ED SEYKOTA Interview by Jack Schwager (Market Wizards)

Updated: May 25, 2021

Ed Seykota - Market Wizards - Interview with Top Traders



Ed Seykota, named by some as one of the best, if not ‘the’ best stock trader of our time.

Ed previously maintained a low profile, until he was featured in the Market Wizard book by Jack Schwager.

He made staggering returns from the stock market, from 1972 to 1988 he turned a $5000 client account into almost $15,000,000, and had it not been for withdrawals during this time, the account would have been up several millions of percent.

In this series of interviews with top traders, we uncover Ed’s personal trading style, rules and general wisdom which have made him possibly one of the most successful, self-taught traders alive today.

Ed began his trading career during the 1970’s and was hired by a major brokerage company to help develop one of the first computerised trading systems, aimed at managing client trading accounts.

Soon however the board of management would interfere with Ed’s system, trying to squeeze out more profits and hindering the systems concept. Ed disagreed with the meddling and decided to leave to begin his own trading venture.

Like other traders we have covered, Ed was hugely influenced by Richard Donchian and his channel breakout strategy. Ultimately however Ed is known as a trend follower who has a complete understanding of the psychological aspects of trading, coupled with solid risk management.

He famously said:

“The elements of good trading are: 1, cutting losses. 2, cutting losses. And 3, cutting losses. If you can follow these three rules, you may have a chance.”

Ed alludes to the aha moment as being the reason for price change and trend creation. For instance, consider this following series:

Which letter do you think comes next?

The puzzle and the eventual aha moment that Ed suggests, represents the creation of a trend and the eventual price change. Initially nobody knows why the price is changing, there is tension and confusion as the price rises. The price rises due to the puzzle slowly being revealed.

Eventually everyone resolves the puzzle, the confusion dissipates, and the move comes to an end.

Jack Schwager had the pleasure of interviewing Ed, but only after a recommendation from a fellow market wizard, Michael Marcus. Michael (Who was taught by Ed) himself managed to turn $30,000 into $80,000,000 over a twenty-year period.

Michael Said:

“You know, you really should interview Ed Seykota. He is not only a great trader; he is a mind”.

It is this mind that Jack Schwager interrogated, and we look to summarise the key discussion points.

When asked about Ed’s studies before designing his very first system, Ed said: -

“I was inspired and influenced by the book Reminiscences of a Stock Operator, Richard Donchian’s five and twenty day moving average crossover system and his weekly rule system. I consider Donchian to be one of the guiding lights of technical trading”.

Jack asked: -

“What was your first trading system?”