Of all the traders TurtleTrader has had a chance to visit with over the years, Ed Seykota (first mentioned in Market Wizards) stands out. In person Ed is a straightforward guy not afraid of expressing his emotions (or cracking a joke), but there is also a silent seriousness in his manner and speech. He has that unique ability to condense complicated thoughts into short stories, analogies or even pictures to paint his point. To talk with Ed is to learn and have a good time as well. You can read much more about Ed in the book Trend Following.
Does Ed work with others? He does. Ed has long run a Trading Tribe (and more recently his web site). His Trading Tribe works on the psychological and emotional issues (the ones Ed believes to be most crucial) inherent in superior trading. We implore all traders to take a visit to Ed’s site and check out what’s cooking. Don’t miss his daily FAQ.
More on Ed Seykota at TurtleTrader – 1
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Tribes and Turtle Trading: An Extract from The Complete TurtleTrader
As time passed, though, the Turtles saw Dennis’s system making huge amounts of money from big trends. They finally had the psychological assurance of “I know this works in my gut, and you can’t take that away from me.”
However, even with the tribe-like atmosphere, even with the Ranger parallels, even with learning in their guts what it really meant to trade like Dennis, as evidence accumulated, it showed that the group process had ultimately turned out not to be significant. That’s because the “Turtle trading tribe” was ultimately undermined by an unexpected threat: competition and jealousy.
Why the Tribe Matters More Than the System
Seykota’s Trading Tribe is built on an observation that the Turtle experiment confirmed from the other direction: the psychological and emotional obstacles to following a trading system are as significant as the system itself. Dennis proved that the rules could be taught. The Turtle experiment also proved that knowing the rules and following the rules are not the same thing. The competition and jealousy that ultimately undermined the Turtle tribe’s group cohesion is the human element that no set of rules can fully account for.
Seykota’s approach to this problem is direct: work on the emotional and psychological issues themselves rather than trying to engineer rules that override them. The Trading Tribe process creates a structured environment in which traders examine their emotional responses to trading honestly, in a group setting, with the goal of bringing unconscious patterns into awareness. This is not therapy in the clinical sense. It is the application of group psychological support to the specific emotional challenges that trading creates.
The “gut knowledge” that the Turtles developed after watching the system work through big trends is exactly what Seykota’s tribe process is designed to build in advance. The Turtles needed to see the system work before they could believe in it at the gut level. Seykota’s tribe process attempts to develop that psychological trust in a systematic approach before the live trading begins, through the shared experience of examining and working through the emotional patterns that would otherwise undermine execution.
Seykota’s ability to condense complicated thoughts into short stories and analogies, noted in the personal description above, is the pedagogical tool that makes the tribe process accessible. The Trading Tribe FAQ is the daily record of this process: questions from traders encountering specific psychological and emotional challenges, answered by Seykota in the same short, direct, often surprising style that made the Toronto seminar attendees feel they had wasted their time even as they were receiving the most valuable insight available. The FAQ is worth reading not for the answers but for the demonstration of how to think about the relationship between psychology and trading performance.
Frequently Asked Questions
What is Ed Seykota’s Trading Tribe and what does it do?
The Trading Tribe is a structured group process that Seykota developed to help traders identify and work through the psychological and emotional patterns that interfere with consistent systematic trading. The process operates through regular group meetings where traders examine their emotional responses to trading situations honestly, with the support of the group. Seykota believes these psychological issues are the most crucial factor in superior trading performance, more important than the specific system a trader uses.
Why did competition and jealousy undermine the Turtle trading tribe?
Because the Turtle group, despite its tribe-like atmosphere and shared training, was competing for recognition and resources within the same program. Each Turtle was measured against the others. Their allocations could be adjusted based on relative performance. The psychological conditions that produce genuine tribe cohesion, shared purpose and mutual support, were undermined by the competitive evaluation structure. The group process could not survive the combination of shared training and competing incentives.
How does gut knowledge of a system’s validity relate to the ability to follow it?
Gut knowledge, the visceral certainty that a system works developed through direct experience of its results, is the psychological foundation that allows a trader to follow the system through drawdowns and losing streaks. Without it, each adverse period raises the question of whether the system is broken. With it, the adverse period is contextualized as normal variance within a system whose results the trader has directly witnessed. The Turtles developed this gut knowledge by watching the system work. Seykota’s tribe process attempts to build the equivalent certainty through psychological work rather than requiring live trading experience first.
Trend Following Systems
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