Born in 1946, Ed Seykota is a commodities trader who is known for pioneering systems trading. He graduated with degrees in Electrical Engineering from MIT and Management from the MIT Sloan School of Management.
Legend has actually it that he started experimenting with systems trading as early as the 1970s when he used early punched card computers to test market ideas. His development and utilization of these systems were first tested on a mainframe IBM computer.
His first foray into trading was in 1960 when he decided to go long on silver after the US Treasury stopped selling it. However this, and a short copper trade that he was convinced by a broker to open, eventually hit his stop and caused him to lose a lot of money. From this, he learned a hard lesson about the way the markets react to news.
Seykota tried a computerized trading system for a futures brokerage house he worked for before venturing out on his own and getting clients. Later on, this same brokerage house adopted his system for their futures trades.
His first trading system was based on exponential moving averages. He improved this system over time and made adjustments to fit his style and preferences. He then added more risk management rules and pattern triggers to improve the algorithms.
In 2005, he published a book called The Trading Tribe in which he discusses a common set of practices known as the Trading Tribe Process (TPP).
Seykota is known to prefer trend-following systems, citing that trend systems do not intend to pick tops or bottoms but rather ride sides. “Fundamentalists figure things out and anticipate change. Trend followers join the trend of the moment. Fundamentalists try to solve their feelings. Trend followers join their feelings and observe them evolve and dissolve,” he said.
Ed Seykota is also known for his controversial claims in physics, among which is his support for the Bernoulli principle.
Among his trader students are Michael Marcus, David Druz, Dean Giordano, and Jason Russell of Acorn Global Investments.
For Seykota, trading requires skill in reading the markets and managing your anxieties. He also mentioned that risk management has actually a lot to do with allowing your stop loss to do its job.
Perhaps one of the most impressive achievements of Seykota is that he is mostly self-taught when it comes to developing systems trading.
According to his profile on Market Wizards, Seykota was able to turn one client’s account from $5,000 to $15,000,000 in just 12 years.
Seykota does his trading mostly from his home office and is able to generate trading signals from his computer programs. He also mentors traders through his website, along with his Trading Tribe or like-minded community of traders.