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Top 26 Quotes From Ed Seykota On Trend Following, Trading And Life

 Quote 1:

“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.”

 Quote 2:

“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, you might have valuable “surprise-a-mentals”.”

 Quote 3:

“If you can’t measure it, you probably can’t manage it… Things you measure tend to improve.”

Quote 4:

“The key to long-term survival and prosperity has a lot to do with the money management techniques incorporated into the technical system.”

 Quote 5:

“There are old traders and there are bold traders, but there are very few old, bold traders.”

 Quote 6:

“”I would add that I consider myself and how I do things as a kind of system which, by definition, I always follow.”

 Quote 7:

“Systems trading is ultimately discretionary.  The manager still has to decide how much risk to accept, which markets to play, and how aggressively to increase and decrease the trading base as a function of equity change.”

 Quote 8:

“Trying to trade during a losing streak is emotionally devastating. Trying to play “catch up” is lethal.”

 Quote 9:

“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.” (more…)

Socrates on Success

“Once A young man asked Socrates the secret of success. Socrates told the young man to meet him near the river the next morning. They met. Socrates asked the young man to walk with him into the river. When the water got up to their neck, Socrates took the young man by surprise and swiftly ducked him into the water.

The boy struggled to get out but Socrates was strong and kept him there until the boy started turning blue. Socrates pulled the boy’s head out of the water and the first thing the young man did was to gasp and take a deep breath of air.

Socrates asked him, “what did you want the most when you were there?” The boy replied, “Air”. Socrates said, “That is the secret of success! When you want success as badly as you wanted the air, then you will get it!” There is no other secret.”

Excerpt from Winning Methods of the Market Wizards

Chapter 2: Hard Work

I am sure that the theme of this chapter comes as no surprise to you. We all know, (or at least most of us do) that to get anywhere in this life, no matter what your field may be, it is going to require some hard work along the way. There can’t be a harvest if you haven’t worked in the fields. And no where is this concept of hard work more evident than in the professional traders I have come to know over the years.

What is striking to me about this group of super-traders, the Market Wizards, is how almost every single one of them is a genuine workaholic. For these people, the level of commitment and dedication to trading is absolutely amazing, and it has engendered in them a performance level so intense and so consistent, it almost boggles the mind. When you look at these individuals, you find the kind of hard work that is almost inconceivable for most people to maintain even for one day, never mind as a lifestyle. But it is this difference in personality and commitment that makes the Market Wizards who they are, and accounts for much of their high levels of achievement.

In order for you to get a real sense of the kind of hard work we are talking about here, I think I should describe for you a couple of individuals and how they work. This will give you a good idea as to how intensely passionate they are about their pursuits.

 

David Shaw

David is a private, almost secretive individual, who has been running a very successful hedge fund for many years now. Basically, his fund is a very sophisticated form of arbitrage. Over the years, it has posted excellent results. (more…)

7 rules for dealing with risk

risk71. Overcome Fear. Fear clouds judgment.
2. Remain Flexible. Surprise outcomes may require a change of plan.
3. Take reasoned risks. Risk can be good if the odds are in your favour.
4. Prepare to be wrong. Plan in advance how to deal with unfavourable outcomes.
5. Actively seek reality. See the world as it is rather than as you want it to be.
6. Respond quickly to change. If your plan calls for some action in the face of unfavourable outcomes, don’t delay.
7. Focus on decisions, not outcomes. In the face of risk, good choices can have bad outcomes, and bad choices can have good outcomes.

From :Inside the Mind of the Turtles :Curtis M Faith

Trick for Traders

I developed a little trick that might seem trivial, but it is very important. Simply put, anytime to you put a trade on, assume that the trade is going to be a loser. No matter how much analysis, how many supporting factors, or how perfect the pattern is, assume that the trade will lose money. This creates a profound shift in your focus because, rather than searching for and possibly discounting contradictory evidence (which can sometimes be as simple as “I just bought and now it’s going down…”), you will be open to and will readily accept contradicting information. Of course you will, because you assumed the trade was wrong to begin with. When you find confirmation for the trade, it is almost a pleasant surprise. Shift your thinking into this mode, and you will be much less likely to overstay your welcome in suboptimal setups that are not working out–you’ll be far more likely to do the right thing, which is usually to pull the plug on the trade (time stop) and look for a better opportunity.

Now, there’s another piece to this puzzle. A lot of writers focus a lot of attention on confidence in trading, and this is important, but it is a different kind of confidence. You must have confidence in your method and know that a profit is virtually assured over a large enough set of trades, and be able to separate this knowledge from the outcome of any one trade which is, more or less, a coin flip.

Trading Wisdom

Successful traders:
1) are very solid with what he called the “basics” (tape reading, execution, preparation for the trading day),
2) have discovered the trades that fit your personality and became excellent at those and
3) realize that successful trading is about pulling a small bucket of profit water out of the market well multiple times (in other words they are not greedy).

4) a passion for trading,
5) the willingness to admit you are wrong in your bias and to change your bias or terminate a losing trade and
6) to work really hard to become better each day.

7) an ability to recognize what trades truly work for you and to STICK with them and
8) calmness in the midst of market volatility.

Unglamorous as it may sound, it looks like the clear winner is hard work and learning the basics. Should this be that big of a surprise? Wasn’t it Thomas Edison who said ” genius is 1% inspiration and 99% perspiration”? But it is interesting to note that two of the three put a very high premium on recognizing your trading strengths and focusing on those types of trades primarily.

Deception Theory

Deception theory often refers to the eight basic emotions communicated through facial expressions: anger, fear, sadness, joy, disgust, curiosity, surprise, acceptance. Are these emotions manifested in markets? Are they predictive? Do they change? Is the theory of deception useful for studying, understanding and predicting markets?

How can you avoid the four poisons of the trading mind: fear, confusion, hesitation and surprise?

poison for TradersReplace fear with faith—faith in your trading model and trading plan

Replace confusion with the attitude of being comfortable with uncertainty

Replace hesitation with decisive action

Replace surprise with taking nothing for granted and preparing yourself for anything.

Larry Hite on “Being Wrong”

One final important gem from Larry Hite is that being wrong is okay. He says he was never very good in school and not much of an athlete either. But he turned that to his advantage because he was able to grasp the idea that he could be wrong. In fact, it came as no surprise to him when he was wrong. Hite recalls with pride: “I’ve always built in an assumption of wrongness [in my trading]. I always ask myself: What is the worst thing that can possibly happen in this scenario? Then I use that worst-case scenario as my baseline. I always want to know what I’m risking, and how much I can lose. And sometimes, when you really look at it, there’s really not all that much risk [which is why you can get rich].”

Listen to Market

The market has a lot to say, just pay attention and you will find loads of useful information. For example, the principle “Do not add to your positions unless the markets prove it”. This is shockingly true in the Futures markets. The players in the futures markets are generally those with high risk appetite. Most of the time they are well equipped, skilled and well informed. It is not a surprise that they are correct most of the time.