Saturday, September 17, 2011

Ed Seykota

Has the answer I was searching for in my trading. For so many years I have been composing a landscape of the market in which I could pull out a few pips. But the truth is there are no landscapes to mold on the market, the trick is to actually flow with the market. Don't stand in it's way, don't hide in the sand when it steam rolls you, don't fight it and refuse to bend to it's metamorphosis. I have been doing that for a few years now, just trying to buy reversals because of some obsession with the direction always reverting to the mean. Mean reversion, sure it exists but why trap yourself in that thinking of only phase of the markets movements? Be like water, like waves in the ocean. I read this today in Covel's book, Trend Following. I always thought the trend following system meant you had to trade crossovers of a moving average or calculate atr ranges until your brain was swollen, but its really all about at the heart of the matter is the flow of the market. God I love it when I have a rare epiphany in the market!

Here is what I read today in all it'd delightful glory:

Ed Seykota once told me a story about being in Bermuda with a new trader who wanted to learn the secrets. "Just give me quick and dirty version of your magical trading secrets," the neophyte said. Seykota took the new trader out to the beach. They stood there watching the waves break against the shoreline. The neophyte asked, "What's your point?" Seykota said, "Go down to the shoreline where the waves break. Now begin to time them. Run out with the waves as they recede and run in as the waves come in. Can you see how you could get into the rhythm with the waves? You follow the waves out and you follow them in You just follow their lead."

I finally felt that today. I didn't just read it and remember the words, I experienced the concept in all it's expansive glory.

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