Hedge Fund and Top Traders Hall of Fame
Michael Covel (February 14, 2005)
Hedge Fund and Top Traders Hall of Fame
Ed Seykota
Paul Tudor Jones
Jim Simons
John W. Henry
Richard Dennis
Richard Donchian
They might not have careers in the public eye (their choice of course), but their performance and trading styles are works of true discipline, exacting precision and huge profits. You won't see them on CNBC.
Wednesday, October 17, 2007
ED SEYKOTA - A LIVING LEGEND
Ed Seykota
TurtleTrader is especially grateful for Ed's guidance and influence. You can read much more about Ed in the book Trend Following.
Trading as a Trend Follower, Ed Seykota turned $5,000 into $15,000,000 over a 12 year time period in his model account - an actual client account. Ed was self-taught, but influenced early on in his career by Richard Donchian's writings. He has served as a teacher and mentor to some great traders including Michael Marcus, David Druz and Jim Hamer.
What makes Ed especially unique is his continual self-examination and commitment to studying the psychological components of trading while also helping other traders achieve their potential.
Seykota Background
In the early 1970s, Seykota was hired as an analyst by a major brokerage firm. He conceived and developed the first commercial computerized trading system for managing clients' money in the futures markets.
Q. How did you first get involved in trading?A. In the late 1960s, I decided that silver had to rise when the U.S. Treasury stopped selling it. I opened a commodity margin account to take full advantage of my insight. While I was waiting, my broker convinced me to short some copper. I soon got stopped out and lost some money and my trading virginity. So I went back to waiting for the start of the big, inevitable bull market in silver. Finally, the day arrived. I bought. Much to my amazement and financial detriment, the price started falling! At first it seemed impossible to me that silver could fall on such a bullish deal. Yet the price was falling and that was a fact. Soon my stop got hit. This was a very stunning education about the way markets discount news. I became more and more fascinated with how markets work. About that time, I saw a letter published by Richard Donchian, which implied that a purely mechanical trend following system could beat the markets. This too seemed impossible to me. So I wrote computer programs (on punch cards in those days) to test the theories. Amazingly, his [Donchian] theories tested true. To this day, I'm not sure I understand why or whether I really need to. Anyhow, studying the markets, and backing up my opinions with money, was so fascinating compared to my other career opportunities at the time, that I began trading full time for a living.
The Market Wizards by Jack Schwager
Ed Seykota was originally profiled in the Market Wizards.
Seykota is another in the long line of alumni from the legendary Commodities Corporation.
Bet Sizing Article by Ed Seykota and David Druz
TurtleTrader is especially grateful for Ed's guidance and influence. You can read much more about Ed in the book Trend Following.
Trading as a Trend Follower, Ed Seykota turned $5,000 into $15,000,000 over a 12 year time period in his model account - an actual client account. Ed was self-taught, but influenced early on in his career by Richard Donchian's writings. He has served as a teacher and mentor to some great traders including Michael Marcus, David Druz and Jim Hamer.
What makes Ed especially unique is his continual self-examination and commitment to studying the psychological components of trading while also helping other traders achieve their potential.
Seykota Background
In the early 1970s, Seykota was hired as an analyst by a major brokerage firm. He conceived and developed the first commercial computerized trading system for managing clients' money in the futures markets.
Q. How did you first get involved in trading?A. In the late 1960s, I decided that silver had to rise when the U.S. Treasury stopped selling it. I opened a commodity margin account to take full advantage of my insight. While I was waiting, my broker convinced me to short some copper. I soon got stopped out and lost some money and my trading virginity. So I went back to waiting for the start of the big, inevitable bull market in silver. Finally, the day arrived. I bought. Much to my amazement and financial detriment, the price started falling! At first it seemed impossible to me that silver could fall on such a bullish deal. Yet the price was falling and that was a fact. Soon my stop got hit. This was a very stunning education about the way markets discount news. I became more and more fascinated with how markets work. About that time, I saw a letter published by Richard Donchian, which implied that a purely mechanical trend following system could beat the markets. This too seemed impossible to me. So I wrote computer programs (on punch cards in those days) to test the theories. Amazingly, his [Donchian] theories tested true. To this day, I'm not sure I understand why or whether I really need to. Anyhow, studying the markets, and backing up my opinions with money, was so fascinating compared to my other career opportunities at the time, that I began trading full time for a living.
The Market Wizards by Jack Schwager
Ed Seykota was originally profiled in the Market Wizards.
Seykota is another in the long line of alumni from the legendary Commodities Corporation.
Bet Sizing Article by Ed Seykota and David Druz
TRADING AS A PROFESSION
Issues for New Traders
Michael Covel (March 12, 2006)
Think you can't make a living trading? Think Again. Traders fail because they risk too much and often have no trading plan. Today it's more crucial than ever to become "Market Wizard" knowledgeable about the real money-making techniques of the great traders. It is no longer rational to invest your personal net-worth in a mutual fund hoping for it to go up forever. Most people are afraid to learn new ways of thinking, particularly when it comes to their money. But the bottom line is, you have no choice if you want to build a fortune. Trend following is designed to keep your emotions in check. Being objective and unemotional is the big difference between the great traders and losing traders.
Formal Education Is Not the Key
A top CEO recently spoke before a class of Harvard MBAs. After his presentation students asked questions one of which was, "What must we do now?" The CEO replied, "Take whatever money you have not spent on tuition and do something else." His point was clear: formal education means less and less in today's world. Trading is no different. The best traders are usually not the products of a formal education in business or finance. Bottom line: you don't have to be a Ph.D. or MBA to trade. You only need to have the desire to work hard and learn. If you must have a Ph.D make it a "Poor, Hungry and Driven" degree instead. If you want honest, straightforward training, we can help. If you want short cuts and hype, do yourself a favor and move on. This is not for you. The great Trend Followers don't ask for permission, they don't make excuses, they just do it.
Geographic Irrelevance: Learn Anytime, Anyplace
You can trade from anywhere in the world as long as you have access to the internet. You do not have to be on Wall Street or have access to Wall Street's buzz as demonstrated by where these superstar trend followers live:
Canadian, Texas (Salem Abraham)
Incline Village, Nevada (Ed Seykota)
Towson, Maryland (Keith Campbell)
Michael Covel (March 12, 2006)
Think you can't make a living trading? Think Again. Traders fail because they risk too much and often have no trading plan. Today it's more crucial than ever to become "Market Wizard" knowledgeable about the real money-making techniques of the great traders. It is no longer rational to invest your personal net-worth in a mutual fund hoping for it to go up forever. Most people are afraid to learn new ways of thinking, particularly when it comes to their money. But the bottom line is, you have no choice if you want to build a fortune. Trend following is designed to keep your emotions in check. Being objective and unemotional is the big difference between the great traders and losing traders.
Formal Education Is Not the Key
A top CEO recently spoke before a class of Harvard MBAs. After his presentation students asked questions one of which was, "What must we do now?" The CEO replied, "Take whatever money you have not spent on tuition and do something else." His point was clear: formal education means less and less in today's world. Trading is no different. The best traders are usually not the products of a formal education in business or finance. Bottom line: you don't have to be a Ph.D. or MBA to trade. You only need to have the desire to work hard and learn. If you must have a Ph.D make it a "Poor, Hungry and Driven" degree instead. If you want honest, straightforward training, we can help. If you want short cuts and hype, do yourself a favor and move on. This is not for you. The great Trend Followers don't ask for permission, they don't make excuses, they just do it.
Geographic Irrelevance: Learn Anytime, Anyplace
You can trade from anywhere in the world as long as you have access to the internet. You do not have to be on Wall Street or have access to Wall Street's buzz as demonstrated by where these superstar trend followers live:
Canadian, Texas (Salem Abraham)
Incline Village, Nevada (Ed Seykota)
Towson, Maryland (Keith Campbell)
TREND FOLLOWING - A BRIEF NOTES
Commodity and Stock Trading with Trend Following and Turtle Trading Systems
Michael Covel (February 16, 2005)
Trend trading is reactive and systematic by nature. It does not forecast or predict markets or price levels. Prediction is impossible! Trend trading demands that you have strong self-discipline to follow precise rules. It involves a risk management system that uses current market price, equity level in an account and current market volatility. Trend traders use an initial risk rule that determines your position size at the time of entry. This means you know exactly how much to buy or sell based on how much money you have. Changes in price may lead to a gradual reduction or increase of your initial trade. On the other hand, adverse price movements may lead to an exit for your entire trade. Historically, A trend trader's average profit per trade is significantly higher than the average loss per trade.
Trendtrading is not a Holy Grail. It is not some passing fad or hyped-up secret black box either. Beyond the mere rules, the human element is core to the strategy. It takes discipline and emotional control to stick with trend trading through the inevitable market ups and downs. Keep in mind though, Trend Followers expect ups and downs. They are planned for in advance. What must all trend followers consider?
Price: One of the first rules of trend following is that price is the main concern. If a market is at 60 and goes to 58, 57, 53 - the market is in a down trend. Despite what every technical indicator might predict, if the trend is down, stay with the trend. Indicators showing where price will go next or what it should be doing are useless. A trader need only be concerned with what the market is doing, not what the market might do. The price tells you what the market is doing.
Money Management: The most critical factor of trend following is not the timing of the trade or the indicator, but rather the determination of how much to trade over the course of the trend.
Risk Control: Trend following is grounded in a system of risk control and money management. The math is straightforward and easy to learn. During periods of higher market volatility, your trading size is reduced. During losing periods, positions are reduced and trade size is cut back. The main objective is to preserve capital until more favorable price trends reappear. Cutting losses is the way to stay in the game.
Rules Rule: Trend following should be systematic. Price and time are pivotal at all times. Trend Following is not based on an analysis of fundamental supply or demand factors. Trend Following does NOT involve seasonals, point and figure, Market Profile, triangles or day trading.
Trend Following answers these critical questions:
How and when to enter the market.
How many contracts or shares to trade at any time.
How much money to risk on each trade.
How to exit the trade if it becomes unprofitable.
How to exit the trade if it becomes profitable.
Conclusions
If you want in-and-out day trading, we can't help. Good trend following systems average five or six trades per market per year. What do you need to get started?
An active mind, willingness to learn and passion to win.
No knowledge of what an Italian bond is worth or what companies comprise the S&P or FTSE index. The key is the price on the chart.
Discipline and common sense to do the right thing per all rules.
About an hour each day at the end of the day to check trades.
A PC and telephone line (or internet connection).
Trading is a zero-sum game. For every winner, there is a loser. What's the difference between winners and losers? Smarts and strategy. For every loser in the NASDAQ implosion there was a winner. Does this mean that there are traders with neither strategy nor smarts actively losing, effectively shifting their funds to the winners, armed with strategy and smarts? Yes, absolutely.
Michael Covel (February 16, 2005)
Trend trading is reactive and systematic by nature. It does not forecast or predict markets or price levels. Prediction is impossible! Trend trading demands that you have strong self-discipline to follow precise rules. It involves a risk management system that uses current market price, equity level in an account and current market volatility. Trend traders use an initial risk rule that determines your position size at the time of entry. This means you know exactly how much to buy or sell based on how much money you have. Changes in price may lead to a gradual reduction or increase of your initial trade. On the other hand, adverse price movements may lead to an exit for your entire trade. Historically, A trend trader's average profit per trade is significantly higher than the average loss per trade.
Trendtrading is not a Holy Grail. It is not some passing fad or hyped-up secret black box either. Beyond the mere rules, the human element is core to the strategy. It takes discipline and emotional control to stick with trend trading through the inevitable market ups and downs. Keep in mind though, Trend Followers expect ups and downs. They are planned for in advance. What must all trend followers consider?
Price: One of the first rules of trend following is that price is the main concern. If a market is at 60 and goes to 58, 57, 53 - the market is in a down trend. Despite what every technical indicator might predict, if the trend is down, stay with the trend. Indicators showing where price will go next or what it should be doing are useless. A trader need only be concerned with what the market is doing, not what the market might do. The price tells you what the market is doing.
Money Management: The most critical factor of trend following is not the timing of the trade or the indicator, but rather the determination of how much to trade over the course of the trend.
Risk Control: Trend following is grounded in a system of risk control and money management. The math is straightforward and easy to learn. During periods of higher market volatility, your trading size is reduced. During losing periods, positions are reduced and trade size is cut back. The main objective is to preserve capital until more favorable price trends reappear. Cutting losses is the way to stay in the game.
Rules Rule: Trend following should be systematic. Price and time are pivotal at all times. Trend Following is not based on an analysis of fundamental supply or demand factors. Trend Following does NOT involve seasonals, point and figure, Market Profile, triangles or day trading.
Trend Following answers these critical questions:
How and when to enter the market.
How many contracts or shares to trade at any time.
How much money to risk on each trade.
How to exit the trade if it becomes unprofitable.
How to exit the trade if it becomes profitable.
Conclusions
If you want in-and-out day trading, we can't help. Good trend following systems average five or six trades per market per year. What do you need to get started?
An active mind, willingness to learn and passion to win.
No knowledge of what an Italian bond is worth or what companies comprise the S&P or FTSE index. The key is the price on the chart.
Discipline and common sense to do the right thing per all rules.
About an hour each day at the end of the day to check trades.
A PC and telephone line (or internet connection).
Trading is a zero-sum game. For every winner, there is a loser. What's the difference between winners and losers? Smarts and strategy. For every loser in the NASDAQ implosion there was a winner. Does this mean that there are traders with neither strategy nor smarts actively losing, effectively shifting their funds to the winners, armed with strategy and smarts? Yes, absolutely.
Ed Seykota - My Mentor
Ed Seykota
Career
As a young man he attended high school near The Hague, Netherlands and also lived in Voorburg.
[edit] Trading methods
Seykota is a trader who in 1970 pioneered a computerized trading system (now known as System trading) for the futures market for the brokerage house he and Michael Marcus were working for. Later, he decided to venture out on his own and manage a few of his client’s accounts.
Much of Seykota’s success was attributed to his development and utilization of computerized trading systems to which he first tested on a mainframe IBM computer. Later on, the brokerage house he had been working for adopted his system for their trades.
His interest in creating a computerized system was spawned after he read a letter by Richard Donchian on utilizing mechanical trend following systems for trading and also Donchian’s 5 and 20 day moving average system. He was also inspired by the book Reminiscences of a Stock Operator. His first trading system was developed based on exponential moving averages.
Ed Seykota, Market Wizards
“
Systems don’t need to be changed. The trick is for a trader to develop a system with which he is compatible.
”
Seykota improved this system over time. This did not mean that he changed the system, but rather he adapted the system to fit his trading style and preferences. With the initial version of the system being rigid, he later introduced more rules into the system in addition to pattern triggers and money management algorithms.
Another aspect of his success was his genuine love for trading and his optimistic demeanour. This factor sustained his efforts to continuously improve on his system.
Career
As a young man he attended high school near The Hague, Netherlands and also lived in Voorburg.
[edit] Trading methods
Seykota is a trader who in 1970 pioneered a computerized trading system (now known as System trading) for the futures market for the brokerage house he and Michael Marcus were working for. Later, he decided to venture out on his own and manage a few of his client’s accounts.
Much of Seykota’s success was attributed to his development and utilization of computerized trading systems to which he first tested on a mainframe IBM computer. Later on, the brokerage house he had been working for adopted his system for their trades.
His interest in creating a computerized system was spawned after he read a letter by Richard Donchian on utilizing mechanical trend following systems for trading and also Donchian’s 5 and 20 day moving average system. He was also inspired by the book Reminiscences of a Stock Operator. His first trading system was developed based on exponential moving averages.
Ed Seykota, Market Wizards
“
Systems don’t need to be changed. The trick is for a trader to develop a system with which he is compatible.
”
Seykota improved this system over time. This did not mean that he changed the system, but rather he adapted the system to fit his trading style and preferences. With the initial version of the system being rigid, he later introduced more rules into the system in addition to pattern triggers and money management algorithms.
Another aspect of his success was his genuine love for trading and his optimistic demeanour. This factor sustained his efforts to continuously improve on his system.
MECHANICAL TRADING MA 5 AND 20
Yesterday the indicators showed average buying. The CI futures were down at 1355 in early morning and closed at 1375. Those who bought clearly made a comfortable profit.
The CPO futures which hit a new high on Tuesday closed down lower and now trigger a "take profit while still high" environment.
Those who have taken profit can now prepared for to enter the market when the price is below Moving Average 5 and continues to average buying. As usual the market will rebound and prepare to take profit once it moves above Moving Average 5.
Richard Donchian and Ed Seykota are still my mentors and have great influence on my trading decision.
The CPO futures which hit a new high on Tuesday closed down lower and now trigger a "take profit while still high" environment.
Those who have taken profit can now prepared for to enter the market when the price is below Moving Average 5 and continues to average buying. As usual the market will rebound and prepare to take profit once it moves above Moving Average 5.
Richard Donchian and Ed Seykota are still my mentors and have great influence on my trading decision.
Tuesday, October 16, 2007
MECHANICAL TRADING
I am now trading using the MECHANICAL TRADING concept.
It has been successful.
The MOVING AVERAGE 5 AND 20 can be a good guidance.
I did manage to weather the SUB PRIME storm.
On average I am making 70% on monthy average.
I am targetting the 1 million mark by end of this year.
Mr Richard Donchian has been and always be my mentor.
It has been successful.
The MOVING AVERAGE 5 AND 20 can be a good guidance.
I did manage to weather the SUB PRIME storm.
On average I am making 70% on monthy average.
I am targetting the 1 million mark by end of this year.
Mr Richard Donchian has been and always be my mentor.
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