Ed's FAQ November 11-20, 2011
The Trading Tribe
(c) Ed Seykota 2003-2011 - Write for permission to reprint.
Ed Seykota's FAQ
Readers Say Ed Says

November 15, 2011

Allergies

Dear Mr. Seykota:

I live in Tianjin, China. Unfortunately, I have many allergies that make trading difficult for me..

Because of my allergies, I spend much of my day cleaning to try to eradicate the effects the dust and dirt have on my allergies..

I have traded in the past but since 2004 am too tired to trade wisely. I can win some days but then lose concentration and lose. I am trading on the foreign commodities exchange.

Would you have any advice or other suggestions to help my trading?  I am hoping to earn enough to get medical help for my allergies. I have no other way to provide for my sustenance.

Thank you so much for any help you can give me.

Thank you for sharing your process. You might consider taking your feelings about <allergies> to Tribe.

November 15, 2011

Nuggets

Ed,

I was in LA last week and met a young man that has a passion for trading. I will let him tell you about his passion but I want to give an introduction. I suggested he look over your site and send you an email. He is 15 years old and programmed a system that he has been able to get a couple of partners to invest with him already. I found him to be genuine and a hard worker.

I met him at a workshop. We spoke about my interest in seeing what I could get out of the conference. It was a good conference but like many of these things you have to get around the marketing to find the golden nuggets. This is one of many reasons I appreciate the things you have helped me with. You give your best and only your best whether it is in friendship or mentoring.

Thanks,

Thank you for the update.

 

 

November 16, 2011

I love the simplicity of Ed's story in Great Trend Followers: "Later, when I was 13, my father showed me how to buy stocks. He explained that I should buy when the price broke out of the top of a box and to sell when it broke out of the bottom".

I need help learning how to draw the "box" and with knowing what to put in it! Any advice?
See the TSP pages.

November 18, 2011

Wants to Learn

Hi,

I am very interested in finding out about any future events that I might attend and also, even more important, I would like to see if there is any way I could meet or at least chat with Ed himself.

I have been trading for a living now for almost 20 years and try and follow the methods that make up trend trading. But I would like to find out if there is a way that I could further my education with the help of Ed Seykota. I have read many articles about his and the best ones are by Michael Covel.

Please respond and let me know if there are any options that I can take to improve my trend following education with the help of Ed himself.

Thanks,

Keep an eye on the FAQ Index page for news about upcoming events.

November 18, 2011

Helping People

Ed,

I don't know if this email will find its way to you or not, but I want to write it either way.

The lessons I learned from you linger on and have helped me go deeper. I've come to realize that you weren't really interested in helping people become better traders or make more money.

Instead you used your reputation as a trader to help people and just generally do good. Generally doing good and having deep meaningful relationships is my version of right livelihood.

I can't follow or mimic your path but I have learned the deeper underlying principles and that has helped me head off on my own journey. I feel a great gratitude to you and would always enjoy repaying your contribution with manual labor. [Name] feels the same way, so let us know if you need anything.

Thank you for your kind offer.


Helping Others

brings out the best in all of us ...

until someone passes a law

making it compulsory.

http://www.dailykos.com/story/2011/01/16/936745/-Since-when-did-Helping-People-become-a-Cancer-on-Society#

November 19, 2011

Kelly Refinement

Hi Ed,

I enjoyed looking at your site.

If I could humbly suggest an necessary refinement to the Kelly Formula provided in your notes i.e. (K=W-(1-W)/R).

As payoff ratio (R) is pressed here as a ‘ratio to one’ the formula makes no distinction between e.g. 100:10 vs. 10:1 or 1000:100 payoff sizes (all would be 10:1 as R is currently defined). Clearly this leverage of the payoffs sizes has a direct inverse effect on optimal leverage.

The more generalized Kelly Rule I suggest can be written as: K= W/ (Pay off when losing) –(1-W)/(Pay off when winning).

The Kelly formula you provide is a special case where (Pay off when losing) =1.

Only if by coincidence this happens to be the case will the quoted formula give you the correct answer whereas the more generalize equation should always be correct.

I hope this is of benefit.

Cheers and all the best.

Thank you for the upgrade.

November 19, 2011

Back-Testing

Good morning Ed,

I need clarification, and apologize for troubling you with such a basic question.

I select a chart. I select a time period, 20 days was the example. I count backwards 20 days. I indicate the highest point during that 20 day period. Then, DO I COUNT BACK 20 DAYS FROM THAT HIGH, and then select the low during THAT 20 day period? Or, do I pick the low THAT OCCURED DURING THE SAME 20 DAY PERIOD FROM WHICH I SELECTED THE HIGH?

Thank you. Have a nice morning.

You can find the best answer for you by back-testing.