(Quotes from Ed in Red)

Ed Says

Hi Ed,

I just saw that you've moved to Austin. Congrats! I hope it works out well for you. The average IQ of Nevada must have dropped precipitously since you moved - I believe your living there skewed the averages higher.

I've been to Dallas a bunch of times and I generally like Texas a lot.

How's the second book going? I can help you promote it when it's ready. I've been doing book reviews and recording some interviews with the authors and making them available as podcasts. They are a lot of fun and I've been reading some great books on decision making and risk management. I provide them for free, there's no charge to have access.

I have several online classes at UCLA, in addition to the ones I teach on the ground. One of them is a Psychology-based course as it relates to trading.

As promised, I haven't mentioned anything about Trading Tribe or anything about you or your Intellectual Property. Nor have I mentioned anything that would betray any of my former tribe members' confidences. I only have used myself and my own experiences as a trader and my personal growth story, which I think students will be able to identify with.

Let me know how you're doing and what you might be up for in promoting your book. I'd be happy to help you and it would be great to catch up.

Thank you for your offer.

Silk Acrobatics

Dear Ed,

A friend of mine is an aerial silk acrobat. Last night I get to see her perform. She climbs a 30-foot silk ribbon with ease on slim yet powerful arms. She drops 6 feet then snaps to a stop, suspended by a subtle wrap of silk around one ankle. The audience gasps. She lays horizontal in mid-air, demonstrating a contortionists' flexibility, then rolls herself back up even higher as the ribbon wraps around her waist. She continues to perform what appear to be exhausting aerobic feats for 20 minutes with no visible strain. There is just one woman on stage and a pair of long silk ribbons, yet with each passing minute the audience response in “oohs” and “aahs” and “uhhhs” increases. It is an astonishing performance.

After the show she returns to the stage to take audience questions. One man asks how she works without a safety line. She says "you are not allowed to fall." I surmise that if she falls her acrobatic career may be over. She does not mention, but I note, that she always has two points of attachment to the ribbon (a wrist and an ankle, for example).

This artist and her art are a metaphor for trading, in my mind. She uses what physical resources she has (slim yet strong physique, flexibility, mental focus and a high pain threshold), maximizing them through years of practice and training. She uses stops, manages risk, cuts losses, "rides the ribbon" and sticks to her system. The result is high entertainment for the audience yet minimal drama for her.

I seek to improve my trading by imagining that I am an aerial silk acrobat maximizing the effectiveness of my resources, attending to safety and not deviating from my system. If the acrobat’s entertainment value is analogous to wealth, then it is clear that one can build wealth with only strong determination, a eye to safety and a commitment to succeed, despite starting with limited resources and experiencing (non-fatal) setbacks along the way. My new mantra is “you are not allowed to fall!” This helps keep Fred aligned with my goals.

My friend, the aerial silk acrobat, is a very successful trader. Now I understand why.

You can find video of similar acrobats on YouTube. Search for "aerial silk."

Hi Mr. Seykota,

I am a writer for AOL Finance and would LOVE for the opportunity to do a feature interview with you. Any topics burning a hole in your mind?!

You are a legend in every sense of the word and I have followed your successful career over the years. I particularly enjoy the whipsaw song.

Please let me know if you have time as it would be an honor!

Warm regards.

You can find an interview with me in Market Wizards by Jack Schwager in which I lay out the basics.  If I think of anything to say that's new or different, I can let you know - maybe around the time I release my book.

Do you think TSP project will go on covering the others steps?

I don't have a way to predict the future of TSP.

Greetings Ed,

I am a big fan of yours based on my reading about you online and through various books. I am interested in learning more about the trading tribe and potentially working with you. Let me know how best to proceed.

You can start by browsing around on this site.

and take notice of your reply.
You use the 'ten commandments' as a metaphor to illustrate how hard it is, as a fallible emotive human being, to follow simple rules.

I recognize the 'essentials' as the simple rules I find difficult to follow, as part of being human.

I feel I have made an obvious insight, which, inextricably, I had not grasped until now.

The 'essentials' take on a new feeling for me.

A new context?

Thank you for sharing your process.

Now I want to make some clear commitments, as I've found that openly expressing them helps me in remaining focused on them:

-I commit to serve others by successfully managing my fund, protecting and growing the capital that has been entrusted to me;

-I commit to accept things and people as they are, without trying to figure them out or change them;

-I commit to enjoy my feelings and help others enjoy theirs;

-I commit to report to FAQ regularly, twice a month;

-I commit to attend a workshop, if and when Ed decides to hold one, as I feel this could be a great chance to work on those deep issues that are not easily dealt with "normal" processes or cannot be solved on my own.

Thank you for sharing your process.

Feelings from jubilation after the closure to sadness, frustration, disappointment and even violence toward him during the legal battles (never acted out but certainly felt).

Being a Tribe member and going to the hot seat during the divorce was a great help.

I am now a very happy person with a wonderful wife and 2 wonderful kids. The divorce is fast becoming a distant memory.

I am now in the process of becoming better trader.

Thank you for sharing your process.

Dear Ed,

In the book of Jack D. Schwager entitled "Market Wizards" you got the following question:

What traits do you look for to identify the winning trader personality?

Your answer:

1. He/she loves to trade; and
2. He/she loves to win.

The answer of question 1 I do totally understand.

The answer of the second question I do not understand fully.

Could you elaborate your answer? What do you mean by love to win; could you give an example.

Thanks!

You might consider taking your feelings about <loving what you do> to Tribe.

Now here's a keeper. Gotta be between 18" and 27" to keep.

We had him over for dinner :-)

Having a ball in Florida while it snows in Tahoe.

I wonder who's the guy holding you.

As I do, the feelings flow and I suddenly realize what to do: simply tell my wife that I know that she is overwhelmed by the situation and that she uses control to cope with it, and ask her if she wants to share her feelings about it with me. Maybe she is open for it and to find another, more satisfactory way to handle problems.

This stuff is awesome…

If she is merely exercising her preferences in parenting styles, you might consider taking your feelings about <wanting to control your ex-wife> to Tribe.

Risk_Per_Share = Ref(ATR0, -1) * ATR_multi;

Heat = Optimize("Heat", 0.05, 0.01, 0.21, 0.02);
BuyPrice = (H+O)/2;
SellPrice = (L+O)/2;

PosSize = Heat * BuyPrice/ Risk_Per_Share * 100; // percentage of equity

PSAdjust = 0.45; // the additional ~0.4% is used to simulate Ed's rounding to "nearest 50" instead of rounding down.
SetPositionSize(PosSize + PSAdjust, spsPercentOfEquity);

How the position size is calculated is necessary to know in order to have a proper risk management system in place.

Of course this contact with be anonymous with no mention whatsoever of your site … unless a person asks - if a conversation were to progress to this level of communication (5% possibility, in my opinion).

Thank you for your consideration in this regard.

With all the dynamic changes in our industry - with markets, regulation and corporate responsibility - please do not hesitate to re-consider our firm, with our ongoing capability for trade execution. Let me know if you have any questions.

You might also consider training your staff to bring them up to full-on professional capability before trying to market them.

Today, I experienced one of these exogenous shocks, which immediately triggered my positive self-talk intended to relax me and gain proper perspective. I managed to control the anger, but continued my activities for the next 30 minutes whilst modestly shaking at times and generally just not being in fully functional state. The feeling relaxed somewhat once I came home and created "a little drama". At this point I went into a yoga position on my bed and tried to relax and breathe. I realized that I was hoping for that person to respond to my dramatic action, and thus beginning to enter this state where I want to create drama and conflict to ease something in my mind. Since this is the source of the traumatic events which I have decided would occur for the final time last Friday, I stopped myself and asked what was causing me create this conflict. I could not figure it out, and I thus write to you in search of some direction or guidance on this matter.

All the best wishes, believe me.

Wants Information on Donchian

Hi Mr. Seykota,

I was hoping you could assist me. I know from reading about your trading that some of your trading systems have been based on Richard Donchian's work. I have searched high and low, but apart from a brief set of 20 rules have not been able to discover anything he has actually written on his approach to developing trading systems. Are you aware of any material that I could either buy or access through some source that would allow me to study his work first hand? I am somewhat cautious about relying on third-hand sources claiming what Donchian's systems were.

Many thanks in anticipation, and thank you for writing the Trading Tribe book.

The TSP project on this site has some examples of Donchian systems.

Dear Sir,

I want to work for you, if please you give me a chance to work for you.

Absent a clue from you as to your skill set,  I can assign you a job: namely, your job is to send me lots of money every day.

I am seeing a divergence forming on my trading career, for the eventual reversal. While my equity line is making lower lows, my understanding and attitude is making higher lows. |=) TTP may help me on the most important missing part.

I generally schedule Workshops in response to demand.

You are welcome.

You say:

"Thank you for sharing your process and your research.

You might consider taking your feelings about <your ideal relationship> to Tribe.

From your letter I might guess that what you want is to complain about your current girl friend and to do some research to find a replacement.

You might consider telling your current girlfriend what you want in a relationship and also ask her what she wants."

Thank you. I guess I am not able to be really honest with myself as well. I like the sex we have and yet I do not feel that deep, romantic bond and trust I look for in a relationship. I wonder that perhaps this is just part of the process of dating and looking for the (ideal?) mate...

The truth is likely to set you both free to find your callings.  Perhaps she feels the same way as you and is happy as is.

You might consider taking your feelings about <making no progress> to Tribe.

TTP and Separation

Chief,

For many guys, separation is a tragedy full of fights, financial worries, vulture lawyers and anger. During the separation I feel very sad. I accept it, even enjoy the feeling. I make a commitment to experience and accept all my feelings.

- My relationship to my ex-wife is excellent. She invites me to lunch, is more considerate to me than before the separation.

- I wake up in the morning thinking “I have more expenses, I could need some 1000 € more a month”. I am not worried or afraid about the money, I just think “it would be better”. One hour later I receive a phone call. A guy invites me to hold a lecture. I get an honorarium of 1000 €.

- I ask my boss for more money. He says “yes, you deserve it”. My salary increases by about 20%.

- I re-start playing guitar. By word of mouth I soon have a band and a first show. More people talk about it. A second show follows. A representative of my Hospital attends it and proposes me to play at the party for the 300 years of the Institution, an open-air event for some…15.000 people.

- I decide to look for a woman who is good for me. I know one, maybe two new women weekly. One day I think “no, it is wrong to look for a woman who is good for me: I rather look for a woman whom I am good for”. After that, I start knowing about one or two new women not weekly, but daily.

I get more and more experienced with TTP. I don't try to fix people anymore. Instead, during the processes I just let people experience their forms until they realize that they are just fighting against, being afraid of, suppressing a, feeling. Then, I just tell them “great, you see what you are doing! You can keep on doing that, I give you all my support. And you can also stop fighting against the feeling. I can also support you in doing that. What do you prefer to do?” Some people prefer to keep on fighting, most prefer to experience the feeling. The standard duration of a process falls from some 45 to about 15 minutes…

And I am only a beginner with this stuff.

hawaii_surfing_nut.jpg

I hope that I might have the opportunity to share my trading story with you and seek you advice regarding my career. I realize this a long shot to make such a request. However, with you in same city, I thought I would at least give it a try.

Thank you for your time. I really appreciate it.

BBQ/joints/artz.html

Trading
Process: I clearly define system; Stick to the system; Improve system through R&D

Progress: I complete system design; Monitor my adherence to system; R&D ongoing

Psychology Process:
- Practice TTP regularly; Work through K-Nots; Read FAQ
- Replace medicinal behaviors with deliberate practices, and experience the feelings.

Progress:
- I start a local tribe.
- I adopt mindset geared toward improvement through deliberate practices.

Compliance, Legal, Accounting & Brokerage
Process: Identify proper structure, meet requirements & set-up business.

Progress:
-Investment Management Company created.
-Researching structure options: Fund vs. Managed Accounts; RIA vs. Private Placement.
(I’m not sure how to best structure investment at this point)

Marketing/ Fund Raising
Process:
-Improve sales and networking skills.
-Align myself with people who are really good at raising money for hedge fund investments; Create marketing team and package.
-Raise money.

Progress:
-I receive an investor commitment.
-First draft of marking document complete.
-Setup meeting with friend who owns a “fund of funds” business.

Commitments
I commit to the following:
-Stick to my Trading System.
-Spend 3 hours/ workday further coding System until Entry and Exits are automatable.
-Attend Toast Masters’ meetings regularly.
-By August 1, 2010- Go live with Fund/ Investment Program
-By December 31, 2011- Raise $10mm USD

uploads/2008/03/toastmasters_blog1.JPG

Thanks for getting back to me. I submit a new TTID for Ottawa.

Have a great evening.

OK.

The Dallas Tribe seemed to think that the Austin group had disbanded, and the last known whereabouts for [Name] were in Chicago...

Will you be starting a new tribe in Austin? Welcome to town!

Yes, I plan to host a Tribe in Austin (Sunset Valley) starting this month.

In the evening I visit my children. My wife starts telling me about her feelings of inadequacy and “being a bad person”. I don't recall her speaking about her feelings in the now before. I receive her and thank her for her openness. Sometimes I think that I am on the right road to intimacy, sometimes I doubt about myself.

Thank you for being there.

Whatisintimacy01.jpg

I have performed a walk forward analysis on the S&P 500 using the EAS system you showed us in the TSP. The following were the steps I followed and what I noticed.

1) Download S&P data from 1950 to the end of 2009 and spot check it for accuracy.

2) Perform an optimization on the data from 1950 to the end of 1969. The optimal parameters are 105/150. These parameters may be somewhat “off” since the 105 was the low boundary on the values I tested.

3) Do a walk forward of 5 years from 1970 to the end of 1974 using the optimal values calculated in step 2 and record the results.

4) Add the 5 years of data from step three and re-optimize the parameters from 1950 to the end of 1974.

5) Perform another walk forward using the latest optimized values on the data from 1974 to the end of 1979.

6) Repeat the process until I have walked through all of the data.


What I have noticed is the parameters have not changed through out the test. They remain 105/150. The system performs well over the long term, but I notice a few trades where the loss on the trade significantly exceeded the initial 10% risk parameter. For example the trade entered on Jan 4, 1960 resulted in an over $400k loss or more than 4 times the initial risk of the trade. This seems to run contra to the motto cut your losses quickly and let your winners run. Perhaps the system can be modified to cut losses quicker.

I am also working on some studies regarding diversification and plan to provide some additional feedback.

Trend-following systems do not predict the profit or loss on any one trade.  The overall performance arises from an aggregate of many trades.

Saturday May 1, 2010

Dear Ed,

I form an intentional community.

New Jersey

Yep, that is what I did. I did so because my true passion lies for trading and not for the law although I wish someone told me that before all the student loans. Toward the end of my legal days, I found myself looking at the charts more than my legal files to the point that it got obsessive. After that, I knew I had to go before malpractice took its course. In any event, thank you in advance for any advice that you may be able to provide. I really hope that you reply to this e-mail.

Clip: http://u.kaskus.us/2/mnrxfavl.gif

While everyone is casting about for the one magic bullet solution which would have prevented this and future crises, he placed the blame for the credit crisis on short-termism, pointing the finger most notably at economists and their models. White said that the models almost all economists use are ‘flow’ models which leave no room for ’stocks’ and thus completely miss unsustainable secular trends.

2. So far, we do not have any hot seat session during our tribe meetings. Most of the time, we focus on snapshot and reporting progress. We have discuss hot seat matter during our last meeting. Cultural differences is our main concern. Our Asian culture is indeed different from the Western culture. It is not easy for someone to open up and discuss about his/her issue in front of others. So I decide to follow the trend of each member. If he/she is ready for the hot seat , then he/she takes the hot seat. I tell them I am committed and I am ready for the hot seat. Members who decide they want to take the hot seat have to deliver their commitment - attend the meeting regularly and willing to take the hot seat. No trying or wait and see. This is to ensure everybody have the opportunity to practice receiving and sending. Ed, is it appropriate to ask the tribe members to deliver their commitment ?

Wishing you all the best.

american-rules-darts.gif

Thank you for your time and I look forward to hearing from you.

You might consider stating what you might like to accomplish and how your mission might contribute to others.

You might keep an eye on Germany, Greece, and the Fed to get a "handle" on the current valve situation.

Wed, February 10, 2010

Ed writes: “One simple plan for getting solvent is to take 10% off the top of what you make and use that to retire your debts. Thereafter, buy only things you can afford without borrowing.”

I believe you mean this to be 10%.

I understand the importance of this. I calculate this to be $605 every month.

It’s going to be very tough.

I don’t have a good start to retiring the debts.

We have just come back from holiday. I have taken my wife and children camping for a week in the Coromandel.

We do modest priced things and are do not spend excessive amounts.

We cook most of our own meals and don’t spend much

We pan for gold in the river, swim in the waterfalls. We go on various tourist tours in the region that are educational and entertaining for the family.

The most expensive activity is taking the boys fishing on a charter boat at $130 for the 3 of us. This is the highlight of the holiday for the boys.

I have spend approx $1,500.00 on accommodations and activities during the week long holiday which is now new debt.

I don’t feel guilty about this new debt as the family deserved the holiday and I feel it is my right livelihood to give them a holiday.

I review my budget.

I stand by my commitment to retire my debts.

Thank you for your support.

And why leave the beautiful Incline Village?

The only answer I know for a "why" question is the venerable "why not" reply.