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Ed Seykota: Greatest Quotes

A big thanks to Steve Burns for the list.

Ed Seykota wisdom:

  • “If I am bullish, I neither buy on a reaction, nor wait for strength; I am already in. I turn bullish at the instant my buy stop is hit, and stay bullish until my sell stop is hit. Being bullish and not being long is illogical.”
  • “Fundamentalists figure things out and anticipate change. Trend followers join the trend of the moment. Fundamentalists try to solve their feelings. Trend followers join their feelings and observe them evolve and dis-solve.”
  • “The feelings we accept and enjoy rarely interfere with trading.”
  • “Systems don’t need to be changed. The trick is for a trader to develop a system with which he is compatible”
  • “It can be very expensive to try to convince the markets you are right.”
  • “There are old traders and there are bold traders, but there are very few old, bold traders.”
  • “I would add that I consider myself and how I do things as a kind of system which, by definition, I always follow.”
  • “Systems trading is ultimately discretionary. The manager still has to decide how much risk to accept, which markets to play, and how aggressively to increase and decrease the trading base as a function of equity change.”
  • “Trying to trade during a losing streak is emotionally devastating. Trying to play “catch up” is lethal.”
  • “The elements of good trading are: 1, cutting losses. 2, cutting losses. And 3, cutting losses. If you can follow these three rules, you may have a chance.”
  • “Losing a position is aggravating, whereas losing your nerve is devastating.”
  • “The markets are the same now as they were five to ten years ago because they keep changing – just like they did then.”
  • “Luck plays an enormous role in trading success. Some people were lucky enough to be born smart, while others were even smarter and got born lucky.”
  • “Having a quote machine is like having a slot machine at your desk – you end up feeding it all day long. I get my price data after the close each day.”
  • “A losing trader can do little to transform himself into a winning trader. A losing trader is not going to want to transform himself. That’s the kind of thing winning traders do.”
  • “If you can’t take a small loss, sooner or later you will take the mother of all losses.”
  • “It is a happy circumstance that when nature gives us true burning desires, she also gives us the means to satisfy them. Those who want to win and lack skill can get someone with skill to help them.”
  • “Risk no more that you can afford to lose, and also risk enough so that a win is meaningful.”
  • “Dramatic and emotional trading experiences tend to be negative. Pride is a great banana peel, as are hope, fear, and greed. My biggest slip-ups occurred shortly after I got emotionally involved with positions.”
  • “Be sensitive to subtle differences between ‘intuition’ and ‘into wishing’.”
  • “The trading rules I live by are: 1. Cut losses. 2. Ride winners. 3. Keep bets small. 4. Follow the rules without question. 5. Know when to break the rules.”
  • “I usually ignore advice from other traders, especially the ones who believe they are on to a “sure thing”. The old timers, who talk about “maybe there is a chance of so and so,” are often right and early.”
  • “I set protective stops at the same time I enter a trade. I normally move these stops in to lock in a profit as the trend continues. Sometimes, I take profits when a market gets wild. This usually doesn’t get me out any better than waiting for my stops to close in, but it does cut down on the volatility of the portfolio, which helps calm my nerves. Losing a position is aggravating, whereas losing your nerve is devastating.”
  • “I intend to risk below 5 percent on a trade, allowing for poor executions.”
  • “I don’t judge success, I celebrate it. I think success has to do with finding and following one’s calling regardless of financial gain.” (On losing streaks and over-trading) “Acting out this drama could be exciting. However, it also seems terribly expensive. One alternative is to keep bets small and then to systematically keep reducing risk during equity drawdowns. That way you have a gentle financial and emotional touchdown.”
  • “In order of importance to me are: 1) the long term trend, 2) the current chart pattern, and 3) picking a good spot to buy or sell.”
  • “Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money.”
  • “Fundamentals that you read about are typically useless as the market has already discounted the price, and I call them “funny-mentals”. However, if you catch on early, before others believe, you might have valuable “surprise-a-mentals”.”
  • “If you can’t measure it, you probably can’t manage it… Things you measure tend to improve.”
  • “The key to long-term survival and prosperity has a lot to do with the money management techniques incorporated into the technical system.”
  • “If you want to know everything about the market, go to the beach. Push and pull your hands with the waves. Some are bigger waves, some are smaller. But if you try to push the wave out when it’s coming in, it’ll never happen. The market is always right”
  • “To avoid whipsaw losses, stop trading”
  • “Pyramiding instructions appear on dollar bills. Add smaller and smaller amounts on the way up. Keep your eye open at the top.”
  • “Markets are fundamentally volatile. No way around it. Your problem is not in the math. There is no math to get you out of having to experience uncertainty.”
  • “Our work is not so much to treat or to cure feelings, as to accept and celebrate them. This is a critical difference.”
  • “Before I enter a trade, I set stops at a point at which the chart sours.”
  • “Trading requires skill at reading the markets and at managing your own anxieties.”
  • “The positive intention of fear is risk control.”
  • “Speculate with less than 10% of your liquid net worth. Risk less than 1% of your speculative account on a trade. This tends to keep the fluctuations in the trading account small, relative to net worth. This is essential as large fluctuations can engage {emotions} and lead to feeling-justifying drama.”

Nice. See Ed on my podcast too.

Recommended Posts and Podcasts:

The belief to win big

Go Forward Move Ahead

Trading with no College Degree

Markets and Profit Podcast

Holding

Trading Mechanics

Meeting Trend Following Pioneer Ed Seykota

Feedback in:

Hello Michael. I’m glad to have come cross your site and all of your information. I Actually have an interesting story about meeting Ed Seykota about 10 years ago.

Ok.

Got into commodities watching my stepfather get long gold before Y2K in 2000. He did well. Took a Ken Roberts course and started dabbling a little bit made some, lost some, but continued to grow my interest through 2004.

Came across the turtle trading site and all the information, read as much as I could, downloaded everything and saved it in files. Read all the books on the recommended reading lists. Out of all the market wizards, for some reason Ed Seykota jumped off the page at me. Liked his spirit. I was headed to Tahoe for a vacation and remembered reading that he lived there. Okay, tracked him down.

Decided to reach out to him. Shot him an email and said thank you for all the work that he did to try to share with people and to bring them along toward a better life. Asked if we could meet and I could thank him in person and buy him a cup of coffee. He replied and said that he didn’t drink coffee but that he liked to ride his mountain bike and play music. He asked if I did either of those things.

In fact, I did ride a mountain bike and I do play guitar. He said well give me a call when you get up here. Let’s go for a ride and play some music, and we did. Was invited back to visit his trading tribe. Very cool experience.

Nice.

You may also enjoy reading the Ed Seykota book on his trading rules.

Ep. 238: Larry Hite and Alex Greyserman Interview with Michael Covel on Trend Following Radio

Larry Hite and Alex Greyserman
Larry Hite and Alex Greyserman

Michael Covel speaks with Larry Hite and Alex Greyserman today on the podcast. Hite is a hedge fund manager and is one of the forefathers of system trading. He was famously featured in the Market Wizards book. A few years ago he started ISAM with Stanley Fink. Greyserman has 25 years of experience in the CTA industry, and was originally hired by Larry Hite at Mint. Greyserman is Chief Scientist at ISAM (PhD in Statistics). He is also a professor at Columbia University. Covel, Larry Hite, and Greyserman discuss Singapore, and Covel’s recent excursions in Asia; how the game has stayed the same despite zero interest rate policy; what people are missing when they say “trend following is dead”; how you’ll never get perfection; their 800 year study, the premise, and what was found out; measuring human nature; the difference between divergent and convergent strategies; risk management; having “perfect” knowledge; using long trends and getting whipsawed in shorter trends; the asset class of trend following compared to the NASDAQ buy and hold, etc.; what’s changed about human nature through all the booms and busts; insurance, hedging your risk, and the risk transference process; asymmetrical leverage; adjusting to new environments; how those that survive are the most adaptable to the environment; and how trend following automatically adjusts to what’s happening. More: www.isam.com.

Listen to this episode:

Ep. 51: Charles Faulkner Interview with Michael Covel on Trend Following Radio

Charles Faulkner
Charles Faulkner

Market Wizard Charles Faulkner makes his 2nd appearance on the podcast:

Listen to this episode:

Larry Hite on Risk

Some wise views from Larry Hite:

“We don’t really trade silver…we don’t trade the S&P…we trade the differences. We really are risk managers. We take on risks, try to exploit them and we leave when they turn against us. That is what we get paid for. Basically we are in the risk transfer business. We take on what people want to sell, sell what people want to buy and hope to make a profit. The reason why one goes to a portfolio is because there are real limits to perfect knowledge. I’ll give you an example. Say you knew which commodity, stock or currency would appreciate the most in the following year, and you knew exactly what its price would be. We did this experiment looking backwards in fact in our database. The question of when you take a position is how are you going to trade the line…how much of a position are you going to leverage. Now, if you have perfect knowledge, would you leverage 5 to 1, would you leverage 10 to 1, 2 to 1? Well it turns out that if you leverage more than 3 to 1 that you are a loser. Because we found that if you did 3 to 1 you would have, even with perfect knowledge, you could go down a third. So that, the only perfect knowledge you could have, would be if you knew every wiggle on the line. Then you would know exactly how much to leverage. But you don’t.”

More.

Kevin Bruce: Silent Trend Following Pioneer

Kevin Bruce is a silent (and very successful) trend following pioneer. Who is he? For those trend following data freaks out there, check this out (PDF). The highlighted sections are Bruce. You ask who is “Signet”? Signet Bank was where Bruce worked. In one of those odd stories Bruce had convinced, due to his performance and his fortuitous timing, to let a regional bank back in the day let him trade a trend following portfolio ‘in house’. To hear him talk about how he managed this relationship is nothing short of amazing. Bruce also appears in my film Broke.

Note: I will be soon putting out the long form interviews of many of the traders in my film. Bruce is coming, but first I will release David Harding (76 minutes) and Salem Abraham (89 minutes). Both are timeless interviews.

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