Legendary Trader: Ed Seykota turn $5,000 into $15 million using Technical Analysis

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Ed Seykota is one of the best traders of our time, if not the best. The lessons we can learn from him are just as valuable. The market doesn’t make the trader. After all, it’s just the playing field.

What actually allows someone like Ed Seykota to trade on such a scale, and with such tremendous success, are a defined set of technical and mental rules. If you are still struggling to achieve consistent profits, this post was written for you. Even if you have found success as a trader, today’s lessons will serve as a refresher.

Ed Seykota has always kept a low profile. If it weren’t for Jack Schwager’s Market Wizards books. He began his trading career in the 1970s, when he was hired by a major brokerage firm. It was there that Ed developed one of the first commercialized trading systems for managing money in the Futures market.

After a few disagreements regarding the way management was interfering with his system, Seykota decided to go out on his own.

So what was his trading performance like in the 1970s and 80s?

As of mid-1988, one of his client accounts—which was started with $5,000 in 1972—was up over 250,000 percent on a cash-on-cash basis.

If we normalize for withdrawals, the account would have been up several million percent.

Those are truly staggering results. Keep in mind that those figures spanned more than a decade of trading, so this was not a fluke or some lucky win streak.

What follows is a rather detailed explanation of Seykota’s five most cherished trading rules.

Rule #1: Cut Losses
Rule #2: Ride Winners
Rule #3: Keep Bets Small
Rule #4: Follow the Rules Without Question
Rule #5: Know When to Break the Rules

 

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