Ed Seykota's

Home  ...  FAQ Index & Ground Rules  ...  Tribe Directory - How to Join

TTP - The Trading Tribe Process  ...  Rocks  ...  Glossary

  TTP Workshop  ...  Resources  ...  Site Search  ...  The Trading Tribe Book

TSP: Trading System Project  ...  Breathwork

Questions

(Quotes from Ed in Red)

Thu, 20 Sep 2007

Father and Son Discuss Trading

Son to Father - 9/20/07

Today I lost $400 on Silver by carelessly entering a order for 10000 units instead of 100 units. I looked at the order form for 100 units closed it. Then reopened and entered a limit order between the bid and ask prices.

The problem was when you open an order book the default unit amount is 10000 units. I entered the order waited 15 seconds and then saw the order was filled ... at 10000 units it opened $435 down. I panicked and immediately market closed it out taking the loss.

I still believe the trade was the right trade to make based on my system and the chart but I felt horrible. I was f---ing furious at myself for my carelessness.

Embarrassed, I repeated the same mistake I'd made almost exactly 3 years ago. I can't remember being that mad in years. If I had not been at work I would have screamed as loud as I f---ing could. I wanted to fight someone right there.

Pretty funny now that I think about it. The worst part was letting my dad down 3 days after he trusted me with his money made me feel pretty stupid, I also have some guilt over trading money that's not mine because I feel like I have no emotional attachment to it and losing this money in such an idiotic way increased the guilt.

I may get back into the silver trade tomorrow but right now I feel I need to clear my head. I'm ready for the weekend. This was a good learning experience - I will triple check all orders and watch my unit size especially with commodities and have changed the default unit size to 100 units even though now thinking about that now it would still be insanely f---ing dangerous with gold. I'm ready for the weekend - cash the check and I'm sorry.

Father to Son 9/20/07

Thank you for sharing your feelings about this with me. Good job on feeling this. It is kind of like that story that Ed tells about the golfer that played in college with Tiger Woods who moves to Phoenix after being in the Incline Village tribe.

After about 6 months, he has become known as The guy to see if you need to get your psychology straight about your golf game. One day he is playing golf with the number one junior golfer in the world, and the kid bogeys the first hole. He tells the kid that if he can not resist but can fully experience all of the feelings associated with making a bogey then he will have an opportunity to shoot the best score of his life.

The kid ends up shooting a 63 for that round, one stroke off of the course record --- and the best round of his life. 

Love,

Thank you for sharing your process.

You might consider taking your feelings about <being furious> and <formalizing your agreements about dealing with errors> to your Tribe as  entry points.

Father and Son

passing the craft.

Clip: http://www.hbo.com/docs/programs/

fatherson/index.html

Thu, 20 Sep 2007

Learning to Trade - Wants to Add On to Position

Ed,

Today, I have another very big up day. My account, after just 4 weeks of trading (the first week I could not get my account open and I did not buy into the wheat move when I might have) is up very close to 200%. Amazing. And I know that it does not always happen like this, and I do know that it did happen like this this time. I am so pleased by this.
 

Tomorrow, I plan to study the charts and determine whether there is a good place for me to add on to any of my positions.

Thank you for sharing your process.

A 200% gain is, by many standards, already a huge winner.

You might consider checking your risk numbers,

and back-testing your ideas before you try to medicate your feelings of invincibility and greed by employing the moron (more-on) rule.

Fri, 21 Sep 2007

Confirming Attendance To Workshop

Thu, 20 Sep 2007

The Fed Acts

Ed,

What do you think about the recent Fed actions?

The Fed is implementing the medicinal response to the fear of a credit implosion: namely, applying even more of the credit drug.

Heroin addicts face systemic resistance to getting off the drug.  Our culture has an advancing credit addiction.

The pro-active response is to allow the economic system to cleanse itself and to support people in experiencing their feelings.

Bernanke Buck

Graph shows the dollar index.

In parts of the US

we are consuming capital

to meet operating expenses. 

In parts of the world,

people are saving money,

and creating capital.

Recent actions by the Fed

are accelerating a weakening

of the US dollar

against other assets.

Clip: http://www.telegraph.co.uk/money/

main.jhtml?xml=/money/2007/09/19/

bcnsaudi119.xml&CMP=ILC-mostviewedbox

Thu, 20 Sep 2007

Jurassic Park and Wall Street Follow-Up

see previous

Ed,

I do not see the reference that you mention.

The item:

That meant that most of China's prodigious savings had to be exported or the nation's interest rate structure would have been under sustained downward pressure, which would have triggered inflation.

Thu, 20 Sep 2007

Trading Improvements

Hi Ed,

I want to share my trading experience over the last week or so. First, I now realize that I created a system and rules that allow me to have Drama.

It/me were great at that, but not profits. The system requires lots of intra-day maneuvers and was short-term. Before exposure to your FAQ and TTP processes I was breaking many rules and not following the system. This worked very well at drama creation and draw down.

In the time since I last wrote, I gained an awareness of this just by reading the web site and I have followed rules better. I am also reworking the system based on what I am learning with intent of drama-less profits. One pattern that I was repeating was to have an exit hit (stop loss usually) and then to just reenter with in a minute or so. The reentry almost always went against me and I would feel or try to feel a range of Feelings. Anger, Fear, Rage, Confusion, Contempt, Frustration …

Now I am following the system and feeling feelings and just noticing them without taking action other than to write about it in a journal.

I had 3 stops hit since I last wrote and I did not reenter any of them. When the 1st one happened I felt anger at first (“I wanted this to win, not be a loss, this makes me mad”) and an urge to reenter it, but I just took a breath picked up a pencil and wrote about feeling angry, then sad and then fearful it would move without me and then about feeling OK and then glad I was following my rules. The next few stops seemed about the same but easier. This feels great, I am so happy I found you and the TTP, thank you!

Thank you for sharing your process. 

Willingness to experience your feelings about your system without acting on them is essential to system trading.

Bela Fleck is the man.  Everyone else is a banjo wannabe.

The Flecktones

Clip: http://bassnews.co.uk/bela-fleck-

Thu, 20 Sep 2007

Financial Freedom Comment

Thu, 20 Sep 2007

Steve Jobs Speaks Out

Dear Ed,

This is Steve Jobs' Stanford Commencement Speech 2005. It gives me goose bumps.

OK.

Wed, 19 Sep 2007

Learning to Trade - Rolling Forward

Ed,

Today I get a call from my broker saying that I must take delivery of October crude oil if I do not close out the position today. The last time this happens I squenched up so much I almost bit a whole in my shorts and got a knot in my stomach. Today, I calmly tell him I want to execute a spread trade to roll the position to November and he gives me a quote which I have him execute at market.

Thank you for sharing your process. 

Sometimes almost everything trends at the same time.  Sometimes they don't.

You might check to see what kind of gain you have if the market takes out all your stops.

Fish Travel in Schools

A Barracuda

may notice a fish

that does not conform

to the pattern

as part of the process

of removing the sick fish

and strengthening the herd.

Clip: http://www.fisherycrisis.com/

Wed, 19 Sep 2007

Feeling the Fear Again  - and Letting it Go
 

Ed,

The day before the Fed rate cut, my fund (US stocks only) is in a drawdown of 25% from its previous high, which was the date of the all-time high on the Dow. Trend identification has been pretty good, though the dramatic quick downdrafts that occurred in July (long) and August (short squeeze from the cut in the discount rate) have been impossible to catch. I have been leveraged long the market since Sep 4 and basically treading water, following my system and executing a few recommended stop-out trades using end-of-day data.

On the day of the Fed meeting I woke up early and ran through a few mental scenarios: “If they don’t cut rates, the market is bound to take a big hit-maybe 300-500 points, which is happening with greater regularity now”; “If they cut 25 bp, the market will probably still take a hit of some degree in a “sell on the news” reaction, since 25bp has been talked up for weeks now”. “If they were to only cut the discount rate, the market takes a big hit”. What should I do?

The answer for me was to go to my simulations for a period of time that is similar to this one on the charts and in the type of economic scenario of a credit crisis; 1998. I compared my current drawdown to that time and also to my overall 10 years of simulations and determined that I was still (at 25%) well within my simulated yearly drawdown expectation and much less than the drawdown of the same period in 1998; in fact I was still under the annual average drawdown expectation.

But fear of being wrong this time had begun to exert itself. I thought of just selling out and sitting in cash to avoid further losses.

In the end, I held my positions throughout the day and did not tune in CNBC to watch the drama that must have been unfolding like the countdown to a prisoner execution (I felt the fear that a prisoner facing his final moments must have felt).

There are a few reasons I was able to do this: First, I completely understood the psychological significance of the value of back-testing my system and I placed high value on the time and effort that went into those many hours and months. I reflected on the positive results that following my system in my own account had yielded in the past year. I also knew that if I abandoned my system out of fear of failure, then I was indeed admitting even greater failure, whether or not any action that I took might prevent further financial loss in the fund.

In the end, I freed myself from the fear and relied on a few personal life experiences in which I have persevered under even greater pressure.

You see, I am a former Air Force pilot and survived several combat situations over North Vietnam under surface-to-air missile attack and have experienced near-death feelings. It was my combat experiences, my training and time in a flight simulator that helped get me through.

I also have experienced the loss of my 19 year old son to suicide. Fear in the markets, while very real for all of us from time to time, can also be worked through. We live on, and we will feel fear again and again on other days as we come to realize its positive intention.

Thanks, Ed. I am certainly no expert and have much to learn about the markets. My main goal is to continue to better understand myself and how and why I function.

Thank you for sharing your process.

A positive intention of fear is risk control.

Unwillingness to experience fear is risky.

Wed, 19 Sep 2007

October 19, 2007 TTP Workshop Intentions

Dear Ed:

Thank you very much for your email. I'm excited to participate on the TTP Workshop. I read your book and some of the FAQ's I share my intentions for the workshop with the [City] Tribe, they are below.

Tue, 18 Sep 2007

Back Testing Multiple Instruments

Tue, 18 Sep 2007

Learning to Trade - Good Ones Pay The Freight

see previous A Big Up Day

Ed,

Today my Dow Jones short position hits its stop and takes me out of the market at 13500 for a loss of $1910. I have been stopped out of Dow Jones twice, wheat once and British Pound once. And still I experience another huge up day today.

At this point my account is up over 130% at Day 3 of Week 5 of this experiment in learning to trade. I understand how amazing this is -- one (or two) good ones pay for them all!

I also am coming to an understanding that this is the system -- ebb and flows, up and down. I recall a line from a poem from my youth by Rudyard Kipling called IF: If you can meet with triumph and disaster and treat these two imposters just the same." I feel pleased and optimistic -- and very aware that tomorrow may be a down day.

I am also reminded of the Sufi story of the man and the horse -- "maybe yes, maybe no, it is hard to say, all I know is that today I am up."

Tue, 18 Sep 2007

TTP Video Recording

Ed,

Periodically I review the pollinator pages and learn something new every time I go through them. Ed, I find the following curious:

Ed Says (From Pollinator Page: How to Run a Tribe Meeting)

I am trying various ways to get the work out there - the web site FAQ and the Pollinator pages. I think we might have a discussion about our last Tribe meeting. Maybe some day I can record an actual Tribe meeting although I have some concerns about recording maybe inhibiting some parts of the process.

I wonder how fast TTP would grow world-wide after posting even 1 or 2 live TTP sessions to the net, possibly with a brief introduction by you providing a general overview of the process.

Thank you for your comments.

You might consider taking your feelings of <having TTP on  tape> to your Tribe as an entry point.

Some Of The Forms That Appear in TTP

are highly personal.

Clip: http://drzaius.ics.uci.edu/mt3.14/

Tue, 18 Sep 2007

Maui Tribe

Tue, 18 Sep 2007

Associate Program Feedback

see previous: Risk Management

Mon, 17 Sep 2007

Learning to Trade - Big Up Day

see previous - A Big Down Day

Ed,

On Monday I experience a big up day.

I am up all I was down on Friday plus half again as much.

My stop on the pound is hit and I am out. But, gold and crude are up big time. I find that in the 4 short weeks of this experiment my little account is up over 80%. Amazing.

Truly amazing, because I have had my stops hit a few times and had some pretty big losses. The interesting thing is today I feel happy but in a more pleased relaxed kind of way, like this is the system and this is the way the system works. Some days up, some days down, which days I don't know just that today I am up.

Another interesting thing happens this morning. I am reviewing my account and see that I am not only out of the pound but that I am negative or short 1 contract. I think this is unusual so I call my broker. They tell me that I have executed on my stop loss for my Sept pound position. I remind them of our conversation last week when we rolled over the Sep for the Dec and set up a new stop loss for the Dec.

They say that I did not say cancel the stop loss for Sep when I roll out to Dec. At first I am a little upset and go into lawyer mode on them. Then I realize that this is their system and I calm down. I ask questions about my options at this point and get clarification for how much this costs me because I have sold short a contract that is expiring and stopping trading in minutes.

Thank you for sharing your process.

Tue, 18 Sep 2007

IV Tribe Meeting Dates

Hi Ed,

Thanks kindly for the reply & the invite to attend the IV tribe meetings on the  4th & 25th Oct.

I will attend the Workshop on the 19th Oct. & the Tribe meeting on the 25th Oct.
 

Mon, 17 Sep 2007

Financial Freedom #2

see previous Financial Freedom
 

Yes, you might interpret having no mortgage, or salaries to meet, or taxes to pay, or debts or money in the bank as a form of freedom from finance.

Financial Freedom

Clip: http://www.treklens.com/gallery/Asia/

Mon, 17 Sep 2007

Relationship With Parents

 
Dear Ed,

Thank you so much for TTP and FAQ. Through your help I am becoming a better person.
 

I'd like to share with you a recent experience.
 

Last week I have returned home to stay a few days with my parents. Some friends of ours have come to stay with us during the week end. One morning I had a discussion with my father and after that we have not been talking to each other anymore. Most of all,

I am very upset because I think he is not considering my mother a lot. My father does not understand that he could help my mother a lot if only he stopped criticizing her. Instead he thinks to be right acting in this way. I think the depression my mother is living with is a consequence of not  being supported by a man who is willing to consider her feelings and  ideas.

Instead my father thinks the problem is my mother and her negative attitude towards life. He has never asked her who she is feeling. Also I feel sad because just before leaving, my mother was crying at the airport.

Thank you for sharing your process.

Your mother and father are part of a system; their rocks fit together and they are familiar with how the system works.

The problem, if anything, is that you feel upset about what you see and you feel a need to medicate the symptoms.

You might consider taking your feeling of <upset about how your father treats your mother> to your Tribe as an entry point.

Your medicinal pattern is to tell your mother to not worry. You might consider a pro-active response such as validating your mother and her feelings by accepting her sadness and encouraging her to cry and talk it out.

Crying Arouses Sympathy

You may respond medicinally,

by advising some variation of

"There, there don't cry,"

You may also respond pro-actively

by acknowledging and encouraging

the sadness - until it produces an aha

that addresses the underlying situation.

Sun, 16 Sep 2007

Financial  Freedom

Hi Ed,

My experience with the Snapshot is that I envision a still picture that is emotionally vivid to me, that I can feel it in the present moment, and I share it with the Tribe. If I can communicate and radiate that to them on a feelings level, the intention is clear and I can commit to the process of achieving it.

I like the idea of commitments and working hard. I am on a mission to lose weight and get in shape. I have my Snapshot, and I work hard at it. I am seeing results and I feel good.

Like a lot of people, I want financial freedom and I dream for a day when I don't have to work for money.

And I truly wish I can have unlimited amount of money to help those in need. Sorta like a Santa Claus and help making others realizing their deeply-rooted dreams. I feel like the smiles on the others is one of the most gratifying, rewarding, and fulfilling feelings.

As I think about this, I have a frightening realization: I don't want to commit to making money!! I don't want to be money-driven!!

You might consider taking your feelings about <working for money> and <having a fun job> to your Tribe as entry points.

You might also like to consider the definition you have for of "financial freedom."

Janis Lyn Joplin

(January 19, 1943 – October 4, 1970)

Me and Bobby McGee

by Kris Kristofferson

Freedom's just another word

for nothing left to lose,
Nothing don't mean nothing honey

if it ain't free, now now.
And feeling good was easy, Lord,

when he sang the blues,
You know feeling good

was good enough for me,
Good enough for me

and my Bobby McGee.

Sun, 16 Sep 2007

Learning to Trade - A Big Down Day

see previous - Less Emotional

Ed,
 

On Friday I experience a big down day. The pound gaps down in a big way. Also, gold and crude are down. The interesting thing is I do not panic or feel a lot of anxiety.

This may be because I look at risk on the basis of closed equity and not market equity. It seems I have the understanding that to make outsize returns I am also subject to some outsize losses (at least in terms of market equity).

Over all, I have gone from up 20% this month to up 6%. I realize that this is big drop, but my feelings about it are really pretty good -- it feels like it is just part of the game.

Thank you for sharing your process.

You may be coming around to holding trading as a system of many positions, rather than fighting with, or having to be right about, individual positions.

Note: 20% swings are fairly large by professional trading standards.  Some large funds may normally vary a few percent in a month. 

You might consider taking your feelings about <ups and downs> to your Tribe as entry points.

Bungee Jumping

like high-heat trading

can be fun and exhilarating

if you enjoy experiencing

the feelings

or painful

if you don't.

Clip: http://www.etribes.com/sites/etribes.com/

Sun, 16 Sep 2007 14:59:55 -

Living Life to the Fullest
 

Insights about right livelihood sometimes appear at Tribe Meetings during the Snapshot Process.

You might consider taking your feelings about <asking questions> to your tribe as an entry point.

The Klein Bottle

in the shape of a question mark

merges inside and outside

into one continuous side.

Clip: http://www.kleinbottle.com/

Sun, 16 Sep 2007

Gliding Along

Dear Mr. Seykota, 

How are you? I hope you and your family are well. I hope you don't mind me enquiring, but do you have any plans to publish The Trader's Window yet?  The story from Market Wizards of the jade master has come to mean a great deal to me. I realized a while ago that i was the interrupting student, and sweeping the floor was sweeping out my feelings and beliefs and confronting them.

Your concept of everyone gets what they want from jade, sorry, the markets, has also had a profound effect on me. I now realize that the last two years i spent losing money in the markets, i too was getting what i wanted.

But since i accepted this belief, like the student of the master, i have been interrupting my teachers less and less, and now i have changed what i want from the markets, and am getting it as you said.

My trades glide effortlessly along until they either hit stop, in which case they sink gracefully into the abyss of forgotten history, or they hit a tightened stop, and gracefully glide down into my account as profits. This is what i want. In fact, i have surrendered so completely to learning, responding to my feelings, improving myself and leading a fulfilling life, that i am actually overcoming hurdles i have thought my whole life, were an irremovable part of who i am.

For instance, my girlfriend today sprang a day out with her parents on me at the last moment. i have never been relaxed in their company, even though they are nice people. I fear i won't know what to say, and that is exactly what i get most times. Not any more though.

Thank you for sharing your process.

Sun, 16 Sep 2007

Vincent Van Gogh

song & power point show

Note: If the song does not play,

try downloading it and saving it it first.

Nice presentation.
 

Vincent

by Don McLean

Starry starry night
paint your palette blue and grey
look out on a summer's day
with eyes that know the darkness in my soul.

 
Shadows on the hills
sketch the trees and the daffodils
catch the breeze and the winter chills
in colors on the snowy linen land.

And now I understand what you tried to say to me
how you suffered for your sanity
how you tried to set them free.
They would not listen
they did not know how
perhaps they'll listen now.

Starry starry night
flaming flowers that brightly blaze
swirling clouds in violet haze reflect in
Vincent's eyes of China blue.
 

Colors changing hue
morning fields of amber grain
weathered faces lined in pain
are soothed beneath the artist's loving hand.
 

And now I understand what you tried to say to me
how you suffered for your sanity
how you tried to set them free.
perhaps they'll listen now.
 

For they could not love you
but still your love was true
and when no hope was left in sight

on that starry starry night.
You took your life as lovers often do;
But I could have told you Vincent
this world was never meant for one
as beautiful as you.

Starry starry night
portraits hung in empty halls
frameless heads on nameless walls
with eyes that watch the world and can't forget.
 

Like the stranger that you've met
the ragged men in ragged clothes
the silver thorn of bloody rose
lie crushed and broken on the virgin snow.
 

Sun, 16 Sep 2007

Alan Speaks Out: It was About the Oil!

Observe what an intelligent person, no longer the influence of politics, says and does.

http://www.timesonline.co.uk/tol/

OK.

DUI

Directing Under the Influence

Sat, 15 Sep 2007

Start Date Dependency

Hey Ed,

My equities trend following system is progressing nicely. I notice that the system becomes more and more in line with the way I like to do things and think about things.

Lately I think about the email you wrote to me regarding start date dependency. I wonder about the specific types of problems this can have for my research and I try to come up with solutions to get around this perplexing issue.

Ed Says:

When you begin trading, you quickly fill up your portfolio with stocks, so your results, for slow get-out systems has start-date dependency.

In the overall system of things, when you sell something and you can buy something new, your MAR may have more to do with your selection strategy than with your exit strategy.


Ed, I wonder if I can relieve the "start date dependency" for "slow get out systems" by varying the start date and the end date.

As far as I know, fund managers do not have much interest in discussing and/or working on the issue of start-date dependency.

Sat, 15 Sep 2007

Trading Experience

Hi, Ed

By chance I read Trend Following book and I found www.turtletrader.com & your website. I was so impressed with your way of investing.

KOSPI (Korea Composite Stock Price Index) of Jan 07 was in a 1300~1400 point range,
until July. Then it was up to 2015 point and went down during august to 1700.

Thank you for sharing your process.

You might consider taking your feelings about <a giant wasp sting> to your Tribe as an entry point.

Wasp Stings and Market Whipsaws

are essentially inevitable

and don't usually cause irreparable harm

unless you get too many of them

all at once.

Clip: http://trouble.philadelphiaweekly.com/

Sat, 15 Sep 2007

Too Funny

see previous

Hi Ed,

re: You reply to FAQ dated 7th September 2007 - "Positive intention of Cycles".


What an absolute cracker!!

ROTFLMHO !!

Cheers,

-----

* ROTFLMHO

Thank you for the encouragement.

Sat, 15 Sep 2007

I am planning to host Tribe Meetings on October 4-th and 25-th.  You are welcome to attend either or both.

Wed, 15 Sep 2007

Jurassic Park & Wall Street

Ed,

I thought you might enjoy reading the enclosed journal from Don Coxe.

He does a great job of mixing his investment ideas and uncommon perspective in with stories of:
 

Mad scientists of Jurassic Park Avenue
Wiccans
Triskaidekaphobia
Eager Germans
Mick Jagger
Vasectomies
Physics and math
The global fool supply

While I can relate to much of his thinking, I do not see how inflation results from industrious, productive living; I feel inflation is more a function of expanding the money supply.

Fri, 14 Sep 2007

Replacing a System

Ed,

Do you think that systems, however good they are, eventually lose their edge (positive mathematical expectancy to make profits) so they need to be regularly refreshed and even replaced from time to time?

I heard this from an author who sells courses on systems trading and building.

Your math is one of the essential components of your overall system; another is your willingness to follow it.

During draw downs, people may abandon their math and look for another system.

People With Problems

 in relationships

with people / trading systems

may give up their relationships

during hard times

only to discover similar problems

and similar hard times

appear in their next relationships

with people / trading systems

Clip: http://www.brisbanetimes.com.au/news/

relationships/breaking-up-is-easy/

Date: Fri, 14 Sep 2007

Learning to Trade - Less Emotional

see previous Wheat Feelings

Ed,

OK.

Fri, 14 Sep 2007

Greenspan Book

Ed,

Greenspan's new book Criticizes Bush and the Republicans - says "They Deserved to Lose."

In his book, Mr. Greenspan defends the policy of cutting short-term interest to 1% in mid-2003 and keeping them there for a year by citing a desire to fight "corrosive" deflation.

Deflation increases the value of money and helps raise the standard of living for people who save; it penalizes those who borrow; it entrains low (even negative) interest rates.

x

"We wanted to shut down the possibility of corrosive deflation. We were willing to chance that by cutting rates we might foster a bubble, an inflationary boom of some sort, which we would subsequently have to address ... it was a decision done right."

Fri, 14 Sep 2007

Humor and Lessons

see previous

Hi Ed,

Fri, 14 Sep 2007

Associate Program - Risk Management

see previous

Per your method,

N - number of contracts

E - equity

M - margin

R - risk per trade

r  - risk per contract

 

N = .1 * E / M  (per rule #2)

R = .02 * E  (per rule #3)

 

eliminating E, we have

 

N = .1 * [R / .02] / M

R/N = .02/.1 * M

r = .2 M

So your math sets your stop at 1/5 of the margin; you have margin-dependency in your risk management.  I see no mention of what you do with your positions if the exchange raises or lowers margins.

The current margin on CBOT wheat is about $2,000 per contract so you are risking about $400 or 8 cents per contract; you place your stop about 8 cents below your entry.

That seems a little close to me for long-term system trading. You might try some simulations to see how this works.  Let me know how it comes out.

Meanwhile, you might consider taking your feelings about <mastering the standard text books on risk management> to your Tribe as entry points.

Shooting Yourself In The Foot

Close stops

and close toes

are both pretty much

easy targets

for execution.

Clip: https://ww2.klatu.net/ecom/images/

Fri, 14 Sep 2007

Hot-Headed Investors Make Better Decisions

Hi Ed,

Here is an interesting article that I read today. Thought you'd like it.

http://news.yahoo.com/s/nm/20070913/

bs_nm/markets_stocks_emotion_dc_2;_

Fri, 14 Sep 2007

Provocative

 
Ed,

You're very good at explaining, in great detail, the basics of trading. I see someone ask about rolling a contract, you talk about contract details and how the their order process might miss the move; yet you don't advise feeling the feelings around preparation.

You post a message after you visit Austin. You say you ask the traders association how many traders are long wheat, and no one is. I wonder if you ask that same question to the IV tribe and I wonder what the answer is.

I wonder if you help your tribe become more profitable traders, or if you just help them feel their feelings and play with rocks.

If you hold a spread position, say long September Wheat, short December Wheat, you might instruct your broker to "exit the spread." 

The orders, "buy the spread" and "sell the spread" might be ambiguous.

You might consider taking your feelings about <provoking and teasing> to your Tribe as entry points.

Sometimes People Tease

in order to engage other people

into a quarrel

that provides contact

without risking intimacy.

The teaser typically has

an intention = result

of provoking / alienating people

and then winding up lonely and bitter.

People who tease the markets

sometimes get a substantial,

impersonal and swift

tease-back in return.

Tease

Etymology: Middle English tesen, from Old English:

t[AE]san; akin to Old High German zeisan to tease
 

1 a : to disentangle and lay parallel by combing or carding
2 : to tear in pieces; especially : to shred (a tissue or specimen) for microscopic examination
3 a : to disturb or annoy by persistent irritating or provoking especially in a petty or mischievous way b : to annoy with petty persistent requests : pester; also : to obtain by repeated coaxing c : to persuade to acquiesce especially by persistent small efforts : coax d : to manipulate or influence as if by teasing e : to make fun of : kid
4 : to comb (hair) by taking hold of a strand and pushing the short hairs toward the scalp with the comb
5 : to tantalize especially by arousing desire or curiosity often without intending to satisfy it

Clip:

http://www.teaganpresley.com/

Definitions:

Fri, 14 Sep 2007

Whom to Blame

Fri, 14 Sep 2007

Fri, 14 Sep 2007

Thank you for sharing your process.

Accurate and Precise

Accurate and Imprecise

Inaccurate and Precise

Inaccurate and Imprecise

Fri, 14 Sep 2007

Feelings, Drawdowns and Heat
 

Hi Ed,

I read your comment:

"Beginning Trend Traders might do well to study this back-test and notice how they respond emotionally."

Your statement is a very interesting topic. When I run a back-test, I tend to focus on two numbers, the icagr and the max drawdown. However, I only see these as numbers. I cannot yet fully associate a number with my feelings. One of the things I intend to accomplish being long GLD it to build some connections between the numbers the back-tests produce and my feelings.

A 38% drawdown in my net equity in one day is probably much more than I would be comfortable with. The "puking-point" comes to mind! So I keep in mind the two topics you teach about managing risk:

1) individual instrument heat
2) portfolio diversification

Your real trading system includes your math and your own willingness to experience your feelings about following your math.

Knowing how much heat you can handle is essential.

You might consider taking your feelings about <draw downs> to your Tribe as an entry point.

If you wish to engage with a Hottie ...

... you might consider

implementing a way to keep cool ...

... or at least have some knowledge

of the nature of heat.

Note: The plot units are

W/mK for heat conductance

and J/gK for specific heat capacity.

Clips:

http://www.leecountynightlife.com/

images/BikeNightHottie.jpg

http://www.popamericana.com/!/Hottie%2520is%2520right.jpg

Fri, 14 Sep 2007

Game Over

Thank you for sharing your process.

The price of CBOT Wheat is currently around $8.44 per bushel.  So $844.00 buys 100 bushels and $8,440.00 buys 1,000 bushels.

The standard CBOT contract is for 5,000 bushels and the Mini Wheat (not a breakfast cereal) contract is for 1,000 bushels.

For the minis, the move off the recent highs ($9.11-1/2 on 9/12) to your $8.44 is about 67-1/2 cents or about $667.50 per contract.

Christmas Eve appears on December 24 and Christmas appears on December 25.

You might consider taking your feelings about <accuracy> to your Tribe as an entry point.

Mr. Mini Wheats

may have trouble

delivering accurate hand signals

in the CBOT trading pits

with only four fingers.

Thu, 13 Sep 2007

Wheat Feelings

see previous

Ed,

Interesting feelings with trying to roll my wheat contract forward to December. I call my broker to set up a spread rolling forward trade and am told that I have a problem.

He tells me that the wheat was put to me last night by someone holding it as a short and that I have taken delivery of the wheat.

I feel a slight pucker in the sphincter and a little knot in the stomach as I calmly ask about what my options are.

He tells me that they are still trading the Sep Wheat and he will enter an order to get me out at market.

 
I then learn I can ask them to re-tender and then set up a spread to roll the position. By time I get through to him, he tells me that I am out at the market which at the time is 841.25.

As wheat proceeds to drop further during the day, I am feeling rather lucky to be out.

All in all, a rookie mistake that doesn't cost me too much. This is kind of like the guys I knew growing up that worked in the oil fields of Texas.

Thank you for sharing your process. 

You might consider taking your feelings about <pucker in the sphincter> to your Tribe as an entry point.

Sphincter

Essential in the process

of letting go.

Lauren Bacall

advises Humphrey Bogart

in the movie, Casablanca (1942)

Just pucker up and blow.

Clips:

http://apps.uwhealth.org/health/

adam/hie/2/9629.htm

http://www.worth1000.com/web/media/

Thu, 13 Sep 2007

Workshop - Knowledge Requirement

Ed,

Trading is not my intention.

I am familiar with the Trading Tribe, Glossary Page and the Trading Tribe Process page. I read FAQ, but I can't claim that I am "familiar with the materials on the FAQ pages". For instance, I am not familiar with the process described below.

"You can enter a spread order by (1) specifying the differential as a limit or (1) at the market.
The broker executes both sides simultaneously. If you try to micro-manage the roll process by entering two limit orders, you run the risk, in a declining market, of doubling up on your position - and in a rising market of losing your position. Note: with limit orders, you may be unable and miss the move."

I understand "The participants determine the specific content of the course by the issues they bring to the workshop." In your experience, is an understanding of the trading process required to experience the specific content?

People with a wide range of interests attend the Workshop. 

Recent attendees include a geologist, a college professor, a housewife, an advertising executive, a therapist, a programmer, a radiologist and, of course, many traders.

So far, no sweepers or strippers, although I am open to them.

Chimney Sweep

Cleaning up

in the markets and elsewhere.

Strippers

buy and sell a sequence of deliveries.

Clips:

http://www.sweep-dreams.co.uk/

Wed, 12 Sep 2007

Learning to Trade - Rolling a Position

Ed,

Today, I get a call from my broker telling me that September Wheat expires on Friday and that I need to close out the trade. I put in orders to sell Sept Wheat and buy Dec wheat with a spread of 20. My orders are as follows:

Sell Limit Order 1 Sep Wheat at 840.0.
Buy Limit Order 1 Dec Wheat at 864.0.

You can enter a spread order by (1) specifying the differential as a limit or (2) at the market.  The broker executes both sides simultaneously.

If you try to micro-manage the roll process by entering two limit orders, you run the risk, in a declining market, of doubling up on your position - and in a rising market of losing your position.

Note: with limit orders, you may be unable and miss the move.

Spreading Can Be Good Exercise

Practice and understanding

can help you to avoid

hurting yourself.

Clip: http://www.treeoffitness.com/Photos/

Wed, 12 Sep 2007

New Fuel?

Ed,

Wow?

http://www.youtube.com/watch?v=Tf4gOS8aoFk

http://www.cosmosmagazine.com/node/1578

 

-----

Jesse Can we really set fire to water?
Wednesday, 12 September 2007

by Carolyn Barry, Cosmos Online

Smoke and mirrors?: The extraordinary claims have sparked a frenzy of interest across the Internet.
 

The radio-wave energy you have to put into the process to separate the H₂ from the O likely exceeds the heat energy you get back from the flame.

Otherwise, lakes, rivers, streams and bathtubs full of water would spontaneously burst into flame and vaporize.  No sign of this yet up here at Lake Tahoe.

Similarly, the amount of energy in a gallon of ethanol is generally less than the amount of energy it takes to produce the gallon of ethanol.

Wed, 12 Sep 2007

Black Monday Drawdown

see previous

Ed,

My equity log matches your test run of the TSP EA 150/15. On Friday 10/16/1987, net equity = 1,922,224.

The following Monday 10/19/2007 (Black Monday), net equity falls to 1,175,286. This one day change in net equity represents a 39% drawdown.

OK.

Wed, 12 Sep 2007

Tribe Helps Relieve Family Shame

see previous

Ed,

On August 17th FAQ page I read the post "an old familiar feeling" and your answer that guilt can entertain drama that stands between a person and prosperity.

Something struck a chord in me and I started thinking about it. I have had that "old familiar feeling" myself.

In fact if you followed me around and watched me in day to day situations you may come to the conclusion that I had done something terrible to feel guilty about.

This feeling has haunted me as long as I can remember. It is like a dark cloud that is almost always back there. After some thought I realized that the feeling was not guilt after all but shame. SHAME was the correct label to the feeling that is always back there.

Now why do I feel shame? Am I that bad a person, have I done the unpardonable sin, Am I unworthy of feeling good about myself, Where or what is generating this feeling?

I took this feeling to my tribe and after all this time I got relief. I feel free and clean.

I have come to realize that this shame was passed down to me by my parents. When I was a child I was criticized and put down just for being a kid. If I was happy and smiling I was rudely asked what I was smiling for, if I didn't do my chores perfectly I was berated and glared down, if I asked a simple question out of curiosity I was asked, not very nicely, why I need to know, if I made an innocent mistake I was punished.

Wed, 12 Sep 2007

Wed, 12 Sep 2007

An Article About Fear

Ed,

Pros have different opinions about fear in this
article. The conclusion words, "The best antidote for
fear just may be fear itself.", attracts my eyes most.

Atricle: http://online.wsj.com/article/

Wed, 12 Sep 2007

Offensive

Wed, 12 Sep 2007

Checking Markets During the Day - Distraction

Ed,

GLD rises with the price of gold. I feel pretty calm; no feelings of wanting to exit or move my stop. I feel like I have a plan and that gives me comfort. I just go with the flow. I feel the difference between back-testing and actually trading a strategy.

One thing I don't like is that I check the markets during the day and it distracts me from my research and programming.

You might take your feelings about <checking the markets and not liking checking the markets> and <wanting a plan that gives you comfort> to your Tribe as and entry points.

You might examine the precipitous drop in equity about 1/4 of the way through the run to see if that is an actual draw-down or an artifact of the computation.

Performance Graph

Wed, 12 Sep 2007

TSP question

Ed,

Thanks for FAQ and the TSP pages.

On this web page:

http://www.seykota.com/tribe/TSP/EA/

Thank you for the catch !

The item now stands as:

Now at the close on Thursday, the price is 19.  We can create a new Three Point Average from {T=11, W=15, H=19} and that gives us 15.  So Thursday's three point average is 15.

Tue, 11 Sep 2007

Ed's FAQ Commitment

Tue, 11 Sep 2007

Feelings About Trading

I turn on the computer this morning when I get to work to see that I am up almost 5% over night. I then watch it as it sinks to 2.5% up, but don't feel too bad about this since this is just part of the trend following game.

If you are sampling the market several times a day, and if you are having substantial emotional reactions to these measurements, you may find yourself synchronizing your trading frequency to your sampling rate.

Optimization studies on trend following systems indicate a trading frequency of a few times per year and less.  See TSP, above.

Essential Trading Equipment

Mostly, your best move

is to sit on your butt.

Clip: http://www.betterbuttocks.com/

betterbuttocks_idealbuttocks.htm

Tue, 11 Sep 2007

Free Capitalism

Dear Ed,

ffffft, booom ... dead. No, sore throat (???). Never had that the last 10 years.

This saves me from a lot, among others a lecture about Turtletrading ("Where is my stomach...") and an evening about investment opportunities in Eastern Europe - via derivatives - hosted by several banks (OH - MY - GOD).

-----

 

This gives room to follow the most interesting economic discussion.

Everybody can watch that the worth of human labor in our countries is steadily decreasing if computer, Chinese people, Indian people, robots etc. are doing the work. We get an offset by cheap Chinese goods which can be bought with little money.

Nevertheless, there are lots of people who lose the access to the workforce meanwhile people who hold workplaces have to work overtime because their power to negotiate the conditions of their offer of work vanishes when there are too many of them.

Free capitalism seems to be a solution since the money goes where the most intention is. This creates wealth.

But what do you do with the less able people like pregnant women, left by their guys, old people, ill people, orphans, etc.?

In free capitalism I miss the incentive to direct some money in that direction. Like Zimbabwe: the Chinese pay the party to get hold of the resources of the country, the wealth goes to some (Mugabe, a few workers) and not to the many in the population.

This is my problem with free capitalism.

In Europe there is an interesting discussion about a basic income: Give 1,000 ¤ to everybody and start the monopoly from there:

www.basicincome.org

Basic income is an income unconditionally granted to all on an individual basis, without means test or work requirement. It is a form of minimum income guarantee that differs from those that now exist in various European countries in three important ways:

- it is being paid to individuals rather than households;
- it is paid irrespective of any income from other sources;
- it is paid without requiring the performance of any work or the willingness to accept a job if offered.

Liberty and equality, efficiency and community, common ownership of the Earth and equal sharing in the benefits of technical progress, the flexibility of the labor market and the dignity of the poor, the fight against inhumane working conditions, against the desertification of the countryside and against interregional inequalities, the viability of cooperatives and the promotion of adult education, autonomy from bosses, husbands and bureaucrats, have all been invoked in its favor.

In Germany the idea is promoted by Götz W. Werner, an entrepreneur who built up a chain of drugstores from scratch and published several books about the idea of a basic income for everybody.

The Minimum Income Guarantee violates the principles of freedom and respect for private property; you have to tax someone to provide the income.  This discourages industry and rewards sloth.

For an example of an economy that is about as free as you can get these days, see Somalia. The country currently operates without a central government.  Despite predictions that the country would disintegrate into chaos, the opposite is occurring.  The standard of living is increasing faster than in the surrounding countries.

Somalia

An pretty good example

of a free economy.

Clip: http://www.theodora.com/maps/

new9/somalia_physical_map.jpg

Tue, 11 Sep 2007

Associate Program - Money Management

I am not clear on what you mean by:

1. The system trades one instrument, wheat, generic continuous contract, long and short.

 

2. The system trades 10% of the total equity on one position.

 

3. The system risk is 2% of equity per trade.