(Quotes from Ed in Red)

Ed Says

Dear Ed,

I hope all is well in Austin. As I read FAQ I notice mention of your "Butcher, Baker, Candlestick Maker" rule. I do a site search on it and do not find the rule definition. I wonder if you will consider explaining the rule?

Thanks for this site and all of your help!

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Thank you, and I thank the entire tribe for their support. I look forward to the work that lies ahead.

A number of high-traffic blogs mention my video and it attracts over 40,000 views.

Over a dozen people sign up to beta-test my product. Each builds their own copy of the hardware from my plans. I incorporate their feedback into my design. One of them introduces me to a local company that manufactures a complementary product. We meet and reach a preliminary agreement for them to manufacture and distribute the hardware portion of my product.

I run some back-of-the envelope calculations that show my end of this deal may be worth between $500,000 and $1,200,000 over the next year or two; more as we develop new products around the same concept. I freak out at these sums. I show my calculations to a number of my associates who find no obvious holes in them. I meet with a patent attorney. I am considering incorporation. I am considering taking outside money to bring this product to market faster. I worry about how my relationship with an investor may work out.

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Dear Support Team!

My Big Wave - To move to Singapore, go live and raise $10M by December 31, 2010.

Milestones:
1) Now living in Singapore - absolutely love it!!!

Puzzles in process of solving:
1) MAS trading approval - My age and experience make obtaining MAS trading approval more difficult than I originally think. I am in the process of solving this puzzle now.

I commit to sending monthly updates on the last day of each month.

Thank you for your support!

Thank you for sharing your process.

Progress Report

Dear All,

During May:

1) I incorporate the legal entity and set up with the brokerage I intend to use for managing client accounts.

2) I start paper trading my system.

3) I receive commitment from two clients to invest. They both change their mind when I follow up with them to begin the account opening process.

I feel disappointment and sadness about the clients changing their mind. I intend to go live with one account in June.

In June I intend to:

1) Make 3 client / potential client calls a day, this includes:

a. reconnecting with the people I speak to during Oct-Dec about my intention to launch a systematic trading business and inform them that I am live; and

b. contacting ex-colleagues, share my current plans, ask for referrals, support and work on increasing my visibility.

I measure my progress by a) making the 3 daily calls and b) closing accounts with clients that are compatible with my offering and are willing to develop a long term mutually beneficial and supportive relationship.

As per my April email I commit to reporting every two weeks. I now intend to report monthly.

Thank you for your support.

Thank you for sharing your process.

Dear Ed,

The first Tribe meeting was awesome. Thank you for your leadership and sharing the technology that makes this progress possible.

When I arrive I feel anxious and excited all at once. I wonder what exactly will this evening hold and will the experience match the anticipation. I am not disappointed.

I realize that I may have problems trusting others and that this may be a roadblock I have to overcome in reaching my goal. I also feel a certain uneasiness about my goal. I wonder and fear that it may be a waste of money if in fact the economy and society follows the path that Ed described as essentially guaranteed. I wonder if I should decide on a different project that match the economy better. I wonder if this is just my mind giving me a “plausible” excuse to sabotage my own plan and progress.

As one Tribe member goes through the process I learn about myself. I have an aha while he works towards his own understanding. I realize that my relationship with my wife is more control-centric then I think. I realize that I try to control her level of frustration with our children and her anger. Rather then receive her feelings I normally try to explain why she shouldn’t feel that way. I realize this is my attempt to control our relationship. I decide to simply receive her and commit to do that on the spot.

I return home the next day and immediately apologize to her for attempting to control our relationship and tell her that I am committed to stopping the control-centric model and starting the intimacy-centric model. I tell her I can’t do it on my own and that I need her. I tell her I need her help and ask if she is willing to help.

She agrees. I feel happy and excited. I feel a little worried that I will relapse into my control forms or will not have the proper resources to execute. I wonder where this will take us and commit again to operating in the intimacy-centric model.

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It is more than 3 weeks of practicing this now, but I fear that I will relapse in to my old ways if I do not go over things and apply the TTP principles consciously and in a deliberate manner. Knowing the principles do not guarantee automatic behavioral change!

I feel like an alcoholic on therapy, who knows that he is just a few drinks away from the old ways.

Dear Ed,

I commit to read and study Pardo “Evaluation and Optimization of Trading Strategies” in TTP workshop with goal of developing my own trend following system with high expectancy of profitability.

Per Ed’s advice, I am careful to learn and define every term I use in my system with precision.

To date, May 25, I complete 8 chapters. I learn and note many trading and system terms. Pardo takes pains to define these terms with references from Oxford Dictionary of the English Language.

My reading of Pardo feels painstaking. Providing my team members this update compels me to review what amounts to one half of the Pardo book. Pardo sets me up for what is to come later in the book with the following warning, after enumerating various realms of super-quants [eg Malenbroit’s discovery price patterns follow fractal geometric patterns not standard Gaussian distribution embedded in Black-Sholes; genetic algorithms; fuzzy logic; complexity theory].

It is clear to me why Ed pounced upon me and my fuzzy explanation of “expectancy” now. Thank you for your honesty, Ed!

Pardo refers to The Unlevel Playing Field. Optimism in his 1990 first edition DTOTS re playing field level between individual trader and professional trader is updated to “It is now clear that this playing field has perhaps never been as unequal as it is today.” [from preface, DTOTS, 2nd Ed., 2008]

I speculate that the game is up before it gets started but keep reading and learn from Pardo that anyone succeeding at trading does so because he has found an edge. Though markets are more efficient than ever “-traders the world over continue to make profits. Why? They have found an edge. And, and this is a very big and, they stick to the rules of their edge; they follow their well-tested trading strategy religiously.”

My study for next several weeks is review of stochastic learned in college. I pay special attention to degrees of freedom (df) and relationship to robustness. My reading borders on painful, and I relate this pain to growth, and I persist. I am introduced to perhaps 100 terms, carefully defined. I commit to learning these terms through disciplined application in set-up and testing procedures based upon Pardo’s 8-Step “development and application of a trading strategy” process on p 43.

TTP progress: I have no tribe. You [my support team] are my only outlet. I have a deep sense of aloneness. This hurts. It makes me emotional. There are daily dramas with my wife. I learn from [Name] and appreciate his sharing of his experience. I hear from [Name 2] and remember his friendly expression. I recall and wonder about [Name 3], and know he is working on his system. [Name 4] comes to mind. My mind seems to reel in recollection. My right shoulder is stiff. I let this happen. My neck is stiff. I consider meditation, yet question it. I am still stopping, halting. Starting and stopping is tiring and I wonder what my intension is. I am surrounded by opportunity, encouraged in my business.

I regularly contemplate my rock, my silver TTP medallion, and my $100 trillion Zimbabwean Note. I feel myself being torn by EMH doctrine and Pardo evidencing that traders working with great discipline and precision and following their system religiously can and do succeed. I realize EMH is not incompatible with Pardo, because few traders do what Pardo is describing.

I learn about off the shelf software platforms, like TradeStation, its strengths and limitations. I learn minimum test window sizing, significance of slippage, the meaning of scripting, test period lengths, importance of accuracy, simulation, preliminary testing, contracts and underlying spot markets, trade frequency, and study examples of trading strategies and market types.

Ed said if I learn what is in this Pardo book I will know a considerable amount about trading systems and development processes. Ed does not exaggerate. Thank you again Ed!

My sense of my TTP commitment [as currently specified] is it is only one small piece of my overall broader system that includes my family, my advisory practice, my personal endeavors, and there is TOO MUCH me, me, me, I, I, I. The imbalance is at the source of my dramas.

I did not commit to reducing drama in my life, but I recall Ed saying we can make new commitments, and evolve commitments, so I am modifying mine now: I want to reduce the drama in my life at work and at home.

While I have immersed myself in the Pardo book, some of this is at the expense of losing site of TTP. I thumb through my heavily highlighted and note filled copy of Ed’s book and realize again why I attended the Workshop “Sticking with Your System.” My system looks like my garage. It is a mess. It is time to clean out and clean up the garage.

Thank you for your team support.

Thank you for sharing your process.

We discussed and agreed to work on moving closer to one another. My Fiancée encourages her to share all of her feelings directly with me. Next step is to continue to lay a foundation of intimacy with my youngest daughter and also move towards my oldest daughter and encourage her to share her feelings.

Hmmm... I wonder where the part is about receiving love, support and encouragement from his parents.

Dear Ed,

I am reading Carl Sagan's Dragons of Eden.

In Chapter 6 he explains that falling is the most common category of dream, and makes a statement which I find very interesting, especially in light of recent market volatility:

"The fear of falling seems clearly connected with our arboreal origins and is a fear we apparently share with other primates. If you live in a tree, the easiest way to die is simply to forget the danger of falling"

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Moving Toward a System

Dear Ed,

I am a graphic designer but I traded spot currencies (or so they call it) and lost money, then I traded options (I am sure you know why) and I lost.

Then I switch to commodities and I lost too! I don't meant to talk about me but he is the only person I know most because of close proximity.

One day I came on a NYMEX presentation from a trader called [Name] who claimed to own the largest clearing firm there, his talk about systematic trading made a lot of sense, for he didn't have his own opinion, but he had the opinion of a system of some sort, it felt like religion (later on I understood religions as time tested systems that are, sorry to say outdated, but the logic is still correct).

I bought the book but I stumbled upon Michael Covel's Trend Following system which he sells online, but I never had $2000 or so to buy it, so I downloaded stocks historical data from Yahoo for free and analyze it with Excel, this analysis was by adding open/close deference of deferent ranges of days then dividing on the absolute amount of the same days, you can say I was dividing Distribution / Magnitude to see if a move was a trend or sideways, very simple.

But... I came to my first AHA like you say in your blog, I noticed something very common or even permanent between all stocks: every 100 days all stocks never move more than 10% to 15% on average, as the maximum move.

After a year of manually on Excel measuring all ranges until 300 days, I found that these limits are somehow called 'Central Limit Theorem', then I found out that what is happening was called 'Law of Large Numbers', and since this has reshaped my view of religion and god, it was the first time I encounter probabilities, this still amazing every time I think of it.

Then one day soon to this, my cousin worked for a market maker, or in Dubai terms, a broker that lets customers open accounts and trade, but this broker had something special, customers traded against a virtual company account, and almost all traders lost their money to this broker, I never cared for that fact but it was the law of large numbers in play and I felt it, I then heard of losers average losers and my cousin the guy whom works at the broker firm confirmed that it is the way all those people lost their money at the end, no matter what account size they start with.

I never traded after that, but I kept of doing my Excel stock price research, I read Market Wizards I and II then I read Fooled by Randomness.

A programmer was hired and we went through historical data, no curve fitting is allowed like they say, I learned more about a field called nonlinear dynamics because observations of price movement had confirmed that the price progress like the square root, if it ever does, with margin of error at every n range.

I this now that, we don't have a choice of which moving average to use if we wanted to define a trend and participate in it, also the loss at each point is the bottom boundary of the confidence interval.

Therefore at any number of days, we can buy/sell if the price was higher/lower and within the confidence interval, the stop-loss point would be the bottom of the confidence interval of the 'n' of days it reached.

News, Bloomberg or what ever analysis out there is useless in risk management of losses, and useless in entry, but it is very important in choosing which markets we trade.

I am not sure of all of this, but some seem right and I wanted to share this with you.

Thank you Ed because I visited your blog along time ago and you seem to know a little more than others, everyone gets what they wish for at the end, I hope I can wish as a group instead of my own needs.

By the way, Nassim Taleb idea of probabilities seem to be true, sometimes people discount parts the probability generator because it doesn't suit them, I fall in that trap all the time.

You might consider that your trading system includes both your math and also your personal psychology.

Nowadays, I notice that both of my kids when asking me a question that starts with the word why, stop themselves and then say "why not." I find it quite humorous, as do they. My kids then proceed to find my wife and ask her why questions. She responds as she sees fit.

I hope this update is helpful to FAQ readers.

Also, I get a clearer understanding of roadblocks that might stand in the way of moving from control to intimacy. The May 3, 2010 post helps me to realize that part of following that path is embracing the change of new relationships while experiencing the loss some existing ones. As I think about this, I say to myself "that is the flow."

Thank you,

Thank you for sharing your process.

Thank you for the cover.

See the Tribe Directory link, above.

Total Cost: $2,229,400.00

Texas :

#1. Governor shoots coyote and keeps jogging. Governor has spent $0.50 on a .45 ACP hollow point cartridge. Buzzards eat dead coyote.

Any wonder why California is broke????

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Hi Ed!

Long time again since I wrote FAQ, but I keep reading it. I can hardly keep up the pace to read so you are doing a good job receiving all questions with answers.

I wanna say that life is a wonderful thing! I have begun to count all the good things I do and all funny things that is happening in my life. Earlier I used to pay a little "fee" to my child when I judged my behavior as bad. He received fund holdings for my fees and I thought it was a good way to remove bad habits. Now I am changing this view since it makes me focus too much on things I don't want to happen. Instead I now congratulate myself for all good things that happens and give myself benefits for doing a good job. Actually I think this has helped me to become more positive. If you think about it, you are doing a whole lot of good things all the time. I like the change, and today I am very happy! It feels like almost everything is going my way and there are so many resources to use when it doesn't. Some of my resources are to feel the feeling, appreciate the feeling, focused breathing, picture recalling (train my mind to remember a detailed picture of what I saw the moment before), tell my feelings, say what I think and accept being rude sometimes, brainstorm, view a situation of how I want it to progress and so on...

The last thing has been important lately. I use visualization to mentally tune in on what I want to achieve. For example, I see myself washing my teeth and go to bed if I'm tired instead of sitting down and watch television. For me it feels like half the effort is to mentally prepare for something and half to really do it. It helps to visualize it. I once heard an expression that Arnold Swarzenegger might have said "I visualize my goal and keep on going until I get it!". I really like that expression! I also fits him.

When it comes to trading I like the expression "don't storm the fortress of fortune, lay siege to it" as Mr. Dickson G Watts put it. It goes slowly but I guess I learn piece by piece. I have accepted that I might not be a fund manager because I feel I could just manage my own money instead with all the freedom it means, even though I might not get that rich. However, I have not given up - it just takes time.

I have lately read a bit about how the market affects the economy rather than the other way around. I thought about you when I read it and it gave me more understanding of what I already thought was true. "Tests" have showed that you can't predict the stock market by looking at economical indicators, the connection is actually slightly negative (when economical indicators go up, the stock market falls slightly since it has already gone up). But if you want to forecast the economy from what the stock market has done, the connection is there. When the stock market has moved up, the economics will follow and vice versa.

That's all for now. Have a nice summer!
 

Thank you for sharing your process.

Mystery solved :-) Though I still don't know what's "astounding returns" that the contributor is talking about.

OK.

I look forward to hearing from you and thank you for your time. :)

Thank you for the provocative article.

Our questions reflect our group so they are both beginners and advanced traders, but I will be the only one on the call. But I would like to record the call to share with them after, I will never sell the recording, only share it with my group. Is that ok?

Q:

We love your book, besides it what other trading books to you recommend to read?

After a losing streak what is the best way to keep your head in the game, assuming you already believe in your system?

After a winning streak what is the best way to keep your head in the game?

What type of personality does it take to be successful at trading others money?

What tips do you have or those who aspire to trade others money?

We could write more, but was not sure how many you wanted or could fit in one hour.

Three.wmv

Thank you for the clip. 

Thanks for the math lesson.

Me too, a penny for your thoughts...

John Smith started the day early, having set his alarm clock (MADE IN JAPAN) for 6. While his coffee pot (MADE IN CHINA ) was perking, he shaved with his electric razor (MADE IN THE PHILIPPINES ). He put on a new dress shirt (MADE IN SRI LANKA) a pair of designer jeans (MADE IN HONG KONG) and some tennis shoes (MADE IN VIETNAM ) then made plans, to look for a good-paying AMERICAN JOB.

After finishing his breakfast, cooked in an electric skillet (MADE IN INDIA ) he sat down in his favorite easy chair (MADE IN ITALY) with his calculator (MADE IN MEXICO) to check how much Gas money he had. After setting his copy watch (MADE IN TAIWAN) by the time on the radio (MADE IN SPAIN ) he got in his car (MADE IN GERMANY ) filled it with Gasoline (MADE IN VENEZUELA) and went out to search for an AMERICAN JOB...

At the end of yet another discouraging and fruitless day, he returned home and started checking for jobs on his computer (MADE IN MALAYSIA).

After a couple of hours, John decided to relax for a while. He put on some sandals (MADE IN BRAZIL) poured himself a glass of Chablis wine (MADE IN FRANCE) and turned on the TV (MADE IN KOREA) and then, just sat and pondered why he could not find a good-paying, AMERICAN JOB ?

He thought about it for quite some time - And now he is hoping, that his President (MADE IN KENYA) will help him to find a good AMERICAN JOB very soon, just as he has promised !!

Yoga/Gym 6 days
FAQs 5 days

Thank you for sharing your process.

4. A rubber band pistol was confiscated from algebra class -- -- because it was a weapon of math disruption.

5. The butcher backed into the meat grinder -- -- and got a little behind in his work.

6. No matter how much you push the envelope, -- -- it'll still be stationery.

7. A dog gave birth to puppies near the road -- -- and was cited for littering.

8. A grenade thrown into a kitchen in France -- -- would result in Linoleum Blownapart.

9. Two silk worms had a race -- -- they ended up in a tie.

10. Time flies like an arrow -- -- fruit flies like a banana.

11. A hole has been found in the nudist camp wall -- -- the police are looking into it.

12. Atheism --- is a non-prophet organization.

13. Two hats were hanging on a hat rack in the hallway -- -- One hat said to the other, 'You stay here, I'll go on a head.'

14. I wondered why the baseball bat kept getting bigger -- -- then, it hit me.

15. A sign on the lawn at a drug rehab centre said -- -- ‘Keep off the Grass.'

16. A small boy swallowed some coins and was taken to a hospital -- -- his grandmother telephoned to ask how he was, a nurse said, 'No change yet.'

17. A chicken crossing the road -- -- is poultry in motion.

18. The short fortune-teller who escaped from prison -- -- was a small medium at large.

19. The man who survived mustard gas and pepper spray -- -- is now a seasoned veteran.

20. A backward poet -- -- writes inverse.

21. In democracy, it's your vote that counts. -- -- in feudalism, it's your count that votes.

22. When cannibals ate a missionary -- -- they got a taste of religion.

23. Don't join dangerous cults -- -- practice safe sects!

Thank you for the pun-ishment!

As I recall, while the MIT lawyers negotiate with IBM over royalties, the price falls from 5 cents per core to about 1/32 cent per core.  Sometimes it pays to hit the bid and take what you can get.

I wonder if you can send an attribution so I can post it beneath the clip.

Clip: www.cartoonstock.com

Hmmm... I wonder how they get the darts to stick in parallel to the face of the board.

Hope to hear from you.

See the link at the bottom of the Ground Rules page for consulting terms.

Dear Support Team,

I am providing the first of my monthly status reports on my commitment to identify a woman that I am willing to marry.

I am hesitant to make this commitment at the Workshop. I feel like it is a very ambitious goal and fear that I cannot make this commitment. My attitude and feeling about this commitment changes significantly over the past month. I notice that my unwillingness to feel <uncertainty> is between me and achieving my goal of having a family.

I start trying to embrace the uncertainty and to experience this feeling. Whenever <uncertainty> comes up throughout the course of the day, I welcome it and use that as a chance to practice feeling uncertain. I am not sure exactly when this changes, but I am now OK with the feeling of uncertainty. It does not bother me and I no longer see this as something I am concerned about. Uncertainty is inevitable and just a part of life.

An hour before my first regular tribe meeting following the workshop, I have a drama with my girlfriend. I feel something in my chest and my cheeks are very hot. I take the hot seat and work through some forms. I work through a role play of a previous drama I have with her. My tribe and I come up with new resources for me to use.

A few days later, I have another drama with my girlfriend. I feel confused about why this is happening, especially after just working through this at tribe! We are not happy with each other for a few days. Then, we share our feelings about each other and discuss these dramas that seem to keep happening. I think we gain a better awareness about our relationship from this. In the last two weeks we do not have any recurrence of a drama.

Overall, I am very satisfied with our relationship. We are open with sharing and receiving feelings and support each other. Only knowing each other for 4 months, we both report being surprised at how close we feel.

Thanks for your support