11 - 20, 2004
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from Ed in Red)
Wed, 20 Oct 2004
What a time I had (as a guest at the IV Tribe). I have a strong
impression that I am learning more than I am conscious of.
Thanks for your time and effort in helping me right my ship - words are
never enough as you know.
Thought you might enjoy this.
I got home and either I or my wife and daughter had changed - somehow
things were different - the lack of drama was very noticeable.
Work that out. Perhaps that would be as futile as trying to work the
With eye contact and intention, I say "I just want you to know that
your feelings are important to me."
She laughs, but not mockingly and later that day,
"You're different; I like it, I like it a lot"
After 20 years she has decided to share her feelings with me - I guess it
is a matter of trust.
So today we are getting into her feelings about her fear that she might
not be able to get pregnant again - amongst other issues ...
Q: What is the positive intention of disappointment?
A: I spent Saturday afternoon in the library with Messrs Roget Thesaurus
and Antonym Dictionary.
I concluded that disappointment was telling me that I need - desperately -
to gain a sense of accomplishment; perhaps to make an appointment with my
Ed's Hot Seat:
So what's this goal of yours "to develop a team of traders the likes
of which the world has never seen"?
I have a vision of being back in the school yard again when teams are
being chosen for some game.
"Ed, Ed, Pick me, Pick me!!"
I lack an exciting vision to work towards and motivate me to greatness!
The thought of being part of a "tribally trained market hit
squad", makes my heart rate pick up. I love that feeling and the idea
has a sense of rightness about it.
If you think I can add value, then please let me know what is required.
I am very keen to return to IV ... I thought I was fairly committed to get
into my feelings before we started, but now my commitment has intensified
You know this tribe thing - with the right people - has got to be the
greatest game in town. Of course you do. It took a lot of guts for
you to take the hot seat, given the subject matter and people present; I
admire that immensely and your actions reflect your determination to lead
Wed, 20 Oct 2004
My current thinking on success relates to the importance of
I offer 2 quotes:
(1) "Those who reach greatness on earth reach it through
(2) "Nothing in the world can take the place of persistence. Talent
nothing is more common than unsuccessful men with talent. Genius will not;
unrewarded genius is almost a proverb. Education will not; the world is
educated derelicts. Persistence and determination are omnipotent."
Any thoughts on this matter?
might take your desire to reduce success to two components into TTP as a
are two kinds
who can count
those who can't.
Wed, 20 Oct 2004
cover trading setup:
Not a Ship to
From the NY Times -
Not a Ship to Spare
With about $100 million worth of crude oil in its hold, the tanker Front
Page will leave Kuwait soon, heading for Louisiana via the Suez Canal.
When it arrives 30 days later, its two million barrels will feed
refineries throughout the Midwest with crude they will turn into heating
oil for the winter.
The trip will be an expensive one.
Exxon Mobil is
paying Frontline, the ship's Norwegian owner, $6.95 million to make the
journey. Last year, the shipping company charged $2.4 million for a
With global oil demand surging and prices hitting record levels, the
world's 1,500 oil tankers are all booked up, and their owners are charging
hefty premiums. The shortage of tankers is one sign of how strong demand
and a lack of investment have left the oil industry's infrastructure
stretched thin - meaning that any hint of disruption in the system can
help make prices spike.
march toward AHA continues. Around the turn, look for a photo of
Front Page (or reasonable facsimile) to show up on the front page of a
far, no oil on the covers.
Wed, 20 Oct 2004
Hi Ed !
First meeting of the Chicago Trading Tribe happened yesterday
evening with 4 members in attendance (of an expected 6).
sending and receiving exercise we did at the Reno workshop and did TTP by
the end of the evening. I'll be writing up a report for FAQ.
on getting up and running. For non-existing future reference,
Mon, 18 Oct 2004
I have a feeling you will not answer this question but here goes.
If one has a long term trading method and risks about 3% per trade what
is a realistic yearly return on capital?
I know with the market every year will be different but say over a 5 year
period what should a good average be?
you risk about 3% per trade on Roulette, Black Jack or Keno - and if you
stick with it long enough, you can get pretty consistent final results.
might take your need for predictability into the process.
game of choice
you need to predict
Sun, 17 Oct 2004
of Trade's Dan
Says Oil May
Rise to $75 a Barrel
By Miriam Steffens
Oct. 17 (Bloomberg) -- Crude oil prices, which rose to a record $55 a
barrel in New York on Friday, may increase further and peak at $75 a
barrel, said Bernard Dan, President of the Chicago Board of Trade, the
second-biggest U.S. futures market.
that some production is going on around the world, I can't see it much
higher than $75 unless there are disruptions in supply lines,"
Dan said on Publishing & Broadcasting Ltd.'s Nine Network's Business
Sunday program in Sydney. ''I think that the U.S. economy is strong
enough to absorb that.''
and visions seem to be gathering and taking form, indicating an AHA in the
Sun, 17 Oct 2004
TTP in the News
Soros and George Bush get together for a hardball session, receive each others
feelings, and fully experience their own. China pays tribute and responds
by downsizing one of their major public works projects and renaming it the
“Two George’s Dam” in recognition of fully experiencing the blockage
and going with the flow.
dream of such things, amazing things, happening as we get 100 tribes up
and running. See 100-th
then, it's just more washing potatoes, celebrating the way it is right
welcome to join a Tribe
Sat, 16 Oct 2004
of Davis Tribe
Hi Ed !
The Davis Tribe meets alternate Friday nights. Here I report our recent
This is the meeting format:
First, drums. We start with drums.
Next, check in. I communicate the purpose of the check-in is to relate
what is 'live' right now for us, not to tell stories. Our current feeling
might be connected with a recent event, or with a distant event, or with
no conscious mind story attached - just whatever is up and alive right now
in one's mind and heart.
We talk about other new tribes. Ed nurtures a new Tribe in Reno. The
entire tribe consists of women. That's a first, since most traders are
guys and the tribes started with traders. One of the women, completely new
to TTP, takes the hot seat. She gets into it, and Ed guides her to combine
her different forms.
Ed reports the
next week she said her husband changed. "He's so nice now, and says
all the things to me I've always wanted to hear. I don't know how that
happened!" she said. I observe husband and wife are pretty much a one
emotional unit. One person can work on themselves, and the other one
changes. I've noticed this phenomenon with my wife too. Somehow, since I
do the work during Tribe meetings, she's now a nicer person. Not sure how
that happens, but it does. TTP seems a practical application for the human
heart of Bohm's Interpretation of quantum physics.
We talk about our Davis Tribe rules:
Hard to join, easy to leave.
Read web site prior to applying for membership
Shoes at door. Fire in the hearth.
Bring gift to meeting, a token of intention.
We initiate processes as needed, most important receiving whatever
We commit to participate regularly.
Goal: Get really clear within ourselves. That's the overarching goal. The
process of getting clear improves business and all parts of life. Getting
clear is not a one-time thing. We don't clean our car windshield just
once. The more we drive, the more bugs and dirt accumulate. We clean it
every two weeks to maintain clarity.
We acknowledge the moment. We discourage blind belief in the existence of
past or future. We perceive that emotions, even those we try to label
'past' or 'future' are live right now in our nerve system. That's how we
remember them, and experience the feelings. This slight shift in
perspective pulls back the partitions We see that it's all here right now,
available to work on. We feel, even see those self-created Gordian
"Oh, the past. Can't change the past." That belief is a way of
avoiding feelings. Believing "oh, the future, it's kind of scary, and
i don't know what's going to happen", is trying to avoid feelings
too. We encourage noticing how it really is: all right here, right now.
We engage the hardball process. We choose simple goals, like
"completing the bookkeeping" and "completing the Winsock
chapter". Amazingly, we discover layers of primeval suppressed
emotion standing between us and these simple goals. We succeed in sending
/ receiving. Next, lighter, pastel emotions appear, then pass. Next,
deeply-held philosophical feelings about life and our place on the great
Mandala appear, then pass. Then there is nothing left.
During check out, participants report feeling physically lighter, and
report that previously-felt congestion in chest now feels flowing. Each
report "aha's", sometimes from what the other said, which
somehow applied exactly to them too. We agree to monitor after-effects.
Thank you, Ed, and IV tribe members for encouraging our new tribe.
many little pieces.
Sat, 16 Oct 2004
The attached video clip is for the guy who worries about his child crying
For Video Clip
think it might be more lively to receive the child.
the father might just continue to entrain similar responses in his other
Fri, 15 Oct 2004
Mother Teresa writes and engraves this poem on the wall of her home for
children in Calcutta (India). I find it very inspiring and it helps me
keep my mind clear.
People are often unreasonable, illogical, and self-centered:
Forgive them anyway
If you are kind, people may accuse you of selfish, ulterior motives:
Be kind anyway.
If you are successful, you will win some false friends and some true
If you are honest and frank, people may cheat you;
Be honest and frank anyway.
What you spend years building, someone could destroy overnight;
If you find serenity and happiness, they may be jealous;
Be happy anyway.
The good you do today, people will often forget tomorrow;
Do good anyway.
Give the world the best you have, and it may never be enough;
Give the world the best you've got anyway.
You see, in the final analysis, it is between you and God;
It was never between you and them anyway.
does not tell you what you should or should not do - or lay down
provides a place in which people can come to their own rules.
conveying the importance
taking care of the poor.
Fri, 15 Oct 2004
The Ethics of
Today's essay from the von Mises Institute explains the ethical
justification of private property rights:
for and celebration of others' private property, especially their
feelings, is essential to TTP.
is a market commodity -
a creation of government.
is an industry -
best control is competition.
best way to control currency -
it to gold, with free convertibility.
Fri, 15 Oct 2004
An important part of building a system that a trader is compatible with is
defining what results the trader is compatible with. This seems simple
enough in theory, but a trader who is experienced in rigorous trading
strategy design knows that it is takes some serious work to find this
definition, and the definition must be made for each individual.
Ed Seykota terms this definition of what is the “right system” for
each of us as our own personal “Bliss Function.” Once a trader defines
his own personal Bliss Function, he can begin the process of designing a
strategy and maximizing the Bliss Function through simulation. In the
mathematics of optimization, this is known as the “objective function.”
Rightly enough, as it certainly does represent the trader’s objective or
- as Seykota says - intention.
Defining a Bliss Function can be very difficult, even for the experienced
trader and strategy developer. Not only is the process very feeling
intensive, it requires the utmost clarity of intention and the capability
to translate this intention from qualitative to quantitative form.
For example, a Bliss Function that is defined as: “I want to have high
returns without lots of draw-downs” is not a Bliss Function at all, it
is just an ambiguous conscious construct that needs to be “drilled down”
and clarified to be defined quantitatively.
One might ask
“what are high returns” and “what does it mean to not have lots of
draw-downs?” A trader might also like to check their feelings about what
returns and draw-downs mean to them. Is the trader willing to tolerate the
draw-downs that simulations show are necessary to achieve what they define
as high returns? A trader seeking 60% returns per annum might like to
check their stomach lining and make sure that Fred’s tolerance for
heat is in sync with CM’s desire for profit. So a trader must go
about this process of defining the Bliss function which involved
processing feelings, clarifying intentions, and lastly, quantifying
One simple bliss function might be based only on the compound annual
return (CAR) relative to the largest peak-to-trough drawdown (MaxD.) This
can be expressed as a simple ratio (CAR/MaxD.) A trader can define this as
the “Bliss Function” and it can be used as the objective function for
an optimization routine. Of course, in this case, the trader needs to be
aware that they might well get a strategy that returns 4% per annum with
maximum draw-downs of 50 basis points. An 8-to-1 CAR/MaxD ratio is
splendid, but 4% might not satisfy the appetite for returns. So the trader
may want to attach a stipulation this particular Bliss Function that the
numerator and/or denominator must be above and/or below some minimum
and/or maximum threshold level.
So we can see, just from a very simple example, how lots of ambiguities
can come up during this process of defining the Bliss Function, not only
when taking our feelings into account, but also when clarifying intentions
and translating our qualitative intentions into quantitative format.
Defining Return Relative to Risk
Many Bliss Functions tend to incorporate some metric of both return and
risk. Indeed, many methods of performance evaluation incorporate some
metric of return relative to risk. One common way to define return
relative to risk is the Sharp Ratio. The ratio mentioned above (CAR/MaxD)
is quite popular in some circles as well.
A method, which is in many senses superior to both of these, is a ratio by
Ed Seykota, called the Lake Ratio. [ For more on some standard return
relative to risk metrics, their drawbacks, and an explanation of the Lake
Ratio, see Seykota’s work “Risk Management” at the following link. http://www.seykota.com/
The Lake Ratio
The Lake Ratio addresses three key aspects of the draw-down process and
the associated feelings that come up during it. These three aspects are 1)
the magnitude of draw-downs, 2) the duration of draw-downs, and 3) the
frequency of draw-downs.
There are, however, some considerations that can sometimes make the Lake
Ratio a questionable objective function for an optimization procedure. For
example, since the Lake Ratio deals with relative volumes (a ratio of
integrals) there are certain situations that might produce the same
mathematical result but have far different effects on the trader’s
equity and psychology. Consider the case of a very sharp equity draw-down
immediately followed by an equally sharp advance; creating a small, deep
lake. This can represent the same thing mathematically as a very small
draw-down that is not recovered for quite some time; creating a wide,
shallow lake. So a 30% drawdown with a 1 day duration might be treated the
same as a 1% draw-down with a 30 day duration if looked at only in terms
of the volume of the lake relative to the volume of the earth below.
Multivariable Bliss Functions and Combinational Logic
This brings up the issue of whether or not a Bliss Function that exists as
an expression consisting of essentially one operator and two operands can
meet the demands of a trader who intends to maximize a highly specific set
of return relative to risk criteria. (Note that Car/MaxD, the Sharpe
Ratio, and the Lake Ratio are all essentially expressions with one
operator and two operands, although it might be argued that this is not so
when the calculations involved in determining the numerators and
denominators are included.)
Fortunately, a variety of mathematical expressions can serve as an
objective function in an optimization routine, so a trader is free to
define a Multivariable Bliss Function that incorporates a very clear and
unambiguous snapshot of their intentions.
The optimization routine can also include conditional statements that set
fixed tolerance bands for certain parameters in the Bliss Function. For
example, let’s say that a trader maximizes the Lake Ratio with the
stipulation: IF CAR > 30% AND MaxD < 20%. Here the trader deals with
the fact that certain strategies may not have any sets of parameter
combinations that produce these results – which is part of the process
of defining the Bliss Function and aligning expectations with abilities.
The optimization algorithm can maximize an expression produced by other
combinational logic including branching statements and so forth that need
not necessarily be expressed as a single continuous function. This
pragmatic approach allows traders to look at return and risk in a variety
of dimensions and may provide traders with the ability to define their
Bliss Function as a snapshot with the utmost detail and clarity.
extension of Bliss Function.
point: Fred is a feelings pump.
tolerance (or resistance) to heat you mention likely locates as a judgment
- just another form that Fred attempts to pump.
attaching anything to it.
Thu, 14 Oct 2004
I want to join a Tribe Community. I live in Rivervale, NJ and have
contacted both communities in NYC. One will not allow non-NYC residents,
the other will consider my application, but I would prefer an easier
weekly commute to the meetings. Do you have anyone else wanting to start a
community in NJ? I’m certainly not qualified to start one on my own yet,
but would like to network with others in my area which may be more
the Tribe Directory for listings and instructions on starting your own
are no listings for people who are just thinking about starting a group.
Wed, 13 Oct 2004
I ran into another situation at work and I'd like to hear what you'd do in
accordance to the TTP principle.
There is an
incident where I feel senior management gave me unreasonable criticisms
that I don't deserve, when they didn't know what actually went on but just
know how to point fingers. In other words, they're quick to take all
the credits (if there is), and even quicker to cast the blame.
Last time I wrote you I said I've learned the best way to win an argument
is start receiving. Well, I find it difficult this time to apply it though
because it is my manager and I just don't feel comfortable asking her,
"What are you feeling when that happens?"
Then I thought
about confronting her (which is another issue I have), but she tends to
speak a lot much more than listen. So if I start confronting (sending my
feelings), and she is not willing to listen (receive), the process breaks
down and it'll become two people both trying to send and unwilling to
receive. And I can't and don't want to force people to receive if they
Then I thought about that in Reno where you taught us to accept the person
just as he is. Whatever he is. Say, even if he is the most boring person
ever. The trick is to simply receive, acknowledge, and accept. So I am
thinking of how to apply it here.
I can try
accepting her unwillingness to listen (receive), OK, but then what's next?
Well, I guess I can accept that senior management has their own logic that
may appear unreasonable to us at times. OK. But doesn't that all just lead
to myself suppressing my real feeling? Or am I misinterpreting what you
mean when you talk about acceptance?
Thanks for the clarification!
might consider asking your boss to help you get clear on your job
it does not include being her therapist, you might consider working on
your feelings, rather that on hers.
you might take your feelings about your boss and about your job into the
You think Your Job Stinks
Wed, 13 Oct 2004
Even though it is not popular among physicists, (largely because its
considered "inelegant"), What is your thought on the Bohm
interpretation of quantum mechanics & the universe?
practitioners notice that when we get an AHA about some issue, other
people central to our dramas, who are not present at the meeting, seem to
have their own resonant epiphanies.
Bohm-ian twist is that all these AHA's seem to occur simultaneously.
theories are currently appearing
all over the world.
Sun, 17 Oct 2004
The system is
that there is no system ...
interview with Steve Jobs, CEO of Apple, at BusinessWeek:
Q: How do you systematize innovation?
A: The system is that there is no system ...
Sounds like an Ed-A.Q!
is always a system.
a conscious specification, it typically defaults to control by feelings we
are unwilling to experience.
of Jobs system is to say there is no system.
there is no system to it,
come Jobs, Gates,
Edison (in his day)
that change the way we live.
Sun, 17 Oct 2004
There is now no
question whatsoever that the Bush re-election futures contract at www.Tradesports.com
is being manipulated. Yesterday the price of the futures were sold down
from about 55 (indicating the market's estimate of a 55% probability of
Bush's re-election) to 10 (indicating on a 10% probability) with a single
10,000-lot order entered by a single trader. An order that size represents
twice the normal volume of an entire typical day's trading. Within moments
after the order was completed, the price recovered back to the
According to sources at Tradesports, yesterday's order was entered by the
same individual who has heavily sold the Bush futures three times over the
past month. The first instance was on September 14, when this trader sold
the futures down from the mid-60's to 49.6. The second instance was in the
middle of the second presidential debate on October 8, when the futures
were sold down from the high 50's to 51.5. The third instance was right
after the third presidential debate on October13. As the debate began the
futures were priced at 57, and by the end of the debate they had risen to
60. Then a few moments later they were beaten down to 54 in a matter of
In markets this kind of behavior is called a "speculative
attack." The idea is not to sell at the highest price possible -- the
normal profit-maximizing strategy of a typical seller. Rather, the idea is
to use one's selling to deliberately cause prices to fall. Why would any
sane trader try on purpose to sell at low prices? In some cases it is in
order to panic other traders into selling at even lower prices, so the
attacker can buy back what he sold at a profit -- traders call that a
"bear raid." But in a speculative attack the motive is more
complicated. It is to cause people in the real world -- not just other
traders -- to panic.
The classic example of a speculative attack is when George Soros massively
shorted the British pound in September, 1992. The Bank of England was
obliged to support the pound's exchange rate under the European Exchange
Rate Mechanism. With the pound plunging and the BoE pouring billions into
supporting it, prospects for the British economy were damaged -- making
the pound even weaker. Eventually the BoE exhausted its will to support
the pound , and had to pull out of the ERM. The pound collapsed -- and
Soros is said to have made a billion dollars on this speculative attack.
It's all based on what Soros has often written about as his "theory
of reflexivity." It's when financial markets affect the real
world, and then the real world in turn affects financial markets. It's a
vicious cycle set in motion on purpose. Here's a speculation of a
different sort: could Soros be behind the manipulation of the Tradesports
Bush futures? The amounts of money involved are pocket change to Soros.
And it would fit his avowed intention to unseat the President. It would be
a cheap way for Soros to damage Bush's credibility and panic his troops. I
have no idea whether Soros is behind this or not. But it would fit.
with all markets, to get a good piece of the major move, you may have to
ride out some corrections.
20 Points Over Kerry
the University of Iowa
Take All Market
Tue, 12 Oct 2004
and Total Risk
Rule of thumb: speculate with 10% or less of your net worth, and stop
trading if you lose 1/2 of that, or 5% of your net worth.
If your account grows, it might become your main asset. If not, you can
likely handle a 5% drawdown in net worth.
I have a doubt about the optimal fraction bet vs. maximum allowable risk
per trade. Many pros, you inclusive, suggest that one should not risk more
than 1-2% per trade, that is, risk measured from entry price to initial
trailing stop. Now what about the optimal fraction bet? Say, if my money
management suggests an optimal fraction bet of 25%, then 2% puts me into
the timid trader rule.
Would you please help me clarify that? Thanks.
25% optimal bet size is for a very specific situation: namely, a coin flip
process that pays 2:1 with a 50% chance. You know your exact risk in
advance (your bet size).
actual trading, even with stops, you cannot predict your exact risk.
might also like to consider if your gut can actually withstand the kind of
drawdowns that a string of 25% losses might produce.
actual trading, you might consider taking small independent positions,
each with a 1/2 % risk to stop, up to a total of 25%.
this plan, your winners and losers tend to average out so you get the same
overall gain with a smoother ride (less volatility).
Risk Management, at Resources, above.
even mean getting bearish
picking out some good shorts.
Tue, 12 Oct 2004
Dead Letter ?
Please advise regarding the status on the TTP Topics catalog. Our last
email communication on this topic was 9/30/2004.
I wonder if you actually got my most recent emails, attached FYI.
I [want to] get clear with you on the TTP Topics subject, before sending
further FAQ questions.
you for your email.
like your Topic Indexing idea and I am happy
to implement a demo to test the concept in action.
re-send me your latest version, along with installation instructions, so I
can pick up the thread and carry it forward.
alive, for a while, at the
in the email bulk mail bin.
be sure of receipt,
a follow-up letter
decade or so.
Mon, 11 Oct 2004
Our tribe cordially invites you to join us on any Thursday evening in our
Tribe meeting. You might love the spirit and drum beat of our tribe.
What lies behind us, what lies before us are tiny matters, compared to
what lies within us. -- Ralph Waldo Emerson
you for the invitation. This fits my intention to visit Tribes around the
visitation program is available to Tribe leaders who are graduates of any
Mon, 11 Oct 2004
On June 24, 2004, I make a post entitled “Trading Tribe Proposition.”
You respond as follows:
Ed Says: Yes. I envision an organization with a
deep commitment to personal growth - that also serves the financial
I plan to further define the vision and invite participation around
You might like to clarify your intention with respect to this
organization. Do you intend to further define the vision and invite
participation on this site?
typically present the vision, as it evolves, at the Workshops.
typically appear a few months in advance, in this case, in August.
you have a specific goal in mind, email me; perhaps we can find ways to
the resonant frequency
induce substantial response.