Questions

(Quotes from Ed in Red)

TTP Dissolves Into Everyday Living

Hi Ed!

I am reading The Trading Tribe Book. Its a nice "take-out" version of the site!

Reflecting on this and after two years practicing TTP since May 2003, It is beyond explanation how much The Process affects my day to day life. Everything just seems better and "just falls into place". I am learning new techniques from this ever evolving process. Thank you.

I seem more detached from things I used to be attached to. The other day, I am in a bank waiting for service. While I am sitting, a woman sits in front of me and spontaneously starts twitching.

This happens every ten second intervals or so. Before TTP, I am laughing at her then afterwards feel sorry for her. Two feelings I do not like experiencing on a person with this type of condition. But I notice during this episode, I do not laugh nor feel sorry for her. Nothing. I accept her for the way she is. I accept things the way they are and I feel free!!!

This is the feeling I like. But I still have lots of work into TTP.

Additionally, our Intentional Community wishes for the delisting of our contact information from the TT directory. We are now practicing privately and are not taking in new members.

Yes !

My intention for The Trading Tribe and for TTP is for people to experience it, and for it to disappear and become just another passing AHA. See Ground Rules

Wed, 15 Jun, 2005

Grrrrrr ...

OK.  Meow, meow, meow.

Tue, 14 Jun 2005

Breakout Stock

The chart does not show a breakout at all; it shows a non-existing past breakout.

Any breakout that exists, exists in the now. If you think the one on the chart exists, try to enter an order to buy it.

Your definition of breakout may inadvertently depends on seeing what happens after the breakout.

You might, as an experiment, find a chart that is breaking out, right now. 

Put your green arrow on the breakout (last bar on the chart) and send it to me.

Betty Breakout Sez:

Stay in the now ...

that's where you find

all the breakouts

you can actually trade.

Clip: http://www.pubclub.com/

Mon, 13 Jun 2005

Wants Money Manager

Mon, 13 Jun 2005

Mon, 13 Jun 2005

Thanks and Congratulations

Sun, 12 Jun 2005

How to Receive and Not Go Over the Line?


Dear Ed,

A family friend just called me. The mother just moved with her daughter from another country to the US less than a year ago. The mother asked me to speak to her daughter, who just started 9th grade, because she is worried that the girl not having a social life, has very few friends, refusing to go out and putting too much pressure on herself with school work that is making her sleep less than 4 hours a day.

When I talk to the girl, I just want to receive and listen without any judgment. I don't intend to "lecture" her and in fact I believe I too may learn something from her.

She said she has been waking up at 4am these days because there are just too much work, and that she thinks having little sleep is actually the norm for 9th graders, or at least some of her classmates are even worse. Today, she woke up "late" at 7am, and in fact she has to "force" herself to, as she feels she needs to start studying.

But throughout the day, she says she just cannot concentrate whatsoever, and end up pacing aimlessly around the house instead. She tries to relax and watches some TV, but then there is the feeling of guilt that is telling her that she should be studying because finals is coming up in two weeks. But when she opens the book, she just doesn't feel like studying at all, and she is upset that she's been wasting the day.

I listen, and at times I try to ask her a bit to see if she can get into those feelings a little more. I ask her what does it really feel like as she begins to study, if it makes her sleepy or something.

I get her to talk a little bit more, and she says sometimes she just feels like screaming out loud or even to punch something, anything. But she can't, because the neighbors would complain.

In my heart, I feel like encouraging, "Go screaming! Do more of that! Scream as loud as you can and feel all those feelings!" However I am very careful not to force people into TTP, and so instead I just ask her more if she has a basement where she can scream out loud, or maybe in the closet.

She says she has none of those, and I don't push her further.

In the end, I just go with the usual encouragement, like hang in there, it's only two more weeks. Get enough rest so that you mother doesn't need to worry. She agrees that her lack of sleep at night make her very tired during the day, and has some careless mistakes in her work. She says she will try to go to bed earlier.

Well Ed, I'd appreciate to hear some of your suggestion. Can I do a better job? I am very careful not to push other people into TTP, especially when I don't have their consent.

You seem to have one contract with the mother to help the daughter and a different contract with the daughter to help the daughter.

Furthermore, TTP is a group process, not a basis for one-on-one therapy.

You might take the feelings of unclear and/or conflicting agreements to your Tribe.

One way to align all the intentions is to have Mother and Daughter read the Trading Tribe book and see if they want to form or join a Tribe.

It's Easier to Enjoy a Sandwich

when you are not in it.

Sat, 11 Jun 2005

SVO-p Drift

Dear Ed,

As I'm re-reading the old FAQ, here's an interesting incident. I run into this post that someone submits his favorite quotes of yours (Jan 19, 04), and many sound so very familiar that it is like meeting an old friend.

Then I see this one, "Take responsibilities for your experience and you will see intention = results."

Immediately I'm feeling suspicious. Something's not quite right. What's that? Hmmm, it is not in the present tense!! You will see  intention = results.

But since the lines are in red (meaning quoting you), I try to think of the rationale of using future tense. Well, I guess it means once one starts taking responsibility, one will see intention = results, and so it cannot be present because one hasn't taken responsibility yes.

But I'm not satisfied. This is strange. So I use the search tool to find out where that exact quote comes (11/26/03), and aha, it actually reads, "Take responsibility for your experience and you can see intention = results."

It is an aha for me personally. What a release!!

Yes.

People who do not use SVO-p or the Responsibility Model seem to have trouble quoting FAQ accurately.

Sat, 11 Jun 2005

The FAQ Feeling


Hi Ed,

How does it feel to write FAQ's?

I'm feeling appreciative and in awe of the simplicity and consistency of your message as I'm reading them.

I write FAQ from the Zero Point.

When I notice feelings about writing FAQ, I typically take that event as a signal to stop for a while.

If It Doesn't Flow

take a break

and experience the stuck-ness.

This works for a lot of things,

like writing FAQ

and Trading.

Clip: http://www.ghostwords.com/

Sat, 11 Jun 2005

Kepler


Hi Ed !

I have a physics question for you. Gravity universal and omni-directional, so why do the planets travel elliptical orbits?

And apparently not the moon.

I know Kepler's laws describes the other force as kinetic energy, but 'where' does that come from?

I mean I know it's in the movement of the planet, but this seems to me to beg the question.

A circle is a special kind of ellipse.

If you start a moon spinning in a circular orbit, it stays in a circular orbit.

This is a delicate task, since you have to send the moon off exactly perpendicular to the line to the planet, with just the right velocity to keep it in the same orbit.

More likely, your aim might be a little off, or you might give it too much or too little velocity, so the moon then has to seek a different orbit.

It then overshoots the new orbit and continues to "oscillate" between orbits, generating an ellipse.

Bodies in Orbit

trace equal areas

in equal time intervals.

- Kepler

http://www.inference.phy.cam.ac.uk/

Fri, 10 Jun 2005

TT Book on the Air

Thank you Ed! How do you feel about my referring to you and your book on my radio programs from time to time?

OK.

OK, Listen Up Guys,

I'm getting a feeling

about this Trading Tribe book.

Sat, 11 Jun 2005

Play the Probabilities

Hello Ed,

I am currently reading a book called Fooled by Randomness by Nassim Taleb, he claims that the world is totally inefficient.

I think he maybe right in the sense that the world including the markets are random and unpredictable because the reactions are so complex for us to trace every change that can affect what concerns us.

For example: if our goal was to eat a chicken from the fridge; we should cook it, eat it, digest it and then we have achieved the goal, on the way we might face deferent levels of danger that produce deferent results, for example the kitchen may catch fire, if this doesn’t happen, the chicken meat maybe old and we may have food poison, if this doesn’t happen we may chock on a chicken bone or maybe the chicken would run away in the first place even before it goes to the fridge.

In cooking-the-chicken situation we humans usually are prepared to all these possibilities along the way to achieve the goal, for example if the kitchen catches fire we can distinguish it our selves or call the fire dept., if someone has food poison or chock on a bone we call the medics or go to a doctor, we also use cages so the chickens don’t run away in the first place.

We humans are capable of counting the probabilities and their outcomes, yet knowing some of the probabilities maybe dangerous in everything we do yet we always eat, drive cars, take elevators because we have set goals and know that the outcomes are much greater than the dangers we face along the way to achieve the goals and even if we fail something in the first time that doesn’t mean we are doing something wrong or we will fail again, all that there is that the probabilities have occurred which prohibited us but this doesn’t mean we are doing something wrong so we should always have enough power to try again.

If I know that my simple system will produce 2000 pips if the price moves a distance from A to B, then I don’t mind losing 20 times x 100 pips on the way, these are the probabilities, you cannot base such probabilities on any indicator because all indicators don’t reflect our real profit/loss ratio.

What we can do is to create a system and count its probabilities and how we should react when a probability happens, we cannot take from the market more than it will give.

Probabilities are fine if you play the markets with this:

If you are human, you also play the markets with this:

In TTP, we take our desires (stomach) to figure it all out (brain) to Tribe Meetings as entry points - so we can learn ways to get these important organs to cooperate.

Clip: http://www.montana.edu/

wwwsi/quinn/pics/brain.gif

Clip: http://www.nlm.nih.gov/medlineplus/

ency/images/ency/fullsize/8731.jpg

Fri, 10 Jun 2005

Eucharist

Dear Ed,

The symbol used in your Divine Ordinance reply is actually not the Eucharist symbol.

The sacramental symbol is a cup and loaf of bread. The mosaic you chose refers to the feeding of the five thousand.

A little boy brought two fish and five barley loaves from which Jesus feeds 5K. I may be the only one to catch this or are there others.

Thank you for the catch.  The item now stands correctly.

Fish Tribe

Some devotees of both sides

are willing to receive each other,

find the positive intentions

and integrate the best of both.

Clip: http://www.bringyou.to/

Fri, 10 Jun 2005

Acres of Diamonds Snapshot

Hi, guys -- an update on Acres of Diamonds:

*Updated the snapshot using clip art; it sits in the center of my desk.

*Am spending less time running tests, and much more time thinking about the results of my tests, understanding the underlying numbers, learning about the software, and making sure that subsequent tests address issues I want to address, and measure them the way I want them measured. In this, I am inspired by Ed's Seykota's comment a while ago that he likes to see programmers spend more time thinking, less coding and running tests. An "aha" for me.

*As part of this, am communicating regularly with the Trading Studio Software developer, which helps me clarify my issues, and will help improve the software.

*The [City] Tribe has been a tremendous support:
.
*[Name-1]s suggestion that I add volume as a parameter

*[Name-2]s approach to setting up the system so I don't need to adjust stops every day.

*[Name-3]'s help in thinking through some of the issues regarding TS, and helping me with coding and analysis.

*[Name-4]'s continued focus on mental attitude, and confidence in the various systems of our tribe memebers.

OK.

In Poker and in the Markets

knowing yourself

can be as important

as running a lot of tests

on trading systems.

Clip: http://www.madore.org/

~david/images/cards/english/

queen-diamonds.png

Fri, 10 Jun 2005

Thu, 9 Jun 2005

Can't Find a Tribe Nearby


Hello Ed,

I have been searching for the way to back up my theories first in the discussion to save the money from expensive lessons and might lead any group of similar thinking people.

I have tried to contact closest person in UK, where I live but response has not come back, thus I could start my own or join any other tribes.

Thu, 9 Jun 2005

Thoughts vs. Feelings

Dear Ed,

I find myself confusing about thoughts and feelings. For example, when I *think* about how things can go terribly, I *feel* disturbed.

When I take this feeling into the Process and ask myself how does it *feel* to be disturbed. I can locate the feeling, which is like a shot at the heart where for a split second the heart doesn't seem to exist, although the feeling is not very strong and only last a split second.

And here's where I have trouble. Despite my curiosity to explore the feeling, I don't know how to "intensify" it, as the receivers encourage.

Moreover, it goes away so quickly I don't know how to re-experience it without a lot of conscious effort. I ask myself over and over, "How does disturb feel like?" Or I may consciously think about and replay the scenario, and sometimes I may be able to feel a little of that "heart-doesn't-exist" feeling again, but in those cases, I tend to be very conscious about the process. My CM is very well aware of what's going on.

Then I remember some of the tricks you have, such as "Keep thinking as much as you can and totally avoid all feelings. See how that feels like." So I ask myself consciously, "How does it feel like to have CM ruling over, and keep 'speaking' ceaselessly in my mind?" OK, I feel annoyed and frustrated at it. I feel (or think?) it is impeding my process. Then I say to myself, "OK, how does it feel to be annoyed and frustrated?" And I keep answering, and keep asking.

It usually doesn't go anywhere. The thing is I keep consciously asking myself questions and I find myself seldom feeling anything.

It's more like another form of DIM where I'm analyzing and tracing my feelings at a conscious level, instead of experiencing it. The process drags on and I have a growing disconnect with the receivers. Despite their effort, I feel like (or think?) they aren't helping.

Then I remember the time when you tell me that my nature is "When I feel uncomfortable, I tend to blame others."

Hmmm, that means I'm actually feeling uncomfortable, so am I doing the right thing? But it just gets more and more questions in the mind, mostly thinking and failing to feel.

Can you please provide some suggestions?

You seem to be successful in avoiding experiencing your feelings by asking a lot of questions.

You might consider asking your Tribe to support you in doing more of that.

Kids Find All Kinds

of Cool Hiding Places

Adults seem to settle

on a few favorites,

like asking questions.

Clip: http://lisashouse.typepad.com/

Thu, 9 Jun 2005

Studies - No Link Yet

Hi Ed Seykota,

I enjoy your FAQs and your site tremendously. This is the first time in my life that I can see what a super human mind is. Your knowledge and kindness are both astounding.

Wed, 8 Jun 2005

Sometimes saying no, serves the applicant as well as the Tribe.

Wed, 8 Jun 2005

TTP Workshop Feedback

One month has elapsed since the May TTP Workshop and I am grateful I was able to attend.

TTP is an amazing thing - just being in the presence of that group of willing receivers put me into some sort of process early on Saturday morning and I was 'live' all day long.

It was difficult to concentrate on the proceedings because of the feelings of sadness, remorse and regret welling up from Fred, but I was unwilling to fully experience them because I didn't want to disrupt the presentations. During a break a willing receiver sensed what was going on and helped me express those feelings more fully by offering me a hug. I experienced the feelings in a form which consisted of unrestrained sobbing for several minutes. It felt great to finally feel those feelings.

After that break, while, I am still 'live', the sadness and remorse disappear. Later in the hot seat with my breakout tribe those sad-related forms re-express themselves, briefly, but I am quickly on to other forms. I experience and am able to resolve a powerful set of forms and am exhausted but feel great afterwards. It is a tremendous experience.

I am happy to report that on a business trip which starts the day after the Workshop concludes, several important breakthroughs occur which are major steps to achieve my snapshot.

I return from my business trip, however, to find that my relationship with my wife is in chaos - she has anger at me for being away on Mother's Day and the several days following. She doesn't feel appreciated for having taken care of the kids on her own while I am away at the Workshop and on my business trip. I am in the dog house.

This seems to be a step back from the major successes I achieve on the business trip. Anger which my wife seems normally unwilling to feel about things unrelated to me expresses itself in a drama with me and all my faults as the lightning rod. I feel sadness and despair.

We are still working through some of these issues, my willingness to receive my wife's feelings, a skill learned at the two workshops I have attended, and the near-year of running a local tribe practicing TTP every fortnight, has been invaluable in keeping my Essential Tribe intact.

In TTP, it's all process, so no one actually interrupts, including the people who think they do.

You might consider taking your reluctance to interrupt others to your Tribe as an entry point.

Please Feel Free to Interrupt

if you have a question.

A person with a k-not

about interruption,

may view others

as un-interrupt-able.

Clip: http://home.netcom.com/

~swansont/interrupt.jpg

Wed, 8 Jun 2005

Changing Risk Preference


Dear Ed,

Hello! I am still here. I risked too much (plunged) three times after my commitment at breath works and luckily came out ahead about $30,000.

Making the money feels good but the risk no longer does.

OK.

Ingesting Everything You See

is one way to get (ice) creamed.

Investing in everything you see

is another way.

Clip: http://www.not.iac.es/

~kalle/misc1/slides/IMG_1232.JPG

Wed, 8 Jun 2005

Frustration, Doubt, Distraction


I work on a stock system that buys all time highs.

In simulation I receive more than 60 signals on one day. On that day I only have room for 4 positions.

I am frustrated. My muscles are stiff. I am tempted to use fundamental data to select trades. I wonder which fundamentals.

I can't backtest fundamental rules. The few technical rules I try, perform worse than random.

Frustration gives way to doubt. Equity trading systems can't work. There is a lot of literature that proves it. There is a gnawing feeling in my stomach. I search for a distraction.


---

What are such

gaieties to me
Whose days are filled

with program checks?

do { x = x->linkp; }
while (0 == x);

Yes.

You can reduce your catch to just the big ones, by using a looser net,

You might consider taking your feelings to your Tribe as an entry point.

Setting Limits on Quantity

enables you to go for quality,

CLip: http://stellargraffiti.com/

My%20Pictures/Tw%20Limits.jpg 

Tue, 7 Jun 2005

Intention or Luck

"Communities are not made,

they happen.

You cannot start nor prevent them, as you cannot start or stop a river.

Too many factors are involved in the creation of a successful community - and inner maturity is one of them."

-- Sri Nisargadatta Maharaj

The Trading Tribe is an intentional community.  We hold that intention = results.

You might notice that your post does not just happen to be over there on the left.   It results from your intention to write it and mine to publish it.

Some People Take Responsibility

for intentions = results.

Others rely on concepts like luck,

and like "stuff just happens"

to explain others' success.

Clip: http://www.nova.edu/

Tue, 7 Jun 2005

Rejection


I read your book in 1.5 hours. I like the new stuff not mentioned on FAQ.

I notice a slight headache, almost the same I had reading Toxic Parents.

I also realize a big rejection drama in me and recall an episode of about two years regularly asking the same girl out with her constantly replying "no" (I wonder what her k-not is for doing this so long ) .

Back then, I explained this as me being simply stubborn and optimistic, something like "if I wait long enough I'll get what I want and need". Of course that was a form of manipulation from my part.

So my love life is unfortunately still limited to none-threatening affairs because of rejecting the feeling of rejection.

I envision myself resolving these issues by asking the right women out, caring for them and being willing to be rejected or reject them. This is the way to go. It's good to know there a people out there that can encourage me to do this.

I am also considering calling the woman intentionally to get rejected again, then thanking her for bringing this feeling.

That's exactly what I wanted her to do back then, except I didn't realize this and instead of appreciating it I would get really mad inside. This probably proves I still have this k-not yet to be resolved.

This is pathetic - I did call her lately after a few years of silence - from a restricted phone number just to see if it was still her number and to check her voice out.

It ended up as an anonymous call - I admit I froze although I did not intend to talk to her anyway. From that point on - I received about five restricted and anonymous calls in a span of a few weeks - most probably from her.

If you wait long enough, what you get is: you get to wait a long time.

You don't resolve this issue by asking the right women out. 

You are already asking the right women out in order to run your drama.

You likely find affectionate and caring women less attractive than the ones you are currently attracting on the Under-Fred Network.

To resolve this issue, you might consider taking your feelings of rejection to your Tribe as an entry point.

Rejection

is a delicate dance

that requires the intention

of all parties.

Mon, 6 Jun 2005

Welcome

Eichgraben

Austria

Mon, 6 Jun 2005

Incline Village Membership

Dear Ed,

I COMMIT to:

Mon, 6 Jun 2005

Resource Link

& Whip Saw Song

Ed,

I sang the whipsaw song to my wife last night and while she enjoyed the lyrics she is concerned I may be tone deaf.

OK.

Mon, 06 Jun 2005

Wants to invest $ 25,000

Dear Mr. Seykota,

A week or two ago I stumbled on a book entitled Trend Following. What an eye opener! Since then I have been completely absorbed in this subject.

I have now also read Reminiscences of a Stock Operator and have ordered other books including Speculation as a Fine Art and Extraordinary Popular Delusions. In addition, I have read some of the on-line Trader Tribe correspondence with you, as well as your piece on Risk Management, including your discussion on investor-manager relations.

The general subject matter is so fascinating to me that thinking about it literally changes by breathing pattern, I almost hyper ventilate ? a result I suspect of some combination of euphoria from the gestalt experience of recognition, countered by a sense of fear, dread and terror.

I want to learn more about the subject, including why it effects me in the way it does, however, I have already concluded that I need to be honest about who I am and to stick to my own knitting, that is I have concluded that it would not be appropriate for me to try to be a trader, even part time, given my age, educational background, emotional make up, financial resources, family responsibilities etc.

On the other hand, I strongly believe it would be appropriate and prudent for me to take a portion of my investment portfolio (modest as it may be) and place it with a highly experienced, successful and reputable trader. In that regard, I am asking you if you would be willing to take me on as a client.

I am a mid-level government employee in my late 50's specializing in the field of urban re-development. My personal assets are very modest. I would like to place $25,000 to $50,000 with you. My intention is to leave that amount in the account for the very long term, giving you complete investment discretion.

For an individual account, you might figure a nominal loss at a couple ATR's (average true ranges).

That brings a loss on many futures trades to about $2,500 per contract.

If you figure an original entry risk at about 1% of your portfolio (fairly aggressive by professional standards) you get:

1% = $2,500, so

100% = $250,000.

So, to run a futures account like a business, you might want to start with about $250,000, and expect losses of about 1% of equity.

A $25,000 account might have some early losses around 10% of equity and that might be a bit volatile, particularly in the context of your "very painful" view of loss.

At this point, I do not have any vehicle for you to pool your assets with others.

A $25K Futures Account

is a pretty good vehicle

for a wild ride.

It might be just the ride

for someone who is looking for ways

to experience the pain of loss.

Clip: http://www.vegalleries.com/

Mon, 6 Jun 2005

How Safety can Increase Risk


Hi Ed !

I like this article:

The Way We Live Now
See a Bubble?

By ROGER LOWENSTEIN

June 5, 2005

It's a good time to be a financial-disaster writer. Disasters abound, and even when they don't, people are eager for your opinion on when the next bubble is going to pop. Scarcely a day goes by without a warning of some dire calamity -- in the dollar, in housing values, in pension funds. The way people crave financial info, we must be the best-informed, most economically literate society ever. But we do not sleep any better for it. Is all the anxiety warranted, or even productive?

A few years ago, the chief claim on the public tranquillity was the fear of ''deflation,'' meaning that the price of just about everything would fall. Before that, it was fear of ''Y2K.'' Neither transpired. This is not to say that disaster never strikes. The number of bubbles and consequent meltdowns over the last quarter-century could fill a proper B-school syllabus. In order of appearance, oil drillers, precious metals, personal computer makers, the stock market, commercial real estate, Trump casinos, junk bonds, biotechs, Russia and Internet stocks each had their moments of glory and returned to earth.

Not every bubble ends with a crash, but sometimes, because of a linkage or feedback mechanism, one loss triggers another and leads to a sort of contagion. In 1929, people who bought stocks on credit were forced to sell, which spurred more losses, more loan repayments and more forced selling. This is what people worry about: the Big One. Japan experienced a somewhat similar meltdown in the early 90's.

Almost by definition, the spark for such calamities is unforeseeable. This explains our vigilance. What is less appreciated is that excessive, or inappropriate, vigilance also exacts a price. It does so in several ways. People who insulate their portfolios against phantom risks pay a toll, just as they paid to protect their computers against Y2K.

In limiting risk, people also limit the opportunity for gain. It is common, today, for investors to own six or eight mutual funds, each of which is likely to be invested in hundreds of stocks. This will, they hope, assure that no little bump, no little meltdown, overly upsets their portfolios. But since when was investing about avoiding the bumps? Anyone investing for the longer term can safely ignore them.

George Bernard Shaw observed that every profession is a conspiracy against the laity. The financial profession duly warns us of meltdown risk, but it has adopted a pinched definition of risk that has led us into fruitless and sometimes harmful diversions. The odds of a meltdown being necessarily uncertain, Wall Street fosters an overly precise, pseudoscientific approach. Investors are told to ''balance'' portfolios (rather than to select stocks), to ''allocate'' (rather than to ''invest'') their assets and to reckon with quarterly earnings forecasts down to the penny per share -- an absurd irrelevancy for someone whose retirement is years away.

Wall Street properly worries about what might go wrong, but it has recast the issue in spurious terms, detaching us from the messy and often subjective considerations that might help us avoid truly perilous bubbles: those that (like the dot-coms) subject us to the risk of enduring loss. If you tune in to enough financial shows, you are bound to stop asking considered questions like ''Is the Web going to be full of other companies competing against this one?'' and to start toying with numerics like a stock's volatility or the percent of your holdings in a given ''sector.'' No wonder people are jittery: this stuff changes every second. To listen to the anchors on cable TV, we should reshuffle our portfolios in response to each new, tangential threat -- oil prices, the dollar, real estate. And, of course, we should diversify in the extreme.

Diversification is insurance against the possibility that we might do something stupid; it also heightens the chance that we will do something stupid. People with flood insurance build their homes closer to the shore, and people in the 90's, having diversified, figured they could afford to take at least a small flier on dot-coms. Risk prevention can lead to risk.


Lately, our search for calamity has focused on those obscure but swiftly multiplying Wall Street beasts, ''hedge funds.'' When General Motors was downgraded to junk-bond status, it was not G.M.'s fate that seemed to preoccupy traders and journalists as much as the fact that some of these funds had suffered possibly dire losses. Why some private-investment partnerships (which is what hedge funds are) should be cause for general alarm has to do with their pervasive character. They are said to be everywhere -- determining the outcome of shareholder battles, roiling the art market, causing a run on convertible bonds. Markets were less worrisome when they were simpler, when they confronted us with fewer choices; hedge funds seem an embodiment of complexity. Also, the last near market meltdown was occasioned by the implosion in 1998 of Long-Term Capital Management, a Greenwich, Conn., bond-trading firm that was, indeed, a hedge fund.


That is hardly reason to indict such funds for the next collapse. L.T.C.M.'s had more to do with its aggressive, leveraged portfolio than with anything intrinsic to its hedge-fund form. But it is human to look for a recurrence, and since Sept. 11, fear of things going drastically wrong has become a national instinct. The reason L.T.C.M. shook Wall Street was that many investment banks held the same positions that the fund did, setting the stage for chain-link losses. But most hedge funds today neither rise nor fall in synchrony. As my colleague Joseph Nocera observes in this issue, they invest in distinct asset types; they are the bits of the chain without the link.

People worry about hedge funds, I think, because of a Galbraithian prejudice that easy money is bad money. At a dinner in Palm Beach, Fla., in March, I casually inquired of one hedge-fund steward how much he controlled. Came the reply, ''Six and a half billion dollars.'' I whistled and replied that 1 percent of $6.5 billion would be a decent living. (Hedge-fund managers often charge 1 percent of assets plus a fifth of any profits.) He smiled and held up two fingers: 2 percent. Do the math; this gentleman's firm will earn, annually, $130 million a year for switching on the lights each morning -- $260 million if his fund attains a ho-hum return of 10 percent. No wonder that the London Business School boasts a ''Hedge Fund Center'' and, according to a recent graduate's informal survey, Harvard Business School sent 60 percent more of its graduates to hedge funds last year than to the much bigger mutual-fund industry.

But hedge funds are less an expression of risk-taking than of people's aversion to risk. Most funds deliberately try to hedge their bets (thus the name) by going both long and short -- that is, betting that one asset will rise while a related one falls. They are thus designed to be less volatile than ordinary stocks, which is why they are so fashionable. The risk isn't meltdown but mediocrity, a glimpse of which may be seen in the industry's recently lackluster returns.

Real estate, the runner-up to hedge funds in the anxiety sweepstakes, could be another matter. A recent Lehman Brothers report, ''The Changing Landscape of the Mortgage Market,'' observed that U.S. homeowners have been ''very willing to increase their leverage . . . through products like IO loans and MTA ARMs.'' This refers to interest-only mortgages, and to those in which the rate begins at an alluring, below-market level but after an interim floats according to the yield on Treasury bills. Who in his right mind would take an ''IO- MTA ARM''? Hmmm, come to think of it, I did.

Although my bank did not describe it this way, an adjustable-rate mortgage is a bet between the bank and the homeowner. If rates fall or remain stable, I win; if rates rise, I lose. Of course, if I lose, the bank might also lose. I might, heaven forbid, default.

Why would a bank finance a home that under a conventional mortgage the borrower could not afford? Some computer in its vault was evidently mollified by the variability of the rate. What makes this bet rather interesting is that millions of other people have the same kind of loan that I do. If rates should take a sudden upturn, it is conceivable that a good many will default, in which case an instrument (a floating-rate mortgage) conceived to help the bank manage interest-rate risk will have resulted in increasing the bank's losses.

The saving grace is that home loans generally are the last thing people default on. But imagine how scary it would be if, say, businesses extended floating-rate contracts to one another -- if virtually every company were dependent on making the right calculation about how these risk-avoidance vehicles would function.

Well, actually, they do. They are called derivatives. Derivatives are contracts that call for one party to pay another according to the movement of an underlying yardstick, like a foreign currency, a bond, a stock or even the weather. Since the 1980's, Wall Street has marketed derivatives as a tool for making risk more palatable, and Alan Greenspan has consistently praised them for enabling firms to spread, or ''manage,'' their risk. For instance, a bank can hedge against the risk that one of its loans will sour. It simply -- well, not so simply -- purchases a ''credit default swap,'' which entitles it to a payoff if a specified company, G.M. for instance, goes into default or suffers a material downgrade in its credit rating. The party on the other side might be a hedge fund that is more sanguine on G.M.'s bonds or has a way (it thinks) to hedge that risk. Every financial firm uses some varieties of derivatives, which, again, are contracts that call for a payment (one way or other) depending on some underlying asset. Their growth has been explosive. Credit-default swaps, for instance, didn't exist a decade ago; today there are $8 trillion of them. No one has any idea of the losses that could ensue from a panic; credit-default swaps ''have never been stress-tested,'' notes the analyst James Bianco.

Neither the Fed nor the S.E.C. has ever really clamped down on derivatives or insisted on a form of disclosure that would tell folks what is going on. So forget hedge funds; if you're searching for the next financial storm, try derivatives. (Nothing much you can do about them, either.) Come to think of it, most of the sudden financial disasters of the previous decade -- Orange County, L.T.C.M., Enron -- involved derivatives, too.

There is a paradox here. A vehicle developed to help reduce individual risk has heightened risk to the system.

At some point, the anxiety turned counterproductive. There was a time, of course, when people could buy only the homes they could afford and invested in only a few, carefully chosen stocks -- when traders could not run certain risks because no derivatives existed to provide a hedge.

Today, whether you are a trader or homeowner, bank or corporate treasurer, our financial culture offers a prophylactic against every conceivable worry.

Maybe weaving a giant insurance net is really the way to manage anxiety, but maybe it has us worrying about what we will do if the insurance fails.

Sure things often turn out, not.

Disc Brakes

Increase Driver Control

and give drivers confidence

to go faster.

Risk breaks,

like derivatives and ARM's

 give the appearance

of financial control

and give investors confidence

to over-speculate.

Clip: http://web.ics.purdue.edu/~iyerav/

Images/015%20US%20Grand%20Prix

%202004/10%20Ventilated

%20Disc%20Brakes.JPG

Mon, 6 Jun 2005

Welcome

Tokyo,

Japan

Sun, 5 Jun 2005

Getting High from New Highs,

Low from Lows

Dear Chief Ed,

Yes, I do wish to publish research based on my system of buying the 55 day historic high breakouts, with a trailing 10 day low as stop, with 0.25% individual bets. I am committed to hiring a programmer to assist me in rigorous back testing, before I submit the paper.

Fortunately for me in [Country] we are in a strong bull market in equities, and just keeping the heat in my portfolio within the tolerance limits of my stomach lining, and buying only the described breaks, the results have been very satisfying.

I have observed that raising the frequency of my system seems to matter to me a lot, as watching the equity curve scale new highs is well, a new high.

Also, I find that my emotional intensity tends to increase considerably when the equity curve is in a drawdown.

You might consider running the integration process on your feelings of highs and lows.

Some People Get the Feeling

in a raft.

Other people get it

in the markets.

Clip: http://www.raftingchile.cl/

imagenes/Trancurax.jpg

Sun, 5 Jun 2005

Real Estate Cover Story

Some real estate speculators, particularly ones who are trading on thin margin, with adjustable-rate, interest-only mortgages may be setting up for substantial drama.

Proper risk management may include some rules of thumb like making sure your speculative property can carry itself as a rental, and making sure you can withstand a drop in property price.

San Diego Real Estate

goes up and down

Scales:

1985 - 2003

$1,500,000 to $900,000

A price decrease of 40%

can help support

lots of drama.

Clip: http://www.sandiego

Sat, 4 Jun 2005

Next Workshop

Hi, Ed,

Your book arrives today and I start reading.

I am excited and want to attend he next workshop. I notice that previous autumn workshops take place the first few days of November. My daughter's 5th birthday is on 4 November so I write this email with the intended result that your next workshop does not take place within 3 days of 4 November 2005.

We are planning a series of Workshops on various dates in various cities.

Fri, 3 Jun 2005

New Chief for Chicago Tribe


Ed,

I am the new chief of the Chicago tribe. Our former Chief is relocating to support his recent marriage.

OK.

Thu, 2 Jun 2005

Chuckles

Did you hear about the Buddhist who refused Novocain during a root canal?

His goal: transcend dental medication.

Yes. His teacher trains his students to follow their pain and discover the tooth.

Willingness to Experience

feelings in the now

transforms pain

into a passing AHA.

Clip: www.endodovgan.com/ Endoinfo_Toothache.htm

Thu, 2 Jun 2005

Transference

One of your workshop attendees writes:

I am in a great space

after the workshop.

My wife loves you!!

Isn't the psychological name for that Transference? ;-)

Transference is a process in which we see others as "causing" feelings we dislike. 

In TTP we hold that we are responsible for our own feelings and and we work to convert our feelings from adversaries to allies.

Transference: you yell at your girlfriend for reminding you of all the irritating things your mother did to you when you were growing up.

TTP: you thank your girlfriend for helping bring up entry points for TTP.

The writer seems to be discussing feelings both he and his wife are discovering about each other, and like.

Women Like What TTP Does

for their men.

Thu, 2 Jun 2005

More Drum Drama

Note from Landlord:

Yes, it is the same neighbor. She left a message on my home phone and then she called me here at the office on Tuesday. You may have calmed her down at the time but she does not like it and I myself have always thought it to be a bad idea.

As far at the day care in the day time. People are not at home in the day and the HO's there approved the school. The teacher is very good at keeping the noise down.

Please refrain from playing drums in the common room.

Working on others is a form of drama.  Working on ourselves reduces drama.

When We Have Our Feelings

in K-nots

we naturally find ways

to drum up trouble.

Clip: http://www.showandtell

music.com/pages/galleries/

gallery_e/drumsdrums.html

Wed, 1 Jun 2005

Thanks and Congratulations

Hi Ed,

I have now read your wonderful book during the last couple of days ... This book brings great clarity, to all aspects of the process and cleared up all gray areas for me. I'm really glad you experienced your perfectionist feelings, and got it out.

Congratulations - on producing this important and much needed work for the world. (You may not have started this project as a professional writer, but you certainly finished it as one.)

Your letter also appears on the book page, above.

Wed, 1 Jun 2005

Bonjour


I would like to know when the next TTP workshop is. Perhaps you could let me know when you have a moment and how one might register.

I am planning to meet whatever demand appears.

I now have a team of TTP Trainers in various metropolitan areas.

We are planning Workshops in various metropolitan areas.

Wed, 1 Jun 2005

Advice and TTP

Ed,

I think you will enjoy the cartoon, notice his name is "Fred."

Mind Over Markets TM - June 1, 2005

(article in Innerworth)



Appreciating the Moment

There are times when every trader enters this peak performance mindset. How do you get there? For one thing, you need to feel calm and relaxed.

Existential philosophers noted long ago that people experience fear and anxiety when they think about, and regret, past mistakes, or when they worry about an uncertain future ...

In his book "Mass Psychology," Dines observes, "anxiety results from spending too much time in the future." "Spending too much time in the future is punished by anxiety, while getting stuck in the past is punished with regrets," according to Dines.

How do you stay in the moment? It's important to focus your attention on your current experience, rather than self-consciously mulling over the past or worrying about the future.

Focus on the process of living in the here-and-now. Dines suggests, "taking it one day at a time."

Scott Shellady, a seasoned trader on the CME, similarly suggests compartmentalizing each trade. By taking each trade one trade at a time, you'll feel more relaxed, and are more likely to enter the zone.

In other words, don't worry about past losing trades or future profits. All your attention and energy should be focused on the current trade.

When you're in this optimal state, you will trust your instincts. You will see the markets more clearly and objectively. You will be intensely aware of your feelings, sensibilities, and judgments. You'll be in tune with the market action. You'll be able to effortlessly review a multitude of details.

When you enter the zone, you'll significantly increase your chances of success.

It isn't possible to always trade in the zone, but when you do, it is a peak experience. At that point, you'll reach a state of bliss.

Don't focus on the prize. Don't worry about past mistakes, and avoid worrying about the future until it happens. By appreciating an ongoing trade moment by moment, you'll not only have more fun, you'll end up more profitable in the long run.

This article helps point out some key differences between advice and TTP.

The author tells us what to do, including avoiding the past and future and then goes onto predict the future, again and again.

In TTP, we encourage each other to do whatever we are doing, even more so, including focusing on the prize and worrying, until we get our own AHA's.

IN TTP we use SVO-p grammar (S-ubject, V-erb, O-bject - present tense) to help us stay in the now.

Wed, 1 Jun 2005

Drums

Hi Ed ! I got an interesting note today. I wonder if other tribes have this issue.

(letter from Homeowner's Association)

I have had a second complaint from [resident] concerning the [your Tribe's] drum playing.

I must ask you NOT to play the drums anymore. If you have to have drums, then you will have to meet somewhere else. As I explained once before, this is close to our neighbors and they have the final say so as to what takes place at the Common Room. Please do Not play your drums anymore.

You might consider taking our feelings about the rights and concerns of others conflicting with your own desires into TTP, as a starting point.

When Other People

Resist Your Wishes

they may be indicating

your real wish

is for them to resist.

Wed, 1 Jun 2005

Trend Following

and Predicting the Market

Hi Ed,

You've said several times that trend followers don't try to predict the market.

Let's say my trend following system generates a signal to go long and I place a buy order. Am I not, in essence, predicting the market?

By placing the buy order my actions indicate that I'm certainly not neutral on the (non-existing) future direction of the market and am in fact anticipating that it will rise else I wouldn't have placed the order.

Is there a difference between this anticipation and prediction?

A computer can follow a system and place orders without making predictions or feeling anticipation.

Predictions and anticipations are objects you create.

These objects may interfere with sticking to your system.

You might consider taking your  feelings of anticipation into TTP as an entry point.

Robots

are like traders

except for that they don't have

feelings in k-nots.

Clip: http://www.neatstuff.net/

space-robots/Metal-House-

Wed, 01 Jun 2005

You can find answers to questions about the book on the Book link, above. 

Find the answer to this particular post at Re-Integration.

Wed, 1 Jun 2005

Know Yourself


Ed:


Last year I experienced a lot of “Aha’s”. This year I’m experiencing a SERIOUS increase in equity. Knowing what the market is going to do next is a lot less important than knowing what I ought to do. I took 5 years to get here and paid around USD 200,000 for it. But I never gave up.

For I knew that I would eventually come around it. However I never imagined I had to deal with childhood issues. That was so terribly interesting and I took up the opportunity to learn about psychotherapy, systemic thinking, metaphors, etc, etc. My father was an alcoholic …

Market entry is important but trade management is the MOST important aspect in this business and this includes the management of risk, size and profits.

This year was a good year (but not a very good year) for the Eurex Bund. The first additions are breakouts of reversals after the Trend Director reverted and indicated a (potential) uptrend. The other additions are via Stochastics, which must come all the way down first. The big thrust bars are usually the signal bars for me to act upon. I risk only 3% of account equity. I dislike the version where you commit a percentage of profits.

I have to do my yearly accounting this time of the year and the 1st of June is the day. My account equity is up 191% (totally tax free) since June 1st 2004. There was one good pyramid last year, two attempts to build pyramids afterwards which didn’t work out and this one which isn’t finished yet but which will be done soon I think. But more important than this, I have been able this year to forgive so many people, especially myself.

I’m not that old yet and already have a small library with some 80 books on Transactional Analysis, Gestalt, NLP, Ericksonian Hypnosis, Brief and Strategic Therapy and Coaching. I will, most likely, become a certified and registered psychotherapist, that is a “Change Master”. The journey of my life is now going through a very nice forest …

 Yes.

Know Yourself

and you don't have to know

so much about the markets.

A Tribe Meeting is a good place for self-reflection.

Clip: http://www.windycityart.com/

california/Reflection.jpg