Saturday, January 28, 2012

A trading legend speaks

A small collection of quotes from Ed Seykota, the famed trend follower profiled in Market Wizards, whose writings and success are a continuing source of inspiration to me:
  • 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.
  • To avoid whipsaw losses, stop trading.
  • Risk no more than you can afford to lose and also risk enough so that a win is meaningful.
  • Trend following is an exercise in observing and responding to the ever-present moment of now.
  • Fundamentalists and anticipators may have difficulties with risk control because a trade keeps looking ‘better’ the more it goes against them.
  • Until you master the basic literature and spend some time with successful traders, you might consider confining your trading to the supermarket.
  • I don’t predict a nonexisting future.
  • It can be very expensive to try to convince the markets you are right.
  • The markets are the same now as they were five or ten years ago because they keep changing-just like they did then.
  • Systems don’t need to be changed. The trick is for a trader to develop a system with which he is compatible.
  • 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.
  • A fish at one with the water sees nothing between himself and his prey. A trader at one with his feelings feels nothing between himself and executing his method.
  • It’s all about sticking to your plan and experiencing feelings as they arise. If you are unwilling to feel your feelings, the temptation is to avoid them by jumping off your system.
  • Traders and Surfers both have to deal with feelings of missing out on the small ones, until the big one comes along. They also have to deal with feelings of staying with the big one.
  • Feelings you dislike, grow stronger; the feelings you like disappear, leaving you wiser.
  • The turning point in the Process occurs when you become willing to feel a historically unpleasant feeling.
"One evening, while having dinner with a fundamentalist, I accidentally knocked a sharp knife off the edge of the table. He watched the knife twirl through the air, as it came to rest with the pointed end sticking into his shoe. 'Why didn't you move your foot?' I exclaimed. 'I was waiting for it to come back up,' he replied".

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