This tends to precipitate choppy markets and strings of false breakouts that tend to discourage trend followers. ***** During trending markets, trend followers tend to wax strong and confident they follow breakouts with enthusiasm and vigor. Acting like a Snail might be the fastest way. In trading, slow and steady profits beats fast and choppy whip-‐saws. To minimize these effects, use longer term (slower) systems. ***** Transaction costs, such as commissions and slippage, become increasingly severe with increasing trading frequency. Trend followers take their signals and leave distractions to fuzzy-‐mentalists. They have little to do with trend following except to provide excuses for missing signals. ***** Your terms: volume trends likelihood trend continuance are all ambiguous, fuzzy notions. ***** The complexity of a trading system has little to do with the markets and little to do with the math it has mostly to do with your emotions. ***** Very short term systems tend to succumb to transaction costs. ***** In Trading – diversification might even mean getting bearish and picking out some good shorts. With this plan, your winners and losers tend to average out so you get the same overall gain with a smoother ride (less volatility). In actual trading, you might consider taking small independent positions, each with a ½% risk to stop, up to a total of 25%. ***** In actual trading, even with stops, you cannot predict your exact risk. ***** As with all markets, to get a good piece of the major move, you may have to ride out some corrections.
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The opposite of diversification is plunging, betting it all on one horse. A portfolio of silver and soybeans provides more diversification that a portfolio of silver and, say, more silver. Silver and soybeans might break out the same day and thus correlate well in the very short term. For example, take stocks from different sectors – or commodities from different groups.
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To diversify, include an instrument that breaks out while others sleep. At the moment two markets simultaneously hit buy stops, they correlate tightly, particularly in the very short term. ***** Trend followers trade at new highs and at new lows. The basic Trend Trading rules are: Trade with the Trend Cut Losses and Ride Winners Manage Risk The definition of Trend is specific to individual traders. A long-‐term trend following system provides direction for all types of markets. They also have to deal with feelings of staying with the big one. Excepts from Ed Seykota’s FAQs Traders and Surfers both have to deal with feelings of missing out on the small ones, until the big one comes along.