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Ed Seykota's

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August 21-31, 2004

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Questions

(Quotes from Ed in Red)

Answers

Tue, 31 Aug 2004

 

Blunt Honesty

 

Ed,

What are your thoughts on blunt honesty with yourself and others?

thanks,

You might like to take your feelings about the difference between "honesty" and "blunt honesty." into the process.

 

 

The Blunt end of a Maul

can assist or injure

 

depending on your intention.

 

Clip: http://www.networds.com/

remodel/2002/mall_maul.html

Tue, 31 Aug 2004

 

Belief in Time

Chief Ed,

You state you do not believe in time. This is different than time not existing.

My current belief is that beliefs frame (and give form to) now.

Please comment on beliefs as related to forms.

If you believe time exists, you perform that act of believing in the now. 

 

If you believe time does not exist, you perform that act of believing in the now.

 

I do not know how to do anything in the past or future, including believing in time (or not believing in it).

 

 

Even Clocks can't do anything

 

in the past or future.

 

Clip: http://pantransit.reptiles.org/

images/2000-10-29/clocks.jpg

Tue, 31 Aug 2004

 

The Present

Chief Ed,

I am thoroughly enjoying the TT site. As I read the newest chapter, it dawns on me:


There is no time ...
like the present.

Yes. The tricky part ...

is to like the present.

 

Enjoying Being in the Present

 

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

Smiles8b/present.gif

Sat, 28 Aug 2004

 

New Jersey



Dear Mr. Seykota,

I'm writing to ask if you ever had Trading Tribe inquiries in New Jersey. If yes, is it possible to contact those traders for the purpose of starting a new TT.

I live in central NJ and have been trading for a living since 1999. Thank you very much.

See Tribe Directory - How to Join, above.

Fri, 27 Aug 2004

 

Math-a-Magics of Risk


Hello Mr. Seykota,


... I came across your name and website ... seems to be a mix of projects and TTP. Looking through TTP I still don't really understand what this website is all about.

 

It seems to be mainly a type of religious youth group but not youth, for gathering and helping improve yourself mixed in with trading stocks or investments, as you call them "instruments." Is this what TTP is?

 

I would like to think it is that but more developing systems and plans to trade stocks as well. It also seems like a group to help each other figure out their emotions and how they affect "systems". systems = anything, economies, markets, life.

I really enjoyed your "Risk Management" page. It gets me motivated and brainstorming. It is just too bad that I didn't get into this stuff around the time I graduated, I would have probably come up with some crazy formulas. I hope that the following questions don't sound really stupid. I have been trading stocks for just over a year now, learning it all completely on my own motivation. I started with no knowledge of stocks or markets or the like.

Once I got down the to calculus part it stopped me for a little bit trying to remember this stuff. Before I continue trying to remember this on my own I am going to write this email.


What I'm stuck on is the R = part
Maybe it is beyond me or maybe I just need a quick reminder.


It looks like you took
S = (1 + b*P) * (1 - b) * S0


divided both sides by S0 to get:
S/S0 = (1 + b*P) * (1 - b)


then you put each side equal to R?
R = S / S0
R = (1 + bP) * (1 - b)


Then with FOIL and a little math took the one side down to
R = 1 + b(P-1) - b2P


What I don't understand is why and how you put both sides equal to R?

 

From there on I can't pull out what I learned. As I type this something in the back of my mind is trying to remember something about dx/dy bah I need to go back and take a refresher class on trig and calc. I love math but those years in school I was turning to lazy mush.

Moving down the page, I have a couple more questions.


- Figure 6, 7, and 8 seem to make sense, but it would help to picture if you used a Z axis showing your calculation with numbers like you did above with the 1000$ starting amount. Are you using the Kelly Formula?


- Lake Ratio:


How far down the X axis does the Earth start in the calculating the Lake Ratio? All the way to 0 or when the equity or fund was originally purchased?

 

Either way it seems relative. Wouldn't you have to have a relative historic fraction to compare to, because it seems like it would be lopsided, especially if you started your earth at 0 stock price?

 

Or are you using this system to compare volatility relative between instruments instead of historic?


PS: Shouldn't it be "divide the total area of water by the area of the earth below it" instead of volume?


Looking at this Lake Ratio I have a few ideas popping up in my head on how to use geometry to come up with different systems of comparing volatility.

I have a couple more suggestions to make the page easier to understand. If you want them let me know. I hope to eventually find time to look through your other theories page "radial momentum".


Thanks,

R (return) is just another name for ending stake, S, over starting stake, S0.

 

You can find out more about TTP at TTP - The Trading Tribe Process, above.

 

Lake Ratio is a conceptual model to support discussions about volatility and draw-downs.  You can frame water and earth as volumes or as areas, as long as you use the same units of measure for both.

 

 

 

Lakes Form

as Rain Falls on your Performance Graph.

 

Smooth, upward performance

catches less water.

 

For more on this

and other topics relating to Risk,

see Risk Management, above.

Fri, 27 Aug 2004

 

Power of the Print


Dear Ed


I have recently read that you believe that short term trading can be just as profitable as (long term) trend following, but that one will need to work ten times as hard to achieve it.

 

Is this quote correctly attributed to you and if so, what is the nature of the short term trading: trend following over a shorter time frame / swing trading / something else?

I do not know what you read unless you tell me the source or provide the quote.

 

If you have the ability to believe whatever you read, you might consider writing down some very beneficial things about yourself, and then read them.

 

 

Reading is Feeding

the mind

 

Be careful what you eat.

 

http://stellargraffiti.com/

My%20Pictures/Bc%20Reading.jpg

Fri, 27 Aug 2004

 

What is Best?


Dear Sir,

Since I was a teenager I've been pondering about this question - is it better to be accepting to whatever that happens, or to fight for it and keep pushing (the never-say-die spirit)?

Time and again people push their limit and they achieve even higher peak that they wouldn't of otherwise. Never, never, never quit. Fight till the end.

On the contrary, reality is just perfectly as is. Market is always right. Reality is always right. It is right because it is just what it
is now.

At some point, I thought I have the "answer." If I give my best, then I can accept whatever that happens with joy. Do everything that I can, and accept the outcome. It resonates with me.

But then recently the second question creeps in - what is my "best"? How do I know that I've done "everything"? It just seems that one can always make a case that "I could have done better."

Or, in TTP context, there is only now, and no one can change whatever has happened in the past. There is no concept of should-of, would-of or could-of.

Does TTP have a concept of "best" then? Best or better implies comparison of two or more objects. But if there's only now, there's nothing I can compare to. If I run the 100M in 9.87s, I cannot run any "better" nor any "worse" than 9.87s in that now moment. So all athletes who say they've given their best and leave with no regret actually are saying they've given their best, and their worst?

I'm still confused, as I still haven't resolved my original issue. To accept or to push? What does giving my best mean? What does do everything I can mean? I feel it is a good entry point for me, perhaps in a polarity context. Our meeting is twelve days away. In the meantime, now, may I please ask for your insights? Thanks.

ciao,

Compete: from Latin com (with) + petere (to seek) - to strive, with others to achieve a goal.

 

We sometimes compete with others (as in the Olympics or in Business).

 

The struggle between individuals helps the community to find the best way to do something - and helps the contestants discover right livelihood.

 

We are all best at being ourselves. When we locate and practice right livelihood, we re-frame questions about who is best and whether to strive or accept as part of the beauty of the free-enterprise system of relating to each other.

 

 

 

Curly

 

By popular acclaim, the biggest, richest, best looking, smartest, thinnest, most compassionate, most powerful, greenest, most curly and hottest and coldest guy on the block.

 

Whether you see Curly as a nemesis or as an ally may depend on the extent to which you realize right livelihood.

 

Clip: http://www.waycool2.com/

aberdeenwoods/curly-blackwing2.jpg

Fri, 27 Aug 2004

 

New Orleans Tribe Meeting


I'm pleased to report the New Orleans Trading Tribe met last night for the first time. Two tribe members attended. We shall gather every second Thursday night hence.

OK.

Thu, 26 Aug 2004

 

Joining the Tribe


Chief,

How may one join the tribe?

Does one have to hang on skewers for three days? ;-)

Or kill a buffalo with bare hands? ;-))


Best regards,

For information on how to join, See Tribe Directory - How to Join, above.

 

I do not know where to find any bare-handed buffalo.

 

 

 

Poker-Playing Buffalo

tend to Play it close to the vest

 

and do not reveal their hands

 to strangers.

 

Clip: http://caliban.metalandmagic.com/

Pages/Hooves/buffalo.html

Thu, 26 Aug 2004

 

Thanks and a Question


Dear Ed Seykota,


Thank you for your reply to my question and obviously even more thanks for your replies to other questions that I read. What we get here is mentoring, a missing link for many traders.

Is there something like an optimal percentage of trend followers within the total population of market participants?

 

A dangerously small or a dangerously large percentage? Trend following group’s total profits and their per capita profits being the criteria for calling that percentage optimal or dangerous. Of course there is an issue of trend definition by each of the followers, so let’s say it is a long term trend, more or less in line with your definition.

 

Do sideline, choppy markets persist sometimes because there are too few trend followers in, too many out of the market – sitting out a choppy market?

Thanks again,

During trending markets, trend followers tend to wax strong and confident; they follow breakouts with enthusiasm and vigor.  This tends to precipitate choppy markets and strings of false breakouts that tend to discourage trend followers.

 

The percentage of money on trend following methods tends to seek its own optimal value.

 

 

Choppy Waters

 

tend to discourage all

but the most stalwart sailors

 

Clip: http://www.sante.univ-nantes.fr/

med/laser/images/choppy.jpg

Thu, 26 Aug 2004

 

Trading Systems


Hello Ed,

I've read just about everything at "The Trading Tribe" web site in recent months. Thank you for such valuable and insightful information. It has definitely helped my trading and I quote "gems" I've learned at the site frequently with my trading friends.

A couple of questions about trading systems:

1) Is it advisable to trade multiple (3 to 4) trading systems simultaneously for diversification purposes or is it better to focus an a single system?

2) Do thoroughly developed and tested trading systems typically have a "life span" and then after some period of time lose their effectiveness?


Best regards,

1) A system comprising 3 to 4 subsystems is a single system.

 

2) A system exists as long as someone follows it.  People have a life span and tend to lose effectiveness near the end.

 

Trend Following acknowledges the principle of Momentum; as long as momentum exists, there is a place for trend following.

 

 

Doubling Up

 

on a long-term position

 

Clip: http://www.travelwiththeleague.com/

Web%20images/94%20YEAR%20OLD

%20MAN%20IN%20LIJIANG.jpg

Thu, 26 Aug 2004

 

Jademaster Question


Hi Ed,

I would like to tell you that you are correct about many of the things you say ... The general concepts are the conscious mind, the subconscious mind, and the universal mind. These ideas and the application of certain exercises including meditation have helped me greatly.

 

I understand that TTP facilitates communication with Fred. Other methods deliberately try to reprogram Fred. Ok.


The student from The Jademaster in The Traders Window one day says "The stone I
hold is not genuine Jade." But why didn't the Jademaster just tell him that the very first day he knocked on the door?

Fred is an indefensible concept about a feelings pump, intentionally unique to TTP.  I do not know if Fred appears yet in other methods.

 

FAQ does not answer "why" questions - see Ground Rules.

 

 

 

Maybe the Jademaster

 

likes marbles

 

Clip: http://www.thebeadsdepot.com/

Images/003R-African%20Jade.JPG

Thu, 26 Aug 2004

 

The Story Continues ...


After many months of brewing green tea,
I find sweeping the floor is TTP,
My thoughts swirl in flames! I finally see!
Jade is not the Trade, because Jade is Me.

 

 

http://www.holymtn.com/jade/jadechar.jpg

 

Thu, 26 Aug 2004

 

Thanks


Dear Ed,

I am reading the book Trend Following from Michael Covel and learn so much again about your great talent as a trader and mentor to others and ... sincere regards and thank again you for what you bring to us in trading and in life.

OK.

Wed, 25 Aug 2004

 

Tolle

Dear Mr. Seykota:


I ... began learning about trend following strategies and your great success in investments and life ... I am considering moving into trading; I was born a passionate competitor and believe I’d excel at this form of trading.

In any case, as I’ve learned about the temperament required for successful trading as alluded to by the content on your Trading Tribe website and in the book Trend Following, it occurred to me that a potentially useful resource for your members would be the Power of Now program (book and audio book), by Eckhart Tolle.

 

Fundamentally, the Power of Now is a psycho-spiritual method of liberating the egoic mindset and attaining enlightenment, doing so by being entirely in the present moment.

 

By being in the present moment, the only moment in which life ever occurs, our ego-related thought processes die along with our sense of time, thereby dissolving anticipatory or backward-looking feelings, thoughts and energies.

 

I couldn’t help but note that enlightenment (as just described, though it really defies mental labels) is the best and final outcome of some of the elements of your program, so I wanted to mention this resource to you as a possible aid to your own and your members’ learning process. I have no personal interest in the program other than it was a transformative tool on my own path.

Best regards,

Tolle seems to advocate freeing ourselves from our analytical minds and egos, letting go of negative thoughts.

 

TTP advocates re-uniting our conscious and subconscious processes through developing willingness to experience all our feelings.

Wed, 25 Aug 2004



aha

Yes!

Tue, 24 Aug 2004

 

Wants to Know More about TT


Hi,

I have just looked at you site and I am interested in finding out more about
the trading tribe, how do I go about that?

Essentially I am interested in meeting people who have an interest in developing their trading skills through sharing information and ideas with others

Regards,

See Trading Tribe Directory - How to Join, above.

Tue, 24 Aug

 

Returning the Favor

Check out [stock], it is a very strong trend.

Many popular screens can pick out the strongest trends. 

 

Before entering a trade, you might like to formulate a plan for exiting.

 

 

Buying

 

is about half of trading

 

Clip: http://www.tricks4u.com/

sure%20exit.jpg

Tue, 24 Aug 2004

 

Long Only


Hi Ed

I have noticed in past posts that contributors have questioned why the
trader in the exercise in system definition did not go short and that you had not encouraged him to adopt such an approach.

 

I too could not understand this and initially thought this must be related to not fighting the long term trend for stocks to increase in value. This confusion dissipated when I did some quick spreadsheet workings which made every thing clear to me.

For example, if a stock is at $10, the maximum profit to be made from going short is $10 per share, while the upside potential is unlimited. If the $10 stock went up 5 times its value, to $50, a $40 profit per share could be realized, while even in the best case scenario for going short would only reap the maximum of $10.

 

Significant profits from going short can only be realized from stocks which have very high entry prices, usually an indicator of upward price strength, not downward.

It is now clear to me that in trend following, we want the price to continue to move in our favor for as long and as much as possible, yet being short a stock has an inherent limitation to do this. Long only for me now.

Regards

The big, major-mover, long-term multi-fold trends tend to occur on the long side - although riding them can have complications.

 

 

Staying Long

 

can have complications

 

Clip: http://www.photo.net/photo/

pcd1626/malibu-long-hair-45.4.jpg

Mon, 23 Aug 2004

 

The Under-Fred Network ...


from: <http://www.nytimes.com/

2004/08/22/magazine

/22IDEA.html>

The Political Brain
By STEVEN JOHNSON

...

As The Times reported not long ago, a team of U.C.L.A. researchers analyzed the neural activity of Republicans and Democrats as they viewed a series of images from campaign ads. And the early data suggested that the most salient predictor of a ''Democrat brain'' was amygdala activity responding to certain images of violence: either the Bush ads that featured shots of a smoldering ground zero or the famous ''Daisy'' ad from Lyndon B. Johnson's 1964 campaign that ends with a mushroom cloud. Such brain activity indicates a kind of gut response, operating below the level of conscious control.

Could the U.C.L.A. researchers be creating the political science of the future? Consider this possibility: the scientists do an exhaustive survey and it turns out that liberal brains have, on average, more active amygdalas than conservative ones. It's a plausible outcome that matches some of our stereotypes about liberal values: an aversion to human suffering, an unwillingness to rationalize capital punishment and military force, a fondness for candidates who like to feel our pain.

What would that kind of insight tell us that we didn't know already? One thing is certain: evidence of a neurological difference between liberal and conservative brains would not be another instance of genetic determinism, since patterns of brain activity are shaped by experience as much as by genes. (Those who suffer from post-traumatic stress syndrome also show unusual patterns of amygdala activity, but those patterns are almost inevitably the imprint of a specific event, and not the long arm of DNA.)

But a recent study by Paul Goren at Arizona State found that voters typically formed their party affiliations before developing specific political values. They become Democrats first and then decide that they, say, oppose capital punishment and support trade unions. But how do they make that initial decision to be a Democrat? The most likely indicator of political preference is your parents' party affiliation, but if everyone simply voted along family lines, the dominant party would simply be the one whose members had the most voting offspring. The real question is why someone would ever break from the family tradition -- without feeling strongly either way about specific issues.

Is there something intrinsically reductive or fatalistic in connecting political values to brain functioning? No more so than ascribing them to race or economic background, which we happily do without second thought. Isn't it more dehumanizing to attribute your beliefs to economic conditions outside your control? At least your brain is inalienably yours -- it's where the whole category ''you'' originates. No one denies that social conditions shape political values. But the link between the brain and the polis is still uncharted terrain. Prozac showed us that the slightest tinkering with brain chemistry could have transformative effects on a person's worldview. Who is to say those effects don't travel all the way to the voting booth?

Our lives generally assume the contours of the feelings we are unwilling to experience.

 

You might consider setting up a Party party - one that sponsors, say dinner parties, at which political advocates could take turns experiencing each others' feelings.

 

 

 

Our Candidate is a Shoe-In

 

http://www.theatlantic.com/

issues/96jul/images/politics.gif

 

 

 

 

 

 

Mon, 23 Aug 2004

 

Workshop Question


Ed,


"Traders may find that the majority of their trading activities are basically ritualistic in nature and actually contribute little to the process of trading successfully. Meanwhile, a few activities, many of them subtle and unconscious, dominate the trading."

I appreciate that every case will be different, at least in detail, but would you please give an example of the above, especially clarifying the phrase "basically ritualistic in nature" and giving an example of the 2nd sentence.

Thank-you very much for your website.

You might keep a log of all the things you do during your trading day. 

 

Rank them according to how much time you spend doing them.

 

Rank them according to how much they contribute to your performance.

 

Likely you get two very different rankings.

 

 

Sat, 21 Aug 2004

 

The Notion of Time



Ed, so many great thinkers of our history has tried to explain what “time” is. So many people has devoted their minds to the subject and I have never really stopped to think about their concepts because I always cultivated my own belief of what is “time” that works for me. When you posted your thoughts, I stopped to think about my concept again, because it really resembles yours. You said:

“We live in a continually evolving, self - computing moment of now. We have no access to the future or the past. Our notions of future and past all reside in the now, along with everything else. Time is a notion that connects two non-existing positions.”

This post is congruent with my belief that time exists as a notion; as a fiction. But when you posted:

“I do not claim to own any time, and do not think it even exists …”

I felt a necessity to ask you: how?

My thoughts about it:

Time does not exists as people usually think about it; time exists as a notion or as a fiction; but it does exists as one;


We cannot say something does not exist only because it is a notion or a fiction, since even notions and fictions exist or else we could not acknowledge them.


Ex: Terminator 2 is a fiction; a group of people conceived it and translated it to images and sounds using a movie structure. When the group of people built that fiction, that same fiction began to exist, as well as the movie, and we cannot say that the fiction T2 does not exist, because it does, as a fiction. We can see that fiction evolve in front of us using a TV.


I cannot understand how we can create things and, even though we have created them, they do not exist.


Ex2: S&P500, like all averages, is a fiction. It is a fiction that is used to measure the evolution of the elements that constitutes itself. However, though it is a fiction, or a notion, it started to exist in the moment his creator create it. Today, people even trade that notion because it is a notion that really exists.


I always believed time is a notion similar to an index. We have created the notion, the fiction or the concept of time, which is an index that measures the evolution of all things that constitutes it. Different people have created different ways to measure or “quote” this index. First, there was the “day-night” measuring system; then the “autumn-winter-spring-summer” and even the “distance-light-travels” measuring system.

 

It is like quoting the S&P500 in different currencies. We can do it in infinite ways, but we can only measure it because it does exists, as a notion or fiction, but it exists.
What is turning my mind around, right now, is “how can Ed say that time is a notion (and as all notions, it exists as one) if Ed also says it does not exist?”


I agree with you when you say we cannot spend time, give time, save time, since we cannot spend an index, give an index, save an index, buy an index; if we say that we can buy the value of the index, we are talking about a whole different thing. It is not about the index itself, which is a fiction; it is about the value people see in it.


I always thought that when people say “Thank you for your time”, they were actually trying to say: “Thank you for your attention”, but they cannot actually say it like this, because the concept of the index “time” and the value of it (that can be translated into the things we actually can do, or can give, or can spend) is mixed up by society.

 

When people thank me for my time, they actually are thanking me for doing something to them; for devoting my mind or my work to them; for stopping doing the thing I was doing to help them in anyway; and this is the value they appreciate, not the “time”, although this is not clear to them.


This thought drives me to the conclusion that time is not the sum of all moments, but only an “index” created to make people acknowledge the evolution of all moments, and thus it is only a fiction.

 

But I cannot understand how this fiction does not exist, in your conception.


Interesting: I stopped writing this e-mail to lunch and while I was lunching, I asked my father, who is 68 years old, “Dad, what is time for you”; believe it or not, he said “Time is only a reference”. I like talking to older people… they usually have developed a life wisdom that is very interesting to learn from.

You really provoked me to think about it and I appreciate if you can elaborate this subject a little more. Your mind is a very complex mind, Ed, and sometimes I get really amazed with the fact that there is actually a mind like yours out there with all this knowledge that may turn lives upside down with its deepness.

Thank you for your attention.

Warmest regards,

All things that exist, exist in this moment of now. While the concept of time may exist in the moment of now, time may not.

 

In trading and in life, you cannot act in either the past or future; you can act only in the moment of now.

 

 

 

Bent Clocks a la Dali

 

For Foreseeing Seeing

the Future

 

Clip: http://www.colegiojefferson.com/

bytheway/jun4_4artdali.htm

 

Sat, 21 Aug 2004

 

FX and Help


Hello Ed,

 

I'm looking for someone who is currently trading Fx on a computer system. I need help with the basics of computer operation and hopefully someone who is doing well trading Fx thats willing to help. This request is probably a long shot but it never hurts to ask.

FAQ does not publish the identity of contributors or reveal personal information. See Ground Rules.

 

 

FAQ Does Not Publish

 

the identities of contributors

 

CLip: http://www.koopatorivm.com/

gaelleriie/page2.html