Trade Like an O'Neil Disciple: How We Made 18,000% in the Stock Market

10.1. ED SEYKOTA: TEACHING A TECHNIQUE THAT HAS HELPED TRADERS AROUND THE WORLD

Ed Seykota has made a lifelong study of how personal psychology affects one's trading. His interview in Jack Schwager's Market Wizards is still considered to be one of the best interviews ever given by a top trader. Seykota says that trading amplifies everything that is going on within a person. One of the first questions that Seykota has been known to ask traders who seek his coaching is: Do you ever cheat on your significant other? Seykota considers it important to know whether traders are willing to compromise their ethics since behavior and other tendencies in daily life outside of trading can bleed into one's trading and have an effect thereby. The two are inextricably, psychologically linked. Thus, the beauty about trading, and the beauty about life as well, is that there is no cheating. Or, as free-market economist Milton Friedman said, "There is no such thing as a free lunch." When people cheat others, they effectively cheat themselves; it will show up in their trading and performance will suffer.

For well over a quarter century, Seykota has been known to take on one student at a time to teach how to be an effective investor. He screens applicants by psychoanalyzing them to see if they have the character traits that will enable them to succeed. While Seykota might not take on a student who lacked the necessary character traits, he created a practice called the Trading Tribe Process (TTP), which ...