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Ed Seykota: Top Trader

Wisdom from Ed Seykota:

The aha! process lies at the heart of price change. For instance, consider the series: OTTFFSSE. What is the next letter? This puzzle creates tension–until you see the first letters of the ordinal numbers–one, two. Aha! you say. A lot happens during an aha. The puzzle dies and the tension dissipates. A societal aha! drives price. Read the newspapers and the news magazines during a major move. At first, no one gets why the move is happening. There’s a lot of confusion. Part of the move’s way up, some people get it. At the end, everybody gets it. The tension is resolved and the move ends.

From Futures Magazine:

Mr. Seykota himself has put together a money management track record with returns of roughly +60% net of fees over the three-decade span of his trading career…

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. An excerpt from and interview of Ed Seykota in Market Wizards by Jack Schwager:

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.

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