Friday, October 21, 2005

Ed Seykota on trends

I noticed a new article on Ed Seykota's site, a discussion on trends. Ed quickly gets to the bedrock in his usual lean and powerful philosophical approach. He says, "Motion, velocity and trend do not exist in the now. They all disappear in snapshots." The argument is similar to those put forth by Zeno in his famous paradoxes, however many of the objections regarding the discreteness of time and space that people make to Zeno's paradoxes do not hold at all for market prices. It is plain fact that bid/ask quotes are discrete. Ed says it follows that, "Technically, since trends do not exist in the now, they do not exist at all and there is no such thing as a trend."

So how does one of the greatest trend followers of all time make his money if trends don't exist? Simple! A trend is an arbitrary definition of conditions that can be queried with price data. When the conditions are met by the given price series, it can be said to be in a trend state. From this premise, Ed goes into some examples and an exercise.

What I took from Ed's article is that the way you define price action, whether mentally or systematically, has everything to do with your ability to profit from it. More robust price action models naturally have more profit potential.


At 4:40 PM, Anonymous Anonymous said...

Ed does not follow long term trends. He claims he does, but in reality (the now), he does not. Which is why he does not post numbers. Ed jumpped on the trend following band wagon about 3 years ago with everyone else. Ed's about as much as a long term trend follower as Larry Williams.

At 4:54 PM, Blogger jontait said...

Have you read the first Market Wizards book? It was originally published in 1989. Here is a direct quote from the paperback edition on page 159:

Jack Schwager: "What is your trading style?"

Ed Seykota: "My style is basically trend following, with some special pattern recognition and money management algorithms."

Maybe you are talking about someone else because Ed has been a trend follower for decades.

At 6:09 AM, Anonymous Anonymous said...

It's bizarre for anonymous to say that Ed's not a trend follower, considering his early experiences testing systems.

At 11:27 AM, Blogger twdean said...

anonymous is just a moron trying to get a rise out you all. as a long time nymex market maker, i can assure you that ed puts up bigger numbers than soros...i should know, i'm a client.
i think if that imbecile anonymous had a clue, or a set of balls, he'd leave a real name. i guess he doesn't have either.


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