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Ed Seykota

Ed Seykota (b. 1946): pioneer of computerised trend following — the first systems ran on punch cards in the early 1970s — and of trading psychology as a discipline. A documented track record among the best ever.

On this page

"Win or lose, everybody gets what they want out of the market." (Market Wizards, 1989)
Period b. 1946
Background Electrical engineering (MIT)
Lens Systematic trend following
Key source Interview in Jack Schwager's Market Wizards (1989)

Who he is

Portrait — Ed Seykota

An MIT engineer inspired by Richard Donchian's newsletters, Seykota was among the very first to run a trading system on a computer: late 1960s–early 1970s, punch cards and weekly printouts, for a brokerage house. On his own, he turned client accounts into legend: Schwager documents an account grown by hundreds of thousands of percent in sixteen years. His Market Wizards interview is considered by many the densest in the book.

Contribution

  • Modern mechanical trend following — Donchian's rules + the computer: reproducible signals, backtesting, execution without opinions. The line leading to Dennis, the CTAs and today's systematic funds.
  • The three rules — "cut losses; ride winners; keep bets small". And the fourth, when asked what matters most: "follow the rules without question".
  • Risk as a fixed fraction of capital — size as a constant fraction of the account (risk per trade): survival before returns.
  • Psychology as a system inside the system — the Trading Tribe and the idea that a trader's self-sabotage is unacknowledged emotional need: everyone "gets what they want" until they recognise what they are really seeking.

What today's students learn from him

  1. A mediocre system executed always beats an excellent system executed sometimes: the discipline entry exists for this.
  2. Rules are written first and tested on data the system has never seen — his 1970s method is still the correct protocol.
  3. If you repeatedly violate your plan, the problem is not the plan: it is what you are really seeking from the market — the most uncomfortable question in trading psychology.

Study path

In preparation — This entry will be extended with the documented operating rules and the bridge to modern systematic trading: discipline-systematic-trading.

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