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Edward Seykota
Born August 7, 1946 (1946-08-07) (age 63)
Occupation commodities trader

Edward Arthur Seykota (born August 7, 1946) is a commodities trader, who earned BSc degrees in both Electrical Engineering and Management from MIT, both in 1969. In 1970 he pioneered Systems trading by using early punch card computers to test ideas on trading the markets. Seykota resides in Incline Village-Crystal Bay, Nevada, on the north shore of Lake Tahoe.

Contents

Career

As a young man he attended high school near The Hague, Netherlands and also lived in Voorburg.

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Trading methods

Seykota is a trader who in 1970 pioneered a computerized trading system (now known as System trading) for the futures market for the brokerage house he and Michael Marcus were working for. Later, he decided to venture out on his own and manage a few of his client's accounts.

Much of Seykota's success was attributed to his development and utilization of computerized trading systems to which he first tested on a mainframe IBM computer. Later on, the brokerage house he had been working for adopted his system for their trades.

His interest in creating a computerized system was spawned after he read a letter by Richard Donchian on utilizing mechanical trend following systems for trading and also Donchian's 5 and 20 day moving average system. He was also inspired by the book Reminiscences of a Stock Operator. His first trading system was developed based on exponential moving averages.

Ed Seykota, Market Wizards

Systems don’t need to be changed. The trick is for a trader to develop a system with which he is compatible.

Seykota improved this system over time, adapting the system to fit his trading style and preferences. With the initial version of the system being rigid, he later introduced more rules into the system in addition to pattern triggers and money management algorithms.

Another aspect of his success was his genuine love for trading and his optimistic demeanour. This factor sustained his efforts to continuously improve on his system although he never changed the response indicators of the system and instead fine tuned market stimuli.

Influence

Some of Ed's students have included Michael Marcus, David Druz, Jason Dekker, and Jason Russell of Salida Capital [1]

Trader, instructor, and blogger Michael Martin is known to be one of Ed's protege's as well. [2]

Controversial claims concerning physics

Seykota maintains a website in which, while he does not deny the validity of the Bernoulli principle, he considers it to be misapplied, claiming that these misapplications are bad physics. Seykota refers to his theory as the theory of radial momentum. He writes:

The classic theory of airplane lift is all about wing curvature ... and that, according to Bernoulli's Principle, fast-flowing air has lower pressure. In 1997, after pondering this matter for some twenty years, Ed Seykota concludes that lift has nothing at all to do with Bernoulli's Principle ... rather, lift is a function of Radial Momentum ... the radial fanning out of a fluid lowers its density ... and therefore, the pressure decreases with the distance from the center of radiation.

Seykota's theory is controversial and as a consequence he receives a lot of criticism.

Notes

References

  1. ^ Covel, Michael (January 13, 2006). "Learn from these up and coming traders". The Connors Group. http://www.tradingmarkets.com/.site/swingtrading/commentary/trendfollower/01132006-48645.cfm. Retrieved 2006-11-17.  
  2. ^ Covel, Michael. "Trend Following". Trend Following: pp. 64.  

Magazines

External links

Further reading

Covel, Michael W. (2009). Trend Following (Updated Edition): Learn to Make Millions in Up or Down Markets. FT Press. ISBN 0-13-702018-X.  


Quotes

Up to date as of January 14, 2010

From Wikiquote

When a feeling dissolves, it ceases to be your enemy and begins to be one of your allies.

Ed Seykota (born 7 August 1946) is a U.S. investor.

Sourced

Markets

  • The markets are the same now as they were five or ten years ago because they keep changing-just like they did then.
    • Source: Koppel, Robert The Intuitive Trader: Developing Your Inner Trading Wisdom, John Wiley & Sons Inc (May 1996), ISBN 0471130478 Read it here

Short-Term Trading

  • The elements of good trading are cutting losses, cutting losses, and cutting losses.
    • Source: Jenks, Philip, (Editor) 500 of the Most Witty, Acerbic and Erudite Things Ever Said About Money, Harriman House (December 2002), ISBN 1897597223 Read it here

Outcomes

  • 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.
    • Source: Schwager, Jack D. (Editor), Market Wizards, HarperCollins (1989), page 172, ISBN 0-88730-610-1, Read it here
  • I think that if people look deeply enough into their trading patterns, they find that, on balance, including all their goals, they are really getting what they want, even though they may not understand it or want to admit it.

Market Trends

  • The trend is your friend except at the end where it bends.
    • Source: Schwager, Jack D. Technical Analysis, Wiley; 1 edition (December 1995), ISBN 0471020516 Read it here
  • Charles Faulkner tells a story about Seykota's finely honed intuition when it comes to trading: I am reminded of an experience that Ed Seykota shared with a group. He said that when he looks at a market, that everyone else thinks has exhausted its up trend, that is often when he likes to get in. When I asked him how he made this determination, he said he just puts the chart on the other side of the room and if it looked like it was going up, then he would buy it... Of course this trade was seen through the eyes of someone with deep insight into the market behavior.
    • Source: Covel, Michael W., Trend Following: How Great Traders Make Millions in Up or Down Markets, FT Press (2007), pages 172-173, ISBN 0-13-613718-0

Predicting the Future

  • 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.
    • Source: Harris, Sunny J. Trading 102: Getting Down to Business, Wiley; 1 edition (September 1998), ISBN 0471181331 Read it here

Trading

  • To avoid whipsaw losses, stop trading.
    • Source: Covel, Michael W., Trend Following: How Great Traders Make Millions in Up or Down Markets, FT Press (2007), page 59, ISBN 0-13-613718-0
  • Here's the essence of risk management: Risk no more than you can afford to lose, and also risk enough so that a win is meaningful. If there is no such amount, don't play.
    • Source: Covel, Trend Following, page 59
  • Pyramiding instructions appear on dollar bills. Add smaller and smaller amounts on the way up. Keep your eye open at the top.
    • Source: Covel, Trend Following, page 55
  • Markets are fundamentally volatile. No way around it. Your prolem is not in the math. There is no math to ge you out of having to experience uncertainty.
    • Source: Covel, Trend Following, page 59
  • It can be very expensive to try to convince the markets you are right.
    • Source: Covel, Trend Following, page 59

System Trading

  • Systems don't need to be changed. The trick is for a trader to develop a system with which he is compatible.
    • Source: Schwager, Jack D., Market Wizards, HarperCollins (1989), page 159, ISBN 0-88730-610-1
  • I don't think traders can follow rules for very long unless they reflect their own trading style. Eventually, a breaking point is reached and the trader has to quit or change, or find a new set of rules he can follow. This seems to be part of the process of evolution and growth of a trader.
    • Source: Schwager, Market Wizards, page 166

Feelings

  • Our work is not so much to treat or to cure feelings, as to accept and celebrate them. This is a critical difference.
    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.
    Trying to treat or cure feelings adds mass.

External links


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