Market Wizard Ed Seykota



“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.” – Ed Seykota

While I had always heard that the interview with Ed Seykota in Market Wizards was fantastic, I wasn’t prepared for it to hit home the way it did. Everything he discusses from cutting losses, to rules to live by, to passionately wanting to win, to getting what you want out of the market really struck a chord with me. This interview forced me to focus on what I really want and if I really have the desire to put forth the effort to go get it.

Trading Rules To Live By

When asked what trading rules he lives by, Seykota lists the following: “Cut losses, Ride winners, Keep bets small, Follow the rules without question, Know when to break the rules.” I have no problem with the first two rules. Keeping bets small is something I just recently addressed. The last two rules are intentionally contradictory, and it just so happens that this is something I have been struggling with. I obviously don’t have enough experience to know when it is acceptable to break my rules. I don’t even think I have enough experience to know if my rules are any good for my personality. My only option here is to keep gaining experience and document what I learn over time. As I gain experience and learn from mistakes, I hope that when to stick to the rules and when to break them will become more clear.

Trading Psychology

Seykota is know for being very interested in psychology and its application to trading. He basically says that you are either a great trader or you aren’t and that great traders will be psychologically driven until they find success. Those who aren’t great traders are simply wasting time until they give up. I am still not sure whether I should take this as encouragement that I’m on the right path or as a warning sign that I am just wasting time until I eventually give ¬†up as a loser. Either way, Seykota has really opened up a can of worms in forcing me to analyze my own trading psychology.

Everyone Gets What They Want Out Of The Market

Seykota uses his discussion on psychology to lead into what is probably his most famous quote: “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.”

After knocking me down a few notches by forcing me to question my trading psychology, he hits me with the question of whether I even want to make money trading. This really forced me into some deep self-analysis and I am still not sure what the answer is.

He goes on to say that “People’s trading performance probably reflects their priorities more than they would like to admit.”

This was the final blow for me. He’s right. I’m simply not putting in the time and effort that I would be if I had a deep seeded passionate desire to succeed here. I’m just a casual observer of the markets making a few speculative gambles here and there. That’s why I have a weak track record. That’s why I feel like I can’t get any traction. I don’t want it bad enough.

The next question is where do I go from here? What do I do with that? I feel like according to Seykota, I’m a lost cause. I also feel like according to most everyone else I read, I am at a turning point where I can make some changes and improve my dedication and commitment. The bottom line is that I have to decide every morning how badly I want this to work. Am I willing to put in the time and effort?