Ed Seykota: the System Is the Easy Part
Ed Seykota (born 1946), an MIT-trained engineer, built one of the first computerized trend-following systems in the early 1970s — punch-card tested rules for trading commodities — while working at a brokerage, and then compounded client and personal accounts with mechanical trend methods for decades. His interview in Jack Schwager's Market Wizards (1989), which recounts a model client account multiplied thousands of times over sixteen years, made him the quiet legend of systematic trading and a formative influence on a generation of trend followers.
The method
Classic trend following, stated with unusual economy: ride winners, cut losers, manage risk per trade as a small fraction of equity, and follow the rules without exception — while keeping a human veto only for extraordinary circumstances. He treats the system's design as the smaller problem; the larger one is the operator's willingness to actually take every signal through the drawdowns that trend systems guarantee.
The psychology he's really known for
- "Win or lose, everybody gets what they want out of the market." His most provocative line: persistent trading behaviour serves some intention, and traders who keep blowing up should ask what the blow-ups are doing for them.
- Feelings as information: his later Trading Tribe work treats emotions not as enemies of the system but as signals to be experienced rather than acted out through the order ticket.
- "The elements of good trading are: cutting losses, cutting losses, and cutting losses."
What transfers
Seykota is the strongest historical argument that a simple, fully specified rule set — the kind you can test and audit — beats improvisation for most humans, precisely because it moves the psychological battle from every trade to one decision: follow the system or don't.