The Trading Tribe
(c) Ed Seykota 2003-2011 - Write for permission to reprint.
Ed Seykota's FAQ

Reader Says

Ed Says

Tuesday, November 30, 2010

Likes a Challenge

Dear Mr. Seykota,

I have read about you a few years ago in Jack Schwager's Market Wizards, and I recently came across your TTP book website that I read with great interest. I am contacting you because I have no connection in the financial industry and was wondering, if you believe that I am worthy of your time, if you could give me a few tips into becoming a trader and getting a job as a trader with proper training or mentor-ship?

I will try to keep this email short and pleasant; and I apologize for any grammatical/spelling mistakes, English is my second language.

I am 26 years old, and I discovered the market only 3 years ago, when I got my first out of college job at [Firm]. Prior to that, I never really knew anything about finance/markets nor have I had any slight interest for it. I dreamed of becoming a lawyer or going to work in a ... think thank. Well all of that changed, partly because of that job; but mostly because I entered the financial services industry right at the peak of the market (August 2007). Seeing the market collapse month after month without really understanding why was an awakening. And from then, I began buying one book after another on markets, investment management, trading, technical analysis, economic indicators, etc..., trying to understand how can one see such market corrections happening. A few months ago, some of my personal work and studies was published in [Publication], as I developed new derivatives trading models.

But to sum it up, here's my problem:

I don't come from a big famous school (I was a top student in school until the last 3 years of high school where I became a bit of a party animal, which destroyed my school grades - I am being brutally honest here), I never worked at a big bank, I know no one in the financial industry to help me; but I'm passionate, motivated, creative, intelligent, humble, honest and disciplined (the French way). In this economy, I can't even get an interview anywhere (I have been applying to every new trading/research/assistant/risk management/analysis jobs opening daily for over the past 5 months), and I am so committed to getting in the trading field that I would literally agree to take a janitor job in any of the well respected funds, just to get a foot in the door and meet people. Its sad but its the honest truth. And despite my small achievements, no one seems to be interested in my profile.

Given your experience, succeeding in becoming a phenomenal trader by yourself, maybe you can share with me some wisdom and helpful criticism to help me orientate myself in the right direction, and hopefully have a trading career as successful as you have. And I don't mean "trading career" as if I see trading as purely a job, what attracts me to it is the intellectual challenge, no matter the cost of sweat and blood (which I seem to have in almost infinite quantity).

I will stop writing now because its becoming too long of an email, and the essentials are here.

Thank you for sharing your process.

You might consider taking your feelings about <wanting a challenge> to Tribe.

Some People Prefer

fighting over winning.

Monday, November 29, 2010

What is in the Book

Mr. Seykota

I’m a [Nationality] Trader (currencies) and to make sure that all the things being said in your TT web site fall in the correct place in my mind, I have translated to Spanish every single word in it.

So my question is, what else can be found in your book about the TTP?

My TRUE intention is to assist at one of your workshops and to meet you in person, since you have a very important name in the trading business, but must important, for all the wonderful things that I have learn in your web site.

I Just cannot make it to the workshop on December 3-5, but I know there will be others; will you be there too?

I want to really experience the TTP, and my wife and I are the first members of the [Country] TT, if you accept us.

Kind regards
Thank you for sharing you process.

TTP continues to evolve.  I am presenting some of the new material in the upcoming Workshop.
Monday, November 29, 2010

Stupid or Ridiculous

Dear Sir,

After quite a bit of hesitation, I am today writing to you to humbly request some of your time for your sound advise and opinion.

Very curious by nature and longing for some real money, I stumbled across trading forex a while back now. I was also before, and still, very attracted by casinos and sport betting. Indeed, I cannot stop trying to "beat the house", which I succeed in to some extent. When leaning on my own how to trade properly and then practicing, I was , without realizing it, walking the path of trend following. It is only very recently that I found out about this philosophy / religion. Reading books about it made me aware of your existence, which brings us to today.

As part of my trading strategy / system, I use, along side known sound money management rules, exponential moving averages crossings and nothing else as signals. Could you then please be kind enough to spare some time to tell me if you think this is stupid and/or ridiculous?

Thank you so much,

Yours Faithfully,
Thank you for sharing your process. 

You might consider taking your feelings about <stupid and ridiculous> to Tribe.

People Who are Unwilling to Feel Stupid

typically wind up doing stupid things.
Monday, November 29, 2010

Note: This item no longer appears, per contributor request, September 12, 2013.
Thank you for sharing you process.

TTP does not "help" people.  It is a vehicle they can use, if they are willing, to help themselves.

If you have, for example, an identity as a martyr, you may entrain all kinds of events that fortify your self-image. 

If you come to TTP with an expectation it might help you, you might wind up using it as another example that justifies your notions.

When you develop some real willingness to grow, a teacher appears.

People Who are Unwilling
 to Experience Martyrdom

typically wind up carrying crosses.
Monday, November 29, 2010

Alternatives to Austin Workshop

Dear Ed,

I just started reading up on TTP and I am very intrigued. I saw that you have a workshop coming up in Austin but it might be a bit too short notice for me to come over to the US from Asia in a few days. But before ruling it out I wanted to inquire:
1. how often do you organize a workshop?
2. and do you already know when you will hold the next workshop?

Thanks for your speedy reply & best regards,
I have no plans for another Workshop at this point. 

Historically, I host a Workshop once or twice per year.
Sunday, November 28, 2010

A Problem With Risk Management Article

Hello Sir,

This days I read a book "Market Wizards" by Jack Schwager and your name was in the book as one of the most successful traders in the world. Searching on the internet after your name I found the  web site.

One of the papers published on that website is "Risk Management". I read with interest the article but I found out that the demonstrations about the betting system contains a big flaw.

You mentioned that the payoff of the system is 2:1 and always bet on head. The problem is if you have $1,000, the bet is $10 and the coin is head the total amount of money after the first bet is $1,010 and not $1,020 as you mentioned.

Amount_after_first_bet = Initial_amount - bet + winning = $1000 - $10 + $20 = $1,010

Using calculus the formula to determine the stake after one pair of flips (one winner and one loser) becomes:
S = (1 - b + b*P)*(1-b)*S0
S - the stake after one pair of flips
b - the bet fraction
P - the payoff from winning - 2:1
S0 - the stake before the pair of flips
(1 - b + b*P) - the effect of the winning flip
(1 - b) - the effect of the losing flip

So the effective return, R, of one pair of flips is:
R = S / S0
R = (1 - b + b*P)*(1-b)

Continuing the demonstration and calculating b for Slope=dR/db=0 we determined that b=0.

dR/db = 0 + P - 2 - 2bP + 2b = 0
P = 2, so
0 + 2 - 2 -4b +2b = 0, which means b=0.

In conclusion, the demonstration from you article is not accurate, but the principles presented are correct.

Best regards,

P.S. If you are interested, there is a betting system to always win in a game with 50% win success rate and payoff of 2:1.

P.P.S. Below you can find the table with winnings for various bet size for the betting system presented in your article.
Thank you for your analysis.

You might consider that a 2:1 bet means you win $2 or lose $1.

The way you have it, when you win $2 you then also have to pay a commission or tax on your winnings so you net out with only $1. I notice you do not assess this fee when you lose.

In trading, you might risk $1000 to your stop. If the trade goes your way, you don't have to pay your broker $1000 when you collect your winnings.

You might consider taking you feelings about <finding fault> to Tribe.

People With Judgmental Parents

typically wind up judging their children.
Friday, November 26, 2010

An AHA! Moment

Dear Ed

I just wanted to report experiencing an "Aha" moment.

Ed says: "Intention = Results".

I have been reflecting on that for quite a few months now, but it just didn't "click" with me because "Intention" tends to imply "future" in my mind and "Results" tends to imply "past" or "present".

Therefore there was a conflict.

But if the past and the future don't exist - only the present "now" exists - then the results I observe "now" in the present are a perfect indication of what my real intention was at the time I implemented the processes, actions or behaviors that generated such results. So, I can see my intentions "now", by observing my results "now" - no more conflict - just simple clarity.

Thanks Ed.

Thank you for sharing your process.
Wednesday, November 24, 2010

Asking Questions

Dear Ed,

I read the contribution from Monday, November 22, 2010 ("Alternatives to Asking Questions“). I find it increasingly difficult to, and seldom ask, questions directly. Rather, I frequently say things like "I wonder if…“ or "maybe you can tell me…“. I wonder if I am applying more the intimacy model, or if I am just turning into a case of Alzheimer disease.

Best regards,
Thank you for your observations.

Wednesday, November 24, 2010

Charitable Guy

Dear Beloved,

I am [Name], A United Kingdom national I have been diagnosed with esophageal cancer. It has defiled all forms of medical treatment, and right now I have only about a few months to live. I am very rich but was never generous, I have given most of my assets to my immediate family members and also, I once asked members of my family to give some money to charity organizations, they refused and kept the money for personal enrichment. I have decided to give alms to charity organizations. I cannot do this myself anymore because of my health. I have a huge cash deposit of Thirteen Million dollars in a security company abroad. I will want you to help me collect this boxes deposit and dispatch it to charity organizations. You will take out 15% of this funds for your assistance.

The fund is safe and kept in a financial institution in Foreign country and I have been using the security company for over 13yrs now but because of the selfish attitude of my immediately relative over mismanagement of my fund, I have decided to look for a foreigner and a good minded person. As I do not have any use for such money myself, at least not in my present age and state of health. I will be going to the hospital anytime soon for a major operations. Except it pleases God, the chance of my survival is slim. I have been led by the spirit to contact you having the hope that you will handle this project well to the glory of God. I wait for your response to accept this offer to show tenderness, love and mercy to the less privileged people in your country & other places around the globe as directed by the spirit of God in you.

Stay Blessed.

James David
Thank you for your kind offer.

Perhaps you might like to meet me over at the sheriff's office so we can be sure to do the right thing.
Wednesday, November 24, 2010

Manifesting Gratitude

Dear Ed,

How do you manifest gratitude for your talents - including those relating to trading?

For example, do you donate or in some other way "give away" your trading profits - or perhaps use them for research or the development of knowledge or humanity, specifically or generally?

Apologies in advance if this oversteps any "red-line" relating to your private life - I am not asking for any specifics (which I understand are completely your own business) - I am merely curious about your views generally (if any) on manifesting gratitude for trading talent.

Many thanks.

Gratitude is a feeling that associates with receiving a gift. 

I generally express gratitude directly, by sharing my feelings in a way that the giver can feel.  For example, in a restaurant, I like to supplement the tip by personally thanking the waitress for taking good care of me.

Hosting this FAQ column is another opportunity I have for contributing something back to the investment community in a personal way.

Also, I notice the markets have a very direct way of extracting financial "gratitude."

You might consider taking your feelings about <private property> to Tribe.

Tuesday, November 23, 2010

Wants 15-20%

Hello Ed,

Is there a system you know of that can produce 15-20 %
consistently on 100k annually. If there was it would be worth a fortune right? You were a pioneer in system trading so how much you still tinker with creating systems I don't know. If had my share of bad luck and concerned about my fixed income. Later
Your total system includes (1) your rules and (2) your resolve in following your rules.

I know of many sets of rules that show good historical returns.  I only know a few people who actually intend to follow their rules.

You might consider taking your feelings about <bad luck> to Tribe.

Bad Luck

seems to follow

those who are unwilling to experience it.

Monday, November 22, 2010

Happy Thanksgiving!

Hi Ed,

How things are going with you? Life is good here and I am enjoying my work and also looking forward for the holidays.

Thank you for your email.
Monday, November 22, 2010

Trading Tribe Twitter
Hi Ed!

I am suggesting a Twitter page for TT as an extension serving our community:

The advantages I enjoy from twitter are:

a. Instant update of a new post on FAQ
b. Most mobile phones and people nowadays, like myself, integrate twitter in my daily life as it "pushes" info instead of me constantly checking if there is an update in my favorite site.
c. More new members can discover TT in this platform as an extension of the main FAQ.

The twitter's purpose are:
a. Each time Ed updates a FAQ, I (or another admin you choose) writes a short message pointing the hyperlink directly to that new update i.e.. new FAQ or new Tribe in X City.
b. Each time FAQ has an announcement, event, meeting, or another Tribe announcement, twitter can display this message to all the Trading Tribe followers.

Twitter does not intend to replace FAQ but to complement and extend its reach and provide convenience to all members.

I am volunteering as the admin for this twitter platform if you wish but you can takeover and do as you please since this is your property. I am open in whichever arrangement you wish.

Lastly, if you wish closing the twitter instead, just let me know. (But I suggest you instead take possession of the login and pw). I took the liberty of reserving this Twitter name for you before someone else does and claim as the TT FAQ.

I also took the liberty in designing it with the TT, name, address, logo etc. for the sole purpose of demonstrating it to you what it looks like if you wish to make this active.

Best regards,
Thank you for the set-up.
Monday, November 22, 2010

Alternatives to Asking Questions

Dear Ed,

I know how you love my questions - but - in pondering the reasons I do this . . . I guess it's my way of drawing closer to people - I am sincerely interested in people and have found that asking a question the other person has an answer to is a good way to open dialog. This works for both participants about 80% of the time.

However, I've come to realize that asking questions is perceived as an intrusion - invading the other person(s) comfort level. I am working on keeping my enthusiastic bubbly sincere interest in the 20% of the other person(s) from invading their 'space' or personal boundaries. My tongue is bloody and sore at times.

I have found that taking a deep breath, down-shifting my brain, and 'pulling' my 'self' back into my self and just waiting sometimes works. Sort of like training my ;tongue' to check with the brain before I engage my vocal chords. Maybe the other person wants to ask me a question because they are curious and care about getting to know me. Or, maybe that other person prefers just a smile and then again maybe a smile is intruding?

I've also learned that I don't know what to do if I can't ask questions - is there another way that you recommend to express my interest in other people that you, for instance, feel comfortable with? I realize that 'my interest' is mine, not theirs necessarily. I guess I have considered my genuine interest in others as a positive participatory welcome exchange that felt good to the other - silly me - sort of like sending the message that someone noticed them, and felt drawn to them enough to make inquiries.

I feel sad that I have caused discomfort for the 20% I've shown an interest in that have not felt the same toward me in return. Perhaps it is the abandoned childhood thing of doing anything to be noticed, to be 'seen' as a person -- noticed enough to matter at all. That cold drafty anguish of echoing loneliness.

I look forward to reading the FAQ's after your Austin workshop. Your participants usually have lots of processes to talk about that have changed their lives. I don't believe there is a Trading Tribe close to where I live or I would attend.

All the best,
Thank you for sharing your process.

One alternative to asking questions is to share your interests, concerns and wonder - and allow the other party to do the same.

Questions (Control-Centric Model)

are a demand for information
and can confront, confuse and disorient
your questionee(s).

Sharing feelings (Intimacy-Centric Model)
such as your concern and wonder
draws people closer
and can help to align them
with your desires.
Monday, November 22, 2010

Associates Abortion with Pain

Dear Ed,

The picture on Monday, November 15, 2010 - New [City] Trading Tribe Chief - shows in fact a medical abortion. I associate this procedure with emotional pain and suffering for all participants.

Best regards,
Thank you for expressing your feelings about abortion (vacuum aspiration). 

In our control-centric culture, people take sides on this issue, judge each other and then wage campaigns to pass laws against (or funding for) it.

In an intimacy-centric culture, people listen to each other's feelings about "political" issues, employ compassion and work toward insight and healing.



Sunday, November 21, 2010

Privacy Assurance

Hi Ed,

I am reading your recently posted FAQs dated November 11-20.

I wish to call your attention to the personal information that is contained in the post "New [City] Trading Tribe Chief" dated November 15, 2010.

The firm name ... appears in the 2nd sentence of 7th paragraph in the contributor's letter.

I expect that you may wish to remove this firm name from the post in order to maintain the confidentiality of the contributor.

Thank you for the catch.

Joe Montana Passes

and Dwight Clark catches.
Sunday, November 21, 2010

Evolution of TTP

Dear Ed,

On Monday, November 15, 2010 (Commitment Update 11-15-10) the collaborator writes "When I’m talking to someone and the conversation shifts into more of an intimacy model, either when they start to experience a feeling or I do, there’s this effect on my vision for a second or less. My direct line of focus remains stable and peripheral vision just fades out“.

I frequently have the same experience. Meanwhile, I can make it last and induce it voluntarily. It allows me to understand much more about the feelings and intentions of my interlocutor and helps me during processes to better accompany the person in the hot seat. In the last time I observe this phenomenon even during casual conversations, when I look someone right into his eyes for a short period.

Best regards,
Thank you for sharing your process.