Ed's FAQ Jun 01-30, 2021

Contributors Say	Ed Says
Jun 29, 2021 Stick to the System / Adjust Parameters Dear Ed, I hope you´re doing well. It's been a while since I wrote you the last time. Corona was forcing me from a short term trader more to a pure trend following trader. I developed a system based in general on DOW theory, using a % filter for detecting high and lows on daily basis (that´s leading to less fake signal compared to the EMA and channel breakout systems described by you, I replicate your systems for comparison of course). It works in backtests very robust without big modifications on many assets. I am grateful that I have recognized the power of the big trends and that I no longer deal with the daily noise. You would bring me really a step forward to help me with following questions: Which software do you use for a portfolio simulation (positon sizing based on save portfolio value (considering current stops), run individual trading systems on individual assets (would be very important for me to calculate portfolio heat) ? Based on which value are you calculation the positon sizing? (current portfolio value?, free account capital?, current portfolio value – open risk positons?) Which source do you use for correct market data? Based on indices like DOW, S&P, DAX, NASDAQ the system generates really less signals (without pyramiding, ~15-20 trades within 35 years). Based on that the optimum heat in simulations shows 50% or so, that´s of course to big and it´s the consequence of less trades in simulation. Would you include pyramiding in e.g. 5% steps until reaching the optimum sizing of 50%? . What when pyramiding is already in simulation finished, would you be sideline? How can we identify and measure what markets the most important of the world are? How many future markets do you use for signal scanning? How impacts the amount of assets the portfolio heat? How many positions do you handle in parallel, considering the management effort of tracking stops and of course rolling future contracts? (I want to be aware of overtrading to guarantee necessary precision and to be able to keep the approach for many years. Think the effort must fit to my character and available time, that´s very important from psychologic aspect. ) Some questions about stocks: Do you mix the futures with stocks in one portfolio or do you have in general two, one for futures one for stocks? What´s your screening criteria for stocks? (universum in general USA, Europe, etc., volume, price level, ROC, etc. ; and that general criterias combined with trading system signal?) How do you use volume to see where are the big boys are playing? How many stocks do you trade in parallel? Do you trade stocks long and short? Is the following process in general correct: 1. Develop (simple) system 2. Make smaller adaptions based on assets (indices behavior is a little bit different to commodities) 3. Optimization of parameters on specific asset (System has only 3 variables, sizing, filter, leverage) 4. If included in portfolio, analyze sizing again portfolio based. Very important question: Stick to the system AND system parameters? Or Stick to the system and adapt parameters if something goes wrong? If so, what indicates that the system parameter is the reason for the bigger DD instead of the markets? Below the trading system project there are many very important and interessting points: Acknowledging Limits: Equity and Margin Trend Definition Testing Platforms Bliss Functions Optimizing a Trend System Dynamic Portfolio Selection Dynamic Risk Modification Pattern Recognition Presenting the Results Forming a Fund Compliance Marketing Operations Is it possible to get information about that points? Especcially the Bliss Functions, dynamic Portfolio Selection, Dynamic Risk Modificaiton, Pattern Recognition, optimizing a Trendsystem. At the end I have to say I love the market and I love to develop and analyze. That’s my passion. If it´s easier for you, just write me direktly an email for answers and discussions. Sincerely,	Thank you for raising these issues. I use proprietary software of my own design, lately mostly in C#. I use commercial data vendors for once-per-day OHLC-VOi data. FAQ does not recommend specific system parameters or methods or specific trades. You might consider taking your feelings about <sticking to the system> to Tribe as an entry point. If you wish to contribute to TSP, you may send me an article; I can help you edit it for publication.
Jun 24, 2021 Wants Mentoring Ed, Hi, I’m a trader/transitioning into being a trader and wanted to reach out to ask if you offer mentoring? Thanks	Thank you for asking about mentoring. I mentor through FAQ (free) and also privately, per terms at Ground Rules, above. I also offer Chat With Ed for persons willing to appear in a podcast.
Jun 23, 2021 Catch Dear Sir, For the March 7, 2020 post, I can see the contributor's name at the end of the post.	Thank you for catching.
Jun 22, 2021 Funny Mentals Dear Mr. Seykota, According to 13 F filings: Michael Burry – infamous for shorting mortgage backed securities – is apparently heavily short the 20 year Bond ETF (via buying puts on TLT) and long on the Short Bond ETF (TBT). A trader friend tells me that this might indicate the Federal Reserve is trying to kill the U.S. dollar and create a new digital currency – called the Digital Federal Reserve Coin. In order to accomplish this, the Fed needs to kill Bitcoin first – (which is happening now). What are the likely chances of the Federal Reserve actually following thru with this scenario and what would the consequences be for us? Thanks for your insight!	Thank you for raising this issue. You might consider taking your feelings about <wanting to predict events in the non-existing future> to Tribe as an entry point.
Jun 19, 2021 Anticipating Profit Dear Ed, Hope you all the best in 2021! I am currently studying Jesse Livermore’s methodology, including the books “How to Trade in Stocks” by himself and Richard Wyckoff’s book about him and found that these books helped to understand your words and methodology about trading, too! I have got much more understanding about the support and resistance trading system now, it is simplified and updated version of Livermore’s trading style, and his pivotal points method, if I did not get it wrong? I mainly found some difficulties on finding market leaders, choosing industries to spot on. Based on Livermore’s style, he seems using the “Power Law” to get the outstanding performance in his trading, which is the best stock overwhelming all other stocks. But what is the method to find that stock and enter the trade before it shows its outperforming uptrend? Another question is about risk / reward ratio before entering the trade. Is there any method to calculate the anticipated profit before the trade? Or just estimate it based on experience? P.S. I may move to the US in the future, hope to have the opportunity to join the Trading Tribe there one day! Thank you very much🙏 Best regards,	Thank you for raising this issue. I know of several ways to anticipate profit. All of them rely on some form of guess work. None of them have to do with trend following. You might consider taking your feelings about <the non-existing future> to tribe as an entry point.
Jun 16, 2021 The Trader's Window In the prologue to a book, the author has extracted some text from a book written by you - The Traders Window. I searched for it on line and someone said that it is in the FAQ section. I couldn’t find it there. Can you send me the exact link?	Thank you for asking about the book. I recall printing up a few copies of the rather short book many years ago - for a few friends to read during visits to my home. I do not recall publishing it or posting copies on line. I might can dig out the manuscript, revise it a bit, bring it up to date and then publish it.
Jun 9, 2021 Ed, Greetings! When are the stocks updated and how frequently are updates made?	Thank you for raising this issue. The stock and futures charts and rankings normally update once per day, after the closing prices propagate through the quote vendor services and then on through my processes.
Jun 8, 2021 Un-Bricking the PSP Dear Ed, I did it! I built a really nice back testing system that I feel like I can trust. I followed the double support and resistance system example you wrote about in the TS Project with the exception of applying it to equities only vs a futures contract which has the added complexity of stitching contacts and calculating p&l differently. My code is however more easily extensible so adding the extra contract stitching procedure and p&l calculation method isn't a big exercise. How I did it was by reaching out to one of my friends from high school who is now a mobile and front end developer. I taught him everything I have learned about trend following and trading systems so that he could have the context of why I was building a back tester. I knew he would know better programming principles than me, also he is a really patient and understanding friend that doesn't mind explaining things slowly. First he taught me about Git and using a remote repository like GitHub to allow for good code versioning and facilitate team programming. We had sessions in the morning where he would make architectural recommendations to my code and problems I was working on. Then I would code it throughout the day and then the next morning we would meet virtually again and repeat the process of me walking him through the code, him making recommendations and I coding it. I grew as a developer and as a person. I shared my research with someone when in the past I almost never spoke to anybody about my trend following research in fear that I fail or give up and look like a failure. Now after facing that I know even if I fail or never achieve being a trend follower through automated trading systems I enjoy going through the process of growing. On your comment of my "entitlement to success." I do agree I can sometimes be over ambitious and I think it stems from my dreamer personality. But I don't think that I'm so much entitled to success as much as I'm just really optimistic in my pursuits. Complete failure is a possible outcome for anything I do but usually I take some time to recoup after failure and try to reflect if I want to try again or just leave it be and move onto something new. When I was about 13 years old I had the feeling that I should be able to load the Pokemon gameboy game onto my PSP(Portable PlayStation by Sony). My thought process was that the computer in the PSP should be much more advanced than the computer in the gameboy so I knew it was just a software thing. I researched A LOT and found out that you can load a gameboy emulator onto a PSP. If you over-ride the factory software on the PSP by jumping two wires on the battery it puts the PSP into a different boot mode and then you can boot the emulator from a memory card vs booting from the factory software loaded on an internal memory. At first I "Bricked" the PSP, which is a risk when you try to boot a processor in a non standard way. I eventually felt like I couldn't do anything about it and left the PSP alone for about a year or so. One day I got the desire to re-investigate the Bricked PSP matter and found out I can order a special battery for the PSP where the wires are already jumped inside the batteries' little chip board. I was able to "Un-Brick" the PSP and follow the steps to load the emulator on my PSP and was really happy to be able to play Pokemon on my PSP! I can still remember the rush I felt when things started to click and I saw the boot was loading successfully. I feel like my Trading is similar, I have a feeling that it's possible. So yeah that is just kind of what I do. I take on projects far above my intellect and just hack my way through it. In high school I wanted a special jacket that only kids with national distinctions can wear so I joined the school's concert orchestra because they won a national competition every year. They recommended I chose playing Trombone but then I asked, how about Violin, they said in 10th grade I'm too old to get good enough in time, Ha so Violin is what I chose. I convinced my solo Violin coach to tab my music sheets and was able to qualify for the group that got chosen to perform at the national competition. We won and I got to wear the special jacket for the rest of my high school days. Do I take short cuts? Sure. Am I trying to take less shortcuts now? Absolutely. That's why I'm trying to code most of the back tester myself. I'm still in the process. Best	Thank you for sharing your process.
Jun 4, 2021 Detaching from Drama Ed: The following is my report on process / progress/ successes / disappointments / dilemmas After a few months of having a good run on not getting involved in any drama, I finally had a breakdown. But I think it was a good run for sure. After the breakdown, I realized that I am getting into a never ending cesspool of emotional argument in which I am going to walk out as a sore loser. I realized my stumble and paused for a day. I have decided to make a daily log of the emotion that is driving my day. If that emotion is something I enjoy then I commit to do more that brings that joy. If that emotion is something I feel like avoiding, then I go one layer deeper and try to catch what it is trying to tell me and make my life better. For example, during the breakdown described above, I was up all night and at first I thought it was anger that was making me stay up but then I realized it was actually fear. That fear was telling me something. I heard it and committed myself to eradicate the source of fear. Every time I feel like becoming a participant in active drama action, I remember that fear and acknowledge that I have not eliminated sources of that fear and my urge to get involved in drama disappears. Maybe that fear is driving my life now, I don’t know. I have concluded that I am trying to have an intimacy centric relationship with an incorrigible person (may be a judgment here ). Does it work? I do not know. I do not have any downside in trying it out. I have a lot to work on. I am doing my best to understand and acknowledge her emotions and asking her to tell me more about it. It kills me to think about how bad I was in understanding my own emotions and ignoring them in search of an ideal / optimal outcome given the circumstances. That act has brought nothing but pure disasters in my life. I have made it a priority to fully investigate what I feel and acknowledge and support what people around me are feeling. I decided to go back to FAQ from a while ago and pick up something that says effectively that in an intimacy centric relationship you need to drop a desire to fix the other person, but most importantly in the process you end up fixing yourself or something like that. It makes me feel good. I decided to finish one more read of the Trading Tribe book. I decide to go to the old FAQ three times a week and see what other treasures I find. Thank you for your support and encouragement.	Thank you for sharing your process. You might consider surveying the other person for willingness to subscribe to your formulation of the intimacy-centric model. If the other person does not have willingness, you might consider taking your feelings about <wanting to fix the other person> to Tribe as an entry point. You might find that you get some or another type of benefit from engaging the continuing drama.
Jun 4, 2021 Radial Momentum Hi Ed, I saw this article and was instantly reminded of the Radial Momentum theory and experiments you share on your site. I would love to know what you think about the article and if perhaps Radial Momentum is at work in the featured device. If it is, maybe instead of an oscillating disc (which I imagine creates the fanning out) they could implement a jet of air with less weight (tubing vs motor) and get the same or better adhesion with less noise ... Here is the article: Somehow This Robot Sticks to Ceilings by Vibrating a Flexible Disc - IEEE Spectrum. I’d love to hear your voice and to know that you are doing well. I’ll give you a call soon to check in. Big hug to you!	Thank you for sending me the article and the hug. I tend to agree with you on the design - perhaps set it up like an air-hockey table with multiple exhaust ports.
Jun 4, 2021 Govopoly Ed, A huge posthumous THANK YOU TO Professor Jay W. Forrester for planting the seed in your consciousness to come up with a killer app for Systems Dynamics, WITH YOUR ADDITION, of A BOOK AND INTERACTIVE WEBSITE. I am confident Professor Forrester was immensely proud of your significant contribution. My humble SALUTE TO BOTH OF YOU. GOVOPOLY should be mandatory reading by all educated adults, taught in all K-12 schools, and universities across this nation. As you know, Chairman and President of China, Xi Jinping, recently banned cryptocurrency - suggesting he too has read Govopoly! With deep gratitude, I am, Respectfully,	Thank you for acknowledging me and the work and the book. As I recall, from my last visit with Jay, his liking the book and the formulation of the system.
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