Questions

(Quotes from Ed in Red)

Tuesday, January 13, 2009

Associate Works on Sports-Betting Model

Ed,

Tuesday, January 13, 2009

Physiology Recapitulates Trading Phylogeny

The Important Middle-to-First Finger Ratio
 

Ed,

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).

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.

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.

Thanks

Thank you for sharing your process.

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 .

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

Monday, January 12, 2009

Inflation, Equities and Commodities

Ed,

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

CRB

Happy trading Ed!

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

Ed,

Monday, January 12, 2009

Francisco d'Anconia

Ed,

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.

Clips:

http://www.agirlandaguitar.com/wp-content/uploads/2008/01/ayn-rand-quote.jpg

Sunday, January 11, 2009

Drift-Adjustment for Panama Method

Sunday, January 11, 2009

Breakthroughs
 
Ed,

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.

Saturday, January 10, 2009

Remarkable Video - Balancing
 

Ed,

I like this performance on the bars.

http://videos.komando.com/

Saturday, January 10, 2009

David Holt on Banjo - Video

Ed,

Bangoist David Holt plays mountain music at TED:

http://www.ted.com/index.php/talks/

Saturday, January 10, 2009
 

Favorite Books

Ed,

Friday, January 9, 2009

Associates Builds Software

Ed,

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.

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

Thursday, January 8, 2009

Tough Day at the Orifice
 

Ed,

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.

Yes.

Thursday, January 8, 2009

Risky Business

Ed,

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.

Thank you for sharing your process.

Wednesday, January 7, 2009
 

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

Tuesday, January 6, 2009

Goldman Mentions (gasp) Feelings

in NYT article about risk,
 

Ed,

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


http://www.nytimes.com/2009/01/04/

magazine/04risk-t.html?



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?

Monday, January 5, 2009
 

Differential vs. Integral Calculus &

$-Days Unit of Measurement
 

Ed,

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.

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

Danger

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.

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

Saturday, January 3, 2009

Coin Flipping Study - Two Coins at Once

Ed,

Here's the coin flipping study.

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.

http://rockfordil.typepad.com/.a/

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

Date:

1/2/2009

Introduction:

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.

Goal:

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. 

Thursday, January 1, 2009

Drift
 

Ed,

Thursday, January 1, 2009

Observations

Ed,

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.

Thursday, January 1, 2009

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/

einstein.jpeg

http://www.pastoral.org.uk/

Thursday, January 1, 2009

Get a Grip

Ed,

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.

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

Ed,

Welcome !

Buenos Aires

Thursday, January 1, 2009

Berlin Tribe

Ed,

Welcome !

Berlin

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.

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.

Thursday, January 1, 2009

Marathon Update

Ed,

Thank you for sharing your process.

Marathon

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

Friday, January 2, 2009

Thinking About It

Ed,



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.

Perfectionism

can be part of a process

in which you and your associates

get to feel imperfect.

Perfection and Optimization

generally inhabit

different places

Clips:

http://www.deal.org/content/index.php?option=

com_content&task=view&id=878&Itemid=1057

Thursday, January 1, 2009

FAQ Analytics

Ed,

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

Ed,

Thank you for the clip.