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February 01 - 14, 2009


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Note: The intention of inclusion of charts in FAQ is to illustrate trading principles - The appearance of a chart does not imply any kind of indication or recommendation to buy, sell, hold or stay out of any positions.




(Quotes from Ed in Red)


Saturday, February 14, 2009


Realizing Goals


Chief Ed and fellow IV members,

Some how I started flowing on the way back and got my goals done during my flight home.  I like my goals and it's real. I am excited. Thank you for your support.

See you on 26-th.


Thank you for sharing your process.

Friday, February 13, 2009


DIM Process



I'm not clear enough emotionally to participate in this series at the IV Tribe. I also had very strong reactions when you brought my awareness to the whereabouts of my drum, and to the word commitment.


I have reconnected with my drum, and I am exploring my feelings with both. Thank you for bringing my attention to them and helping me find clarity.

Please let me know if there is anything I can offer to assist you with your purpose. I am willing to offer my technology expertise, software development, and trading system design skills. Feel free to pass my information along if you know of anyone in need.

I am leaving for [City] next week. My intention is to find a reasonable place to stay for the next six months until my financial commitments are cleared. I am looking for a room to rent or a property to manage. Do you have any suggestions or know of anyone looking?



Friday, February 13, 2009


Urban Cowboys


My children also thank you!


Friday, February 13, 2009


Telling Feelings


Hi Ed!

Here comes an update from [Country]. Our Tribe are meeting once a month and we are currently 5 people. I am beginning to apply trading tribe techniques much more in my everyday life. I am for example more prone to tell my feelings in different situations. I have come to tell my feelings to some people that I have felt my relation was a bit un-natural.


All in all I am more straight forward now. One different view is that I give back what I get to the person I am "getting it from", not to anyone else. I have felt it is cowardly to come home to my family and complain about work instead of complaining at work if my annoyance is created there. I feel both good and bad about that. I do feel good about things much faster (less farsighted), but some times I feel like I'm complaining too much.


Still, if I complain and get a bad feeling about it, I always make it up by apologizing.

Trading is working out okay. I am a lot less consumed about the results. I don't even think it is necessary to work in the industry. I could satisfy my needs and goals on a hobby level. However, to become a portfolio manager is still my main goal.

I have some habits of paying for my weaknesses. If I eat to much candy I invest money for my son. If I am acting in a way I consider bad (trying to be a fair judge ...), I invest for my godchildren. It is a way of seeing the positive side of bad habits. It helps me to not dwell on it. I give and I am cured!

I've been thinking about the similarities between some religious habits and the trading tribe meetings. I do not believe in God. I think the theoretical model of how TTP works is important for me. I believe that the mind, feelings, habits and discipline is creating the result. I have to believe in it for it to work for me. If you had told me that if you tell your feelings, God will listen and help you, I don't think it would have worked for me. We could still have made the same techniques but I think the result would have been different with a different theoretical model. Bla bla bla ... I feel I am not able to put in words what I think. Better with feelings.

I know I have an issue about money. (Might be usual to traders ...). I think it is an awful lot of money to join a workshop. I would never pay so much money for something we can imitate here without a dime in cost. It is also a good lesson to build it up by yourself. Of course, I might miss out on a lot of things but that's life. Whatever I do, I miss out on something. It is a choice. Do you ever feel the need to justify the cost of the seminars?


I wonder if you consider the price to be an important ingredient to get very eager people to join, or is it just a way of earning a good salary on something else than trading? Don't misunderstand me, I think you are doing an excellent job. I wouldn't wanna miss a thing you do, but I don't think it is good money management to spend such a large part of trading capital on one bet. A good job deserves be appreciated with good money!


Thursday, February 12, 2009


Tribe Meeting Evolution



I send you the report of the Tribe meetings in [City]. I was there for 10 days and planed to host 3 meetings for 4-5 members. At the end, they were 7 meetings, 19 participants, 14 hot seats (2 with me on it), and 1 rock process. This is my idea of a refreshing holiday.

First meeting: On Friday, 5 hours after arrival, my sister tells me about a friend of her who cannot visit the planed meetings. I invite her to visit me. She never met me before, and at the end we talk for more than 3 hours about her most intimate problems. We work on the issues “anger” and “oppression”. After I receive her, she starts understanding her problems. She leaves for a holiday the day after that, and indicates her wish to participate at further meetings after her return.
This was a nice warm-up.

Second meeting: On Sunday, 10 people show up. We meet in a country house and carry out the exercises under two majestic pines. It is a wonderful summer evening. I discuss TTP for 15 minutes, and we start working. No questions, no long explanations. We carry out the exercises “tell me what you think”, “tell me what you feel” and “show me what you feel”.


I observe that participants frequently do not understand what they have to do. Hence, we carry out the exercises first in a huge circle. Everybody sees what I mean, and I can correct / advice everyone. After that, we carry out the exercises in pairs for 10 minutes.


Before and after each exercise we check in and out. After “Tell me what you think”, one participant decides to leave and to wait for us in his car. This creates a lot of feelings in the group. We start practicing “tell me what you feel”. The participants report feeling anger, sadness, irritation, annoyance, and so on, all related to the departure of the one member.


I report feeling the sun on my back and some itching in my hand. They are all very surprised. I explain that they all use the same objective fact (the departure) to experience some feeling, while I just observe a guy leaving and do not feel a thing about it. I deeply thank the member for giving us such an excellent example!

After the next exercise, “show me what you feel”, the group is so hot that I decide not to carry out “show me more of that”, for I fear that I will have 10 people going all together into wild contortions and losing control without supervision.


But as several members express worries about the departing one and his situation, we check for him. He sleeps peacefully in his car! This yields a collective aha. We can use one and the same situation to feel, well, anything that we want to feel.

We make a short break. Some people drink coffee, some smoke. I joke “Well, this can be your last coffee or your last cigarette, since many people stop with it after TTP”. After this comment, another member decides to leave.

I ask for issues, and most members have one. Curiously, I forget to ask one member (A) if she has an issue. We postulate that this is a need of (A) not to work on her issue or of mine not to support her. Since it is late, I look for the “ripest” members and carry out 2 hot-seats.


In the first, we work on “anger” of one member. In the second, I manage the process of my own sister. She is unable to experience “loss” and “sadness”.


This fantastic new Tribe offers relentless support and she grieves for a time that seems never to end. I receive her with infinite compassion. I teach her that what she feels is not right, not wrong: it is just her way of doing things.


I experience the endless sorrow and misery of a child who will never see the world, of a mother who will never know her child. I cry and suffer and grieve with her. As she finishes, I feel the release of tension and the joy in my own body. The Tribe (most of them women) is deeply moved. We check out and finish for the day.

Third meeting: On Wednesday, five new members appear; again, we are 10. We repeat the exercises under the pines. The first hot-seat is very intense; the hot-seater goes through several forms and it takes her a lot of effort to reach the climax.


To me, this is not new. But this time, I do not feel supported by the Tribe as I manage the process. Once, I turn my face to observe the Tribe, and some of them are aghast, hiding their faces, horrified. During the check out for the process, three members leave. Two of them tell me that they will return to a next meeting. But the third looks really freaked out.

After that, (A) takes the hot-seat (see “Second meeting”, above). This time, I do not forget to ask her. The issue is “I do not get recognition”. The start is difficult.


To isolate the feeling, I start irritating her and mention that maybe she does not deserve recognition. She gets really angry and her eyes shine with hate. I do not know how to proceed further. Then, something very curious happens. I ask her how she feels and she murmurs something about “losing her dignity”.


I understand that she feels like losing her dignity on the hot-seat, and say “well, then, we can stop and check out”. In fact, she was saying “Sometimes I want to lose my dignity.” I misunderstood her. And as I suggest her to stop, she collapses completely and literally falls from her chair, crying in despair.


She feels terribly alone and lost. She is confronted with some intra-uterine issues. She understands that this is the origin of several health problems and decisions in her life. She wants to throw up. We encourage her to do it. Again, I receive her with all my compassion, until the issue resolves. Then, she reports that nausea and throwing up feel joyful. She realizes that she does not to feel nausea anymore.


I observe that a misunderstanding results in a successful process. Intentions = results, no matter the method you apply.

On the second hot-seat, a member works on “anger”. He always contains his anger and does not express it. He is a good friend of mine; I have known him for over 30 years and hence I dare to increase his anger.


First, I advice him to contain his anger more and more. As he reaches the maximum countenance, I start literally insulting him. He contains his anger more and more. After some minutes, I ask him how he feels. He clenches his teeth and says “I want to kill you with my own hands”.


I continue “you are just a crappy damned coward; you mess up with me because I am 10 inches shorter than you. Attack yourself, if you have the guts! You are the problem, not me!” The guy really explodes. He releases all his anger and shouts like a madman. The whole Tribe shouts in shared joy and celebrates his anger. He is completely released from it. At the end of the process, I ask him about his feelings.


He says “if someone else would insult me that way, I would have killed him”. I answer “well, I don't know, for you are a crappy coward”. This time, he laughs wholeheartedly. He is, in fact, a huge guy, about 10 inches and 50 pounds above my size. Sometimes, managing a process requires a lot of courage.

Previous to my flight, I mention Tribe to some old friends who can be interested about it. I do not invite one of them, for I think that he will not be interested. Curiously, he decides to visit me while we held the meeting. I cannot hide the issue, he is very interested and he ends up visiting the fourth meeting.

Fourth meeting: After her first hot-seat, my sister observes so many changes that she recommends her husband to visit a meeting. He (B) is deeply skeptical, kind and very intelligent. We plan an extra meeting for him, for another friend, and for the old friend who I thought would not be interested.


We repeat the exercises under the pines, and during it B and I lose contact with the surroundings. It is a weird sensation, and I explain him that we entered in trance. I ask him if he is willing to allow me to guide him. He mentions feeling afraid, and I feel his fear. After some instants, he agrees. His issue is, again, “anger”.


Anger affects his whole life; he is very frequently irritated, his own son does not want to play with him because he is always angry. However, he realizes that this conduct is inappropriate. We re-enter the trace.


I use the process to show the other members that TTP also works without drums, without shouting for encouragement, without red faces and swollen veins in your neck.


The process is peaceful, serene, but extremely intense: at the end, I am drained and deeply moved. B remembers events in his childhood; he realizes how he learned some resources from his father. He also realizes that this is not necessary. Anger is love to yourself. Anger allows you to set limits. And you can be extremely angry without shouting at or attacking others, and even like the feeling.


After the hot-seat, B is another person. I observe his calm, his new attitude. A real change.
At this point, several members have seen a couple of processes. I take the hot-seat with the issue “I do not manage the money of my family”. My wife and my children got a gift from her father. He lets some scatterbrains from the [Name] Bank manage the money; after 10 years, the total return is negative (-30%!). Since I don't want to mess up, I let her father manage the money conservatively and trade with about 10% of the total amount.


The largest part is “secure”, and my trading is “speculation”. I realize that my father in law is responsible for the security of my family, and I only play games with a minimal part of our savings. On the hot seat, I realize that not taking responsibility for the whole money is very irresponsible: instead of managing it myself, I let some s-for-brains from the [Name] Bank administer our money! I seriously commit to change the situation as soon as I am back.

Each evening, after the meetings I have a talk with my mother. After the death of my father, she feels alone and lost. She keeps criticizing people and making them responsible for her problems. We have a tense relationship. I dislike physical contact with her like hugging or cuddling. I receive her hate and her unwillingness to change. She tells me that she cannot change, since she is 72 years old, and the others should act as she likes. I tell her that I see no chance to change the others, and that she should assume another attitude. She promises me to think about that.

Fifth meeting: Another new member appears. We are 5. We meet under the pines and repeat the exercises. I also use them as warm-up for the Tribe. The new member brings the issue “acceptance”. She does not feel accepted since her childhood. During the process she expresses the fear of getting mad and losing herself. Some weeks ago this could freak me out.


But I remember having a dream during my visit to IV. It consisted of only one sentence: “Everything is just another issue taken to the hot seat.” Even paranoid maniacs who menace to kill you with a chainsaw are just showing a form. As I mentioned you, this changes my whole approach to psychiatric disorders.

In the second hot seat, a friend works on his issue “I do not get the job that I want”. He sees that the problem is related to not letting her father down, but also not being better than he is. He develops a bouncing motion. I encourage him to bounce further and, knowing that he is a very skilled dancer, I suggest that he is just dancing, the dance that he likes the most, and that he should keep on dancing as long as he wills.


I doubt that Fred Astaire enjoyed his dancing as much as our friend does! He resolves his issue. I look forward for knowing how it works out on his career.

In the night, I have another talk with my mother. I mention that she can change her perception of the problems, but she cannot change other people. She repeats me that she cannot change, and that the others are guilty of her problems. I tell her “well, if you see things that way, we don't need to discuss it any further. But I also do not want to talk with you about your problems.”

Sixth meeting: The next day I talk to my mother. We sit under the pines. I tell her that I really mean what I said the night before, but that I am also sad about that, because she is my mother. She asks me what she can do, and I tell her “well, to start, you can be very, very still and look into my eyes.”


She starts telling me about her problems, and I find her feelings. She starts scratching her forehead, and I suggest her to do more of that. She gets into her feelings very fast. She identifies “loneliness”, “feeling rejected” and “feeling at the wrong place”. She remembers the terrible feeling of losing my father.


She has no idea about TTP, but she repeats all steps of a process: finding a feeling, disliking it, being intrigued about it, starting liking it, feeling the change. I let her freeze the form several times, until she feels she is ready. She cannot find the feelings anymore. She realizes that her conduct is not helping her. I offer her to carry out a rock process. I put her usual answers (getting angry, trying to hurt) on a rock and offer it to her.


She accepts it the first time and realizes that it does not work. She wants to get rid of it. I take the rock away and tell her that I am offering it again. She firmly rejects it; I try several times, in several tones, but she does not accept it. I take another rock and together we search for new, better resources: To laugh at the aggressor, to take a deep breath and find a better answer, to ask the aggressor what he pretends, to tell him her feelings, to ask him about his feelings, and sometimes to get angry and to attack him. She accepts the new rock and commits to use it. I feel that she is done and release her.

Some hours after that, I observe my mother in astonishment. She seems to be 5 or 6 years [younger], she has lost her amour and her aggressiveness. And, most strange of all: I have the urge to hug her and to feel the physical closeness. It is a feeling I HATED for years, and now I need it!


As my mother resolves the issue “feeling rejected”, I do not reject her anymore. Weird.

In the night, we go for a walk. She tells me how well and how released she feels after the hot-seat. She is very grateful. While she talks, she stumbles, falls and hurts her nose. She bleeds profusely. It is late, we are in a lonely area, and in this part of the city, cars do not stop in the night at a lonely road. As I help her and ask myself how to transport her home, a car appears out of nowhere, stops and offers help.


Until the next day, I keep on thinking what my mother is trying to feel.

Seventh meeting: My sister, my mother and myself participate. The issue is obvious: the fall and injury of my mother. I ask her how she feels about that: She is very angry and impotent. I ask her to feel the feelings. I hope that the form does not include rubbing her face or doing something with her nose, because she got two stitches. But it does not. She expresses anger, frustration and impotence. She remembers her own mother, frustrating her as a child, as she asks for affection and cuddling (remember that I could not stand her cuddling me?).


She realizes how she experienced anger and impotence in her job, in her marriage, in relationships with other family members. She used the same resource for almost 7 decades to hide her sadness. She works for a very long time, and I admire her courage and her willingness to do the work. At the end, she is exhausted and we stop the process. My sister knows how to manage a process, but this is not important: she also realizes what my mom needs.

Aftermath: As I leave, I say good bye to my mother. I hug her for a very, very long time. I feel a closeness that I did not feel for years. Now I know about her loneliness, her sadness, her despair. I promise to visit her more frequently.
Some days after my return, my sister tells me that her son is crying because he misses me and my children.


She is surprised, because he usually does not cry: instead of sadness, he usually shows aggression and anger. She is another person, and her son is another boy.

Several Tribe members contact me and report clear changes in mood. They wonder if they will last. I know that they will last.

I discuss our financial situation with my wife. I declare that I will not keep watching while a bunch of imbeciles play games with our future. We agree to clear up the situation this weekend. We will retire the whole amount from the managed account and I assume responsibility for our finances.

I think that right now I hold the record for the hot-seats with the oldest (72) and the youngest participant (my daughter, 8 years old).
I observe that, in the last weeks, I get EVERYTHING that I want. It starts to be scary…No, getting what I want is exactly what I want to get.

It is a fantastic Tribe, Ed. I am missing them already.


Thank you for sharing your experiences.


Congratulations on your progress with your mother and with your family.


You seem to like to skate back and forth between the roles of provocateur, process manager and Tribe leader.


If you like to "push" the process along, you might consider balancing with frequent willingness testing.




If You Like to Push,


you might consider making sure

to test your playmate for willingness.



Clip: http://www.shaolincom.com/Images-S/




Thursday, February 12, 2009


Poor Performance

Hi Ed,

I have attached the equity curve for the infamous "Turtle" system over the past 40 years. I'm sure you are familiar with the rules. What are your
thoughts about the reasons for poor performance over the past 15 years?

I do not know the exact rule set to which you refer.


You might consider taking your feelings about <poor performance> and <wanting reasons> to Tribe.



Wednesday, February 11, 2009




Ed Says: You might consider taking your feelings about <uncertainty> to Tribe.

Ed, isn't this a paradox? Trend trading typically entails embracing and living with uncertainty. On the other hand I am naturally or instinctively afraid of the uncertain. So trend trading is humanly unnatural?

Unwillingness to experience uncertainty can lead to medicating your feelings by violating system rules.



Tuesday, February 10, 2009


Being the Best


Hi Mr Seykota,

Would you be able to outline a series of steps from your own experience and observations of others of what it takes to reach a level of performance that makes a person one of the best, if not the best in their respective field?


I expect you to tell me to take my feelings about being an elite performer to a tribe meeting, however I don't want to dispel this desire, but rather take with me in every moment so that I am constantly working towards it.


This is obviously related to trading, but a general approach would also be helpful.

Any advice you can put forward would mean the world to me.

You are already the very best (and only) you on the planet.



Monday, February 9, 2009


Trouble with Stops




How are you? I have been studying your excellent TT site! After 8 years of working for the "man" at Pacific Life as a wholesaler of mutual funds and VA's, quite successfully, I was laid off on Jan 9th 2009.


For these last 5-6 years I have traded stocks and options as my true passion. I now have both NQ and qualified assets to trade, thank God for severance packages and rollovers, LOL.


I use a 20/50 day MA crossover system and am an expert at candlestick indicators. I am TA first, but enjoy a good story or funnymentals (guess this is my Achilles heal), and want to get intently involved in what you have put together.


Are there TT groups in the LA area? I want to participate and be part of your team. The problem (issue) I am working through is that I trade equities and find it tough to set stops, I understand pyramiding, am attempting to manage risk, even to the point of being proud of taking small losses, and the concept of trailing stops (though a problem with my small cap universe.


It is difficult to deny that bear days happen and take out good positions in OTC small caps and listed small-mid caps. If you have read this far, I appreciate and admire your consideration and / or counsel.


If you understand my risk management dilemma and can offer guidance I will be forever indebted.

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



Your Relationship with Stops


may have a lot to do

with how you hold them.



Clip: http://cache.jalopnik.com/assets/resources/




February 9, 2009


Breakthrough with Wife



I sense a major breakthrough in my relationship with my wife. I feel the excitement of entering a more intimate relationship with her. I feel a lightness in my abdomen. I have a tingly sensation in my jaw.

My exposure to TTP at the July Workshop continues to provide benefits. Thank you for what you do. I wish you all the best with the upcoming Workshop.

All the best,

Thank you for sharing your process.



Feeling the Excitement


of entering

a more intimate relationship.


Clip: http://imagecache2.allposters.com/


Sunday, February 8, 2009

Feelings and the Ego



I have a few questions that you may wish to ponder:

How do feelings and the ego overlap or don't they?

How does an individual's ego affect their feelings and / or feeling responses?

I am quite certain the answers to these two questions provide the basis for almost all feelings and feeling responses.


Transcendence of the ego into a higher state of consciousness and specifically objective awareness confirms these conclusions.


You may notice that in the ego world feelings are nothing more than a survival mechanism of the ego itself and thus never ending recursive loop.

This is just some food for thought.

In the TTP cartography of the mind, a feeling is the conscious awareness of an emotion. 


We use awareness of feelings to help program automatic responses to our emotions.


In this way, we can become more effective in staying on the path or serving right livelihood.


A fully "transcendent" individual would have no desires, motives, emotions, feelings or responses.




Transcendent Masters


can sit for endless hours

in Lotus Posture.


Statues are better at this

than are most people.



Clip: http://www.buddha-images.com/PathomChedi/


February 7, 2009


Unable = Unwilling




Ed says, "The only emotions that bother me seem to be the ones that I am unwilling or unable to experience in the moment of now." (FAQ
August 14, 2008, Grief Cycle)

I have this thought when I read it: in the context of feelings and given intention = result, isn't unable just another name for unwilling?

And I guess one approach to unwillingness is to see if we are willing to experience the feeling of unwillingness?




When you notice this, you become less susceptible to manipulation by bums who claim privilege by attempting to trade on their forms




Honest Bum




Golf Bum









February 7, 2009



Dear Ed Seykota,

Thank you for answering my previous letter.

1 Now I would like to here from you about stop lose, by which philosophy to use it, just any opinion not any instruction. (I read FAQ rule).

2 Also would like to here your opinion about leverage. Because any body who start to trade get 100:1. Would like to know your opinion about what kind of leverage use generally the top traders?

3 Other interesting moment for me is to know your opinion about next.

I met with an opinion on forums that the banks traders or institutional trader have more advantages than other traders (let say private traders).

Actually I don't know and don't see the bank insight. But in spite of that after understanding the philosophy trend follower I don't agree with these. But may be I don't know something in that is why I would like to have your opinions about these.

4 How do you think broker business more profitable or trader?

5 Today I mean crises period on world economy banks, companies, and ordinary people all speaking about lack of the money. But before the crises everything was fine there was enough money for everybody. What happened? It could not be people throw out the money not? But why suddenly money was not enough to everybody. Does it mean that the peoples, investors just hide them, capital and wait good time to use them?

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





can serve by helping

mask deeper issues.



Clip: http://www.billfulton.com/images/confusion.bmp

Friday, February 6, 2009

Top Ten Questions - for Psychics


Believe it or not, each year nearly $2 billion is spent by Americans for psychic answers to their problems. For example organizations such as the Psychic Readers, or Psychic Believers Network charge anywhere from $2 to $5 a minute to supposedly answer people's questions, mostly about the future. To point out the silliness of this practice, here's a "Top Ten List of Questions for Telephone Psychics":

10. Why don't psychic hotlines call you right before you call them?

9. Why do phone psychics have to ask for your credit card number?

8. If you have a friend who works for a psychic network, should you plan a surprise birthday party for him or her?

7. Why is it you never see the headline, "PSYCHIC WINS LOTTERY"?

6. Is it possible for a "psychic fair" to be cancelled due to unforeseen circumstances?

5. Does a psychic amnesiac know in advance what he is going to forget?

4. Do people with psychic powers get nostalgic about next week?

3. Why don't people understand that psychics are only doing what they're doing because it makes them feel less poor?

2. If psychics can tell the future, why haven't they retired on their stock options?

And the number one question for psychics is...

Would a midget fortune-teller who escaped from prison be called a small medium at large?

By the way, did you hear the one about the frog and his psychic? A frog telephones the psychic hotline and is told, "You are going to meet a beautiful young girl who will want to know everything about you." The frog says, "This is great! Will I meet her at a party, or what?"

"No," says the psychic. "Next semester in her biology class."

Source: Dr. Neil Chadwick’s Joyful Ministry Circular. 


I knew you were going to send me this list.

Friday, February 6, 2009


Trading Metrics

Mr. Seykota,

In the Panama method the adjustment factors accumulate and the continuous chart develops a downward or upward bias with respect to the splice or the cash chart. We define as drift the amount of bias. In the panama and splice charts, the drift is the distance between the closing prices of the associated charts.

The drift can be imagined as a stony stair built on the ground. For a market that is in backwardation the ground acts as the reference and it represents the closing price of the splice chart. Each step represents a delivery; the distance from the top surface of a step to the ground represents the cumulative adjustment factor as well as the distance of the panama chart with respect to the splice chart.

Stony stairs are build progressively by adding layers of stones, so that the first layer of stones is laid on the ground, the second layer of stones is laid on top of the first layer, etc. Once we lay down the first layer of stones we stand at a distance above the ground. Every time we add a layer of stones the cumulative distance from the ground increases.

In a similar manner the adjustment factors build up progressively each time we roll on to the next delivery and the distance (drift) of the panama chart with respect to the splice chart builds up in steps.

The problem here is that the drift builds up in steps, not smoothly.


For example, if we hold on to the first delivery for 20 days, the drift for days 1 to 20 is 0. If the first adjustment factor is 5 and we hold on to the second delivery for 10 days, the drift for days 21 to 30 in the panama chart is 5 etc. If we attempt to correct the panama chart by subtracting from each delivery in the continuous contract its corresponding cumulative adjustment factor, we end up with the splice chart.

In the stair paradigm, if we downsize the stony blocks we can smooth the shape of a stair so that each step is replaced by many smaller steps.

In a similar manner we can change the shape of the drift so that it develops smoothly in small steps. For example, if we hold on to the first delivery for 20 days and the first adjustment factor is 5, the daily drift is 5 ÷ 20 = 0.25. So on the first day the drift is 0.25, on the second day it is 0.25 + 0.25 = 0.5 and so forth. On the 20th day the drift is 5.

If we hold on to the second delivery for 10 days and the second adjustment factor is 2, the drift of the panama chart with respect to the splice chart on the 21st day is 5 + 2÷10 = 5 + 0.2 = 5.2, on the 22nd day it is 5.4 and so forth.

We calculate the drift for every day in every delivery of the panama contract. The result is a smoothed drift whose duration matches the duration of the panama contract. The smoothed drift can be used to adjust the price level of the panama chart, without distorting its continuity. If we subtract from every closing price in the panama contract its corresponding drift, the price level of panama chart will match approximately the price level of the splice chart.

Results included in a previous e-mail prove that this method works. The attached documents clarifies the diversification process.


Thank you.

A continuous contract eliminates the "steps" between successive contracts in order to simplify back-testing. The process of joining contracts  induces "drift."


A cash chart is also continuous and does not have the "drift" that you find in continuous contracts.


If you wish to use cash contracts for back testing, be sure to allow for carrying charges that you incur for holding the physicals.

February 5, 2009

Wing Suit Flying





I'd like to see them fly back up the mountain.

Tuesday, February 3, 2009


Dynamic Systems



Thanks for the suggestion yesterday. I go online and find a system dynamics curriculum that Forrester built to teach it at a 12th grade level. I start reading through it and download and use Vensim software (free) to build and test my first system. See the document attached. I learn about stocks, flows, endogenous and exogenous variables, and dimensional consistency, etc.


Give me a month and I will at least be conversant. The next system I intend to build and send you is the interest rate problem from yesterday.

Thanks again,





You might like to see if you can reproduce the  systems on the Models page.

Tuesday, February 3, 2009


IV Tribe Meetings Thursday, January 29, 2009



Thanks for the invite – I know you host interesting sessions.

Although I feel tempted, I decide not to commit to 10 weeks.

If you recall my last visit to your house, I gain momentum to work on a web project.

My project grows and transforms into a trading-related series of reports.

I intend to send you details in another email.

I feel anxiety in my stomach and restless impatience when I think about all I want to do for my project.

The unpleasant sensations grow in intensity as I travel about without accomplishing “enough” on my To-Do list.

I take the feelings as a signal to sit myself down to focus attention and effort on the project.

That said, I have a ski trip planned for Heavenly in early Feb and probably another in late March.

I intend to be in your neighborhood (South Shore) Feb 6 – Feb 10 and could potentially arrive Feb 5.

If it works out for me to attend erratically or if there is another event I could participate in, please let me know.

I wish you the best with your series of meetings.


Tuesday, February 3, 2009


Soros on the Economy


"The bursting of bubbles causes credit contraction, the forced liquidation of assets, deflation and wealth destruction that may reach catastrophic proportions.


In a deflationary environment, the weight of accumulated debt can sink the banking system and push the economy into depression.


That is what needs to be prevented at all costs.


It can be done – by creating money to offset the contraction of credit, recapitalizing the banking system and writing off or down the accumulated debt in an orderly manner.


They require radical and unorthodox policy measures. For best results, the three processes should be combined. If these measures were successful and credit started to expand, deflationary pressures would be replaced by the specter of inflation and the authorities would have to drain the excess money supply from the economy almost as fast as they had pumped it in.


There is no way to escape from a far-from-equilibrium situation – global deflation and depression – except by first inducing its opposite and then reducing it."



Hmmm ... I don't see any mention of the positive intention of deflation.


Soros does not appear to present a model, as much as he presents an agenda for enacting some responses to some feelings he has about deflation.

See Models for examples of viewing policy changes from a system-wide viewpoint.

Tuesday, February 3, 2009





Thought of you when I read this. This kind of clarity I think would capture the attention of your readers.

"The law of unintended consequences is what happens when a simple system tries to regulate a complex system. The political system is simple. It operates with limited information (rational ignorance, short time horizons, low feedback, and poor and misaligned incentives. Society in contrast is a complex, evolving, high-feedback, incentive-driven system. When a simple system tries to regulate a complex system you often get unintended consequences." -- Andrew Gelman

Which came from this. Also interesting


You sounded good when we talked ... even though the signal was bad.

All the best,

1. Re: "The law is what happens when ..."

More likely, a law guides, informs, and models what happens.

2. Re: "Unintended consequences ..."

From intentions = results,

the results are intentional.

Tuesday, February 3, 2009


Comments for the Book

I send you the informations for the book.

Antidepressants: There are different families: Serotonin-Noradrenalin reuptake inhibitors (SNRI) and also Selective Serotonin reuptake inhibitors (SSRI), tri- and tetracyclic antidepressants.

I was uncertain about the sentence about families of hypnotic drugs: in fact, there are more hypnotics in heaven and earth, Horatio, than benzodiazepines and barbiturates. For example, chloral hydrate.

Positive intention of cancer: It is rather the intention of the symptom. A patient with leukemia can

- Be severely worried about his family: what is going to happen to them

- Be severely worried about him/herself: What is going to happen to me!

- Accept that this is the end of life and things are out of control

- Get a blood clog or a hemorrhage in his brain and die without suffering

- Die slowly and painfully due to infection

- Be angry about not having money to pay a bone marrow transplantation

- Be trustful and full of hope/thankfulness to the doctors

- Experience terrible pain,

And so on.

Death can even protect you from something worse (being enslaved, losing love, being jailed in a dungeon, torture…). Most of these fears are, of course, not related to the current situation, but are unconscious contents whose origin we (or at least I) don´t know.

To your medical questions:

- Probenecid inhibits the resorption of uric acid in the kidney and hence increases its excretion. Since gout patients have too much uric acid, the loss is not a problem.

- Allopurinol inhibits the oxidation of xantines (a product of purines) into uric acid. Purines à xantines à uric acid. The xantines can be eliminated through the kidney and do not accumulate. Uric acid forms crystals and salts with sodium. They can precipitate in the kidney, the joints (gout) or in other structures, leading to the manifestations of gout.

Both drugs may have secondary effects, some of them severe. This is in my view not related to the drug, but to the need of the patient to experience the secondary effects (itching, mental problems…)

- My sources describe acidosis as a condition required for gout. A high concentration of uric acid alone during alcalosis does not result in precipitation and also not in gout. Hence, keep your pH high: eat fruits, greens, drink a LOT of water, and start breathworking 16 hours a day... well, maybe not. Bicarbonate salts are OK, they contain sodium (which you need); if your blood pressure is OK, bicarbonate is also OK.

I remember your resistance to take magnesium to prevent leg cramps. Leg cramps may be an important sign that you are overwhelming your system. However, maybe you want to think about what is the difference between taking sodium not to experience low blood pressure and taking magnesium not to experience leg cramps?

This and next week I have some meetings regarding the issue with the paper for the New England Journal of Medicine. I want to send you my impressions of my visit to IV after those meetings, to be able to report about the process but also about ist results.

I informed the Dept. of Health of Bonn today. I am waiting for an answer.

Today, my Tribe receives two new members.

It´s FUN!


Thank you for the information.

Tuesday, February 3, 2009

Break Even

Hi Ed,

I haven’t written since my thank you note for the July Workshop. I have been very busy trading and working my system. More on that later, but you crossed my mind just now and I had a quick question for you when you have a minute, if you don’t mind.

What are your thoughts on the make up of a breakeven trader?


That is to say, a trader that consistently, in almost any imaginable market environment seems to always achieve breakeven as the result of major dedicated focused system-based and non system-based (yet systematic) trading efforts.

I hope you are well.

Kind regards,

A break-even trader might get a nice bonus this year.


You might consider taking your feelings about <risk>, <stability> and <self-worth> to Tribe.

Tuesday, February 3, 2009


Wants a Workshop



Are you going to do any seminars in 2009?

See the link to the TTP Workshop, above.

Tuesday, February 3, 2009


Gold, Gold Everywhere



I forgot to tell you -

I have been thinking the Gold chart looks pretty strong - especially if it can get through $1,000 - BUT -

In the past 2 days the following happened to me:

1.) I was speaking with a guy who owns a storage unit that houses a car of mine. All he wanted to talk about was gold.

He said," I think I am going to buy some gold - things are just crazy"

2.) I was getting my teeth cleaned yesterday and as I laid on my back with my mouth open the dental hygienist said,

"My husband and I just don't know what to do. We have lost our retirement. I think we're just going to sell our stocks. My husband thought we should have bought some gold a while back but our "financial advisor" said that was a bad idea. (gold = $500 at the time). You can't lose in gold right?"

3.) I heard about Gold on TV frequently last week

4.) I heard about Gold on the Radio as well

Hmmmm ... Just a little update from the "front lines" ...

See you soon,

Thanks for the heads up.


People  talking about what they are "going to do" and what they "should have done" is different from people bragging about all the money they are making by being in the market.


If this is a golden opportunity, we might do well to keep an eye on it - a Golden Eye, that is.




Golden Eye with James BOnd

circa 1995


The 17-th film in the series

 is the first to star Pierce Brosnan


 and the first to employ

a non-Ian Flemming novel.






Clip: http://en.wikipedia.org/wiki/Goldeneye

Tuesday, February 3, 2009

Greetings to you Sir,

I am submitting an overview of my trading system in hopes you will assess it for obvious weakness which my biases may fail to perceive. If you are willing, let me know how much compensation you might want.

* I start by scanning 3 year weekly charts of stocks which trade over $5.00 and with min daily volume >250k shares.

* Go long or short on new high or low of ~233 days.

* Risk ~1% of account equity/trade.

* Initial stop is ~3 X ATR of 21 periods (weeks).

* Trailing stop is 11 periods.

* Chart pattern support/resistance influence all entries/exits/position sizing, etc to a small degree.

* Discretion influences whether a trade is taken if I already have positions in that market sector so as not to be too heavily committed in one area and therefore more diversified.

* I try to be roughly equal long/short with regard to # of positions and dollar amounts.

I thank you for your consideration and look forward to hearing from you.

With warmest wishes for your continued health & happiness.

Respectfully & Sincerely,

I don't see anything particularly systematic about:


* Chart pattern support / resistance influence all entries / exits / position sizing, etc to a small degree.


* Discretion influences whether a trade is taken if I already have positions in that market sector so as not to be too heavily committed in one area and therefore more diversified.

* I try to be roughly equal long / short with regard to # of positions and dollar amounts.

You might consider taking your feelings about <back-testing> to Tribe.


If you want private consulting, see the Ground Rules page, near the bottom.

Tuesday, February 3, 2009


Thank You


Hi Ed,

I have read about you and your trading methodology for a while now. However, I recently stumbled upon your website www.seykota.com  and the trading tribe activities. [I guess tt_95, refers to trading tribe and year of establishing it].

Thanks for your valuable thoughts on emotions. it is very fascinating to read your comments and thoughts on the FAQ.

Although, I am studying trends in (stocks, politics, commodities, weather), and really value your thoughts on that. I think it is in the area of emotional growth, where I think your thoughts are most valuable to me personally.

So thanks to you dear friend for being a teacher, a wonderful teacher.


Thank you for your encouragement.

Tuesday, February 3, 2009

Golf Balls and Bernoulli

Ed -


I really enjoy reading about your Bernoulli focus. really is fascinating. one question - how do you explain how a golf ball is lifted?


I always assumed that the backspin created a low pressure lift as the ball was propelled.


btw, after 15 yrs in the fundamental hedge fund side, have started a new hedge fund long /short equities that is systems based. I have a normalized earnings model filtering into a trend system that has taken me about 7 years to develop so we'll see how it works.

A golf ball gets its initial lift from the face of the club (or in some cases, the side).


Thereafter, back spin lifts the ball while front spin keeps it low. Lateral spin can accentuate a slice or a hook.


A golf ball in flight rides close to the borderline between laminar and turbulent flow


The dimples on the case are an attempt to keep the flow laminar.


To see this effect, watch cigar smoke rise in a still room; at first it is laminar; then it gets turbulent.


Personally, I'm waiting for some sort of self-propelling ball with on-board GPS support.




Smoke, like Golf Balls and Some Markets


rise smoothly for a while


and then become turbulent.


Clip: http://content.answers.com/main/content/




Reference: http://www.golfjoy.com/golf_physics/


Tuesday, February 3, 2009

Inflation Concerns -

see: Friday January 16th 2009



Was the system before this down turn that much different.

There was a situation where many banks were chasing more risky (bad) business. They were making money 'intra day' so to speak and then losing it (and a lot more) in the bigger trend.

Or can we just accept the bigger the boom the bigger the bust?

Thanks again for your work.

Its quite amazing what you can say with just a few words.

The current contraction may indicate deep, long-term and inexorable growth of government as well as a normal business cycle.

Monday, February 2, 2009


What is the Meaning of all this Heat ?


I notice the responses and suggestions you offer on FAQ to my previous 2 e-mails.

Thank you for your support.

I sincerely appreciate your insightful feedback and all you share.

My GUI presents a graphical model of the trading system. The tabs present views of the phases of the simulation loop, as shown the "Main Simulation Loop" page of the documents.

The parameters of the model can be modified in-place on the model views, selected for optimization and locked.

The GUI is in a primitive state.

I have the backtest engine and other supportive pieces working well, though in progress.

I am testing a system using the example given in the Support Resistance Trading System Project as the trend following method. My numerous attempts at using other trend following methods fail to produce satisfactory results when it comes to testing over a wide range of start and end dates.

I am not clear on how to create and manage heat in the system.


I am experimenting with some techniques. I want to manage heat when pyramiding, also.

I am using the Risk page, FAQ's and the "Determining Optimal Risk" paper as sources.

I am not clear on the term "heat" as used in the material. It seems to have various meanings
depending on context.

Two definitions I have for heat are:

1) Distributed bet size ("Determining Optimal Risk" paper)

2) Portfolio percent drawdown (FAQ Jan 8, 2003)

I do not understand how these are the same.

FAQ on 4 Aug 2003, states "You might consider viewing heat as less as something to tolerate
and more as something to create and manage."


... "Big Breakthrough when he finds out he
has control of the gas knob."

It seems the idea is to create heat (open positions using trend following method for entry and set protective stops) and then manage heat by buying, selling and / or moving stops.

It seems the idea is to manage (maintain) heat somewhere between too little heat (timid trader) and too much heat (bold trader). While thinking about this, the process of controlling heat reminds me of hysteresis, like a thermostat. After a heat adjustment, the resultant heat appears, partly depending on my adjustments, and partly depending on how the market moves.

In physics, heat is a form of energy that registers as a temperature gradient.


In emotions, heat is a sensation of arousal, excitement or irritation.


In relationships, heat is slang for pressure, as in, "taking heat" for an action or a decision.


In trading, the term likely appears for the first time in an article by Dr. Dave Druz and me, Determining Optimal Risk


As I recall, we are looking for a term to capture the qualitative property that differentiates high-risk trading from low-risk trading.  High-risk trading generally has a higher cumulative bet size, higher drawdowns and more emotional pressure.


The term, heat, refers to all of these.  At this point I do not know of any attempts to formulate heat into a quantitative scale.


In practice, we generally measure cumulative risk-to-stops, subtract this quantity from total equity to get "core equity," likely also an original term.


In core equity risk management, you take a fraction of your current core as your next risk.  That fraction, incidentally, also carries the name, heat.






Heat can indicate physical temperature,

psychological pressure

and / or emotional engagement.



Clip: http://www.thehollywoodgossip.com/




Monday, February 2, 2009


Looking for the Joy

Hi Ed,

Thank you for taking the time to read this letter.

Two years ago, I was very passionate about trading. I thought that this was what I really wanted to do with my life. This must be the ultimate profession I thought. All you needed was some capital, and an internet connection. With some capital that I had earned over the previous years, I actively traded. I even did day trading just so to be immersed in the "action" of the market on a day to day basis.

However, 1 year into day trading, I was going nowhere. Not losing much, nor winning much. I felt that this endeavor is a waste of time if I am not risking, or gaining more. Eventually, I started losing with surprising consistency.

My position trading account was not faring well either. I kept changing my system almost each time I lost on a trade.

I felt so disgusted (at the time when the banks were failing) with the market that I put on some trades that I vowed to forget for years to come. I traded on margin and bet that the market wouldn't go down past my losing point, but it did, and just at almost the right point.


Funny how it feels that the market "knows" and is always working against me.

I quit day trading because I felt burnt out and I stopped position trading because my capital was wiped out. I felt that my time and energy would be better spent developing websites where I could make more "return on energy." I would go back to trading, but next time I would trade with the trend on a much longer time horizon.

But I am not happy. This is not what I am passionate about. I don't wake up excited to start my day. I feel that this is just a means to get to something else. What that something else is, still eludes me.

How did you know what you really wanted to do in life?

Many thanks,

The joy rarely comes from the job; it typically comes from what you put into the job.


If you put some excitement into your website designing, you might find out it's fun and rewarding - and leads to other opportunities.


See Progress Report, below.


You might consider taking your feelings about <return on energy> and <wanting excitement> to Tribe.



Feelings of Excitement


typically depend on externals

like watching your trade

go up and down.


Joy typically arises




Clip: http://www.subliminalmoney.com/


Monday, February 2, 2009


Wants Some Insights

Dear Ed-

I am writing to tell you that I am a big fan and to introduce myself. I first found out about you in the Market Wizards book. Your chapter was the most unique in that it was the most insightful. It provided an angle about trading for the reader that allowed them to ask questions which could give them insight about their probability for success. I have read the book many times and your chapter has helped me in many ways.


I have been a trader for 12 years and have had a very successful career, but the last few months have been quite challenging for me.


I am a very ambitious individual and an avid reader of trading books. I sometimes feel that maybe my ambitions can lead to my frustration with the market, in that the desire to succeed is very great and the lack of recent success has me feeling a little bit down.


I am thinking about attending one of your seminars, but in the mean time if you could get back to me with some insight about trading a market like this it would be much appreciated on my behalf.


Thank you for all that you have done for the trading community and I look forward to speaking with you in the near future.

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




For a Piston


pushing constitutes Right Livelihood.




The Same Holds for a Custodian




you can make

pretty good money at it ...




once you get the hang of it.









Sunday, February 1, 2009


Progress Report

Dear Ed-

This is a progress report on my work since we visited Incline.

As you may recall, the tribe encourages me in creating a web business.

At first I experiment with fanciful ideas. I have two more hot seats with my local tribe which reveal both my insecurities and my impatience with writing about my personal stuff.


Then I focus on helping traders and active investors. I create a blog about back-testing and a set of information products with data from back-testing the US stock market.


I enjoy learning about internet marketing and experimenting with business models, Google advertising and sales sites. My plan is to sell my own reports, and to extend my business model to publish information products from other traders too. I have three reports, a sales site up since Jan and now a growing customer base.

Thanks for your encouragement to get this project started.

Best regards,

Thank you for sharing your process;  congratulations on following through.

Sunday, February 1, 2009

Support and Resistance Project

Optimization Results

Hi Ed,

I have attached my results on optimization of Support and Resistance Project. I have reproduced your results. Mine are very slightly different from yours, but I believe it is accuracy of Excel and Visual Basic rather then real discrepancy.

I sent you earlier also results of the project with Exponential Crossover System, also done in Excel.

I cannot do the next project because I don't have any software that allows me to download all stocks from web to find trends.

I am waiting for your other projects to do.

Great thanks for giving us the opportunity to learn from you. Wish you all the best,

PS. Since these projects do not depend on particular product to trade, I can implement them for stock trading. Is this right? The beauty of that is that I don't need any sophisticated software, "experts" and their newsletter services and so on. Just an excel sheet with some VB code! Great thanks for that.

If you wish to pursue an interest and publish a paper about it on FAQ, I can work with you on it.

Sunday, February 1, 2009


Bottrop Germany Tribe

Good evening Ed,

hope everything is fine with you! I attach the TTID Template for the Tribe I intend to start. We are currently only 2 people who are willing to do the work and hope to find more people (over FAQ) to get the tribe started!

Yours truly,



Welcome !