Ed Seykota’s success as a true trend follower

Ed Seykota’s success as a true trend follower – Traders and investors who have been successful in their careers mostly dedicate their knowledge and time to developing the world of trading and investment such as establishing investment companies, becoming consultants, commentators on various investment and business media, developing trading software, writing books, and so on. We can benefit positively from their career stories and views on the world of trading and investing.

Edward Arthur Seykota was an American commodity trader born in the Netherlands. He was one of the pioneers of trading with computers in the early 1970s, and a follower of Richard Donchian, the father of trend following. In learning trading knowledge and methods, Ed Seykota is a self-taught who learns from experience. As a trading teacher and mentor, his students have now become powerful and well-known traders, including Michael Marcus, David Druz and Jason Russell of Salida Capital. Seykota’s most impressive achievement is being able to grow client funds from $5,000 to $15,000,000, or about 300,000% in 12 years (source: turtletrader.com).

Born in the Netherlands in 1946 and immigrated to the US, Ed completed his education in electrical engineering at MIT and management science at MIT Sloan School of Management in 1969. In the early 1970s he worked as an analyst at a brokerage firm. This is where he began to develop a trading system with a computer which at that time was still very simple. His first trend following method was based on the theory of the Donchian 4 Week Rule and the 5-20 day Moving Averages. Seykota is a true trend follower, and he is always consistent in his way of trading, both to manage his personal and client accounts.

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In excerpts of his interview with Jack Schwagger as written in the book ‘Market Wizards’, Seykota said: “I once experienced a considerable loss of silver commodity, then my broker recommended to sell on copper, but lost again. I am waiting for the price of silver to rise and plan to buy with the largest possible trading size. When it came time for me to open buy. but what happened? Sold out, my funds ran out. I wonder, why the price of silver fell again, I don’t think that’s possible. I believe in market news, and that’s an example of price movements that don’t always match predictions. When my mind was completely stuck, I read Richard Donchian’s writings on trends. He wrote that a mechanical trading system that follows the trend will be very useful, because the market always moves in a trend. Yes, that’s him. I then tried the theory by creating a simple program that could backtest the theory. It’s amazing, the theory is really profitable. Although I don’t really understand why the market is like that, but since then I decided to trade for living, trading is my full time job.”

Seykota concocted system trend followingit is simple and easy to understand. According to him, if traders can consistently follow the trend, under any market conditions, they will always profit. “The existing trading system should not be changed. It is the trader who has to adapt to the system.” said Seykota, who also integrated his trend following system with money management. According to his students, his success in trading is also strongly supported by his mental attitude that loves this job and his high optimism.

What is his advice for traders? “If you lose, close your position immediately. If you are profitable, let your profits move with the trend. If you cannot accept a small amount of loss, sooner or later you will experience a large loss. You must dare to cut-loss. I ever felt. You see, there are many old traders and bold traders, but very few brave old traders.” says Ed Seykota who now lives on the north coast of Nevada, USA.

Source: www.turtletrader.com


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