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Ed Seykota Golden Trading Rules

 Here is what I found on Wikipedia about Ed Seykota:

Edward Arthur Seykota (born August 7, 1946) is a commodities trader, who earned S.B. degrees in Electrical Engineering from MIT and Management from the MIT Sloan School of Management, both in 1969. In 1970, he pioneered Systems trading by using early punched card computers to test ideas on trading the markets. Seykota resided in Incline Village, Nevada, on the north shore of Lake Tahoe, but recently moved to Texas. 



Before I start looking into Seykota's Trading Rules, I want you to watch the following video:

https://youtu.be/jTd2UyL6mf4



1) Ride Your Winners

2) Cut Your Losses

Well, what can I say. These are usually the most common phrases you hear from successful traders. It sounds so easy and it actually is. But it is very hard to do because all kinds of emotions and thoughts are keep us from following these simple rules!

3) Manage Your Risk

Another basic advice, "manage your risk" instead of looking into how much money you can make on the trade. I get asked so often from beginning traders: "Andy, how much money can I make trading spreads?" Of course, there is no answer to such a question because it all depend on how much are you willing to risk. Important to me is always the relationship between Drawdown and Profits. Knowing only the percentage of the profits is a completely worthless information for me.

4) Use Stops

My biggest concern when I put on a trade always is, where do I have to place my stop and therefore, how much risk do I have to take to put on the trade. Don't worry so much about the perfect entry level because it doesn't exist. But always worry about where you place your protective stop after the entry.

5) Stick to the System

In my opinion this is where you can see the biggest difference between wanna be traders and professionals because all the rules from above are meaningless if a trader is not capable to follow his rules.

6) File the News

In the song they sing "What do we do with a hot news flash, honey … etc. We stash that flash right in the trash."

Nothing more to say!

I think the song really brings it down to the most important rules in trading. And as I said before: "Trading is actually very easy, it is just very hard to do!"

 

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Wednesday, 11 December 2019

Derivative transactions, including futures, are complex and carry a high degree of risk. They are intended for sophisticated investors and are not suitable for everyone. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results, and all of which can adversely affect actual trading results. For more information, see the Risk Disclosure Statement for Futures and Options.