The Trading Tribe

Ed Seykota's FAQ
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Apr 29, 2016


Hello Ed,

Below is a direct passage (underline is my own) written by Richard Donchian in a 1960 article for the Financial Analyst Journal, titled High Finance in Copper: 

{Because copper futures enjoy wide price movements, one can trade in them, employing a trend-following loss limiting method, and have an extraordinarily good chance of making a net profit, on balance, every year. One rather simple, easy to follow, automatic trend-following method which tends to produce good results is submitted as follows: (a) Whenever the price exceeds the highs of the two preceding calendar week's ranges, buy (and cover shorts if you have previously sold). (b) Whenever the price falls below the low of the two preceding calendar week's ranges sell, and sell short. (c) One exception to (a) and (b) above is advisable; namely, if the extreme high or low of the two preceding weeks comes on Friday-or the last trading day of the two weeks if the market is closed on Friday-and the first trading day of the third week is about to give a buy or sell signal by exceeding the Friday extreme, do not take action unless the Friday extreme is exceeded by 20 points or more.

This method is undeniably crude and over-simplified. Most purchases and sales are made on a so called "forcing technique", on stop buy orders in the midst of rises and on stop sell orders in the midst of declines, so that every time a move is made it tends to look foolish, in that it could have been done at a better price earlier.

There are some refinements to the method, and some combinations of the method with supply-demand fundamental factors, which can improve the performance somewhat but these are beyond the scope of this article.

The method, even in its simplified form, despite all its failings, has the unique merit that "it works".} 

Is it just my interpretation, or would you think from this reference that Richard Donchian did in fact utilize (or overlay) fundamental factors to assist his pure technical price-based approach?

Thank you,
Thank you for raising this issue.

I recall, from working in the same office with Richard Donchian, many years ago, that he has an assistant managing some accounts by his rules.

I also recall writing a computer program to implement his rules and finding some of his rules inconsistent with others.

I also recall him entering trades that do not originate from his official rules.

Richard Donchian

Apr 27, 2016


Dear Sir,

As we bow in a front of a "Guru" to show respect from within, I bow at your lotus feet !

Thanks for the encouragement with your words, which has wisdom, words can't describe. Your few lines has changed my whole process of thinking.

I have been immensely benefited after reading your interview in "Market Wizards" and I have read at several times and keep reading regularly from last 4 years. (Sir you are always there when I need you, I just need to open the book :-) )

Sir these are the lines which keeps reminding me of my goal :

"Every body gets what they want from the market"
"It is a happy circumstance that when nature gives us true burning desires, she also gives us the means to satisfy them"

I thank you for the encouragement and mother nature for giving me a burning desire and means to satisfy them.

Thanks and Regards
Thank you for acknowledging me and the work of the Trading Tribe.

You might consider your teachers as temporary lamp holders, standing along your path - as you come to discover you carry your own light.

You can pass your teachers, salute them and then continue on, illuminating your own path and the paths of others.

The Path to Enlightenment

holds more fruit

than the destination.

Apr 27, 2016


Hello Mr Ed Seykota

I have read about you in the famous book "Market Wizard".

I wanted to know from your experience your rules for money management  in managing trade profitably.The material read on your site may not be sufficient in understanding the subject at the implementation level.

Please advise if possible.

Thank you for raising this issue.

You might consider taking your feelings about <understanding> and <sufficiency> to Tribe as entry points.
Apr 25, 2016


Hi Ed, 

I would like to attend  one of your workshops in order to learn more and delve deeper in to TTP. Do you intend on hosting a workshop this year?

Thank you for raising this issue.

I host Workshops in response to demand.
Apr 24, 2016

More on Verbatim


thanks again for your response and support of my process and for catching the typo! Thank you also for explaining the rationale for editing my send. I believe you are sincere and don’t edit an item for purposes other than you state, and I feel good about sending items to FAQ. 

Concerning typos, I think the word precious in your response is a misspelling of previous, but I like precious! I am sure all FAQ submissions are precious to you. 

print this and the following or not as you see fit

Concerning the drug reference, I see what you mean about that. It was meant as a joke playing off the “trippy” content of one of the songs and your recent condition, but you know how jokes are, and I do to. I’ll examine my relationship with substances. No feelings about that come up right away, but I am aware that I know how to keep some things locked up pretty tight.

Thanks again.
Thank you for extending this thread and for catching my previous precious typo.

Per my recent experience with post-op Vicodin, I consider some of its side-effects more troublesome than the pain it medicates.
Apr 24, 2016

Tribe Meeting - Seeking Abundance


I arrive at Tribe meeting feeling hot about two seemingly unrelated issues.  I notice frustration surrounding my inability to access abundance.  I feel like abundance is right above me, I can see it flowing like water, but a thick glass separates me from abundance. I feel I just can't get to it!  The second issue involves me no longer wanting to engage in the "Success, Self sabotage, Build back" cycle.  The process manager first illustrates the cycle as a circle and then as a sine wave on a graph.  I see that the cycle may persist but I might strive for shallow and smoother oscillations in stead of the wild ride of deep oscillations.

My forms take me through what seems like the birthing process.  By the end of the process I can experience the choking in my neck and pressure in my head while laughing. 

I feel I don't go deep enough in experiencing my form but during the check out of a fellow Tribe member I make connection I can choose to make things hard or I can make them easy. 

Success does not have to always come from hard work, struggle or discomfort.  Furthermore the degree of struggle is not proportional to my
degree of success.  With me writing this a couple hours post process I wonder how things may change with my boom bust cycle. I now have the freedom that choice offers.

I feel happy to spend time with good friends.  I enjoy the company and conversation.  I feel like I visit family more so than friends.  I like the close feeling.

Thank you.
Thank you for sharing your process.
Apr 24, 2016

Happy / Record Profits in Pens


Every time something with my health appears, I always learn some interesting things about myself (usually about impatience and self-sabotage) and I seem to re-learn them each time since the weed of impatience seems to grow back quite easily once I think I pulled the weed out (and forget about it) :)

Thank you for your well wishes. I am the happiest I have been in many many years.

I feel this weird feeling of being powerful (not in the 'stepping on others' way) but in being so much more aware of my belief system, self sabotage, and the games I play and the role I played in other people's games.

In the last 3 months I have gone through so many pens journaling that the Pen company will have records profits this year. It has been such a rewarding experience!
Thank you for sharing your process.
Apr 23, 2016


Hi Ed,

Thank you for your feedback to what I sent. When I read it, some thoughts and feelings appear:

·         Confusion – You retitle my send “Losing Weight – Seeking Pity”. That is not SVOP-p and it is difficult to determine the meaning. Since I am the sender, and my process is about losing weight, I can infer that the losing weight part refers to me. It might follow that the seeking pity part also refers to me. I check in with myself to see what kind of feelings come up when I consider that I seek pity. I don’t find much in the way of feelings. It doesn’t really resonate when I think about it or when I search my body for feelings. I then turn to the John Moreland song and give it another listen with your SVO-p rewrite in mind. My first reaction when reading what you wrote is “Golly, Ed, don’t be so hard on the guy. I was just trying to share some cool music that happens to be made by a person with a high BMI!” On re-listening, however, I clearly heard the SVO-p message and the song took on a different slant. It is the story of him seeking pity and a demonstration of the techniques he uses to attempt to manipulate her to engage with him to play the pity game. Maybe she played in the past, but she isn’t now and that frustrates him. Interestingly, the feeling this realization evokes in me is pity for the singer, not pity that his lady friend won’t cry for him, but pity that he doesn’t seem to be conscious of what he is doing, and thus is likely to remain stuck in pity seeking mode. At one point, I complain that I am stuck in the wanting to do something about my weight, but not doing anything about it mode. It feels like there are some ties between the theme in the song and my complaint. Since the last tribe meeting I don’t have an issue with that, but it might still be something to explore. Thank you.

·         Violated or feeling used – For the first time that I recall you don’t post my submission as I send it, but omit part of it. The omitted part was a couple of other links to music I was listening to and wished to share. No big deal, maybe. Or, maybe it is a big deal because it highlights one aspect of my send and alters the context of my message from one of sharing a few links to music to one more focused on a song about pity. In any event, it raises the question for me of whether or not other reader submissions on FAQ are manipulated prior to posting, and this is where the feeling of slight nausea and disgust at being violated or used come up. I don’t know if I like a system of communication where one party gets to edit both his and the other party’s content and then publish it publicly without the sending party having any kind of right of review or ability to remove or edit content if changes to it alter the original meaning. Seems too much like the traditional media model. I am experiencing those feelings and choosing to send this to FAQ, so there is that.

·         Happiness – I am happy to report that my commitment to losing weight through better nutrition, more physical activity, and keeping open channels of communication with my support network is intact. My weight decreased from about 260 pounds to 250 pounds during the first 30 days. In the last 15 days, it has decreased about another 5 pounds. That is a steady enough trend for my liking. I am losing weight slower than I have done in the past, but I am also making changes that I feel I can stick with better than those I made in the past. That feels OK. I am also very happy to report that the health of the rest of my family is improving as well and both my wife and children are a bit leaner than they were 45 days ago. We have all agreed to help one another in efforts to eat less of the kind of foods that don’t support good health, more of those that do, and to stay active. My wife and I are communicating well, and I don’t think we are engaging in drama of the type in the Moreland song, but we haven’t gone dancing yet. Maybe I can either set a date and go dancing or explore the feelings that associate with being unwilling to follow through on that. Thank you for your support.
Thank you for sharing your process.

The item on the left appears verbatim, starting with your word,  "Hi."  I generally supply the date and the title at the top.

Occasionally, in editing for FAQ, I correct spelling or grammar, such as in your "SVOP-p" that still has an extra p.

I also generally omit or edit non-essential profanity, attempts to promote products, complex mathematics and personal references to me.

Aside from that, most everything goes in, pretty much as is.

In your previous send, I omit your suggestion that I employ pain pills to enhance my enjoyment of two videos that you suggest:

"Also, if you still have some pain pills they may enhance (or not) enjoyment of this other artist I have been listening to a lot of."

I do not recommend using pain pills or other substances for recreational purposes - and, in this case, I elect to omit the reference rather than to recommend you might consider examining your relationship with substances.

Thank you for the catch.
Apr 21, 2016



Thanks for sharing your insights Ed, your comments are helpful in providing a deeper perspective into the questions, like always.

Incidentally, I think you ought to consider writing an autobiography for your next book. Your story is fascinating, and your analysis of ideas always seems uniquely spot-on -- it'd be a real treat to read about your firsthand account (I know it'd be a classic for the decades hence, probably like a 21st century version of Reminiscences of a Stock Operator, though your journey would be much more fortunate than Livermore's..)

If you decide to write it, please drop me a note. I'd be glad to reach my contacts at [Publisher] and [News Agency] to see if they can't pitch in on the release and distribution.

Thank you for encouraging me.

Like many Tribe members, I have plenty of issues - and I continue working on them.  

For example, I play banjo and write songs and don't yet have a band.  Also, I have a lot of theories about relationships and, after two divorces, don't currently have a mate.

At such point that I feel I actually exemplify right livelihood in my own life, I may consider sharing my story. Until then, I feel I still have plenty of work to do, on myself.

I appreciate the inspiration, support and guidance of the Tribe and of those who write in to FAQ.
Apr 21, 2016

Tribe Report - Connecting the Dots

Dear Ed
I have been attending the Tribe in [City] for about 18 months. I had many hot seats and most of them seems to be related to a childhood issue with my step-father, but it was never very clear, sometimes I doubted its relevance because couldn’t connect the issue with real life. But last night it was different, I could see the issue in my everyday life.
The issue: Context: My mother divorced when I was 6 years old. Then, she moved in with another man and the kids went with her, my brother, sister and myself. This relationship lasted about 6 years.  During this time everyday life was very difficult, the guy used to drink almost every day, he was aggressive, there were a lot of arguments, stress and he liked to punish us with things like no TV, kneel on your knees for 30 min and even physical aggression.
My siblings and I had to look after the house, cleaning, cooking etc..  Many times when he gets home he used look for things to complain about and saying that the job was not done properly or was not even done (which was not true). He was always looking for reasons to punish us.  So, arguments started. He would complain, we (kids) would say that it was not true.  Then in comes my mother who was always trying to avoid the fights and arguments. She used to say don’t talk back, just do what he says, that is his away (he is not bad). That was what I was doing, just putting up with that situation.  So, we lived that way almost every day. It was like when he gets home the peace was gone (almost every night). Of course many times he acted like a father taking us out on weekends.
Hot Seats: Most of my hot seats are problems in dealing with similar situations like, the boss that is rude or offers bad working conditions and then I internally don’t agree but instead of telling them I put up with the situation until a point that I leave the job.  However, my hot seat last night was a bit different. It is about a situation with friends where I find it hard to say no.  For example, I had a couple of friends that asked to stay in my place for 3 days or maximum a week. They ended staying for a month (which means they didn’t tell the truth), they also didn’t behave the way I expected instead of keeping a low profile and not disturbing my flatmates, they actually keep their stuff all over the house, make noise in the morning. It was a very difficult situation. But instead of telling them what I was thinking I just waited until they left.  Weeks later they asked me again and I said NO. I see this pattern of putting up with things without saying anything. I am happy that from the last Tribe meeting I can see this pattern in my life.

Kind Regards
Thank you for sharing your process.

You might consider re-running the role play to give yourself an opportunity to negotiate with your mother (the Rock Donor), in a loving and kind manner, the return of the [Just-Put-Up-With-It] Rock.  

This may require you establish rapport with her and share feelings back and forth.  You might show her you appreciate her trying her best to protect you - and that you now wish to return the Rock and try another response pattern - and that you know where to find the Rock if you ever want it again.

When you fore-give the Rock to her, gently, and with full agreement and understanding on both sides, you may notice a shift in yourself.  

Subsequently, you may notice other people instinctively treating you differently.
Apr 21, 2016

Back to Basics

Hi Ed,

It was amazing how you guided me by asking the critical questions, instead of providing me with the answer. Thank you.

You were right, the system I proposed does not hold up to high skid, and is not as stable as the simple crossover system. But I continued to think along the line of combining the crossover and the support resistance system. I followed your advice to do things the simpler way, and it worked.

I tested a system that uses exponential lag crossover to determine the long term trend, and a 20 day Donchian Channel to enter and exit the market. I did a screening of the 2 lag parameters (Figure 1), this time with skid=0.5.

I am really surprised at how stable the system is. It works for most of the parameters. Then I picked a random parameter, say, 200/30, that looks not as good as its neighbors. I plotted the equity curve (Figure 2), with a benchmark that grows at 20% annually. It looks wonderful. I did an out of sample test using a different portfolio, and 200/30 works even better than the optimal parameter 120/25.

I am going to add this system to my portfolio :)

By the way I feel a bit guilty of emailing you so frequently. Hope that does not take you too much time. On the other hand, it feels good that what I am doing is being watched by the master. Thank you for being so patient with me :)

Best regards,

Thank you for sharing your process.
Apr 21, 2016

New Tribe Meeting


We meet for our second "New Tribe". 3 present, one still sick, one can't make it.

After drumming we try some more Hamming Questions and then more standard "tell me how you feel / show me how you feel".

Two people report issues.

Nice people not behaving nicely

The first (Member #2) again has problems with people taking him for granted, abusing his good intentions, lying to him. A friend visits his country with husband and baby, asks to stay a few days. This turns in steps into a month. They do all sorts of inconsiderate and annoying things while staying. They don't provide any food and complain when some supplies run out, leave lights and appliances on when they go out, make noise by using the upstairs kitchen early in the morning (6:30 am) when a downstairs kitchen is available, clutter up the kitchen with their stuff etc. They go away for a while and then ask to stay "for 2 nights". He doesn't believe them. Initially he refuses but then almost relents when he finds that they are staying with another friend and putting him to great inconvenience.

During the description of this he repeatedly says "she is a good person". Maybe the husband is not so good, but she is. Some of us egg him on, saying "she lies to you, exploits you, acts inconsiderately, but she is a nice person???".

Such themes of being up upon by people come up before for M#2, several times. On freezing the hot seat, he comes up with a fairly recent similar incident. I ask for something earlier and point to similarities with an early incident with a step father from another hot seat. Some light comes on in his mind and in his eyes as he sees the connection of this earlier incident to the current one, and to many similar situations in the past. He decides to reenact this earlier incident.

His step father looks for the slightest pretext to punish the children and him in particular. He thinks they didn't clean up properly so they must do it all again, in fine detail - almost like cleaning with a toothbrush. Also no television and they have to kneel on the hard floor for 30 minutes. He tries to argue but his mother gives him this strategy "don't argue, go along with it, don't make a fuss he is a good person/ he means well".  His sister is defiant and argumentative, but this doesn't help her either.

On first reenactment he accepts this rock. I feel that part of the rock seems to be that you are either a pushover or you are a nasty hostile person (<like his sister>).

We come up with some new strategies: Tell the truth, be real with people, in the real actual current situation. Respect your own boundaries. People respect you when you do this. You can even be a role model when you do this. You can feel good about respecting yourself. You don't have to solve everyone else's problems. Sticking up for yourself in a quiet, firm way is not "making a fuss". Don't tell yourself someone is a good person in order to excuse their behavior.

We reenact and M#2 refuses the old rock and takes the new one with the new strategies.

He spends quite a time going through old incidents and reprocessing them. He sees how they related to one another.

After releasing us from our roles we checkout. We feel this was a good hot seat. M#2 says emphatically how he suddenly realizes how these problems are connected - before he couldn't see it. 

I feel more fluent during this hot seat and freeze M#2 without hesitation and it works. I feel this comes from my own hot seat last time, as feel more comfortable leading now.

Feeling she should want to spend more time with her parents.

M#3 is sharing her parents' house; she has the downstairs to herself and may not see them for days at a time. Her mother wants to be more involved with her and to 'help' her, for example by "tidying up" (rearranging) her things. M#3 greatly values her autonomy. Since she ended her boyfriend relationship recently she feels very happy and works productively. She looks this way too, which is such a contrast from when she first showed up at Tribe

Her mother seems to believe that she has wasted all this time with ex-bf. M#3 seems to feel this way too. She feels she should be grateful to her parents. She then reveals some things that went on with her parents that suggest that one can understand their might be limits to her gratitude eg their failing to support her when an uncle sexually abused her cousins and tried to abuse her (at age 10). Accused of "tearing this family apart", threats from other family members to kill her if she persisted i telling these 'lies', no backup from her parents.

At this stage in retrospect I was starting to feel ill, and I spend a the next few days in bed with the flu (I am now feeling better). I allow the discussion to meander around for quite a while. I think there was a hot seat there: maybe about "feeling you should feel gratitude when objectively, maybe not, and feeling you should want to be closer to your mother when you don't". But as it pans out, M#3 decides that this is a life issue not a rock: people putting pressure on you to feel and act how they want, and your need to make your own decisions and to feel good about that.

On checkout. M#3 feels the talk was of value. I agree but I feel we could do better.

We check out for the night and disperse into the evening. On the way home I cannot concentrate at all on my studies.
Thank you for sharing your process and for documenting your meeting.

You might consider, as part of the Rocks Process,  allowing the client (M2) an opportunity to negotiate, in a loving and caring way, the return of the Medicinal Rock to the Rock Donor.

You might also consider, when you have a client (M3)  that wishes to pass, finding out the client's feelings about proceeding.

Client reticence may indicate trust issues.

You can gain the trust of your Tribe by getting on the Hotseat yourself, to lead the way through issues that come up for all members.

In this connection, you might consider taking your feelings about <can't concentrate on studies> to Tribe as an entry point.

Parents Teach Their Children

how to behave
and how to feel about themselves.

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