Ed Seykota

The elements of good trading are: (1) cutting losses, (2) cutting losses, and (3) cutting losses. If you can follow these three rules, you may have a chance.

Ed Seykota

I feel my success comes from my love of the markets. I am not a casual trader. It is my life. I have a passion for trading. It is not merely a hobby or even a career choice for me. There is no question that this is what I am supposed to do with my life.

Ed Seykota

I sometimes get the most confident of my ability just before a major losing streak.

Ed Seykota

If you want to know everything about the market, go to the beach. Push and pull your hands with the waves. Some are bigger waves, some are smaller. But if you try to push the wave out when it’s coming in, it’ll never happen. The market is always right.

Ed Seykota

A losing trader can do little to transform himself into a winning trader. A losing trader is not going to want to transform himself. That’s the kind of thing winning traders do.

Ed Seykota

The key to long-term survival and prosperity has a lot to do with the money management techniques incorporated into the technical system. There are old traders and there are bold traders, but there are very few old, bold traders.

Ed Seykota

I seem to have a gift. I think it is related to my overall philosophy, which has a lot to do with loving the market sand maintaining and optimistic attitude. Also, as I keep trading and learning, my system keeps evolving. I would add that I consider myself and how I do things as a kind of system which, by definition, I always follow.

Ed Seykota

Sometimes I trade entirely off the mechanical part, sometimes I override the signals based on strong feelings, and sometimes I just quit altogether. The immediate trading result of this jumping around is probably breakeven to somewhat negative. However, if I didn’t allow myself the freedom to discharge my creative side, it might build up to some kind of blowout. Striking a workable ecology seems to promote trading longevity, which is one key to success.

Ed Seykota

All trading is done on some sort of system, whether or not it is conscious. Many of the good systems are based on following trends. Life itself is based on trends. Birds start south for the winter and keep on going. Companies track trends and alter their products accordingly.

Ed Seykota

The profitability of trading systems seems to move in cycles. Periods during which trend-following systems are highly successful will lead to their increased popularity. As the number of system users increases, and the markets shift from trending to directionless price action, these systems become unprofitable, and undercapitalized and inexperienced traders will get shaken out. Longevity is the key to success.

Ed Seykota

Fundamentals that you read about are typically useless as the market has already discounted the price, and I call them “funny-mentals.” However, if you catch on early, before others believe, then you might have valuable “surprise-a-mentals.”

Ed Seykota

I am primarily a trend trader with touches of hunches base don about twenty years of experience. In order of importance to me are: (1) the long-term trend, (2) the current chart pattern, and (3) picking a good spot to buy or sell. Those are the three primary components of my trading. Way down in very distant fourth place are my fundamental ideas and, quite likely, on balance, they have cost me money.

Ed Seykota

I try to identify a point at which I expect the market momentum to be strong in the direction of the trade, so as to reduce my probable risk. I don’t try to pick a bottom or top.

Ed Seykota

I handle losing streaks by trimming down my activity. I just wait it out. Trying to trade during a losing stream is emotionally devastating. Trying to play “catch up” is lethal.

Ed Seykota

I set protective stops at the same time I enter a trade. I normally move these stops int o lock in a profit as the trend continues. Sometimes, I take profits when a market gets wild. This usually doesn’t get me out any better than waiting for my stops to close in, but it does cut down on the volatility of the portfolio, which calm my nerves. Losing apposition is aggravating, whereas losing your nerve is devastating.

Ed Seykota

I intend to risk below 5 percent on a trade, allowing for poor executions. Occasionally I have taken losses above that amount when major news caused a thin market to jump through my stops.

Ed Seykota

a. Cut losses.
b. Ride winners.
c. Keep bets small.
d. Follow the rules without question.
e. Know when to break the rules.

Ed Seykota

Many are called and few are chosen. Society works by the attraction of the many. As they are culled out, the good ones are left, and the others are released to go try something else until they find their calling. The same is true for other fields of pursuit.

Ed Seykota

Mostly I follow the rules. As I keep studying the markets, I sometimes find a new rule which breaks and then replaces a previous rule. Sometimes I get to a personal breakpoint. When that happens, I just get out of the markets altogether and take a vacation until I feel that I am ready to follow the rules again. Perhaps some day, I will have a more explicit rule for breaking rules. 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.

Ed Seykota

He/she loves to trade; and
He/she loves to win.

Ed Seykota on traits of the winning trader personality