Ed Seykota

Ed Seykota

Postby winston » Fri Apr 09, 2010 10:48 am

Make This "Uncomfortable" Trade for a Quick Profit By Tom Dyson
Wednesday, April 7, 2010

Ed Seykota has a favorite trade…

Seykota is one of the most famous traders in stock market history. He made billions following trends in the commodities and futures markets, starting in the 1970s.

According to Futures magazine, Seykota has returned on average 60% a year for the three-decade span of his career.

In one profile I read about Seykota, he describes how he looks for markets that have gone so far in one direction, they can't possibly go any farther. Then, he bets they'll go farther. In other words, he likes to jump on trends, especially when they seem extended.

"Buying high, selling higher,"
he calls it.

In all the trading books I've read, nothing sticks in my mind like this piece of trading wisdom from Ed Seykota. It sounds totally counterintuitive to me, and I've never read about a strategy like this anywhere else. He made billions using this technique. We can too, if we're able to use it…

I'm about to show you my favorite "extended trend" trade right now, but before you jump into this trading strategy, there are a few of things you need to know…

First of all, Ed Seykota chases momentum. It's like jumping taxis on Fifth Avenue. You jump in and stay in as long as it's speeding downtown. But as soon as it gets snarled in traffic, you jump out and find another taxi that's speeding downtown. This way, you only put your money into trades that are working. When they stop working, you pull your money out and jump into another trade that's working. Momentum traders rarely hold positions for more than a few weeks.

Second, to make this strategy work, you have to ditch your trade as soon as it stops moving in your direction. In other words, you must use a stop loss. Stop losses protect your capital and make sure you don't get bogged down in a losing trade. A triggered stop loss is a message from the market that says "This trade isn't working, time to find another trade that is."

Finally, these "extended trend" trades can feel extremely uncomfortable. I'm a thrifty person, and I love bargains. I'm much more comfortable, for example, buying a stock that's fallen for many days in a row and selling a stock that's risen for many days in a row. But I've lost money on these setups a thousand times. Now I know the profit is almost always in sticking with the trend.

So what's my favorite "extended trend" trade right now?

It's the stock market. The S&P is in juggernaut mode. As of Monday, it had risen in 26 out of the last 38 trading sessions for a gain of 12% in two months. Investor sentiment indicators like the put-call ratio and "dumb money" confidence show investors are "nosebleed" bullish. Technical indicators for momentum, like the Relative Strength Index, are close to their maximum possible highs.

$SPX: The S&P is in juggernaut mode…

In short, the recent uptrend in the S&P is extremely extended. For a bargain hunter like me, buying into the S&P right now feels almost suicidal… like I'm guaranteed to lose money.

But if my experience… and Ed Seykota's track record… are anything to go by, buying into the stock market's trend right now is likely to be a profitable short-term trade.

Buying a double- or triple-long ETF for the S&P is one way you can make this trade. Or buy stocks that are highly leveraged to the stock market like homebuilders or financial stocks. When the S&P rises, these stocks soar.

Your emotions will tell you not to make this trade. It's too uncomfortable. But it's the right trade if you're looking for a quick, short-term profit. Keep holding as the long as the market is rising and be quick to cut your losses when the trade moves against you…

Source: Daily Wealth
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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Re: Ed Seykota

Postby Cheng » Fri Apr 09, 2010 1:23 pm

I like this guy. He was interviewed in Market Wizards. Very smart guy who beat Warren Buffett's % compounded records. :D
"The really big money tends to be made by investors who are right on qualitative decisions." Warren Buffett

"Risk no more than you can afford to lose, and also risk enough so that a win is meaningful." Ed Seykota

Scan with FA, Time with TA, Volatility is my Friend. :)
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Re: Ed Seykota

Postby Cheng » Fri Apr 09, 2010 1:25 pm

"The really big money tends to be made by investors who are right on qualitative decisions." Warren Buffett

"Risk no more than you can afford to lose, and also risk enough so that a win is meaningful." Ed Seykota

Scan with FA, Time with TA, Volatility is my Friend. :)
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Re: Ed Seykota

Postby kennynah » Fri Apr 09, 2010 1:46 pm

But if my experience… and Ed Seykota's track record… are anything to go by, buying into the stock market's trend right now is likely to be a profitable short-term trade.


Your emotions will tell you not to make this trade. It's too uncomfortable. But it's the right trade if you're looking for a quick, short-term profit. Keep holding as the long as the market is rising and be quick to cut your losses when the trade moves against you…


these 2 phrases are important to understand that we are reading about Swing Trading here... the article can easily confuse readers that they are adopting momentum trading, which implies Position Trading. the difference is in the period of holding...Swing is fast and furious (not as furious as scalping) and Position trades are given at least months to pan out...

and i do agree that if one is successful in swing/scalp trading, it is conceivable that annual returns can be 60% or more...one just needs to be consistently very good at it.. let me give you an example, using /ES (mini SP500 futures)...

the initial margin requirement is US5,625/contract ...
5% of this margin capital = US280
$280 is ~ 5.6 points move in SPX.. clearly, it is possible to earn 5.6 points in 20 trading days...
even without compounding, a monthly 5% gains will translate to 60% increase in capital....

and the possibility is even more compelling when trading gold or silver futures...as their initial margin capital requirement is smaller...
Options Strategies & Discussions .(Trading Discipline : The Science of Constantly Acting on Knowledge Consistently - kennynah).Investment Strategies & Ideas

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Re: Ed Seykota

Postby lithium » Fri Apr 09, 2010 10:44 pm

Cheng wrote:This is his website:
http://www.seykota.com/tribe/

The whipsaw song:
http://www.youtube.com/watch?v=LiE1VgWdcQM :lol:


HAHA didn't know seykota is such a funny guy! :lol:
"Play Great Defence, not Great Offence "
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Re: Ed Seykota

Postby greenhoney » Sat Apr 10, 2010 11:36 am

and very talented!!!
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Re: Ed Seykota

Postby winston » Tue Aug 28, 2012 8:52 am

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

- Ed Seykota
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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Re: Ed Seykota

Postby winston » Tue May 17, 2016 8:01 pm

The Best Investors You've Never Heard Of

By Dr. Steve Sjuggerud

Warren Buffett is the best investor of all time... right?

That's the conventional wisdom. But the truth is there are plenty of investors with better track records than Buffett...

For example, have you ever heard of Ed Seykota?

Most people haven't. His name doesn't show up on lists of the world's best investors. But it should...

Seykota is said to have turned $5,000 into $15 million in 12 years in one of his core accounts. That's an extraordinary return of nearly 300,000%.

How did he do it? It was surprisingly simple...

Instead of focusing on fundamentals and earnings reports, Seykota simply follows the trend. He buys what's going up and sells what's going down.

Seykota isn't the only guy with an amazing track record using this approach. Other guys have used the same basic concept to produce extraordinary gains of their own...

• Michael Marcus claims to have earned an incredible 250,000% return on an account he managed over a 10-year period.

• Bruce Kovner reportedly made 87% gains PER YEAR... for 10 straight years. That's an extraordinary total gain of 52,000%... which turned $10,000 into more than $5 million!
You never hear the "pros" talk about these guys. Why is that?

I think it's because most pros don't believe such a simple trading idea could possibly work. But how can you dismiss returns like these?

Buffett's approach – finding good companies by digging into fundamentals – feels "smart."

But I have crunched the numbers to figure out what works. Here's what I've learned: You can make money Buffett's way... But you can make more money Seykota's way.

I realize that sounds crazy... Simply following prices shouldn't lead to massive gains. But it does. When you crunch the numbers, you learn that's what works.

Doing just that – following trends – is how Seykota made nearly 300,000%.

I prefer to do what Seykota does. I rarely buy into a downtrend.

I might find an idea through the fundamentals like Buffett. But I almost always wait to buy until the uptrend appears.

I highly recommend that you do the same for one simple reason: It works.

Source: Daily Wealth
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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