Seykota's FAQ

Discussions about personal psychology for the individual trader.
rajivm
Roundtable Knight
Roundtable Knight
Posts: 129
Joined: Fri Jul 25, 2003 12:50 am
Location: New Delhi, India

Post by rajivm » Wed Oct 10, 2012 11:57 am

stopsareforwimps wrote:
rajivm wrote:I feel IF a System is Good - trader will have no problem in following it..Only when system is not good enough this problem arises
Are you saying this based on experience, or expectation? Many good traders report that they have trouble following their system. Many trading books talk about the same problem.

My personal experience (30 years) is that it is quite hard to follow a good system.
Well I feel there are only 3 reasons for not following the system -
1. Drawdown % beyond your pain threshold
2. Duration between new equity highs longer than what you really want to me
3. CAGR% smaller than minimum CAGR% you wish to achieve
:D
If these 3 are taken care of..I feel easy to follow system

stopsareforwimps
Roundtable Knight
Roundtable Knight
Posts: 199
Joined: Sun Oct 10, 2010 1:47 am
Location: Melbourne Australia

Post by stopsareforwimps » Wed Oct 10, 2012 9:59 pm

rajivm wrote:
stopsareforwimps wrote:
rajivm wrote:I feel IF a System is Good - trader will have no problem in following it..Only when system is not good enough this problem arises
Are you saying this based on experience, or expectation? Many good traders report that they have trouble following their system. Many trading books talk about the same problem.

My personal experience (30 years) is that it is quite hard to follow a good system.
Well I feel there are only 3 reasons for not following the system -
1. Drawdown % beyond your pain threshold
2. Duration between new equity highs longer than what you really want to me
3. CAGR% smaller than minimum CAGR% you wish to achieve
:D
If these 3 are taken care of..I feel easy to follow system
I would agree these are reasonable hypotheses. What I and others find though is, it is not as easy as it looks.

People are very poor at predicting how they will feel and behave in novel situations. People often find it a lot harder to follow a good system than they expect. I would be interested so hear if you have actually followed a good system for a long time. Have you compared the theoretical performance of the system with the actual performance? Did you take every trade? Did you add rules "on the fly"?

One reason that it is hard to follow good systems is that many profitable systems have far more losing trades than winning trades. Psychologically it feels terrible, even as your account equity mounts. It's a bit like selling door to door - you made one sale for every five doors you knock on, and you get various rude and dismissive rebuffs on the other four doors. You made money, but, man, do you ever need a beer at the end of the day to salve your hurt feelings.

Moto moto
Roundtable Knight
Roundtable Knight
Posts: 427
Joined: Mon Jun 01, 2009 4:12 am
Location: once again in the UK

Post by Moto moto » Thu Oct 11, 2012 5:25 am

Additionally - when its making money its usually quite boring.....the need to tweak needs to be suppressed.

Chuck B
Roundtable Knight
Roundtable Knight
Posts: 469
Joined: Thu Apr 17, 2003 6:34 am

Post by Chuck B » Thu Oct 11, 2012 6:26 am

Adding to those good comments just now...

I'll present the Chuck B corollary: the easier it is to follow a system, the more likely it is a long-term negative expectation system.

One example would be a system that profits from selling short option premiums, even with a well-designed attempt to hedge exposure with stops in the underlying or some such plan. Eventually, maybe even after 10+ years of "good" performance, money flowing to your fund to manage, etc, the piper gets paid, and paid in a big way. :wink: Of course "nobody" wants to think and/or believe it would ever happen, especially after years of "experience" that *debunks* the naysayers of the method.

AFJ Garner
Roundtable Knight
Roundtable Knight
Posts: 2040
Joined: Fri Apr 25, 2003 3:33 pm
Location: London
Contact:

Post by AFJ Garner » Thu Oct 11, 2012 12:03 pm

Anyone who thinks it is easy probably hasn't traded long enough.

The random entry/exit tests I have been running recently certainly bolster the conclusion that TF has worked for a long period of time and I suspect it will continue to work. Especially when you throw random portfolios into the mix.

But that still doesn't make it easy. Tactical, Chesapeake and numerous other long running and well known operators have hit maximum draw down over the past couple of years.

The psychological pressure is severe and doubt always creeps in. There may well be people out there with nerves of unimaginable strength who can breeze through these periods but I suspect they are rare beasts indeed.

I agree with the comments on Ed's FAQ - they veered far away from trading and very close to the therapist's couch. I wonder if that could possibly be partly because after so many years of trading and trend following Ed had come to the conclusion there was little more to be said than he had already ventured.

Many drifted to the site in search of a guru - someone who could hold their trading hands and guide them to a fortune. To which Ed rightly and often said that it is easy to devise a very reasonable trend following system and the Whipsaw Song probably said it all.

Perhaps his real message was to tell people that the biggest obstacle to success was themselves and their psyche. In which case, he very probably got it right.
Last edited by AFJ Garner on Thu Oct 11, 2012 2:41 pm, edited 1 time in total.

daveineagan22581
Senior Member
Senior Member
Posts: 42
Joined: Mon Mar 14, 2011 9:50 pm

Post by daveineagan22581 » Thu Oct 11, 2012 2:26 pm

AFJ Garner wrote: The random entry/exit tests I have been running recently certainly bolster the conclusion that TF has worked for a long period of time and I suspect it will continue to work. Especially when you throw random portfolios into the mix.
AFJ, as usual, you are a searchlight in the rough seas of trading. We are finding the exact same thing. TF works but you have to give it time and stay the course.

Someone earlier said that trading, if done right, can be really boring. After 20+ years of devising strategy’s and systems we finally have reached sheer boredom. Run TB each day, validate and send in orders; then go to work at my real job. We find our LTTF system extremely simple to follow. The unbelievably hard part is waiting for time to pass to reach a new equity high, and resisting the urge to tweak it.

stopsareforwimps
Roundtable Knight
Roundtable Knight
Posts: 199
Joined: Sun Oct 10, 2010 1:47 am
Location: Melbourne Australia

Post by stopsareforwimps » Thu Oct 11, 2012 6:43 pm

AFJ Garner wrote:I agree with the comments on Ed's FAQ - they veered far away from trading and very close to the therapist's couch. I wonder if that could possibly be partly because after so many years of trading and trend following Ed had come to the conclusion there was little more to be said than he had already ventured.
Back in the 1980s in the Market Wizards interview Ed clearly had a big focus on psychology. He would have been trading for a couple of decades by that time. He apparently worked with a well known trading psychologist for a while. Ed appears to be the "Systematic Trader" discussed in one of the psychologist's self study courses. They seem to have had a difference of opinion on the role of professional psychologists in the "process" as Ed calls it.

I sometimes wonder how simple trend following really is. Ed Seykota appears to be an exceptionally smart guy, and many other systematic traders are too. There are a lot of subtleties around risk management, market selection, bias-variance trade-offs, and cost and tax minimization. I spent some time with a man who was probably of average intelligence trying to do trend following, and I saw him struggle with many of these ideas.

Chuck B
Roundtable Knight
Roundtable Knight
Posts: 469
Joined: Thu Apr 17, 2003 6:34 am

Post by Chuck B » Thu Oct 11, 2012 8:57 pm

stopsareforwimps wrote:They seem to have had a difference of opinion on the role of professional psychologists in the "process" as Ed calls it.
They did a seminar together way back in the early days, and disagreements related to what each understood their agreement to be resulted in the split. That seminar grew into the Peak Performance seminar, and Van greatly enhanced it over the years including things like the marble game, etc... This is all based on ancient now (i.e. 15 years ago) knowledge. I have no idea what has transpired since the 90s.

daveineagan22581
Senior Member
Senior Member
Posts: 42
Joined: Mon Mar 14, 2011 9:50 pm

Victor Niederhoffer

Post by daveineagan22581 » Fri Oct 12, 2012 11:39 am

On the topic of famous traders who have blogs/faqs/etc, here is a site which has from time to time great tidbits about real-life trading from Victor and submissions from others which are really well written. http://www.dailyspeculations.com/wordpress/. Enjoy.

AFJ Garner
Roundtable Knight
Roundtable Knight
Posts: 2040
Joined: Fri Apr 25, 2003 3:33 pm
Location: London
Contact:

Post by AFJ Garner » Fri Oct 12, 2012 1:57 pm

Very entertaining. He is certainly no fan of trend following: http://www.dailyspeculations.com/vic/go ... rview.html

You will also find a damning review on his site of a well publicized book on trend following.

RedRock
Roundtable Knight
Roundtable Knight
Posts: 939
Joined: Fri Jan 30, 2004 3:54 pm
Location: Chicago

Post by RedRock » Fri Oct 12, 2012 3:18 pm

Somewhere deep in my memory-banks, I recall Mr Neiderhoffer went bust a time or two before ltcm madof it fashionable. ehhhh fwiw

AFJ Garner
Roundtable Knight
Roundtable Knight
Posts: 2040
Joined: Fri Apr 25, 2003 3:33 pm
Location: London
Contact:

Post by AFJ Garner » Fri Oct 12, 2012 3:26 pm

Perhaps a man to put on "ignore". I can't really follow his reasoning (or is it just my bias that I do not care to?) but in any event he seems to be a man on a soap box. I have now spent a little more time looking at the site and searched the domain for the phrase "trend following". Having read quite a number of contributions, the discussions, though more polite, differ little from the endless nonsense on Elitetrader. I'm damned if I know what the answer is but it is probably not to be found on that particular forum.

stamo
Roundtable Knight
Roundtable Knight
Posts: 522
Joined: Tue Mar 13, 2007 5:27 pm

Post by stamo » Sat Mar 16, 2013 1:58 pm


AFJ Garner
Roundtable Knight
Roundtable Knight
Posts: 2040
Joined: Fri Apr 25, 2003 3:33 pm
Location: London
Contact:

Post by AFJ Garner » Sat Mar 16, 2013 2:07 pm

Thanks for the tip off. I like Ed but I confess that I do find FAQ somewhat difficult.

Macro
Roundtable Fellow
Roundtable Fellow
Posts: 70
Joined: Sat Dec 03, 2011 11:22 am

Post by Macro » Sat Mar 16, 2013 10:18 pm

Glad he's posting again.

stopsareforwimps
Roundtable Knight
Roundtable Knight
Posts: 199
Joined: Sun Oct 10, 2010 1:47 am
Location: Melbourne Australia

Post by stopsareforwimps » Sat Mar 16, 2013 11:58 pm

Thank you. There goes the afternoon (reading the new entries in FAQ).

daveineagan22581
Senior Member
Senior Member
Posts: 42
Joined: Mon Mar 14, 2011 9:50 pm

Post by daveineagan22581 » Sun Mar 17, 2013 12:41 pm

it would be nice to see ed talk about trading vs. all this emotional early childhood repressed notional experience stuff. really doesn't add to the whole experience a trader needs to go through to become comfortable with what he's doing and successful, imo. the early seykota stuff from market wizards etc was great. but the faq? all i get from it are good pictures every once in a while.

AFJ Garner
Roundtable Knight
Roundtable Knight
Posts: 2040
Joined: Fri Apr 25, 2003 3:33 pm
Location: London
Contact:

Post by AFJ Garner » Sun Mar 17, 2013 1:45 pm

I quite agree; no disrespect intended but if I want a shrink I'll go find one. If I want trading articles and chat I don't see much value in FAQ. Some of the other stuff on Ed's site was very valuable though and I think he should extend that.

I am about to make a separate post on the topic but will mention it here too. I want people's views on good blogs to include at Traders' Place.

stamo
Roundtable Knight
Roundtable Knight
Posts: 522
Joined: Tue Mar 13, 2007 5:27 pm

Ed's new book "Govopoly" has been released

Post by stamo » Sat Dec 14, 2013 9:20 am

Ed's new book "Govopoly" has been released...

You can buy it here.

Post Reply