable to respond in the way that I know he wants me to. I feel a small impulse to do something. A feeling of "want to connect" flickers inside of me but never really makes it out of my body as as words or an expression. I know that I appear mostly unresponsive. Hot Seat tells me he accepts my limitations and I feel inner relief of physical pressure. The inside of the tunnel seems a little brighter and cooler. Even though I am unable to fully respond to Hot seat, I feel better and slightly more open.

Hot Seat thanks Tribe members and releases us from our respective roles. I feel a huge wave of relief - my body feels cooler and light-weight. I feel energized and my eyes open wide. The room seems very bright.

After Rocks Process we check out again.

I feel optimistic and sure that even when some people seem unresponsive to my use of Heart Rock in day to day life, I may in fact be making a connection and it may be helping both of us. I feel encouraged by this.

Thank you Tribe!

Thank you for sharing your process and insights and for documenting your meeting.

May 18, 2016

Wants to Attend a Workshop

Dear Ed,

I have recently discovered TTP. I'd like to learn more and I understand that you have held Workshops in the past. If you decide to do one then I would love to attend.

Thank you.

Thank you for expressing an interest in attending a Workshop.

Watch FAQ for more information on Workshops.

May 17, 2016

More Questionable Advice

Ed,

Fyi - Attached is a copy of another promo for "your trading method..." just received from the Stansberry guys, in case you haven't seen this one yet.

- - - - -

Have you ever heard of Ed Seykota?

Most people haven't.

But if you piece the details together from several books and websites, you learn he got an electrical engineering degree at M.I.T., and today lives in Texas, thousands of miles from Wall Street.

But what’s remarkable and rare about Seykota is that, according to various sources, he turned $5,000 into $15 million in 12 years in one of his core accounts.

That’s an extraordinary return of nearly 300,000%!

As one of his colleagues says:

"He is the best trader in history, period. Who else comes close? The household names, Buffet and Soros, are less than half of Ed's return each year."

Yet despite these astronomical and extraordinary gains, he is completely ignored by the mainstream media.

Search The Economist going back to 1986 (as I did), and his name does not appear in a single issue.

Search Barron’s and The Wall Street Journal going back to the mid-1980s and his name appears just once.

Why is that?

Why is this investor totally ignored by Wall Street and the media?

Well, it’s because he uses a controversial and unique approach to make absurd amounts of money … an approach many academics, economists, and mainstream investors say can't possibly exist.

And he's not the only one. Amazingly, over the years, other guys have used the same basic concept to produce extraordinary gains of their own …

For example, a guy named Michael Marcus claims to have earned an incredible 250,000% return on an account he managed over a 10-year period.

Bruce Kovner reportedly made 87% gains PER YEAR … for 10 straight years. That’s an extraordinary total gain of 52,000%... which turns $10,000 in more than $5 million!

A guy named David Harding has become a billionaire thanks in large part to a similar investment approach. Yet despite his and others' success, almost no one's heard of these guys.

Why?

Well, as Harding says of his approach to investing, "Most people believe it doesn't work."

And that’s why this is an incredible opportunity for you and me.

If you want to make more money with your investments — we're talking a LOT more money here — you need to see how this approach works.

It's totally unique.

And no, you might not be able to make a 300,000% return on your money, but I firmly believe you can use the concept behind this strategy to increase your returns by 100% to 200% or more over the next year.

Get all the details here…

Sincerely,

Steve Sjuggerud
Senior Analyst, Stansberry Research

P.S. If you think this sounds too good to be true, recent studies at Cambridge University, New York University, and the University of Chicago back up the concept, after studying up to 200 years worth of data.

Please don't invest any more money until you see how this works right here …

Thank you for the heads-up on these guys trying to use my name.

Marcus, Kovner and others of my personal friends and acquaintances who have extraordinary track records generally cite right-place-right-time and trend trading as major factors.

They also generally have strong character - something that fly-by-night advisers don't have, don't exemplify and cannot teach.

For more on Porter Stansberry and the SEC case against him for a "scheme to defraud public investors by disseminating false information," see: https://en.wikipedia.org/wiki/
Porter_Stansberry

May 17, 2016

Wants a Mentor

Hi Sir,

I very admire your trading strategy I am trader from India.

I need a mentor like you can you mentor me How to trader in the market how to control, greed, fear & Emotions

Thanks & Regards

Thank you for raising this issue.

You might consider beginning by writing down what you wish to accomplish.

You might also like to consider the positive intentions of your feelings.

May 15, 2016

Massage and Trading

Ed, your I review with jack Schwager is incredible but one thing I don't get is what does (massage) have to do with trading is it maybe because so one don't feel tense and feel relaxed tho I listen to that interview every day and your whipsaw song every day just so I keep my mind focused on my trading.

Best regards

Thank you for raising this issue.

I do not know of any trading systems that formally include massage.

On the other "hand" it sounds like fun - especially the part about "back" testing.

May 15, 2016

Suspicious Advice

Ed - I guess you may already be aware(?) that the Stansberry research bunch are now 'teasing' for and selling a $1,500 per year advisory service,
based on the Ed Seykota secret (plus others such as Bill Dunn, Dave Harding, Mike Marcus, John Henry etc.) "Magic Number"/differential trading method.

Anyway, I thought you should know about this latest use of your name just in case you don't already...

Best regards,

Thank you for the heads-up.

The only trading secret I know: nobody has any secrets; guys who sell "secret formulas" generally want to keep that secret secret.

I do not authorize Stansberry to use my name and I do not endorse his methods.

His implication (that he has some trading secret) seems quite dishonest - and might tell you something about his whole operation.

Porter Stansberry Fraud Allegation

May 12, 2016

Tribe Meeting Report

Ed,

We meet for our 3rd "New Tribe". 3 present, 2 can't make it.

After drumming we try some more Hamming Questions ( https://docs.google.com/document/d/
1oQSfNiAWn3Dd_tOlsp2TJwsdzR5p
CXDgNQhioxQJajo/edit?usp=sharing ) and then more standard "tell me how you feel / show me how you feel".

Prometheus (pseudonym) comments on his last hot seat report. He notes that he feels he for-gives the old rock with love and respect though we does not put the detail of this in our reports. 'Thank you. I appreciate your good intention in offering me this rock. But I have my own rocks now."

It occurs to me that perhaps we could explore the mother's feelings more, using more of our empathy. She wants to have a boyfriend, but the boyfriend is abusive to the children. Perhaps acknowledging her feelings in the matter, as well as the children's concerns, may produce a better result all round.

Two people report issues.

Achilles (me) reports working through Robert kegan's change process (see https://drive.google.com/file/d/0B_hpown
P1A4PdERFVXJDVE5SRnc/view?usp=sharing ) in order to improve my effectiveness. I have the goal specifically to achieve on a daily basis 4 hours or really hard tough work, 4 hours of normal type work, 2 hours of wholesome fun. The process seems to be working as I am mostly tracking those number but I have a vague sense of unease somewhere. Also I feel I could probably achieve 4+5+3 ideally or even 4.5+5+3.

I am fairly keen to go into a hot seat pretty fast but other members feel it would be better to explore the issue first. We talk about it for a while. The feeling of anxiety subsides somewhat.

The moment passes. I feel I miss an opportunity.

Socrates gives me a very nice bottle of fine wine for my recent birthday. I feel very touched by this.

Socrates reports that his issues with his wife are not a problem, at least for the moment. His mother stays with them for the last two months and perhaps his wife is on good behaviour to avoid looking bad in front of mother in law. He reports that he takes various supplements to improve his vitality. These help him feel good but he has trouble getting to sleep. He reports only 4-5 hours sleep the previous night, though he looks absolutely terrific, not like someone who is sleep deprived.

We discuss various issues around supplements, hormones, exercise and fitness, and sleep for a while. Socrates reports not feeling hot any more.

At the end of the night everyone else feels good about the night but I feel we could do a lot more.

Thank you for sharing your process.

May 12, 2016

Trading Tribe Connections

Dear Ed,

A few months ago I reread “Market Wizards” and with your interview with Schwager as my favorite I decided to Google your name to see what more I could learn about you.

That led me to purchasing the “The Trading Tribe” which has since completely captured my interest. I’m working through the idea of putting a tribe together here in Portland, not of traders necessarily, only three of us either have any serious interest or history in the markets, rather a shared interest in the qualities that tend to Right Livelihood is the common thread that I’ve noticed in the people that may be the right members for the Tribe.

Starting from scratch it seems a tricky business both in the right leadership (Chief) and then attracting those who possess the willingness and
the right motive.

One of the reasons I’ve decided to write a letter in addition to emailing the FAQ is that I wanted to include these two CD’s. Many many things that have come to mind while reading the “The Trading Tribe” and this interview of Dr. Stephen Marmer jumped out at me right away. Dr. Marmer is a fairly regular guest on a podcast I’m familiar with and I always look forward to listening to him, and would even more so if the host, Dennis
Prayer, didn’t constantly interrupt him.

This particular interview seemed to parallel some
of what I read in “The Trading Tribe”, specifically that to really change we have to re-experience our formative emotions but have a different outcome. If Marmer’s comments are Tribe related the call-in’s later in the interview are probably less so. Later I’ll take my displeasure about interruptors to the Tribe.

The second CD is just a couple of short clips, one from “Finding Joe” and the second from Bill Moyers interview with Joseph Campbell taken from the PBS special many years ago, “The Power of Myth”. I’m not sure how much the comment by the British guy regarding “colluding with you to create a story that’s hard for you to get out of” is relevant to The Trading Tribe but I decided to include it anyway.

Campbell’s comments about the mind as a secondary organ and the body as the primary source of wisdom (my words) may be more to the point. And not to get tangled up in words, I learned long ago the importance at times of defining our terms to be sure in a discussion that we’re all talking about the same thing.

Another of Marmer’s theme’s is that “we are the architects of our own misery”. Similar to this was a concept about framing our unconscious behavior that I learned in a class I took twenty years ago, that we will “walk across broken glass to meet our driving needs”. I’ve understood the idea, but clearly identifying my own driving needs took a long time, despite it being sometimes easy to see in other people. And then once I did clarify my driving needs it didn’t automatically translate to wisdom. I did begin however to develop an awareness of the subtlety of the inner dialog, a first step. But as Mr. Incredible says, “why is it never easy?”.

This class that I took was called “The Pursuit of Excellence” offered by a company called Context and founded by Randy Revell, who was also part of Life Spring and EST.

The follow on to this first class was called “The Wall” and it was a five day retreat with “ground rules” that I think most of us were unprepared for. The end result for the 30 of us was a degree of intimacy that we also would not have been prepared for or expected.

It’s my closest personal experience to from what I read in the FAQ’s of reaching the zero point. We were asked to identify our most difficult relationship and focus on that over the course of the five days. In the end I was completely surprised by the tidal wave of emotion that engulfed me while standing in front of the group reading my written thoughts and dialog. Then the group surrounds you as you lie down and everybody together with one finger each lifts you up.

For me personally it was remarkable in that the relationship I chose was with my father, the location was where I was in camp at 12, terribly homesick, and just last week my brother and I moved my Dad into assisted living, which is to say the last six months have been insightful. Still need to work it through though and I can see no better avenue than a Trading Tribe.

So many other references have come to mind these last few weeks while reading and thinking through your book and reading the FAQ pages. Also Joseph Campbell again in his interview with Bill Moyers on “The Hero’s Journey” when he talks about the importance, the necessity, of becoming an emotionally self responsible adult, and also Campbell’s discussion of the “Grail”, which I recalled while reading through one of the TT FAQs from quite a number of years ago.

If I remember correctly in Michael Crichton’s “Travels” he talks about an “entity”, his twelve or fourteen year old self or something like that, and the process of releasing it. It’s been a long time since I read the book but when reading through the FAQs and people describing their Rocks process it comes to mind.

Thank you for sharing your process and insights.

May 11, 2016

Tribe Report - No Losing Days

Ed,

Good talking with you. I recall that I owe you a post Tribe meeting report.

It may be just a coincidence but since the Tribe meeting and the work I did there I don't believe I have had a losing day in the markets.

Regardless of whether it is cause or correlation (I lean to the cause side) I find that pretty damn interesting.

Let's catch up again soon.

Best regards,

Thank you for sharing your process.

May 11, 2016

Red Lines on Chartbook Pages

Ed,

I noticed some charts with red lines, interesting places, but no comments. So I was wondering what you were trying to convey to the reader?

Thank you for raising this issue.

The red lines convey the current stop levels.

May 11, 2016

Grief Cycle

Ed,

This chart might apply to getting over a relationship and also to getting over a trade.

Thank you for sharing your insights.

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