I had the good fortune of hearing Ed Seykota speak at the International Federation of Technical Analysts in San Francisco a few weeks ago. To say he’s extraordinary is an understatement. I can’t even bring myself to quote his performance numbers at the risk you’ll question this writer’s personal credibility. Suffice it to say, when you are invited to talk to a group of insiders such as the IFTA crowd, your credibility is beyond reproach.
Ed is famous for a number of reasons beyond his envy-inducing stock market returns. He was one of the first traders who pioneered a computerized trading system (now known as System Trading) back when mainframe computers required punch cards for instructions. Considering his multiple MIT degrees, that in and of itself is not surprising. But what I so admire Ed for is his gift as a “simplifier”. He manages to boil trading down to understandable basics. In Jack Schwager’s book, Market Wizards, this is abundantly apparent as well.
I have heard Ed Seykota speak on multiple occasions, and once again on this go-around he didn’t disappoint. After playing his banjo and having us all sing the lyrics to his market lessons song, he candidly spoke about his experiences. What follows are my takeaways from that talk. I trust Ed’s wisdom will ring a bell with you as well.
- One good trend pays for them all.
- Accept just enough risk so you can sleep well at night.
- When prices break through your stops, pull the trigger and sell.
- News: we stash that flash in the trash. Ignore the “newsamentals”.
- Betting the right size matters bigtime.
- Most investors get stressed and need to stop the pain, so they use medicinal strategies instead of doing the right thing.
- You have to notice trends early. If you wait and only participate in them when they’ve gone exponentially vertical, it’s too late. Look for a fresh trend.
- Plow money back into your trading portfolio. Don’t make a big profit and then run out to buy a new Porsche.
- When trend traders begin to lose interest, momentum starts to turn negative.
- There are no Holy Grails. You just have to do the work, follow your disciplines and trends, and then cut your losses. It’s that basic.
- Know where you’ll get out before you get in.
- I have no demons. I’m a blessed man.
- Luck is just a fat tail or outlier on a normal distribution. Luck happens. If it happens to you, manage it with humility and use stops.
- The folks I mentor who wash out are those who just cannot control their feelings like I ask them to do. They can’t accept their own emotional landscape.
- The trading adrenaline does diminish over time and with experience. The objective is to rid yourself of it – totally.
Trade well; trade with discipline!
-- Gatis Roze
I’ve been gratified by the overwhelmingly positive response last week to my Tensile Trading ChartPack blog. For those of you who missed it…check it out.