Apr
28, 2020
Let's Make a
Deal
Mr Thorpe,
I'd like to read your book Govopoly. While I do not budget
$125 for single books, I do budget more than that for
charity. I'm happy to offer you $25 for the book and $100
sent to the charity of your choice.
Thanks,
|
Thank
you for presenting your intriguing offer.
OK, so how about you send me $25 and also send $100 to charity.
I can send you 72 pages, and the rest to charity.
By the way, Mr. Thorpe no longer works here. He now goes by the name
Edward Thorp. He likes to write books about blackjack and
security price forecasting.
|
April
21, 2020
Hi Ed,
How are you? Hopefully you're doing great!
I've got two questions, can you give them two different answers in the
FAQ?
I see life as a continuous 'psychiatrist couch' or a continuous prayer.
One is asking to bring into awareness that which is a block to a higher
understanding or to be more loving.
How do you see the idea of getting ill as a way out of repressed guilt
within one's psyche? The more energized and bought into the belief
system "people are catching a virus", the higher the likelihood the
subconscious mind will put oneself in the situation to actually catch
the cold.
It is useful to ask what an illness means in order to both heal the
illness itself and to heal the underlying psychological issue. How do
you see this idea?
Also, I'd like to take my feelings of adapting and accepting to the
Tribe. It's difficult for me to accept this level of hysteria and
folly. And I limit myself with the belief: "this is going to be such a
hit to the economy that I won't have any opportunities". I feel really
alone.
Thanks, Ed. Take care.
|
Thank
you for raising these issues.
For my views on COVID-19, see:
www.Epidemic-Lab.com
You might consider taking your feelings about <hysteria and
folly> and <alone> to Tribe as entry points.
|
April
20, 2020
Wants to
Understand
Hello,
Thank you for making all these great resources available.
I’ve never been much of a math or statistical student …
Are there other lower level books or classes you’d recommend I study so
that I understand your charts more?
|
Thank
you for sharing your process.
I wonder if you can tell me which chart you wish to understand more.
|
April
20, 2020
Flying Hugs
Dear Ed Seykota,
I hope you are safe and well.
Remembered you suddenly!
Two neighbors are fighting and shouting. I intervene and suggest that
the one who is very angry should calm down as it may affect her heart.
She ignores me completely!
I remember your words Everybody gets ...
I realize it is not what she wants.
I come back in my apartment.
I start wondering how suddenly we remember you due to what we have
learned!
Thanks!
Flying hugs to my beloved teacher and guide.
|
Thank
you for sharing your process.
|
April
19, 2020
Definitions
Dear Ed,
In the document "System Math" you have posted on your site I'm not sure
how you define
ndAtrMultiplier in: Entry Risk
ndEntryRiskPerLot = ndAtrMultiplier * ATR
and ndHeat in: Entry Quantity
Quantity = EquityBudget * ndHeat / ndEntryRiskPerLot
May I ask that you please tell me how you define these variable or how
to calculate them?
|
Thank
you for raising these issues.
In the back testing protocol, we have both ndAtrMultiplier and ndHeat
as independent variables.
You define their values and run the simulation.
By testing a matrix of values for the values you define for the
independent variables, you can find the values that optimize your
results.
|
April
19, 2020
System
Structure
Hello Ed,
I hope this note finds you well. Question: what is your definition of
"system structure."
Regards,
|
Thank
you for raising this issue.
To see my views on Models, Causality, Levels, Rates,
Intentions, Results, Integrals and Differentials see: link
|
April
18, 2020
TSP
Ed,
Now I am trying to valid your Diversification Study results on TSP.
I notice that your post data of S&P and Gold. So yes, I
know I can use these data to study and investigate the
diversification benefit by myself.
But now I want to make sure I can duplicate your results to penny and
output the same equity log, to make sure I program everything right
when I program to run 2 system at the same time.
So please let me know if you also post the data of Copper and Crude
Oil, if this might involve you to some copyright violation to your data
supplier, it does not matter if you refuse me.
I can understand.
But if not, I ask for your help to post them, now I am on the way to
educate myself as a trader.
Thanks in advance and thanks for your consideration.
I always appreciate that I learn so much thing through reading your
interview in Market Wizard, and then find your website and again learn
lots of knowledge.
I appreciate the precious relationship that I develop with you.
I hope I can fly to your house and say thank you to you when I become a
successful trader.
|
Thank
you for raising this issue.
I wonder if you can successfully duplicate the results for the data on
the site for S&P and Gold.
|
Apr
17, 2020
Correct
Metrics
Good day, Ed.
Thank you for the work you have done over the decades in the financial
markets and in particular the modeling of trend following systems.
I want to record my trades as best I can and use the data to account to
myself a comprehensive strategy performance report over a set period of
time.
I have one question?
Am I correct if only use My Maximum Drawdowns to track performance?
I found that focusing energy on risk averse approach (keeping track on
drawdowns and managing them) is a much more profitable method than to
keep score on profit percentiles or other metrics. I am currently in a
drawdown and have reduced my position sizes on trades from 1 % to 0,8%
risk of open equity in my account on any single trade but not exceeding
3% on all open positions until I recover to a new high on my account's
equity curve.
I keep track of drawn downs monthly and quarterly. This is all I do to
measure the performance of my system. I can't project profits but I can
only limit what's in my control : limiting inevitable drawdowns in my
account due to low win rates.
I am not sure if this is correct or complete.
Would you please give me your input.
Thanks a lot
With Regards
|
Thank
you for raising this issue.
You might like to take your feelings about <correct> to
Tribe as an entry point.
Once you have clarity about
correct, let me know how you identify the correct
meal; the correct car; the correct wife.
From there, we can continue the discusion about the correct metric for
your system.
|
April
17, 2020
Radial
Momentum
Good day Mr. Seykota,
I sent a link for your "Radial Momentum Theory " to Miles W. Mathis.
After reading your theory Miles suggests I send you the link to his
"Charge Field Theory of Lift" as they are related.
http://milesmathis.com/lift.pdf
Have fun!
|
Thank
you for sharing your link.
|
April
17, 2020
Life Runner
Hey Ed,
I hope you and yours are doing well through these crazy times.
I've been chipping at myself, improving bit by bit, trying to stay
present and listen to the messages coming from my emotions.
Holy S--t; sabotaging yourself -- not acknowledging my own great
potential -- is a coping mechanism to avoid staying present with
disappointment.
I've been working with staying present through my emotions and watching
them subside. It's had a remarkable effect on my performance in grad
school.
A lot of this stems from your comment many years ago --"what we don't
like runs our lives" -- true indeed friend.
|
Thank
you for sharing your process and insights.
|
Apr
13, 2020
Tribe Meeting
Report for March 2
Dear Ed,
First and foremost, I want to thank you for the resources to you have
on your website and for sharing the Trading Tribe process.
Your interview in Market Wizards has had a profound impact on my life
and career and the resources on your website have shaped my trading and
my views. I aim to continue the journey to right livelihood through
participating in the Trading Tribe.
I attend my second Tribe meeting and there are four of us attendance.
The meeting starts with the tell me what you are thinking, tell me what
you are feeling and show me what you are feeling exercise.
During the tell me what you are thinking exercise, my partner tells me
he’s thinking about what I do as a job. This makes me laugh which
causes my partner to smile. During his next turn, he asks the same
question which makes me laugh again. I wonder what triggers my response
to this question for the rest of the process. I notice I have the same
response when others have asked me this question in the past.
We then drum and check-in. TM1 says that he does not have any issues he
wants to take to the hotseat. TM2 mentions that his Dad has asked him
to manage some money for him and he’s been struggling on making a
decision and he doesn’t know what to do. He would like to take this to
the hotseat. I (TM3) state that I do not have any issues I want to take
to the hotseat currently. Ed:
I am glad that I have had privilege to read Govopoly book.
When I see "If ever there were a time for big government, for ambitious
programs, for a central role for federal authorities, it is right now"
At least I am grasping what is going on and where it is
headed.
Stay safe. TM4 states he has an issue but he is not that
hot. We invite TM2 to take the hotseat.
Hotseat 1
TM2 is HS1 and TM1 is PM. We create a field of acknowledgement and
encourage HS1 to develop his forms. He rocks back and forth with his
head on his lap. He clenches his fists and extends his arms.
The PM
freezes HS1 and asks him to recall a memory. He recalls at
a memory when he, his mum and ex-girlfriend are out shopping.
PM asks HS1
how he felt in that situation. HS1 states that he didn’t
feel anything and he thinks the memory is unrelated as nothing
happened.
The PM asks him is he is willing to develop his forms again. HS1 says
yes and we try again. He rocks back and forth on the floor, stretches
his arms out, puts his head on his lap and clenches his fist.
PM freezes
HS1 at his peak and asks him to recall a memory. He
recalls a memory of when he is young and he is standing in a room
whilst his father shouts at his mother for a trivial reason and
threatens her with divorce.
He recalls his mother apologising and trying to appease the father
while his father continues to berate her. The father talks as if he has
already got the divorce and how great his life would be in that
situation. The mother cries and apologises whilst the father continues.
The father
also asks HS1 who he would choose after the divorce and
states that he is the one who provides for the family whilst the mother
does nothing. HS1 recalls saying that he would choose his father and
that he is saddened by his response.
We conclude
that the father is the stressor and the mother is the rock donor. The
medicinal rock makes HS1 appease his father and agree with him in order
to move on from the situation.
We roleplay the situation with me as the mother and TM4 as the father.
The father berates the mother and says that he is the one that provide
for the family, the mother does nothing and he is going to get a
divorce. He asks HS1 who he wants to stay with. The mother then offers
the medicinal rock to HS1. HS1
sincerely states that he does not want the medicinal rock and that he
does not want to respond like this anymore.
The PM
suggests a heart rock whereby HS1 responds by sharing his feelings with
his father. He also suggests that HS1 hug his mother.
We roleplay the situation again. HS1
tells his father he does not like it when they argue. He
then hugs his mother and helps her with what she is doing. The father
asks HS1 if he is choosing his mother over him.
HS1 says no, he is being fair. In each case, HS1 is unhappy with the
response. He feels he is choosing a side. He shares that he would like
his father to recognise that he he is treating his mother badly. We point out that he cannot
change his father.
HS1 acknowledges this and we roleplay again. This time, when the father
starts to berate the mother, HS1
shows his anger and frustration by screaming. He tells his
father he does not like it when he treats his mother badly. He then
hugs the mother. We notice that HS1 seems much happier with this
response and HS1 agrees. I notice the difference immediately.
We check-out in our roles and then as ourselves.
After the meeting, I re-read the TTP extensions and notice that I did
not give HS1 the medicinal rock and he did not forgive it back. Instead
he sincerely refused to accept it. I will share this with the Tribe and
I am confident that we will continue to improve our process over time.
Ed, I also have a question regarding the process. I wonder if you still
use the Zero-Point process or whether you have completely replaced this
with the Rocks Process in the Tribe that you run. I also wonder if
certain issues are suited towards the Zero-Point process whilst others
are suited to the Rocks Process.
Thank you,
|
Thank
you for documenting your Tribe Meeting. Your report presents
with enough clarity that I can detect numerous issues.
You
seem to use a hybrid process, combining TTP, drama class and advice. I
notice the client winds up employing a yell-at-dad rock to let
off
some steam and then feel better.
I also detect numerous sequencing issues. Consider Beethoven's
5th Symphony - the one that starts out with "da-da-da dah."
If
you go "da-dah da-dah da-dah" you get something entirely different.
I occasionally use the Zero-Point Process as an example of medicating
feelings.
|
Apr
12, 2020
Dopamine-Centric
Trading
Hi Ed,
Thank you for the wise words of wisdom always.
I have some daily trading algo systems which produce a very good profit
with small risk that I am otherwise very happy with.
However I notice that there are times when the algo system is not in a
trade and that my capital is sitting there doing nothing and not making
a return during that time. Sometimes this waiting period can be a month
to a few months at a time. This also seems to be affecting my overall
bliss function.
I would like to be putting the capital to work earning a return and
compounding while waiting during that month to a few months for the
algo system to enter a trade.
Trading a smaller timeframe of the same asset didn’t seem to make sense
to me since I am already trading the asset on a larger timeframe with a
better performing and more blissful strategy. Other assets on the
exchange from what Ive deeply researched are very correlated so trading
them does not make sense either. The only other option I am aware of is
to move funds from one exchange to trade completely uncorrelated
assets; however this can be very cumbersome and fraught with risk.
When thinking about taking my desire to be making money all the time to
Tribe as an entry point, I could not think of anything that needed to
be worked on emotionally with wanting to put my capital to work best,
in fact I thought it was a very valid point to consider as a wise money
manager.
I am wondering if you have encountered situations like this and if so,
what seemed to provide optimal returns and bliss function. Or if some
rock I am not seeing should be taken to Tribe as an entry point.
|
Thank
you for raising this issue.
Low-frequency traders trade once in a while.
High-frequency traders trade continually, at frequent intervals -
with spaces between trades.
Obsessive traders trade continuously, unceasingly, constantly and
without interruption.
The craving to fill every moment with the suspense and anxiety
of
trading may indicate a form of dopamine addiction.
Some traders with this condition also employ an alternate and less
expensive method of satisfying their cravings for
newness and variety: namely, serial pornography.
They typically set up several screens, each with many movies until they
have
lots of them going at once. Then they keep scanning from one
to another at approximately two-second intervals.
At each switch, they get a dopamine "hit."
This helps feed their cravings and also saves them from
blowing up their accounts through day trading.
Note: this behavior can
also deepen their dopamine
addiction.
For an alternative, perhaps healthier approach,they might consider
taking their feelings about <having to wait for a trade>
to Tribe as an entry point.
|
April
11, 2020
TT Chart
Server Back On Line
Ed,
Just a quick expression of appreciation for resurrecting the chart
server!
Best regards,
|
Thank
you for acknowledging the work.
My former data supplier terminates service in mid-February.
It takes about a week to notice the problem and to confirm
the supplier does not intend to resume serice; another week to locate
an alternative supplier; another several weeks to revise my software to
accomodate the new format.
Link to TT Chart Server
Link
to TT Chartbook
|
Apr
10, 2020
Wants an
Anecdote
Hi Ed,
I allowed what you responded to me with about the brothel owner to sink
in deeply.
I
am understanding the response to be a redirection of focus. A
redirection of ones thoughts from what could go wrong to what brings
success.
I remember you telling us in your workshop that
“Intentions = results”, and my intentions have always been to be the
most successful and profitable trader I can be with the least amount of
risk, which is the same way I have approached life.
However
I can see that perhaps the approach I have been taking to get there
asking the type of questions that focus on pain and mistakes will only
bring more of the same. My belief was that knowing them would safeguard
me from them, but I am understanding to not even think about them in
the first place and just focus on success and things that bring ease,
joy, profits, minimal risk, etc is a much better use of questions and
focus.
Was that the intended lesson you were conveying?
And with that being said, how about if I reverse the questions I had
before:
1)
I am looking for the most amount of success in the markets which means
to me the most profits at the least amount of risk. I can backtest
different ideas to give me such models.
What would you say was your most successful realization in trading?
Perhaps your answer may be the same as last time, but if there is
anything else I would enjoy listening to your perspective.
|
Thank
you for raising this issue.
I do not generally discuss my own biographical material on
FAQ. See ground rules, above.
I do not know what you mean by a "successful realization."
I gather you would still like to view some peak experience - formerly a
negative one, now a positive one.
Perhaps you feel that an intense epiphany can substitute for the
ongoing application of discipline and character.
You might consider taking your feelings about <wanting a quick
fix> to Tribe as an entry point.
|
Apr 9,
2020
More On Pain
and Pitfalls
Hi Ed,
Thank you for the answers. The points are well taken and understood.
When
you mention "I gather you parse your experiences into lessons and
further sort these by pain. You might consider taking that method to
Tribe as an entry point."
What other ways of viewing the
experiences then? Instead of a dichotomy of "good" and "bad"
experiences, are you suggesting to view them as neutral, or some sort
of feedback mechanism without attaching an emotion to them?
I
would say I am defining "pain" or "pitfalls" as any experience you
would not want to repeat again in trading that you were not aware of at
the time.
|
Thank
you for raising this issue.
So
this guy visits a brothel and tells the madam he wishes to develop his
skill - and asks her to tell him about some of the finer points of her
profession.
In particular, he asks her about her most painful lessons, and pitfalls.
"Well,
you sure have a mighty curious way of going about this," she replies,
"I don't know any of my gals or customers who think about pitfalls and
that kind of thing. I wonder how come you want get into all
that.
He thinks a moment and replies. "Well, it works really well in my
trading."
|
Apr 8,
2020
Risky Business
Dear Ed,
You
talk often about the importance of risk control. I've heard you on
multiple occasions refer to risk budgets such as risking at most 5% of
your account on a trade.
I think I understand the
implications for sizing positions and setting initial stop-in and
stop-out points. I wonder if you can elaborate on how you continue to
apply this risk budget to a winning trade. One approach I can imagine
is moving your stop-out points each day so that your risk remains at
5%, i.e., each day you treat the position as if you just entered it.
Another approach would allow higher risk in a winning position, as long
as it remains winning per your system's definition of winning. In the
limit case, this would mean leaving the stop-out point at its initial
value and relying solely on the system's exit signal.
Ed:
I am glad that I have had privilege to read Govopoly book.
When I see "If ever there were a time for big government, for ambitious
programs, for a central role for federal authorities, it is right now"
At least I am grasping what is going on and where it is
headed.
Stay safe.
|
Thank
you for raising this issue.
I
do not recommend risking 5% or any other percent, for that matter.
Your "optimal risk" depends on your own personal risk
preference.
You
might consider running some back tests that display various risk
metrics such as: original entry risk; open position risk;
short-term volatility; longer-term drawdowns.
As you examine
the ups and downs of these metrics, you might notice your feelings and
"optimize" your system around some combination that fits with your own
preferences and tolerances. |
Apr 8,
2020
Assimilation
Marches On
Ed,
This chart from the Bureau of Labor Statistics shows large
contractions in the Free Competition Sector, especially Leisure and
Hospitality. It shows big gains in Government.

|
Leisure
and Hospitality Down
Government Up
|
credit:
Bureau of Labor Statistics via CNBC |
|
Thank
you for sending me the chart.
|
Apr 7,
2020
Govopoly
Ed:
I am glad that I have had privilege to read Govopoly book.
When I see "If ever there were a time for big government, for ambitious
programs, for a central role for federal authorities, it is right now"
At least I am grasping what is going on and where it is headed.
Stay safe.
|
Thenk
you for sharing your process.
|
Apr 7,
2020
Pain,
Secrets, Pitfalls and Risk
Hi Ed, thanks for your answers every month.
I sincerely hope you have been well and your weight loss has reached
your goal. Do you have any updates on that? I know it is easy to eat
more now that we are quarantined inside. I have had to adjust my
fitness routine and become more creative to stay in the shape I desire.
I did watch the Sheryl Crow video and listen to her words and
understood the point you were making. I also have become a lot more
focused on attention to details (like the simple misspelling that you
pointed out) and taken this into my trading analysis.
Questions for this month:
1) Not that I'm ever looking for pain in the markets (or life), but
sometimes things happen. What would you say was your most painful
lesson in trading?
2) In trading, what is most important, that most people don't realize
the importance of?
3) Can you talk about some of the biggest Pitfalls that can blindside
someone; that they may not realize about trading.
4) I am reading Van Tharp's book "The definitive guide to position
sizing". What are your most important lessons you learned about
position sizing? I have seen Van Tharp, Mark Minervini and others
mention the importance you place on position sizing in trading.
|
Thank
you for raising these issues.
1. I gather you parse your experiences into lessons and
further sort these by pain. You might consider taking that method to
Tribe as an entry point.
2. I gather you would like a trading secret. OK, so how about
this one: nobody has any trading secrets. Of
course, people who sell trading secrets want to keep that one secret.
3. You might consider taking your feelings about <pitfalls and
pain> to Tribe as entry points.
4. You might consider sizing your positions to your own personal risk
tolerance. You might take your feelings about
<risk> to Tribe as an entry point.
|
Apr 3,
2020
Tipping Point
Hello Ed,
I hope you are doing great! One question.
Even
though humans are animals of habit and, so far, we have only seen
increasing socialist policies in relation to this virus pandemic /
hysteria.
Do you think there is a chance for a tipping
point? And will people finally realize the futility of the Govopoly
System and will stop feeding it?
Am I too positive? :D
|
Thank
you for raising this issue.
Nothing in the Assimilation Model indicates a reversal of assimilation.
On page 13 of Govopoly,
I illustrate the dynamics of assimilation with a parallel about wasps
laying tiny eggs inside caterpillars.
As the larvae mature, they assimilate the caterpillar from the inside
out.
The
hapless caterpillar does not have an "aha" about this; he does not get
to a "tipping point" and realize the futility of his situation; he does
not stop feeding the larvae who continue growing and assimilating him.
The baby wasps emerge from the carcass and fly off to find other
caterpillars to seed.
Of course in our case, we only have one caterpillar and the larvae
don't seem to mature very much.
For
an indication of the recent exponential expansion of the Govopoly
system, you might consider comparing the national responses to (1) the Swine Flu from 10 years ago
and (2) Covid-19 recently.
You might consider taking your feelings about <accepting and
adapting> to Tribe as entry points.
|
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