Ed Seykota
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| Edward Seykota | |
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| Born | August 7, 1946 |
| Occupation | commodities trader |
Edward A. Seykota (born August 7, 1946) is a commodities trader, best known for having been profiled in the books Market Wizards by Jack D. Schwager and Trend Following by Michael Covel. Ed holds degrees in Electrical Engineering and Industrial Management from MIT, 1969. In 1970 he pioneered Systems trading by using early punch card computers to test ideas on trading the markets. As discussed in Schwager's book, Seykota resides in Incline Village-Crystal Bay, Nevada, on the north shore of Lake Tahoe.
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[edit] Career
As a young man he attended high school near The Hague, Netherlands and also lived in Voorburg.
[edit] Trading methods
Dubbed to have “the mind” of a trader, Ed 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, Ed decided to venture out on his own and manage a few of his client’s accounts. This proved to be success as his investments generated huge returns. For instance, as recounted in the book Market Wizards by Jack D. Schwager one account had a return of 250,000 percent within a span of 16 years, an astounding track record for Ed.[1]
Much of Ed’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. However, the thing that disappointed Ed most was the fact that they doubted the signals generated by the system, which resulted in missed opportunities.
While his interest in creating a computerized system was an idea that 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 Ed also was 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. |
However, Ed is a constant innovator, which meant that he 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, Ed later introduced more rules into the system in addition to pattern triggers and money management algorithms. All of these worked well with Ed’s feelings as well, elements which were crucial for his success in trading.
Another aspect of Ed’s success was his genuine love for trading and also his optimistic demeanour. This factor sustained his efforts to continuously improve on his system. At the same time, Ed utilizes a combination of his mechanical system and his feelings when he trades.
[edit] Influence
Ed has influenced traders like Jason Dekker and Michael Stephani of Dekker Capital Management and Jason Russell of Salida Capital [2]
[edit] Controversial claims concerning physics
| Disputed science: Radial momentum |
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| Year proposed: | * 1997 |
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Seykota maintains a website in which he does not deny the validity of the Bernoulli principle, what he does instead is he blows the whistle on the misapplication of the Bernoulli principle by claiming that these mis-applications are pure and simple bad physics. Seykota refers to his theory as the theory of radial momentum. He writes:
- The classic theory of airplane lift is all about wing curvature ... and that, according to Bernoulli's Principle, fast-flowing air has lower pressure. In 1997, after pondering this matter for some twenty years, Ed Seykota concludes that lift has nothing at all to with Bernoulli's Principle ... rather, lift is a function of Radial Momentum ... the radial fanning out of a fluid lowers its density ... and therefore, the pressure decreases with the distance from the center of radiation.
Seykota's account of his "theory" is revolutionary and controversial as a consequence he receives a lot of criticism. For example, he claims that for spherical expansion, pressure is inversely proportional to the square of the radius. But according to mainstream physics, this statement is incomplete, since we are not told what is expanding (ideal gas?) into what (vacuum?), nor whether the pressure is varying spatially as well as varying over time, and if so, where he is trying to evaluate the pressure.
His response to objections to his theory is that they are "emotional", do not identify specific deficiencies, and that he felt that because his theory was radical but correct, it would be typical for it to receive disapproval for quite some time, until a champion with scientific credentials would come along to support it and take credit for it.
[edit] References
Elbe, Susan (October 11, 2000). Seykota expects "No Excuses" for reading proficiency. Zephyr staff. University of Nevada, Reno. Retrieved on 2006-09-04.
Troseth, Eric. "Can you forecast the market?", Work & Money, The Christian Science Monitor, October 20, 2003. Retrieved on 2006-09-04.
Seykota, Ed, Dave Druz. "Determining Optimal Risk", Stocks & Commodities magazine, March 1993. Retrieved on 2006-09-04.
Featured Speaker. TSAA 23rd Annual Conference. The Technical Securities Analyst Association of San Francisco (November 12, 2005). Retrieved on 2006-09-04.
[edit] External links
Seykota's official home page (2006). Retrieved on 2006-09-04.
Seykota's Trading Tribe website (2006). Retrieved on 2006-09-04.
Seykota's Bernoulli challenge website (2006). Retrieved on 2006-09-04.
Listing Seykota's "theory of radial momentum" (2006). Retrieved on 2006-09-04.
Brief biography. Profile. Master Mind Trader (2006). Retrieved on 2006-04-12.
[edit] Further reading
Schwager, Jack D. (1993). Market Wizards: Interviews with Top Traders. Collins. ISBN 0-88730-610-1.
Covel, Michael W. (2005). Trend Following. Financial Times Prentice Hall. ISBN 0-13-134550-8.
[edit] Notes
[edit] Magazines
Cohen, Amos, Joel Marver and John Slosberg. "Is there logic in Market Logic?", Futures magazine, Nov 1990. Retrieved on 2006-08-23.
Seykota, Ed. "MACD: sweet anticipation?", Futures magazine, March 1991. Retrieved on 2006-08-23.
Hartle, Thom. "Ed Seykota Of Technical Tools", Stocks & Commodities magazine, August 1992. Retrieved on 2006-09-05.
Burke, Gibbons. "Building on the Tower of Babel", Futures magazine, Sept 1992. Retrieved on 2006-08-23.
Burke, Gibbons. "Gain without pain: money management in action", Futures magazine, Dec 1992. Retrieved on 2006-08-23.
Burke, Gibbons. "Hard look at new software", Futures magazine, Dec 1992. Retrieved on 2006-08-23.
"Quick Scans: The New Market Wizards", Stocks & Commodities magazine, 1993. Retrieved on 2006-09-05.
Burke, Gibbons. "How to tell a market by its covers", Futures magazine, April 1993. Retrieved on 2006-08-23.
Burke, Gibbons. "Where to get end-of-day data.", Futures magazine, April 1993. Retrieved on 2006-08-23.
Hartle, Tom. "ChartBook System Version 3.2", Stocks & Commodities magazine, 1994. Retrieved on 2006-09-05.
Nusbaum, David. "Mind games", Futures magazine, June 1994. Retrieved on 2006-08-23.
Burke, Gibbons. "State of the chart", Futures magazine, August 1994. Retrieved on 2006-08-23.
Reerink, Jack. "Hot new CTAs of 1995", Futures magazine, Oct 1995. Retrieved on 2006-08-23.
Sweeney, John. "ChartBook Revision D 1.3", Stocks & Commodities magazine, 1999. Retrieved on 2006-09-05.
Tucker, Sherwood. "Stop right there", Futures magazine, April 2000. Retrieved on 2006-08-23.
Krueger, Diane. "The best reads for traders", Futures magazine, June 2000. Retrieved on 2006-08-23.
Collins, Daniel P.. "Turtles hatch", Futures magazine, Nov 2001. Retrieved on 2006-08-23.
Kelly, Ray. "The four pillars of profitable trading. (Trading Techniques)", Futures magazine, March 2002. Retrieved on 2006-08-23.
Lo, Teresa. "Set Up Your Trades With The Swing Indicator", Stocks & Commodities magazine, September 2004. Retrieved on 2006-09-05.
[edit] Books
Starzec, Jason, Mark Crisp (2003). How to Become a Stressfree Trader. page 57: iUniverse. ISBN 0-595-27505-2.
Dunn, Andy (2004). Great Companies, Great Charts. page 86: iUniverse. ISBN 0-595-31275-6.
Tharp, Van K. (1998). Trade Your Way to Financial Freedom. McGraw-Hill. ISBN 0-07-064762-3.
Pring, Martin J. (1995). Investment Psychology Explained. page 200: Wiley; New Ed edition. ISBN 0-471-13300-0.
Schwager, Jack D. (1995). Technical Analysis. Wiley. ISBN 0-471-02051-6.
Harris, Sunny J. (1998). Trading 102: Getting Down to Business. page 210: Wiley. ISBN 0-471-18133-1.
Koppel, Robert (1996). The Intuitive Trader: Developing Your Inner Trading Wisdom. pp 75, 90: John Wiley & Sons. ISBN 0-471-13047-8.
Nagy, Andras M. (2006). Commodity Trading 101. page 97: Murine Press. ISBN 0-9753093-0-7.
Steenbarger, Brett N (2003). The Psychology of Trading. page 316: John Wiley & Sons. ISBN 0-471-26761-9.
Watson, David (2005). Business Models. page 240: Harriman House. ISBN 1-897597-58-4.
Marder, Kevin N. (2000). The Best: Conversations With Top Traders. M. Gordon Pub. Group. ISBN 1-893756-08-4.
Tier, Mark (2005). Becoming Rich. St. Martin's Press. ISBN 0-312-33986-0.
Schwartz, Martin (1999). Pit Bull. Collins. ISBN 0-88730-956-9.
[edit] Footnotes
- ^ Schwager, Jack D. (1993). Market Wizards: Interviews with Top Traders. Collins. ISBN 0-88730-610-1.
- ^ Covel, Michael (January 13, 2006). Learn from these up and coming traders. The Connors Group. Retrieved on 2006-11-17.
