Ed Seykota -- Ed Seykota's achievements must certainly rank him as one of the best traders of our time. In the early 1970s, Seykota was hired by a major brokerage firm. He conceived and developed the first commercial computerized trading system for managing clients' money in the futures markets. In the ensuing years, Seykota applied his systematized approach to trading a handful of accounts and his own money. During that period, the accounts Seykota managed have witnessed an absolutely astounding rate of return. For example, as of mid-1988, one of his customer accounts, which started with $5,000 in 1972, was up over 250,000 percent on a cash-on-cash basis. Market Wizard.

Systems don't need to be changed. The trick is for a trader to develop a system with which he is compatible.

The key to long-term survival and prosperity has a lot to do with the money management techniques incorporated into the technical system. There are old traders and there are bold traders, but there are very few old, bold traders.

Dramatic and emotional trading experiences tend to be negative. Pride is a great banana peel, as are hope, fear, and greed. My biggest slip-ups occurred shortly after I got emotionally involved with positions.

I prefer not to dwell on past situations. I tend to cut bad trades as soon as possible, forget them, and then move on to new opportunities. After I bury a dead trade, I don't like to dig up the details again—at least not in print. Maybe some evening, after dinner, sitting around a fire, off the record, deep in the Tahoe winter...

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.

a. Cut losses.
b. Ride winners.
c. Keep bets small.
d. Follow the rules without question.
e. Know when to break the rules.

Mostly I follow the rules. As I keep studying the markets, I sometimes find a new rule which breaks and then replaces a previous rule. Sometimes I get to a personal breakpoint.

When that happens, I just get out of the markets altogether and take a vacation until I feel that I am ready to follow the rules again. Perhaps some day, I will have a more explicit rule for breaking rules. I don't think traders can follow rules for very long unless they reflect their own trading style. Eventually, a breaking point is reached and the trader has to quit or change, or find a new set of rules he can follow. This seems to be part of the process of evolution and growth of a trader.

Good traders have a special talent for trading just as good musicians and good athletes have talents for their fields. Great traders are ones who are absorbed by the talent. They don't have the talent—the talent has them.

A losing trader can do little to transform himself into a winning trader. A losing trader is not going to want to transform himself. That's the kind of thing winning traders do.

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. I know one trader who seems to get in near the start of every substantial bull move and works his $10 thousand up to about a quarter of a million in a couple of months. Then he changes his personality and loses it all back again. This process repeats like clockwork. Once I traded with him, but got out when his personality changed. I doubled my money, while he wiped out as usual. I told him what I was doing, and even paid him a management fee. He just couldn't help himself. I don't think he can do it any differently. He wouldn't want to. He gets a lot of excitement, he gets to be a martyr, he gets sympathy from his friends, and he gets to be the center of attention. Also, possibly, he may be more comfortable relating to people if he is on their financial plane. On some level, I think he is really getting what he wants.

I think that if people look deeply enough into their trading patterns, they find that, on balance, including all their goals, they are really getting what they want, even though they may not understand it or want to admit it.
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