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January 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)


Tuesday, January 13, 2009

Associate Works on Sports-Betting Model


I am stumped on how to keep past rankings from updating with the new ranking. Your thoughts would be appreciated.

You might consider completing the coin flip study (see Two Coins) into a form for publication on these pages, and then take that level of expertise into your sports betting investigations.

Tuesday, January 13, 2009

Atlas Shrugged

Hi Ed,

It seems to me that a lot of what you say here in the FAQ about society, government, taxation, or fairness resonate closely with Ayn Rand's Atlas Shrugged. I am a little surprised that it is not in the Books page of your site.

Ayn Rand, Milton Friedman, The Austrian School of economics and others follow a philosophy that a society operates better when the citizens enjoy freedom of choice.

Tuesday, January 13, 2009

Physiology Recapitulates Trading Phylogeny

The Important Middle-to-First Finger Ratio



See This.


Jan. 13 (Bloomberg) -- A glance at a trader’s hand may reveal the size of his paycheck. The longer the ring finger is compared with the index finger, the bigger his pay is likely to be, a study of London traders found.


The secret to prosperity may be contained in their digit ratio, which reflects the length of the index finger divided by the length of the ring finger, according to a study of 44 London traders. Traders with a lower digit ratio (.93) made an average of 679,680 pounds (or about $1 million U.S.), compared with 61,320 pounds ($90,956 U.S.) by those with a higher ratio (.988).

Source: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a0DSeeJp9jWg

Thank you for noticing this important research.



The Study Goes On To Prove


the current banking crisis

is actually a direct result

of top banking officials

following the mistaken practice

of stretching out their forefingers

rather than their ring fingers.


The  study does not mention

the placement of their thumbs

during the late phases

of the credit expansion.


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

Tuesday, January 13, 2009

Giving Back Profits

Dear Sir,

At the very outset, I would like to thank you for the encouragement you give traders through your open approach on the trading tribe, I have recently shifted my trading from an subjective to a more objective system based short term trading approach.


I do not have any difficulty in taking my trades but do feel a lot about giving part of my profits back (in some cases, my gains have turned into losses).


Since my exits are also system based, my mind often veers to taking profits (my old mindset) whenever the gains are large. I used to think that my mind would stop playing games and feelings would not interrupt my trades (it has not yet done so) but despite knowing that trend following means giving back some of the gains back, I find myself getting uncomfortable when I have to give back some part of my gains. Please guide.


Yours truly,

Thank you for sharing your process.


You might consider taking your feelings about <giving money away> to Tribe.

Tuesday, January 13, 2009 


Wants to Understand

Dear Ed Seykota,

To teacher Ed Seykota - with proud to say i am a trader.

I don't know you will answer me or not you will read my letter or not because it is a little big letter but I know one thing I believe if these letter will reach Ed Seykota then I will have my answer.

I greet you from distance country [Country]. Also I hope you excuse me if I make any mistake, because English is not may native language. I can say proudly that you are very seldom men who in trading world try to help others who just come in to the business.

Thank you for it.

I am 29 years old. First time in my life I was interesting on stock market when I was child seeing the film where Eddy Murphy was a poor man on street and when Duck brothers from company Duck and Duck which operate on New-York stock market bet with each other in 1 dollar that if to give chance to anyone he could success.

Late now day when I read about trend followers I was find some thing similar with Richard Denis and Ekhart bet.

Later (it was already time when I study on [Firm] on specialization Engineer Economist) when I have little amount I went to course which open one internet broker company in my city where I could have a little bit large information about stock and forex market. During my study I tried a lot of time request some more books or any thing they tried not to give it. It looks like they was not interesting on success traders. Just to give that necessary information that he open an account on they company and loose it. Of course I don't stop interesting looking for any e-book from internet about it.

Later I find out that one my friend open a company which was introducing company of some broker from USA. So he told me that he take a course in USA from [Name] personally. And I request from him any books so gave me [Name]'s new dimension and chaos theory. By learning this I tried to open some little account several time and of course lost them. In spite my friend successes by these method and he his may be one man in my country who good in trade forex. Actually I proud with him. But he always not enough time to teach me .May be as common traders my friend also believe that giving information of trade to other it will not work .I don't know.

What I gain from my trade that was practice and I don't afraid to loose money. But I understand I can't lose as gamble.

But I always not stop thinking why am I losing; I understand that there was some problem on philosophy of my trading method and me.


Because what order I make even all was against trend sometimes even I think that I have against trend mania .but I understand that I am not right and I need immediately to solve it.


Later I understand that all system which predicts the market is the cause of you enters against the market.


I have never seen bad thing that looking for top and bottom. Which I always feel on my account size. If I not solve it I will never will success. I thanks to my lost because only this help me understand that I am wrong. I find on my lose that Elliot too much subjective, and also my other friend day trading method too quick and risky. I test and try a lot of indicator which of course not work. Also I think that I need the way when I will be able to trade on trend only. But how to cache trend? How? Also I could not agree with idea of my day trader friend trying explaining me that we can get signal and trade. But if I agree with him in this case I just am doll who implement others order .I can't agree with him. Continue looking for my philosophy of trading.

I make web site ... all I do myself on html. Format because there are not other way to decrease expense when you make some business idea and you have not sufficient money. Not one of them bring me money .


I have never afraid of doing hard work .I make a lot off business idea .which I couldn't do because of insufficient amount. And never stop if some problem on these way I look alternative way.

But trading was only sphere which I don't want to stop.

Finally I find out that a part month ago only just one EMA could show you the direction of market and also separate you from big lose using it with other little .Crossing with each other give some entry and exit signal. Also I find out that from 1 minute to -1 hours time frame if use it will be losing. And 4 hours and up you get positive result.

After I reading the Swagger Market wizard find you and find that there are people who are trend following trader. I understand that only these people philosophy will explain me all about market and to which I believe in my deep heart Trend following.

When I read Market Wizard I feel that only you not only trend follower also just man with such philosophy. I was happy find out that you have a trading tribe .and FAQ.I read all FAQ 2003 until now. I start to feel you mind.

Even when I find on some forum that some trader say you have funny whipsaw song. But I can't believe that you could make funny song. And listening it several times and reading the word of your song find out that you explain everything about trade only on one song. Song with big philosophy.

But there are several not clear thing for me I hope you will help me.

I don't know could I explain and could give all necessary question. I hope and believe that you will explain me if I not. Because you are Ed Seykota.

And I know other thing student is ready and I see my teacher. That man is you.

I lose my job and day by day I go down financially. But I have one investor who plans to invest my trading if I will be able to explain profitability of it and do it.

I know I am close to my desire as never. That is I understand philosophy of trend following.

Best regard to my teacher Ed Seykota

Thank you for sharing your process.


I notice this photo is on your website.



You might consider taking your feelings about <sitting on the beach> and <undertaking a thorough study of trend trading> to Tribe.



Monday, January 12, 2009


Wants a Mentor

Hi, Ed

I wanted to say thank you for your time and consideration regarding this email and I’m truly grateful for your website and infinite wisdom. I came across your website a few months ago reading a trend following book and since then I’ve learned so much about math, physics, trading, human psychology and other stuff posted on the site then I ever did in college, which in a way is kind of sad. But I wanted to know if you offer any mentoring programs for students or additional TSP projects? Ed, I again appreciate your time and consideration.

Thank you,

I occasionally mentor someone who wishes to start a business or produce a study for this site.

Monday, January 12, 2009


Inflation, Equities and Commodities


Surprisingly, as I review the 2 charts below, it seems to me that major moves in equities and commodities take turns with each other. Commodities seem to do well in historically high inflationary periods and once the masters of the universe (ie. the Fed) start to target a low inflation rate, equities begin to take off in turn.


Seems like traders and investors wait for the printing press to slow down and then use all the easy money to plow back into equities.


Ed, these observations seem to be in line with your recent comments about trend followers being in for the ride of a lifetime, I assume you mean futures trend followers? The current "return to base" pattern looks awfully similar to the "return to base" during '74-'75.

PS. From this simple analysis, it seems that a well rounded portfolio strategy, that covers all the angles, might contain both futures trend following and equities trend following systems running concurrently.



Dow Jones





Happy trading Ed!


Clips: WSJ, CRB

You might consider devising a strategy to capitalize your theory - and then working with your Tribe to develop the emotional resources to implement it.




Stimulus Package Model





Clip: Ludwig von Mises Institute



Monday, January 12, 2009


Programmer Problems



How would you go about getting rid of a programmer?

Hmmm... OK, you might try opening windows; he may get a bad code.

Monday, January 12, 2009

Francisco d'Anconia



This is vintage Ayn Rand. I just finished a reread.


Francisco, like Ayn seems more comfortable in the world of logical didactic than  expressing feelings.


Capitalism, the feeling, grows and prospers.  Capitalism, the theory, withers and dies.




Ayn Rand Philosophy




The US Post Office, Like The Borg


conquers by assimilation.







Sunday, January 11, 2009

Drift-Adjustment for Panama Method

Dear Mr. Ed Seykota,

I derived the Drift-Adjusted Panama Method, which eliminates the drift effect in the Panama Method.

I tried the method on several markets with data from CRB:

-S&P (SP)
-Euribor (B-)
-EuroBund (BF)
-Crude Oil (CL)
-Eurodollar (ED)
-Soybeans (S-)
-British Pound / U.S. Dollar (BP)
-Copper (HG)
-Cattle (LC)

and it appears to be doing the job.

Do you believe that this method and the results are of value? Thank you.


I am not clear on your meaning for the word, drift.

Sunday, January 11, 2009


I previously reported that our Tribe carries out extremely long meetings which end after midnight, we have hot chairs about crucial issues lasting for up to 4 hours, and carry out extenuating rock processes when signature forms appear.


All this involve always two persons, one Tribe member (A) and me. Another member (B) feels that I am acting out some drama whit (A). (A) has a health issue and the feeling <I never had it easy>. These problems complement my issues <I fix people> and <I always do it the hard way with a lot of effort>. We recognize that (B) is right. At the next meeting, I let (B) manage (A)´s process. Instead of a whole evening, as usually, it takes them less than one hour to work through several forms and to complete the process. A huge aha for (A) and me.

I am the second on the hot chair. My issue is <my son does not do his homework and I get mad at him>. A parallel issue is <My son does not trust me>. I search for the exact feeling: it infuriates me to stand for 15 minutes by my son while he dresses up or starts writing his homework. I feel that I waste my time. On the hot chair I remember our family moving to a larger house as I am 7 years old. I feel that my parents betray me as I lose my old room, the old home, my friends… Now, I realize that my parents did not lie to me: I just could not understand the meaning of <moving to another house> and the implicit losses. I also remember my parents not telling me that my grandfather is dead until after his burial, as I am 5 years old. I did not have a chance to tell him goodbye. I understand that they themselves were overwhelmed with the death and tried to protect me. After this aha I experience a huge emotional outpour lasting for several minutes.

I go in the form again. As I freeze it, I start shouting in overwhelming anger. It is so strong that I doubt if my Tribe will be able to support me. But they are relentless. After completing it, I repeat the form, which this time is joyful. I intensify it and have a huge aha: the time that I spend with my children is a gift. It is wonderful to be with them, and to spend 15 minutes by my son waiting for him to dress up is not a waste of time. It is better than spending 15 minutes reading the newspaper, watching TV or sleeping. Soon my children will not need me anymore; they will leave thehouse and live independent lives. I should be thankful for every minute that I spend with them. By procrastinating, my son is showing me the value of spending my time with him.

I also realize that I cannot expect my son to trust me: this will happen or not depending on my behavior. He will decide if he trusts me or not, and I cannot change it. My responsibility is just to act as a father.

The next day, I ask my son about a problem at school. We receive information that some class comrades have been teasing him for weeks, but although we ask him repeatedly, he does not tell us a word. This time, he tells me the whole story with all details. As we discuss how he can cope with the molesters, I am speechless as he says “maybe I just tell them “Thank you for teasing me, do more of it, I like it!”… You cannot offend a person willing to experience his feelings...

My wife participates at our meeting. I agree with you: I do not consider it advisable to let her manage my process or for me to manage hers. I do not even try it, for it feels like trespassing some limit of intimacy. But she sees what I go through every Friday and understands me and my process. She is willing to participate further and, to my surprise, to take the hot seat in a coming meeting.

I discuss TTP with a psychiatrist, he is the Chair of a psychiatric hospital in our city. I know him for years. As I finish, he says "I know that you are a solid scientist and not prone to esoteric. We have to start a group with patients!".

Ed, I cannot express in words how thankful I am.


Thank you for sharing your process and for being willing to do the work.

Saturday, January 10, 2009


Remarkable Video - Balancing



I like this performance on the bars.



Thank you for the clip - and for the reminder that I have to balance my checkbook.

Saturday, January 10, 2009

David Holt on Banjo - Video


Bangoist David Holt plays mountain music at TED:



My favorite part is the Thunder-wear performance in the last three minutes of the clip.

Thank you for the clip.

Saturday, January 10, 2009

Favorite Books



Are there any good books that you have read recently that you haven’t added to your “favorite books” list?

I am open to your suggestions, especially when you include how you feel the book is improving your life.

Friday, January 9, 2009

Associates Builds Software



I'm progressing. :-)

I now have wireframe diagrams of the screens, many hand-drawn sketches, notes and user flow diagrams that help with thinking about the overall User processes.

I am building prototypes to "flesh-out" the UI and come up with an app look and feel I like and that works.

What's do-able with the technology plays a large part in creating a *real* GUI set versus wire-frames, sketches and abstract ideas.

The launch screen prototype lists a set of business processes to create, operate (follow) and manage a systems trading business. The initial launch screen is the main entry point for each related but separate process. Each process provides custom tailored tools to accomplish the work flows and process goals of the particular function, and can be performed by different people.

The buttons Create, Operate, Monitor, etc., launch an application or link (when they are coded :-) to an intranet website to perform the function.

Clicking on the "Create" button on the launch pad screen starts up the System Designer prototype. It's best to maximize the browser window to full screen. (I use 1600x1200 screen resolution. The other launch functions are just stubs for now.)

System Designer is a GUI front-end to the back test engine and other pieces that I have working and fits in with my architecture and design philosophy. It's written in Adobe Flex, and in the app's current form, it loads in a browser and runs in Flash Player. I intend to migrate it to an "AIR" application that functions as a regular desktop application.

The System Specification panel on the left is a view of the currently configured system. Clicking on each item in the spec view pops out a detail view of that aspect. The "System Spec" is written out to a specially formatted ASCII text file that can be parsed and loaded by the backtest engine.

Some stuff that is "roughed in":

1) In the top title bar, on the right, the "Create" button opens a dialog to create and manage "System Specs". A composite system can be created that combines 2 systems to diversify. I have in mind a versioning system to track versions of the systems during design and deployment.

(The Simulate and Optimize buttons don't do anything.)

2) The Menu button is to access application level functions. Menu items do nothing at this point.

3) The System Specification panel is a set of trading system main functions that the user configures to select modules and algorithms coded in the backtest engine. The Tradeables section is "the universe" of allowed contracts, forex pairs or stocks. Clicking on the "Futures" item under Tradeables brings up a dialog to select Futures/Forex/Stocks (it doesn't populate back in the prototype). Clicking on "US-Futures-Liquid-20081017" brings up a dialog to select pre-formed lists of Futures.

Everything else is "stubbed out" at this point.

Candidates section configures the candidate selection algorithms that select "what to trade" to open new positions.

Method section configures the trend following algorithm. Bet Sizing, Risk, Pyramiding and Purge configure the corresponding algorithms.

I intend to use the area across the bottom (the gray area) for control/dashboards for control and monitoring of simulations and optimizations.

I also have plans for more panels to "fit" below the System Spec panel at the left.

The main center (white) area is for visualizations, graphics and tables to analyze the simulations and optimizations to get a feel for the system.

Thank you for sharing your process.


While you are busy about designing the App from the code up, you might also consider completing a few key methods and distributing them in beta form so you can start gathering user information about the features users like.




Savvy Developers Know


that customers

make a very good

quality control staff.


Clip: http://www.uweb.ucsb.edu/~n_r_d/



Thursday, January 8, 2009


Cool Indications


Which indicators do you use to identify the stocks you identify on the chart server. I pick up most of them using a 5 day-10 day-SMA-crossover when I screen, but I don't pick up all of them. What gives? If that's proprietary knowledge, I dig. Anyways, if you help me with that you are the man.

Yeah - Cool Daddy-o. You might dig the hip difference between two SMA's - rather than groovin' on their cool crossovers.

Thursday, January 8, 2009


Tough Day at the Orifice


Sounds like you are an expert on orifices. I have several questions if this is possible.

My regulator will produce anywhere between 30-90 PSI. What I am going in to fluctuates between 0 and 30 PSI. I am needing a flow curve like the (linear flow vs. pressure) one attached.. Is there a way to use standard orifices (non-electronic) to get this done.





If you wish for more detail, you might consider sending a description of your apparatus.

Thursday, January 8, 2009

Risky Business


I was a proprietary futures trader on the Chicago Mercantile Exchange for 10 years. I experienced great success followed by a complete loss of all capital.


The "methods" of floor trading never set well with me in regards to risk management, yet it is the way I learned to profit as a floor trader. I was continually trying to learn other strategies for trading that made more sense to me in terms of risk/reward despite the huge success I was having as a floor trader.

I eventually was led to [Name] and his courses on classic bar charting technical analysis. I took what I learned ... and developed a strategy for trading off the floor. This strategy, however, was NOT a "system". It had no position sizing aspects to it. So even though I experienced some great success early on with this strategy, it eventually led to my downfall.

After burning through all of my capital, I decided to take a break from the industry. Over the past few years I have been working for a startup company helping to streamline procedures and processes.


During this time I discovered The Complete Turtle Trader. It had piqued my interest because I had been opposite so many Richard Dennis trades as a floor trader that I had always been intrigued by him. Anyway, I also read Trend Following by Michael Covel and those two books have become my "Bibles" ever since. I have really bought into the school of trend following and it is really the only trading philosophy that makes sense to me now.

My purpose for contacting you is that I am interested in being involved in something for which I am passionate. And since I no longer have capital to pursue my passion on my own, I would like to join a fund management company that is from the trend following school.


If there is any opportunity within your group in terms of supporting / mentored roles or associate / junior manager positions, I would be highly interested. If not, any referrals that you could provide would be greatly appreciated.

Thank you for taking the time to read my email and I look forward to hearing from you.

Thank you for sharing your process.


You might consider connecting with a Tribe in your area in order to form support and mentoring relationships and a forum in which you can examine your feelings about <risk>.

Wednesday, January 7, 2009

Trading Tribe Workshop


Are there plans for a future workshop in 2009?


I occasionally schedule a Workshop when I have something new to present and/or when I sense a demand for one.


Recently I sense a gathering demand.

Tuesday, January 6, 2009

Goldman Mentions (gasp) Feelings

in NYT article about risk,


An article appears in the NYT magazine about risk, Goldman people speak of feelings:



I quote :

“How then do we account for that story that made the rounds in the summer of 2007? It concerns Goldman Sachs, the one Wall Street firm that was not, at that time, taking a hit for billions of dollars of suddenly devalued mortgage-backed securities. Reporters wanted to understand how Goldman had somehow sidestepped the disaster that had befallen everyone else. What they discovered was that in December 2006, Goldman’s various indicators, including VaR and other risk models, began suggesting that something was wrong. Not hugely wrong, mind you, but wrong enough to warrant a closer look.

“We look at the P.& L. of our businesses every day,” said Goldman Sachs’ chief financial officer, David Viniar, when I went to see him recently to hear the story for myself. (P.& L. stands for profit and loss.)


“We have lots of models here that are important, but none are more important than the P.& L., and we check every day to make sure our P.& L. is consistent with where our risk models say it should be. In December our mortgage business lost money for 10 days in a row. It wasn’t a lot of money, but by the 10th day we thought that we should sit down and talk about it.”

So Goldman called a meeting of about 15 people, including several risk managers and the senior people on the various trading desks. They examined a thick report that included every trading position the firm held. For the next three hours, they pored over everything. They examined their VaR numbers and their other risk models.


They talked about how the mortgage-backed securities market “felt.” “Our guys said that it felt like it was going to get worse before it got better,” Viniar recalled. “So we made a decision: let’s get closer to home.”

In trading parlance, “getting closer to home” means reining in the risk, which in this case meant either getting rid of the mortgage-backed securities or hedging the positions so that if they declined in value, the hedges would counteract the loss with an equivalent gain. Goldman did both. And that’s why, back in the summer of 2007, Goldman Sachs avoided the pain that was being suffered by Bear Stearns, Merrill Lynch, Lehman Brothers and the rest of Wall Street.

The story was told and retold in the business pages. But what did it mean, exactly? The question was always left hanging. Was it an example of the futility of risk modeling or its utility? Did it show that risk models, properly understood, were not a fraud after all but a potentially important signal that trouble was brewing?


Or did it suggest instead that a handful of human beings at Goldman Sachs acted wisely by putting their models aside and making “decisions on more subjective degrees of belief about an uncertain future,” as Peter L. Bernstein put it in “Against the Gods?”

Tribe Members develop fluency with the language of feelings.  Many are skillful at differentiating between intuition and into-wishing.

Monday, January 5, 2009

Differential vs. Integral Calculus &

$-Days Unit of Measurement


I reflect on Ed's preference for integral calculus over
differential. I notice that a trend line is the slope of a price series, a derivative of the pricing "function" with respect to time. If underlying prices are in dollars, I can express the differentiation in money per unit of time, e.g. $/day.

I look at Ed's Lake Ratio diagram and observe that colored areas under the graph look like a definite integral of the price over time. I can express the integration in money times unit of time, e.g. $*day.

I understand the meaning of $/day as money flow.

I wonder what the meaning of $*day is.

In nature and in trading, trend does not exist, except as an idea. You cannot directly measure a trend. You cannot perform differentiation.


You can, however approximate differentiation by performing two integrations and then taking the difference.  This process necessarily induces delay into the measurement process.



Computation of Trend


In this case, the underlying price is dark blue. Trend (green) is the difference between the 3-day MA (pink) and the 10-day MA (light blue). Compare the trend we can measure with the actual trend that goes instantly to a positive value and then instantly to a negative value.




The unit of measure "money-time" or "dollar-days" appears frequently in normal commerce. 


Your mortgage, if you have one, has the property of principal amount and time (other properties: interest rate, base currency, etc.).


You might owe $10,000 for 30 years or 30,000 for 10 years.  In either event you agree to assume 300,000 dollar-years of debt.


Absent compounding and time-value of money, the total interest in these two cases is the same.


$-days measures your interest-rate-normal interest payment.


($-days)  = $ / (%/day)


If you want a name for the quantity, you might consider "obligation" or "burden".


You might consider taking your feelings about <paying / collecting interest> to Tribe.



Monday, January 5, 2009

Breaks Up With Girlfriend

Hello Ed,

On new year’s day my girlfriend breaks up our relationship. She says it’s because we were struggling too much but I didn’t think it was that bad to reason this break.


I remember me and sometimes her too shutting down many times when I was in a snit. In the past we said a few times that something has to change but it didn’t. It seems to me that we even didn’t try. Now that we are separated we both feel bad and miss each other.


She says that she needs time before talking about the whole break-up. I notice fear in me that after a few weeks she could feel so good that she doesn’t see any sense in building up a new relationship with me.


I’m writing on a paper that helps me to sort the things I think led to this whole thing and think and write about ways how the problems could be solved so that we wouldn’t tease us that often.


Among other things it seems to me that expressing our feelings openly would be the most important part and that we lacked it. When one of us was offended he often did not express his feelings and so the offended acted differently and led the other to feel feelings of being offended, attacked and so on.


This whole thing was like a vicious cycle and made things worse until a bigger struggle appeared. It created drama.

It is hard not talking to her when missing her but maybe we really need some distance for some time.

Yours sincerely,

Thank you for sharing your process.

You might consider taking your feelings about <separation>, <rejection> and <being alone> to Tribe.




Resisting Feelings ==> Pain


Experiencing Feelings ==> Growth



Clip: http://www.illdave.com/images/


Sunday, January 4, 2009


Dear Ed,

I spent my holiday with my folks and had a great time. My mom has cancer and going through kimo. She looked healthier than I thought. Since I came back I been medicating intensely for some reason. I feel I want to drop everything and go back home.


Then again I could be sucked in to her drama. Through TTP I could see things clearer and it's evident that my dad and mom are in very dangerous relationship. I feel lost here. My rock is guiding me to ask for support and I decided to write FAQ.

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


Danger is a possibility of harm or injury.



In The Markets and In Traffic


you can avoid injury


by reading danger signs



Clip: http://www.toadking.com/6x9=42/danger.jpg

Saturday, January 3, 2009

Coin Flipping Study - Two Coins at Once


Here's the coin flipping study.


I also made a histogram for NFL total points scored and margin of victory for 2007 regular season

I see you are coming along with your studies.

You might like to extend your study to
compare the split-the-bet returns with the single bet returns.

This can address issues about the interrelationships between diversification, profitability and volatility of returns.

You might consider normalizing the results by splitting the bet into 1/2 bets. Note: you now have four events per cycle, rather than two.

Your NFL model may benefit by the insights you gain by becoming familiar with a simpler game.




You Might Come To Bet Better


once you learn

the flippin' math.





Friday, January 2, 2009


Dynamic Portfolio Selection

Hi Ed

Per your comment: If you wish to publish a study to this site, send me a draft of it.

I send you a draft of it. I am willing to visit IV for an IVTT R&D meeting.

I am very thankful I am in better touch with my feelings during an extremely emotional past week, which included an attempted high drama by my family, followed up by my wife's miscarriage.



Dynamic portfolio selection for a simple stock trading system DRAFT






Stock selection is an important factor in a mechanical trend following system’s (MTFS) performance results.  Absent a method to dynamically filter positions, many stock MTFS’s invest all available trading capital quickly. Results from unfiltered tests are heavily influenced by the stocks that generate signals soon after inception and dates the test started and ended.



This study demonstrates how a MTFS with a systematic and dynamic process to select stocks works.  It also demonstrates how a long-only MTFS using selection criteria that favors highly liquid stocks with strong performance outperforms one that favors stocks with weaker historical performance.


I like the topic. 


I wonder if you have a simple DPS model that actually runs in such a way that avoids start-date dependency.

Thursday, January 1, 2009



I have been thinking about the best way to blend different systems to trade a single portfolio in an attempt to improve equity curve and have less drift from historical performance into actual trading.

With regard to trend following methods, I like breakouts. I don't trust other fancy methods, such as moving average crossovers, oscillators, volatility bands, etc. I believe they are instead attempts to medicate aversion to risk, rather than simple and robust trend following methods. I am just making some experiments with averages, such as MACD, as trend direction filters.

So, I feel like working with different time frames and see how much drift I experience from back-testing into an out-of-sample period or even across different markets.

Do you see any issue? I find it funny that with regard to trading methods, I have some clear feelings about what I like and what I definitively don't. It's much like a gut feeling that tells me to avoid the fancy and unknown, and manage risk with what is more traditional e time-proven.

I'm not clear on what you mean by the term, drift.

Thursday, January 1, 2009





When I read these, for some reason I think of you - especially #4.  These are so bad I just have to share them with you!

1. The roundest knight at King Arthur's round table was Sir circumference. He acquired his size from too much pi.

2. I thought I saw an eye doctor on an Alaskan island, but it turned out to be an optical Aleutian .

3. She was only a whiskey maker, but he loved her still.

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 Blown-apart.

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 kept getting bigger. Then it hit me.

15. A sign on the lawn at a drug rehab center said: 'Keep off the Grass.'

16. A small boy swallowed some coins and was taken to a hospital. When 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. It's not that the man did not know how to juggle, he just didn't have the balls to do it.

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

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

21. A backward poet writes inverse.

22. In democracy it's your vote that counts. In feudalism it's your count that votes.

23. When cannibals ate a missionary, they got a taste of religion.

24. Don't join dangerous cults: Practice safe sects!

I try out ten of these during one of our bluegrass concerts, to see which would get a laugh.


Result: No pun in ten did.

Thursday, January 1, 2009

Fragment Thinking: Subject - Verb - Object


I'm wanting to test your willingness to allow another a-ha into your life, as it may well prove useful to the entire tribe. The below words do not presume to actually provide the a-ha, but merely to set the stage (if I had all the answers, I wouldn't be writing!).

Warning: Change, as always, lies ahead.

Wondering: Since falsehood does not hold up well in any endeavor, I'm wondering how to reconcile quantum reality and language, in particular the paradigm of subject - verb - object, which assumes a fragmented universe, which -- as I know you're very aware -- does not exist.

Background: In the substantially proven concept that is called "the most profound in science," that is to say the 44 year-old Bell's Theorem, there is no such thing as a "local reality," but, instead, only what David Bohm refers to in a book by the same name as: "Wholeness and the Implicate Order."

In essence, Bell's Theorem states (and mathematically proves) that a hidden quantum variable, sometimes called the "pilot wave," instantaneously connects everything at once at superluminal speeds ... in the Now (that of course being about 5.4 x 10xx-44 seconds in "Planck time").

And thus all, of course, is at-once both oneness and change in the Now.

For consideration: After an appropriate set-up, David Bohm remarks in his book: "Such (fragmented, subject - verb - object) thought was shown to bring about a thoroughgoing confusion that tends to permeate every phase of life, and that ultimately makes impossible the solution of individual and societal problems."

Bohm takes on the fragmented (and therefore false) thinking implied by an object-oriented language (e.g., English) by proposing that a more action/verb-centric language such as ancient Hebrew or Aramaic be used. In particular, Bohm discusses a new mode of language that he calls the "rheomode" ("flow mode").

The practical wisdom in this is that a rheomode more closely parallels what's really happening, and is therefore more truthful than an imagined universe made up of objects, regardless of how much our physical human sensory systems would prefer to argue otherwise.

A-ha in Waiting: Since I imagine that it would be rather lonely (and impractical) to come up on one's own with a modern language construct that more closely mirrors reality and helps to end fragmented thinking, I am thus writing -- in true wonder -- of your thoughts along these lines and any a-ha's that you may be willing to offer us.

High Regards,

You might notice that while many people write about rheomode, no one writes in rheomode.


We live at a level of aggregation at which we do not notice quantum effects; speaking in quantum language is a bit cumbersome in a Newtonian world.


At our level, plain English works fine. SVO-p, in my opinion, works better in relationships since it entrains the appearance of subject who assumes responsibility for action in the moment of now.


Another alternative might be LR-tf, which models dynamic situations as an interplay of Levels and Rates (see Euler's method; modern numeric math;  FAQ Analytics, below) and then considers them in both the time and frequency domains.


If you can get your own reality down to that of a a nano-particle, travelling around an accelerator on a mission of choosing a slit through which to pass, you might consider describing your existence in rheomode. 


In that scenario, if you have something re-levant (a rheomode term) to say, you might consider saying it rather quickly, before you collide with a colleague.




Particle Physics




Tickle Party Physics



Clips: http://physics.syr.edu/HEPOutreach/





Thursday, January 1, 2009


Get a Grip


I want to take a second to tell you about a potentially deadly mistake a lot of people make with automatic handguns.

That 'fatal mistake' is called "limp wristing."

Limp Wrist: Verb, Failing to grip your automatic handgun tightly enough, causing the pistol to fail to extract a spent casing from the chamber.

If you think about it, the only reason your handgun's slide operates in the first place, is because you are holding onto the bottom of the handgun. Believe it or not, if a pistol was floating in space, and you pulled the trigger with a string, the slide would not cycle.

The bullet would go flying one way, and the pistol would go flying the other! In order for the slide to cycle (ejecting the spent casing and loading the next one in line) the bottom of the pistol, the frame, must remain stationary. This is because the slide cycling depends on a spring, and a spring can't depress if there is no resistance on one end!

Thank you for the tip.


Here are a couple definitions for you to add to your list.

Gun Control: Hitting the target.


Vegetarian: Bad Hunter.



Thursday, January 1, 2009


Buenos Aires Tribe




I am sending you the current Tribe Information documents for Buenos Aires.




Welcome !


Buenos Aires


Thursday, January 1, 2009


Berlin Tribe




I am sending you the current Tribe Information documents for Berlin.



Welcome !




Thursday, January 1, 2009

Does History Can Reflect Future

Dear Ed,

I'm very enjoying read your wisdom through your web site. it's help me a lot, thanks.


Here is a question still worries me . I have created a good trade system, when I choose the constant parameter for my system, I did a lot back-testing. now, it's works very well . To me, it's my market trend.

Say, I got a constant parameter from the history, but WHY it will continuous work for next couple of years. does the history real can reflect future? I believe this, but what philosophy behind this phenomenon?

Happy New Year!

Back-test parameters do not predict anything. 


They guide your response to the markets in the ever-evolving moment of now.


If you believe you can access the non-existing past and future, you might consider working some spread trades between them.




How To Predict The Fuschia


Assume it gets

a little older.


Clip: http://arnica.csustan.edu/jpeg/fuschia.jpg

Thursday, January 1, 2009


Marathon Update


I want to give everyone a marathon update: I am prepared to finish the marathon in two weeks. Its been a long way from running a quarter mile back in June.

The training over the last month has been frustrating. My Iliotibial Band (connects pelvis to knees) was having problems which causes knee pain on longer runs. I found that I couldn't run more than 15 miles without my knees locking up. It is actually a common problem, it is associated with increasing distances too fast. The fact that I skipped some short runs during the weekdays is also probably a factor. Seriously, I was afraid that I wouldn't be able to finish the marathon, much less a 20 mile run. The good news is that I can use elastic straps around my thighs to correct the mechanical problem and helps the IT band. This method has worked on several long run for me.

Yesterday was New Year's Eve, which was a great day for me. My daughter had her first birthday, I finished my 21 mile run. Both of these things make me very happy and very proud. The 20 mile run (I did an extra) is typically the longest run while preparing for a marathon.

At this point, I begin the taper period of the training. This is a light training period in order to give the body plenty of time to heal. I'm also looking for the biggest risks to my plan of running the marathon. I've certainly gotten the training done, and I am comfortable with my equipment. I think the biggest risk is my knees, followed by my arches. I have some stretches to help with the knees. Also, because of the knee issues, I've been running on a dirt track instead of road surface for the past month. I'm a little nervous about this and will train on pavement for my remaining runs.

I'm feeling confident that I will finish the race. I'm feeling apprehensive about my knees for being my biggest risk. I'm feeling proud of myself for my work. I'm feeling thankful and appreciative to people who have been supporting me.

Thank you for sharing your process.






Clip: http://www.belfastcity.gov.uk/news/


Friday, January 2, 2009


Thinking About It


Thank you for your long and deep answer from 29.12 - Understanding the Wife. I am thinking a lot about it. It generates several questions.

- A syllogism for the new year: I ask myself “Why should our life not be perfect?”. There is no answer for “why” questions. Hence, our life can be perfect.


Life is what it is.  If part of what it is, is you thinking it's perfect the way it is, then you create perfection.






can be part of a process

in which you and your associates


get to feel imperfect.




Perfection and Optimization


generally inhabit

different places









Thursday, January 1, 2009


FAQ Analytics




Happy New Year !



Thank you for the chart.


The chart looks to average out at about three or four items per day - that happens to be my current production capacity.


When submissions exceed this rate, the backlog grows, the response time (delivery delay) lengthens and submissions fall.  When backlog falls, response time shortens and submissions rise.



A Simple Feedback Model

of the FAQ production process.





In This Simulation


The system is initially in balance.


I increase the Answer Rate

from 3/day to 4/day

at t=50 days.


Backlog falls,

lowering the response time

(delivery delay).


This increases the attractiveness

of sending in questions.


The question rate rises

and overshoots the answer rate.




I notice this actually happens

whenever I try to "catch up"

with the demand for FAQ.


Readers notice the quick turnaround.

The flow of questions rises

above my capacity to generate replies.


In for-profit operations,

management then typically

grows the business

and makes more profit.


In this "business"

I do what I like

which is maybe

3 or 4 per replies per day,


The system entrains

a delivery delay

long enough to balance

production and orders.


Thursday, January 1, 2009


If My Nose Was Running Money - Humorous Video



A little humor for the new year.

Thank you for the clip.


I wonder how it happens that noses run and feet smell.