Living With Ed Seykota | Open Interest | Ep.19 BONUS
Summary
Trading Psychology: Strong emphasis on aligning strategy with personal psychology and using meaningful capital to truly learn behavior under risk.
Discretionary vs Systematic: Ed Seykota is portrayed as a technical discretionary trader who uses charts, not news, while the guest runs systematic, backtested programs for investors.
Risk Management: Discussion of optimal bet sizing, taking necessary heat for returns, and the real risk of ruin when oversizing positions.
Drawdowns & Discipline: Guidance to avoid tinkering systems during drawdowns and to maintain statistical integrity and discipline despite losses.
Position Sizing Mechanics: Advocacy for equity-proportional sizing, preferring closed-trade equity over volatile open-trade equity to avoid over-risking.
Process Resilience: Praising a “no memory” approach to losses, focusing on doing the right thing each day regardless of recent outcomes.
No Specific Tickers: No public companies, sectors, or regions were pitched; the conversation centered on trading process rather than asset-specific opportunities.
Anecdotal Insights: Stories from Seykota’s apprenticeship illustrate pattern anticipation, psychological clearing, and the importance of keeping one’s word.
Transcript
[music] what what's your biggest draw down, you know, like in his trading? [music] And he thought for a while, well, that's how he would talk. Well, I don't think I've lost more than 50% in a day. [music] I mean, it's like, wow. I mean, this is a guy who probably has made more money trading returnwise [music] and you know, it's like he knows if you want to get the optimal return, [music] you have to push that bet size and the heat has to be high and most people [music] can't do it, but if you're wrong and you're too far, you're going to wipe out. I would It's like don't do this at home kids kind of thing. >> Imagine [music] spending an hour with the world's greatest traders. Imagine learning from their experiences, their successes, and their failures. [music] Imagine no more. Welcome to Top Traders Unplugged, the place where you can learn from the best [music] hedge fund managers in the world, so you can take your manager due diligence or investment career to the next level. Before we begin today's conversation, [music] remember to keep two things in mind. All the discussion we will have about investment performance is about the past and past performance does not guarantee or even infer anything about future [music] performance. Also understand that there's a significant risk of financial loss with all investment [music] strategies and you need to request and understand the specific risks from the investment manager about their product before you make investment decisions. Here's your [music] host, veteran hedge fund manager Neils Castro Larson. Welcome to another episode in the open interest series on Top Traders Unplucked hosted by Moret Seabbert. In life as well as in trading, [music] maintaining a spirit of curiosity and open-mindedness is key. And this is precisely what the [music] open interest series is all about. Join Moritz as he engages in candid conversations with seasoned professionals from around the [music] globe to uncover their insights, successes, and failures, offering you a unique perspective [music] on the investment landscape. So with no further ado, please enjoy the conversation. [music] Hi everyone and welcome back to the open interest series on top traders unplugged. This is part [music] two of my conversation with Dave Drew. This is the bonus part where he speaks about his time with Edota and a couple of other things. Um some really interesting stories there. I hope you'll enjoy that. I thought it was really great. Um we appreciate any feedback uh you have on this. So please let us know if you want. You can always send us an email. It's info@toptradersonpluck.com. But let's get into it. Here is part two with Dave Drew. So, we'll we'll keep it trading focused. Um, just speaking about how you designed the system, what's important to you, how to trade, you know, emotions, things like this. >> I I could give you some anecdotes here and there about my apprenticeship with Edota if you'd like. Some people find that interesting. You can ask me some questions about that. He's sort of a private guy in certain ways. So, it's not like I can tell you everything, but I can give you from my perspective some of the things that I picked up from my six months living with him. >> Oh, you lived with him. >> Oh, yeah. You mentioned that in Tahoe. >> I was I was his first apprentice back in uh it was 91 or 90 somewhere in there. He had several after that. I don't know what he's doing now. We've fallen out of touch in the last several years, but um yeah, no, I I was fortunate enough to be his living apprentice. I lived with him for six months straight and traveled with him wherever he went and just um you know, picked up what what uh I could and what he shared. And there's some some pretty interesting things that he had to share that are different than my approach that some people might be interested in. A lot of the things that Ed does no one else can do and you might as well don't even try. Um so what what is this? What do you mean by this? >> So you you've read the market wizards the original book right in 1980s. What? Um anyway, so wasn't it Jack Schwagger? Was he the author? I can't remember for sure. >> Yes. Yes, he was. >> But anyway, um you know, he he gave a a beautiful chapter on Ed and he was you can tell he was absolutely astonished by Ed when he went to visit him. He visited him in Tahoe and he saw u you know Ed's computer on his desk and all the programs Ed was doing and at the time you know it's quite advanced. Um, now it's, you know, anyone can just download an app and do these things. But, but Ed had written all his own programs. So, Jack assumed that Ed was a systematic technical trader. That is absolutely the most incorrect assumption about Ed that I think most people take away from that book. You know, like you use a computer for your trading. if I glean from what you're saying and we did and we have algorithms that we followed strictly and back tested everything before we would implement anything right so this is what we think of as a systematic trader but Ed isn't that at all not even close Ed is a technical discretionary trader he wrote all these programs to support the data presentation uh that he then used to make discretionary calls about buying and selling. He does have or did I don't know what he's doing now. He did have some very specific general rules that he followed that he felt were, you know, sacrosan to trading. And these are the general rules everybody follows. Um you know, cut your losses short, let your profits ride, diversify. and so on and so forth. Um but um he did not have a computerized system to do this at all. Uh he would look at the charts each day and then decide what he was going to do the next day. >> So he was looking for setups like um >> yeah I mean he >> chart patterns and stuff like that. >> He is the best trader the world has ever seen in terms of being able to um make money in the markets. Now he's no way is he the kind of trader any institution would want to invest in because his um his equity swings can be gigantic and you know his job in his mind was I make as much money as I can in the markets you know and um but he would look at the charts each night and then decide what he's going to do and it was it was absolutely amazing I remember one time this was back when they were called German boons, the German boon chart. We're looking at the charts and these are chart programs Ed wrote. This was way before you could um buy a chart program and just have the thing chart. Um and we wrote some of our own inhouse before you could get them commercially too. But Ed had written his own chart programs. And he had the ability in his chart program to use his mouse and uh draw, you know, hypothetical what the market might do or what patterns might look like. So one day we're looking at the charts and we're looking at the a German boon chart and you know I'm just my favorite part was looking at charts with Ed to see what he's going to say. So, we're looking at these charts and and I said, ' Ed, what do you think's going to happen with those boons tomorrow? And he takes his mouse and he draws a bar, you know, with a a high, low, and a close. Okay, the next day, Boon did exactly what he drew. Okay, I mean exactly what he drew. So he just had this amazing ability to uh anticipate what the markets were going to do. And um this is something that you you can't program. You can't teach somebody directly. And when I when I visited him or the first, you know, right off the bat when I'm starting out to be his apprentice, he gives me this little teeny book that he wrote. And I can't remember what it was called. Maybe I can. The trader's window. And this book has nothing to do with trading. Okay. He wrote this little book called The Trader Window. And in it, it talks about a jade master, you know, and the jade master, you know, somebody comes to the jade master and says, "Master, master, teach me about jade." And the guy doesn't say anything. And the guy comes back and teach me about jade. And the guy gives him a little rock, you know, and the guy looks at the rock and, you know, comes back the next day and the guy said, "Well, you know, this doesn't look like jade to me. The jade master doesn't say." Gives him another rock. This goes on forever. You know, it's one of these Zen kind of teaching things. And then after a number of years, the guy that's been coming and sitting with the jade master, he knows what jade is. He knows everything about jade. And the master has basically told him nothing. They just sat together. Okay. So he gives me this book and little did I realize this is Ed's teaching style, you know, you just hang out with the guy and you see what he does and see if you can do it. So anyway, um >> So what was it like on a day-to-day basis? Were you sitting next to him on a desk like chair by chair and watching him? >> No, no, no, no. Most of the time it was just whatever I was doing that day, you know, like, "Hey Dave, let's uh let's go down the hill to Reno and and go to the grocery store." Okay. And so we'd go down to the grocery store, [snorts] you know, and that's what we'd come back and then Ed would play banjo, you know, he's a great banjo player. And um then like at the end of the day when markets closed, we look at charts and it would take about maybe 10 minutes. That was my favorite part. And then I said, "Well, Ed, what do you think about this?" "Well, I think I might buy that." You know, I said, "Well, where do you where are you going to buy that?" "Well, you know, somewhere around here." And he draw the little mouth. He never tell me exactly. I said, "Well, but where are you going to put your stop?" Somewhere around here, you know, and that's it. That's what we do. And I just watch him do this. And he is very, very big. very big on psychology and his idea was you know like from market wizards everybody gets what they want from the markets and it's and markets are a a vehicle for people to work out their psychology and if they have any um hidden psychological kinks they're all going to come out in the markets. you know, this is his his idea and if you've got anything that's screwing you up inside, you're going to bring it out of the markets. You're going to screw yourself up. So he was very big on trying to understand your own psychology, but it wasn't like he sat down and and gave you a, you know, a shrink session. But he did have these these sessions where traders would come together and they'd talk about their problems and stuff like that just to try to get it out so that it didn't come out in the markets. So he's very big on psychology and he spent a lot of time with his programs to display different things but it was mostly just charts things that we can get easily today but it was not easy back then and you just didn't spend that much time looking looking at markets at all and during the day you know it's not like he was he had screens didn't have live screens and anyway it was It was an amazing experience to hang out with him. Um, not just to watch him trade, but he's so perceptive about people's psychology that you could not hide anything from this guy. If you had any psychological um problems or things you were working on, he could see it instantly and he would nail you on it. And it's very uncomfortable actually because you know most of us have these ego defenses and you know we walk around all day with them and we're fine. But Edward just nail right through them you know because you know that's that's how you get to be a good trader I think was his idea that you have to make sure you understand your psychology as well as possible because if your style of trading doesn't fit your psychology you're going to fail. That's his idea. And everybody has a slightly different psychology. You won't be able to stick to your system if your psychology doesn't match it. You know, like, you know, we're computerized systematic traders. Well, you take someone who just doesn't have a psychology that can do that. Even if it's a fabulous program, they won't follow it. They'll go in and tinker with it. They'll screw around with it or they'll do something. All right. Anyway, you understand your psychology well, make sure your system is based on it. Now, he always tried to encourage me to get away from systematic computerized trading because he felt that the returns on that were not nearly as much as you could get from discretionary trading, but technical discretionary trading. In other words, never listen to the news. What does the chart tell you? What does the price tell you? and then make your decisions based on true factual information. Um, he always tried to get me to learn to trade this way. And I said, I can't possibly do that for my investors. I don't have any, you know, back testing. I don't have anything to go on. But he's always encouraging me to learn to do that. Well, after I apprenticed with him for that time, I thought, well, all right, I'll try it with my own money for my own account. And he always also said if you you always have to trade with money that's meaningful in order for you to learn and understand yourself. Like if you're you know if you're a millionaire, you don't put $10,000 in an account and trade or you're never going to learn anything because it doesn't mean anything to you, right? So you have to put something meaningful into the account. This is very scary because if you're wrong, you're going to lose a meaningful amount of your equity, right? right of your assets, right? But this is his idea. You this is what you have to do. So after I apprenticed with him, I um I said, "Okay, I try this for myself." And so I took, you know, for me what was a significant amount of money and set up my own account and I let my investors know, you know, that that, you know, I do have a proprietary account and it's has nothing to do with what we're trading and I'm not trading ahead and blah blah blah. just to disclose. Well, so what I did is I continued to run my systems for my investors, but I traded this account for a little over a year and every day I would say, "Okay, pretend you're at. Okay. All right. You're add. You're sitting with that. Okay. Look at the charts. Okay. What would I do?" Well, I'd probably buy it around here. I'd probably put a stop about here. Okay. So, I did this for about 15 months. made 300% return and absolutely went crazy because it was not my trading style. At the same time, my systems made 20% for my investors. I closed the account and I saw a psychiatrist for a year because I so messed up myself by pretending I'm somebody I'm not. Even though I somehow was like, you know, the guy that went to the Zen master, you know, I pretended I was Ed for a year and I couldn't do it. But so that it's just he has a completely different style than you get from that book. And I think that's maybe one of the most interesting things that, you know, we could bring up if people were interested about it. Um, but you know, we don't need to go into all zillions of edge stories. You know, if you've read all the things you can find on me online, Ed and I once wrote an article together on optimal bet size. Did you ever see that? It's out there online somewhere. There is >> about heat distribution and these type. >> There is actually an optimal bet size if you have a system with a known edge per trade. Now that's the thing because systems don't have a stable edge per trade. It varies depending on the period of time and so it's only a rule of of thumb. I mean it is true that there is an optimal bet size and um so that's the thing to take away from that type of a a study. you know, you you do a back test, you see what the edge is or what would have been the optimal bet, you know, for this particular system on that particular portfolio. And this again, this is a computerized systematic trading method. He knows how to do all this. It just isn't the way he did it. So, we wrote this article on optimal bet size and the optimal bet size is it's a lot bigger than most people would want to use because, you know, you go too far and your risk of ruin is douche. you you're head right into it, but you go too little and you know your risk of ruining is almost zero, but you're not going to make a lot of money. And so, you know, I was curious uh I asked him, Ed, what what's your biggest draw down, you know, like in his trading? And he thought for a while, well, that's how he would talk. Well, I don't think I've lost more than 50% in a day. I mean, it's like, wow. I mean, this is a guy who probably has made more money trading returnwise. And, you know, it's like he knows if you want to get the optimal return, you have to push that bet size and the heat has to be high. And most people can't do it. But if you're wrong and you're too far, you're going to wipe out. So it's a it's a very, you know, I would it's like don't do this at home kids kind of thing, you know. But so that's uh another really interesting thing that I got from him is here's a guy who actually made a lot of money in the markets but he did it by you know the rule is you want to make a lot of money you have to bet bigger than you think but not too big you know enough that you have take a lot of heat and most people they just could never ever ever do it. And also the other amazing thing is, you know, you think about it, if if you're a discretionary trader, you have to learn to deal with what it feels like when you take a big loss or several big losses in a row. And most discretionary traders that do that, even systematic traders, I mean, I know I would feel it. You just feel awful and you it can make you feel down and it it it can make it like you you you just don't want to get up there and swing again the next day, you know, because you're just been hurt. But a discretionary trader, just like a systematic trader, has to somehow cope with this and be able to get up there and still do the right thing the next day, even if he's had a string of losses or one big loss, you know, just recently. And in this regard, Ed was absolutely flawless. Flawless. He had no like no memory of what happened. It was like every day was new and every day was do the right thing and he was never affected at least outwardly. You could never see that he was affected by any losses that had happened recently. That was an amazing thing I learned from hanging out with him. I I he just never expressed anything other than the right way to trade every time. >> Sounds like he didn't take any of these losses personal. Like you wipe them from the memory and you just, you know, rinse and repeat the next day. Exactly. Did you Did you also do this? Is this something that you learned from him? Is like there's no memory type of thing about the markets. >> You mean when I when I did my year of discretionary trading? >> Yeah. I just recounted. I just pretended I was Ed every day. >> Yeah. I was I did it for like 15 months. Yes. Yeah. But but it it was just so not me. I can't tell you. It's like I can't tell you I don't want to do that ever again, you know. >> Yeah. You said this. So then when you when you had your own firm, did you feel that pain again? I mean, it doesn't mean that you need to take it personal. >> Systematic trading. >> Yeah. I'm I'm not going to lie to you. Absolutely. When when I would lose money for investors by following my system, it always hurt. But, you know, it's like I'm doing the right thing. My my uh my research is really good. It's solid. I have confidence long term. But of course it hurts when you when you are in a draw down. You know how people handle draw downs. I think it makes some of the biggest difference in who is successful over the long run is during a draw down your psychology really affects what you're doing. People question their systems. If it's a, you know, an algorithmic system, they'll go, "Oh man, something's wrong with my system. Maybe I need to change something. What a mistake. You know, that's the worst time to change something is in a draw down. You have to make absolutely sure that there's something wrong if or you should never tinker in a draw down. That's not to say that you can't improve your systems and you know it's good idea for people to always try but don't let the draw down psychologically affect your your appropriate assessment of your your research. Uh so many people tinker with their systems in draw downs and you can't you got to let the statistics play out. >> Yes. which is a tough thing to do because it means that you have to trade um at the appropriate size when you are in a draw down. You can't have a draw down reduction rule where you're all of a sudden you know dialing back because you may not it may take ages for you to come out of the draw down if you ever come out of the draw down. So you have to have some way to to manage your bet size in draw downs or in gains as because you know you start with a million dollar account and your bet size is X. Well, when you're 2 million, it should be 2x or approximately. I mean, your bet size needs to change with your equity at some point. If it's dayto day or month to month, it does need to adjust. Um, and you can't just, you know, as it goes up increase and as it goes down stay the same unless you're willing to increase your risk of ruin probabilities. So it's, you know, it's all just follow the system in the draw down is what how whatever your system is unless you're absolutely sure that there's something wrong with it. That's right. Like when you go into a draw down with your example of the million-doll account and you're down at say 500,000, your bet size should no longer be 1 million. It should be approximately depending whether you use closed trade equity, open trade equity, but say it's 500,000. That's that's the base that you're using to size it. But it probably shouldn't be 250,000 which would be too little risk put on to get out of the draw down. So that is you know a bunch of these draw down reduction rules. I think they do exactly that. Like the system goes into a draw down and they start >> putting on risk betting smaller than they you know should um simply because they want to get we don't want to get into more pain. We don't want to get into more trouble. But that also, you know, there's a price to pay which means you're not getting out of the hole, >> right? And and if you statistically you're it screws up screws up all the statistics of how that how your trading system should work. Um anyway, yes, I I agree with what you're saying there. Your bet size should be proportional to your equity depending on how much heat you want to take in that particular system. And somehow there should be an automatic adjustment within the system to change the bet size with respect to equity fluctuations and how you time that and whether it's based on open or closed equity. Open equity it never works really. People can try it but closed equity or or equity after everything got wouldn't be stopped out. Something like that's much more stable. But um and it's got there should be some type of adjustment rule built in. That's my opinion. >> Yes. Because your open trade equity is also far more volatile. It includes all these you know big open profits that you have and when you then use that capital as a base to size your trades um you have a propensity to overrisk. Whereas the closed trade equity is more of a step function that's supposed to go from the bottom left to the top right and therefore much more stable over time. I agree that's I totally agree with that. [music] >> How does one get to be an apprentice of that sea? Was this >> Yeah. Well, okay. So, I can tell you how I did. Um I don't know if he's doing it anymore. In fact, you know, I doubt he is. Um I mean, he did it for a while and you know, it's like he tried it for a while after me. There were a few other guys. Um, I don't know how long he kept it up, but um, all right, so here's how it worked. You know, I'd read the market wizards and I got the impression that this guy is a systematic trader, algorithmic trader like me, you know, and I thought I want to learn from the best. Well, I didn't realize, of course, he's not that, but nonetheless, I wanted to learn from him. And I and in the book it doesn't say like exactly where he lived, but you got the idea that it was near Lake Tahoe, Nevada from the book. And so one day I was in the Tahoe area. And this was in the days before cell phones, of course. And this was in the late late ' 89, 90s, somewhere around in there. And so I just stopped at a little 7-Eleven store and there was a pay phone and there was a phone book and so I looked up. So I wonder if Ed Sakakota is in the phone book. So I looked up and there it is. Ed Zakakota in public. So I called him up on the phone. He answers the phone. He doesn't have a secretary. And I and I said, "Hey, Ed, you know, my name is my name is Dave Drews and I'm a quantity trader and you know, would it be possible to, you know, learn some learn from you or study with you or, you know, have you look at my trades or something?" And he pauses for a send me your trades. Send me your trades. I'll look at them and and we'll talk later. And I said, "Okay, okay. Where do I send them?" And he say, "Gives me some address." So I go home and for the previous year I got all the charts from the previous year and I marked on the charts, you know, like our exit or entry point, the size, the stop point, you know, where we got out, all this kind of stuff. So I I ex I express mail or FedExed, you know, my all my charts to Ed for the last year. And um, you know, I put in there, okay, when you get these, give me a call. like you said you would and I'm waiting to hear from you. Well, so you know about a week and a half or two weeks go by something like this and then hear a word from Ed and I thought I had to get it because I know the FedEx people delivered it. So I called him up again on the phone and I said, "Hello, Ed. This is Dave Drews. I talked to you, you know, a week and a half ago or whatever. You told me to send you my trades. I did. I wonder if you had a chance to look at them." He goes, "Who? You know, it's like, "Oh, who are you?" And I said, "Well, I'm Dave D. Where are you calling from?" "Calling from Hawaii." "You have anything to do with with my my my ex-wife's attorney?" She's in Hawaii. "No, Ed, I'm just a trader." You know, he's yelling at me and he's like, "I'm tired of talking to attorneys." No, I'm just a trader. I sent you charge. I don't remember anything. And I said, and I got and I got like sort of upset with him because I worked really hard on these charts and he told me to do it. I said, ' Okay, look on your desk. I said, 'Look on your desk. Do you have a FedEx package there? He said, "Well, yeah, I got one here." [laughter] I said, "Ed, open it." He opens it and he says, "Oh, I look at these trades." He goes, "You trade a little bit like I do." He says, "Why don't you come out here and be my apprentice?" That's That's how it was. That's how much >> funny I I thought you were working together at Commodities Corp even earlier, but that So you you didn't overlap there. >> We didn't overlap at all. Not a bit. Not a bit. No, that's how it worked. And so and I I said to him, "Okay, don't forget that you told me to come out there to be your apprentice because I got to get a plane ticket. I got to change my hell schedule. I got to fly out there and do not forget you told me to do this, you know, because I could just see this guy like totally forgetting the whole thing, right?" And so and then and I thought I rearranged things and and I did call him back and said and we're still on on this, you know, I'm planning to come. Yeah. Yeah. I'll come get you at the airport, you know. And so anyway, that's how it started. But >> funny. I didn't know you were already in Hawaii back then. I thought you were on the east coast at some point. >> No, no, no, no, no. I was in Hawaii. Hawaii and Alaska is where I were were was. And anyway, so when I went out to live with Ed to begin with, this was I mean living with this guy was it was one of the most amazing experiences of my life. He [clears throat] was he had a he had two places in Tahoe, one gorgeous huge house and then one condominium, both on the lake. And so he was staying currently at the condominium. And he had a big room, a big like beautiful living area that looked out over the lake with his main desk with his computer on it. And then he had this little room in back, you know, and the little room in back and like had like no heat and it had a little bathroom, but you know, it wasn't wasn't heated. The toilet seat was freezing butt cold. And anyway, so I got that little room in back and my job was to clean data for him. So this was in the day when when data would you know you'd get end of the day downloads and there was a lot of bad data and so I would each day I would look through all the data and try to see that data looks bad then I try to find what the good data somehow and tell them and then totally forgot about me 100% didn't even know I was there. Okay. And I I I would have to come out from the back room you know to see him at his desk and and I would come out and he go like Who's this guy come out of the back room? I said, "Hey, Ed, you remember me? I'm apprenticing back here cleaning data." Oh, yeah. How you doing? [laughter] I said, "Ed, is is there any food around here?" Like I hadn't eaten for a day or so. You know, I was expecting he's going to come back and say something. Is there any food around here? He goes, "Uh, probably something in the fridge." And then he goes right back to Yeah. It's like even know I was there. I and this went on for a while, you know, and then it just the whole thing is you couldn't make it up. You could not make these stories up. But anyway, he finally realized that I was actually there and I I did have some value at cleaning data and anyway, we got to be good friends after a while, but it was quite quite the experience. So anyway, >> amazing. Thanks for that, Dave. >> Yeah. >> Um Yep. Yep. Fun stories. >> Fun stories. Let me tell you one final Ed story. So Ed has this idea that we limit ourselves in our success in the markets because we don't believe that we are deserving of great success or we feel that we're not worthy uh or that we're not adequate or not good enough. there's we hold ourselves back. That's one of his psychological ideas. So always trying to clear our psychology and help us feel that we we do have the ability to succeed and we um if we have that mindset we will attract the success and if without that mindset it works very much against us. So, I got this. I understood this. Well, so we're now in Maui where he also had a house. And so, I'm in the back room again, still doing my stuff, getting ignored almost all the time. But, nonetheless, you know, come out, look at the charts in the afternoon, go with him to the grocery stores, you know, do errands for him because he didn't like to drive. So I would drive and he would tell me where he wants to go and he would sit there and and doze off. Well, he knew that I liked cookies to snack on cookies, you know, like cuz cuz we would sometimes go to a grocery store and he'd say, "Oh, what do you want to buy?" You know, get, you know, get some food. And so I would, you know, I'd always get some cookies to snack on. Well, one day after I'm sitting in back forever and I come out and he'd been just been ignoring me forever, but still we would go for walks on the beach. We'd talk about trading at this point and we were getting to be friends a little bit. Uh, and he was trying to instill in me that I need he said, "You know, Dave, one reason you're probably not as successful as you could be is because you're limiting yourself." And I said, "Yeah, well, okay, if you say so." So one day he said, "Okay, let's let's go down to Foodland." And Foodland is a grocery store. So in the evening and so we take a drive down to Foodland and I'm getting like perturbed that I'm with this guy now like for four months and he just barely even recognizes me. Um so we're going to Food Land. He says, he could tell that I was feeling a little miffed and a little discouraged. says, "Dave, why don't you buy yourself some cookies when we're in food land?" I said, "I'd love to buy some cookies." And you know, how many cookies can I buy? And he said, "As many as you want. Buy as many cookies as you want." I said, "Really, Ed? As many cookies as I want." He said, "Yeah, as many cookies as you want." So, it's like trying to be my buddy. So, we go into Foodland. Soon as I get in the door, I go up to the manager's desk and I say, "I want to buy every single cookie in the entire cookie row in the whole store." And this man's paying for it. He turned green. And the guy, the manager says to me, "Are you serious?" I said, "Yeah." He said he going to buy me as many cookies as I wanted, and I want to buy every cookie in this store. And Ed Ed lives by his word. He's a commodity trader. if he says buy a million beans at such and such a price, he's going to stick to it cuz that's what he said and I knew that. And so we bought every single cookie in the entire store and the guys brought these big pallets out, you know, and we they put them all in the back and when we left there was not a single cookie. It was an entire row of a grocery store, you know, all the cookies in the grocery store because he he gave me his word. I thought he's trying to teach me to have no limitations, you know. He says, "I can buy as many cookies as you want. You sure I double check it? You're paying for?" Yes, every cookie. you know, and I don't know what it cost him like $10,000 or something, which might not have been, you know, not a whole lot for him, but still, he never expected that. And but he was a man of his word. He kept his word. And then we, you know, he said, "What am I going to do with all these cookies?" I said, "Dad, why don't you donate them to, you know, the homeless shelter or something?" I said, "They're shelf stable. Someone will pro." And so he does. And then they interview him for the Maui newspaper like this benevolent guy donates cookies to us. >> He got the benefit out of it. >> Yeah, he got a big benefit out of it, you know. But ever since then, he never ignored me and and I gained his respect, [laughter] you know. So, >> how did how did you put all these cookies in his car? What happened? We didn't we kept them in back of the store and the next day the the vans came from the homeless shelter or the the the church or whatever and picked them up and took them away. >> Got it. [laughter] Funny story. >> But that's uh that just you know two things you know don't limit yourself and always keep your word you know or that story. >> Perfect. Well great Dave. Um that's going to be fun on Friday uh 48 hours from now. Um you'll be a great podcast guest. If I can already say that now. >> Well, I hope that I can say something that will help your audience either trade better or not lose as much money or be a better person psychologically. Thanks everybody for listening. This is the end of part two. I want to once again thank Dave for coming on to the open interest series. I know this has been a first for him. It's been fantastic speaking with him for the first time. I really enjoyed it and I'm sure that you can learn something valuable about trading from the conversation that I've just had with Dave. So, we'll also include some of the most important points and summarize them in our show notes. As ever, if you have any questions, please contact us. We're always happy to respond and we will I want to thank you again for listening and see you next time. Thanks for [music] listening to Top Traders Unplugged. If you feel you learned something of value from today's episode, the best way to stay updated is to go on over to iTunes and subscribe [music] to the show so that you'll be sure to get all the new episodes as they're released. We have some amazing guests lined up for you. And to ensure our show continues to grow, [music] please leave us an honest rating and review in iTunes. It only takes a minute and it's the best way to show us you love the podcast. [music] We'll see you next time on Top Traders Unplugged.
Living With Ed Seykota | Open Interest | Ep.19 BONUS
Summary
Transcript
[music] what what's your biggest draw down, you know, like in his trading? [music] And he thought for a while, well, that's how he would talk. Well, I don't think I've lost more than 50% in a day. [music] I mean, it's like, wow. I mean, this is a guy who probably has made more money trading returnwise [music] and you know, it's like he knows if you want to get the optimal return, [music] you have to push that bet size and the heat has to be high and most people [music] can't do it, but if you're wrong and you're too far, you're going to wipe out. I would It's like don't do this at home kids kind of thing. >> Imagine [music] spending an hour with the world's greatest traders. Imagine learning from their experiences, their successes, and their failures. [music] Imagine no more. Welcome to Top Traders Unplugged, the place where you can learn from the best [music] hedge fund managers in the world, so you can take your manager due diligence or investment career to the next level. Before we begin today's conversation, [music] remember to keep two things in mind. All the discussion we will have about investment performance is about the past and past performance does not guarantee or even infer anything about future [music] performance. Also understand that there's a significant risk of financial loss with all investment [music] strategies and you need to request and understand the specific risks from the investment manager about their product before you make investment decisions. Here's your [music] host, veteran hedge fund manager Neils Castro Larson. Welcome to another episode in the open interest series on Top Traders Unplucked hosted by Moret Seabbert. In life as well as in trading, [music] maintaining a spirit of curiosity and open-mindedness is key. And this is precisely what the [music] open interest series is all about. Join Moritz as he engages in candid conversations with seasoned professionals from around the [music] globe to uncover their insights, successes, and failures, offering you a unique perspective [music] on the investment landscape. So with no further ado, please enjoy the conversation. [music] Hi everyone and welcome back to the open interest series on top traders unplugged. This is part [music] two of my conversation with Dave Drew. This is the bonus part where he speaks about his time with Edota and a couple of other things. Um some really interesting stories there. I hope you'll enjoy that. I thought it was really great. Um we appreciate any feedback uh you have on this. So please let us know if you want. You can always send us an email. It's info@toptradersonpluck.com. But let's get into it. Here is part two with Dave Drew. So, we'll we'll keep it trading focused. Um, just speaking about how you designed the system, what's important to you, how to trade, you know, emotions, things like this. >> I I could give you some anecdotes here and there about my apprenticeship with Edota if you'd like. Some people find that interesting. You can ask me some questions about that. He's sort of a private guy in certain ways. So, it's not like I can tell you everything, but I can give you from my perspective some of the things that I picked up from my six months living with him. >> Oh, you lived with him. >> Oh, yeah. You mentioned that in Tahoe. >> I was I was his first apprentice back in uh it was 91 or 90 somewhere in there. He had several after that. I don't know what he's doing now. We've fallen out of touch in the last several years, but um yeah, no, I I was fortunate enough to be his living apprentice. I lived with him for six months straight and traveled with him wherever he went and just um you know, picked up what what uh I could and what he shared. And there's some some pretty interesting things that he had to share that are different than my approach that some people might be interested in. A lot of the things that Ed does no one else can do and you might as well don't even try. Um so what what is this? What do you mean by this? >> So you you've read the market wizards the original book right in 1980s. What? Um anyway, so wasn't it Jack Schwagger? Was he the author? I can't remember for sure. >> Yes. Yes, he was. >> But anyway, um you know, he he gave a a beautiful chapter on Ed and he was you can tell he was absolutely astonished by Ed when he went to visit him. He visited him in Tahoe and he saw u you know Ed's computer on his desk and all the programs Ed was doing and at the time you know it's quite advanced. Um, now it's, you know, anyone can just download an app and do these things. But, but Ed had written all his own programs. So, Jack assumed that Ed was a systematic technical trader. That is absolutely the most incorrect assumption about Ed that I think most people take away from that book. You know, like you use a computer for your trading. if I glean from what you're saying and we did and we have algorithms that we followed strictly and back tested everything before we would implement anything right so this is what we think of as a systematic trader but Ed isn't that at all not even close Ed is a technical discretionary trader he wrote all these programs to support the data presentation uh that he then used to make discretionary calls about buying and selling. He does have or did I don't know what he's doing now. He did have some very specific general rules that he followed that he felt were, you know, sacrosan to trading. And these are the general rules everybody follows. Um you know, cut your losses short, let your profits ride, diversify. and so on and so forth. Um but um he did not have a computerized system to do this at all. Uh he would look at the charts each day and then decide what he was going to do the next day. >> So he was looking for setups like um >> yeah I mean he >> chart patterns and stuff like that. >> He is the best trader the world has ever seen in terms of being able to um make money in the markets. Now he's no way is he the kind of trader any institution would want to invest in because his um his equity swings can be gigantic and you know his job in his mind was I make as much money as I can in the markets you know and um but he would look at the charts each night and then decide what he's going to do and it was it was absolutely amazing I remember one time this was back when they were called German boons, the German boon chart. We're looking at the charts and these are chart programs Ed wrote. This was way before you could um buy a chart program and just have the thing chart. Um and we wrote some of our own inhouse before you could get them commercially too. But Ed had written his own chart programs. And he had the ability in his chart program to use his mouse and uh draw, you know, hypothetical what the market might do or what patterns might look like. So one day we're looking at the charts and we're looking at the a German boon chart and you know I'm just my favorite part was looking at charts with Ed to see what he's going to say. So, we're looking at these charts and and I said, ' Ed, what do you think's going to happen with those boons tomorrow? And he takes his mouse and he draws a bar, you know, with a a high, low, and a close. Okay, the next day, Boon did exactly what he drew. Okay, I mean exactly what he drew. So he just had this amazing ability to uh anticipate what the markets were going to do. And um this is something that you you can't program. You can't teach somebody directly. And when I when I visited him or the first, you know, right off the bat when I'm starting out to be his apprentice, he gives me this little teeny book that he wrote. And I can't remember what it was called. Maybe I can. The trader's window. And this book has nothing to do with trading. Okay. He wrote this little book called The Trader Window. And in it, it talks about a jade master, you know, and the jade master, you know, somebody comes to the jade master and says, "Master, master, teach me about jade." And the guy doesn't say anything. And the guy comes back and teach me about jade. And the guy gives him a little rock, you know, and the guy looks at the rock and, you know, comes back the next day and the guy said, "Well, you know, this doesn't look like jade to me. The jade master doesn't say." Gives him another rock. This goes on forever. You know, it's one of these Zen kind of teaching things. And then after a number of years, the guy that's been coming and sitting with the jade master, he knows what jade is. He knows everything about jade. And the master has basically told him nothing. They just sat together. Okay. So he gives me this book and little did I realize this is Ed's teaching style, you know, you just hang out with the guy and you see what he does and see if you can do it. So anyway, um >> So what was it like on a day-to-day basis? Were you sitting next to him on a desk like chair by chair and watching him? >> No, no, no, no. Most of the time it was just whatever I was doing that day, you know, like, "Hey Dave, let's uh let's go down the hill to Reno and and go to the grocery store." Okay. And so we'd go down to the grocery store, [snorts] you know, and that's what we'd come back and then Ed would play banjo, you know, he's a great banjo player. And um then like at the end of the day when markets closed, we look at charts and it would take about maybe 10 minutes. That was my favorite part. And then I said, "Well, Ed, what do you think about this?" "Well, I think I might buy that." You know, I said, "Well, where do you where are you going to buy that?" "Well, you know, somewhere around here." And he draw the little mouth. He never tell me exactly. I said, "Well, but where are you going to put your stop?" Somewhere around here, you know, and that's it. That's what we do. And I just watch him do this. And he is very, very big. very big on psychology and his idea was you know like from market wizards everybody gets what they want from the markets and it's and markets are a a vehicle for people to work out their psychology and if they have any um hidden psychological kinks they're all going to come out in the markets. you know, this is his his idea and if you've got anything that's screwing you up inside, you're going to bring it out of the markets. You're going to screw yourself up. So he was very big on trying to understand your own psychology, but it wasn't like he sat down and and gave you a, you know, a shrink session. But he did have these these sessions where traders would come together and they'd talk about their problems and stuff like that just to try to get it out so that it didn't come out in the markets. So he's very big on psychology and he spent a lot of time with his programs to display different things but it was mostly just charts things that we can get easily today but it was not easy back then and you just didn't spend that much time looking looking at markets at all and during the day you know it's not like he was he had screens didn't have live screens and anyway it was It was an amazing experience to hang out with him. Um, not just to watch him trade, but he's so perceptive about people's psychology that you could not hide anything from this guy. If you had any psychological um problems or things you were working on, he could see it instantly and he would nail you on it. And it's very uncomfortable actually because you know most of us have these ego defenses and you know we walk around all day with them and we're fine. But Edward just nail right through them you know because you know that's that's how you get to be a good trader I think was his idea that you have to make sure you understand your psychology as well as possible because if your style of trading doesn't fit your psychology you're going to fail. That's his idea. And everybody has a slightly different psychology. You won't be able to stick to your system if your psychology doesn't match it. You know, like, you know, we're computerized systematic traders. Well, you take someone who just doesn't have a psychology that can do that. Even if it's a fabulous program, they won't follow it. They'll go in and tinker with it. They'll screw around with it or they'll do something. All right. Anyway, you understand your psychology well, make sure your system is based on it. Now, he always tried to encourage me to get away from systematic computerized trading because he felt that the returns on that were not nearly as much as you could get from discretionary trading, but technical discretionary trading. In other words, never listen to the news. What does the chart tell you? What does the price tell you? and then make your decisions based on true factual information. Um, he always tried to get me to learn to trade this way. And I said, I can't possibly do that for my investors. I don't have any, you know, back testing. I don't have anything to go on. But he's always encouraging me to learn to do that. Well, after I apprenticed with him for that time, I thought, well, all right, I'll try it with my own money for my own account. And he always also said if you you always have to trade with money that's meaningful in order for you to learn and understand yourself. Like if you're you know if you're a millionaire, you don't put $10,000 in an account and trade or you're never going to learn anything because it doesn't mean anything to you, right? So you have to put something meaningful into the account. This is very scary because if you're wrong, you're going to lose a meaningful amount of your equity, right? right of your assets, right? But this is his idea. You this is what you have to do. So after I apprenticed with him, I um I said, "Okay, I try this for myself." And so I took, you know, for me what was a significant amount of money and set up my own account and I let my investors know, you know, that that, you know, I do have a proprietary account and it's has nothing to do with what we're trading and I'm not trading ahead and blah blah blah. just to disclose. Well, so what I did is I continued to run my systems for my investors, but I traded this account for a little over a year and every day I would say, "Okay, pretend you're at. Okay. All right. You're add. You're sitting with that. Okay. Look at the charts. Okay. What would I do?" Well, I'd probably buy it around here. I'd probably put a stop about here. Okay. So, I did this for about 15 months. made 300% return and absolutely went crazy because it was not my trading style. At the same time, my systems made 20% for my investors. I closed the account and I saw a psychiatrist for a year because I so messed up myself by pretending I'm somebody I'm not. Even though I somehow was like, you know, the guy that went to the Zen master, you know, I pretended I was Ed for a year and I couldn't do it. But so that it's just he has a completely different style than you get from that book. And I think that's maybe one of the most interesting things that, you know, we could bring up if people were interested about it. Um, but you know, we don't need to go into all zillions of edge stories. You know, if you've read all the things you can find on me online, Ed and I once wrote an article together on optimal bet size. Did you ever see that? It's out there online somewhere. There is >> about heat distribution and these type. >> There is actually an optimal bet size if you have a system with a known edge per trade. Now that's the thing because systems don't have a stable edge per trade. It varies depending on the period of time and so it's only a rule of of thumb. I mean it is true that there is an optimal bet size and um so that's the thing to take away from that type of a a study. you know, you you do a back test, you see what the edge is or what would have been the optimal bet, you know, for this particular system on that particular portfolio. And this again, this is a computerized systematic trading method. He knows how to do all this. It just isn't the way he did it. So, we wrote this article on optimal bet size and the optimal bet size is it's a lot bigger than most people would want to use because, you know, you go too far and your risk of ruin is douche. you you're head right into it, but you go too little and you know your risk of ruining is almost zero, but you're not going to make a lot of money. And so, you know, I was curious uh I asked him, Ed, what what's your biggest draw down, you know, like in his trading? And he thought for a while, well, that's how he would talk. Well, I don't think I've lost more than 50% in a day. I mean, it's like, wow. I mean, this is a guy who probably has made more money trading returnwise. And, you know, it's like he knows if you want to get the optimal return, you have to push that bet size and the heat has to be high. And most people can't do it. But if you're wrong and you're too far, you're going to wipe out. So it's a it's a very, you know, I would it's like don't do this at home kids kind of thing, you know. But so that's uh another really interesting thing that I got from him is here's a guy who actually made a lot of money in the markets but he did it by you know the rule is you want to make a lot of money you have to bet bigger than you think but not too big you know enough that you have take a lot of heat and most people they just could never ever ever do it. And also the other amazing thing is, you know, you think about it, if if you're a discretionary trader, you have to learn to deal with what it feels like when you take a big loss or several big losses in a row. And most discretionary traders that do that, even systematic traders, I mean, I know I would feel it. You just feel awful and you it can make you feel down and it it it can make it like you you you just don't want to get up there and swing again the next day, you know, because you're just been hurt. But a discretionary trader, just like a systematic trader, has to somehow cope with this and be able to get up there and still do the right thing the next day, even if he's had a string of losses or one big loss, you know, just recently. And in this regard, Ed was absolutely flawless. Flawless. He had no like no memory of what happened. It was like every day was new and every day was do the right thing and he was never affected at least outwardly. You could never see that he was affected by any losses that had happened recently. That was an amazing thing I learned from hanging out with him. I I he just never expressed anything other than the right way to trade every time. >> Sounds like he didn't take any of these losses personal. Like you wipe them from the memory and you just, you know, rinse and repeat the next day. Exactly. Did you Did you also do this? Is this something that you learned from him? Is like there's no memory type of thing about the markets. >> You mean when I when I did my year of discretionary trading? >> Yeah. I just recounted. I just pretended I was Ed every day. >> Yeah. I was I did it for like 15 months. Yes. Yeah. But but it it was just so not me. I can't tell you. It's like I can't tell you I don't want to do that ever again, you know. >> Yeah. You said this. So then when you when you had your own firm, did you feel that pain again? I mean, it doesn't mean that you need to take it personal. >> Systematic trading. >> Yeah. I'm I'm not going to lie to you. Absolutely. When when I would lose money for investors by following my system, it always hurt. But, you know, it's like I'm doing the right thing. My my uh my research is really good. It's solid. I have confidence long term. But of course it hurts when you when you are in a draw down. You know how people handle draw downs. I think it makes some of the biggest difference in who is successful over the long run is during a draw down your psychology really affects what you're doing. People question their systems. If it's a, you know, an algorithmic system, they'll go, "Oh man, something's wrong with my system. Maybe I need to change something. What a mistake. You know, that's the worst time to change something is in a draw down. You have to make absolutely sure that there's something wrong if or you should never tinker in a draw down. That's not to say that you can't improve your systems and you know it's good idea for people to always try but don't let the draw down psychologically affect your your appropriate assessment of your your research. Uh so many people tinker with their systems in draw downs and you can't you got to let the statistics play out. >> Yes. which is a tough thing to do because it means that you have to trade um at the appropriate size when you are in a draw down. You can't have a draw down reduction rule where you're all of a sudden you know dialing back because you may not it may take ages for you to come out of the draw down if you ever come out of the draw down. So you have to have some way to to manage your bet size in draw downs or in gains as because you know you start with a million dollar account and your bet size is X. Well, when you're 2 million, it should be 2x or approximately. I mean, your bet size needs to change with your equity at some point. If it's dayto day or month to month, it does need to adjust. Um, and you can't just, you know, as it goes up increase and as it goes down stay the same unless you're willing to increase your risk of ruin probabilities. So it's, you know, it's all just follow the system in the draw down is what how whatever your system is unless you're absolutely sure that there's something wrong with it. That's right. Like when you go into a draw down with your example of the million-doll account and you're down at say 500,000, your bet size should no longer be 1 million. It should be approximately depending whether you use closed trade equity, open trade equity, but say it's 500,000. That's that's the base that you're using to size it. But it probably shouldn't be 250,000 which would be too little risk put on to get out of the draw down. So that is you know a bunch of these draw down reduction rules. I think they do exactly that. Like the system goes into a draw down and they start >> putting on risk betting smaller than they you know should um simply because they want to get we don't want to get into more pain. We don't want to get into more trouble. But that also, you know, there's a price to pay which means you're not getting out of the hole, >> right? And and if you statistically you're it screws up screws up all the statistics of how that how your trading system should work. Um anyway, yes, I I agree with what you're saying there. Your bet size should be proportional to your equity depending on how much heat you want to take in that particular system. And somehow there should be an automatic adjustment within the system to change the bet size with respect to equity fluctuations and how you time that and whether it's based on open or closed equity. Open equity it never works really. People can try it but closed equity or or equity after everything got wouldn't be stopped out. Something like that's much more stable. But um and it's got there should be some type of adjustment rule built in. That's my opinion. >> Yes. Because your open trade equity is also far more volatile. It includes all these you know big open profits that you have and when you then use that capital as a base to size your trades um you have a propensity to overrisk. Whereas the closed trade equity is more of a step function that's supposed to go from the bottom left to the top right and therefore much more stable over time. I agree that's I totally agree with that. [music] >> How does one get to be an apprentice of that sea? Was this >> Yeah. Well, okay. So, I can tell you how I did. Um I don't know if he's doing it anymore. In fact, you know, I doubt he is. Um I mean, he did it for a while and you know, it's like he tried it for a while after me. There were a few other guys. Um, I don't know how long he kept it up, but um, all right, so here's how it worked. You know, I'd read the market wizards and I got the impression that this guy is a systematic trader, algorithmic trader like me, you know, and I thought I want to learn from the best. Well, I didn't realize, of course, he's not that, but nonetheless, I wanted to learn from him. And I and in the book it doesn't say like exactly where he lived, but you got the idea that it was near Lake Tahoe, Nevada from the book. And so one day I was in the Tahoe area. And this was in the days before cell phones, of course. And this was in the late late ' 89, 90s, somewhere around in there. And so I just stopped at a little 7-Eleven store and there was a pay phone and there was a phone book and so I looked up. So I wonder if Ed Sakakota is in the phone book. So I looked up and there it is. Ed Zakakota in public. So I called him up on the phone. He answers the phone. He doesn't have a secretary. And I and I said, "Hey, Ed, you know, my name is my name is Dave Drews and I'm a quantity trader and you know, would it be possible to, you know, learn some learn from you or study with you or, you know, have you look at my trades or something?" And he pauses for a send me your trades. Send me your trades. I'll look at them and and we'll talk later. And I said, "Okay, okay. Where do I send them?" And he say, "Gives me some address." So I go home and for the previous year I got all the charts from the previous year and I marked on the charts, you know, like our exit or entry point, the size, the stop point, you know, where we got out, all this kind of stuff. So I I ex I express mail or FedExed, you know, my all my charts to Ed for the last year. And um, you know, I put in there, okay, when you get these, give me a call. like you said you would and I'm waiting to hear from you. Well, so you know about a week and a half or two weeks go by something like this and then hear a word from Ed and I thought I had to get it because I know the FedEx people delivered it. So I called him up again on the phone and I said, "Hello, Ed. This is Dave Drews. I talked to you, you know, a week and a half ago or whatever. You told me to send you my trades. I did. I wonder if you had a chance to look at them." He goes, "Who? You know, it's like, "Oh, who are you?" And I said, "Well, I'm Dave D. Where are you calling from?" "Calling from Hawaii." "You have anything to do with with my my my ex-wife's attorney?" She's in Hawaii. "No, Ed, I'm just a trader." You know, he's yelling at me and he's like, "I'm tired of talking to attorneys." No, I'm just a trader. I sent you charge. I don't remember anything. And I said, and I got and I got like sort of upset with him because I worked really hard on these charts and he told me to do it. I said, ' Okay, look on your desk. I said, 'Look on your desk. Do you have a FedEx package there? He said, "Well, yeah, I got one here." [laughter] I said, "Ed, open it." He opens it and he says, "Oh, I look at these trades." He goes, "You trade a little bit like I do." He says, "Why don't you come out here and be my apprentice?" That's That's how it was. That's how much >> funny I I thought you were working together at Commodities Corp even earlier, but that So you you didn't overlap there. >> We didn't overlap at all. Not a bit. Not a bit. No, that's how it worked. And so and I I said to him, "Okay, don't forget that you told me to come out there to be your apprentice because I got to get a plane ticket. I got to change my hell schedule. I got to fly out there and do not forget you told me to do this, you know, because I could just see this guy like totally forgetting the whole thing, right?" And so and then and I thought I rearranged things and and I did call him back and said and we're still on on this, you know, I'm planning to come. Yeah. Yeah. I'll come get you at the airport, you know. And so anyway, that's how it started. But >> funny. I didn't know you were already in Hawaii back then. I thought you were on the east coast at some point. >> No, no, no, no, no. I was in Hawaii. Hawaii and Alaska is where I were were was. And anyway, so when I went out to live with Ed to begin with, this was I mean living with this guy was it was one of the most amazing experiences of my life. He [clears throat] was he had a he had two places in Tahoe, one gorgeous huge house and then one condominium, both on the lake. And so he was staying currently at the condominium. And he had a big room, a big like beautiful living area that looked out over the lake with his main desk with his computer on it. And then he had this little room in back, you know, and the little room in back and like had like no heat and it had a little bathroom, but you know, it wasn't wasn't heated. The toilet seat was freezing butt cold. And anyway, so I got that little room in back and my job was to clean data for him. So this was in the day when when data would you know you'd get end of the day downloads and there was a lot of bad data and so I would each day I would look through all the data and try to see that data looks bad then I try to find what the good data somehow and tell them and then totally forgot about me 100% didn't even know I was there. Okay. And I I I would have to come out from the back room you know to see him at his desk and and I would come out and he go like Who's this guy come out of the back room? I said, "Hey, Ed, you remember me? I'm apprenticing back here cleaning data." Oh, yeah. How you doing? [laughter] I said, "Ed, is is there any food around here?" Like I hadn't eaten for a day or so. You know, I was expecting he's going to come back and say something. Is there any food around here? He goes, "Uh, probably something in the fridge." And then he goes right back to Yeah. It's like even know I was there. I and this went on for a while, you know, and then it just the whole thing is you couldn't make it up. You could not make these stories up. But anyway, he finally realized that I was actually there and I I did have some value at cleaning data and anyway, we got to be good friends after a while, but it was quite quite the experience. So anyway, >> amazing. Thanks for that, Dave. >> Yeah. >> Um Yep. Yep. Fun stories. >> Fun stories. Let me tell you one final Ed story. So Ed has this idea that we limit ourselves in our success in the markets because we don't believe that we are deserving of great success or we feel that we're not worthy uh or that we're not adequate or not good enough. there's we hold ourselves back. That's one of his psychological ideas. So always trying to clear our psychology and help us feel that we we do have the ability to succeed and we um if we have that mindset we will attract the success and if without that mindset it works very much against us. So, I got this. I understood this. Well, so we're now in Maui where he also had a house. And so, I'm in the back room again, still doing my stuff, getting ignored almost all the time. But, nonetheless, you know, come out, look at the charts in the afternoon, go with him to the grocery stores, you know, do errands for him because he didn't like to drive. So I would drive and he would tell me where he wants to go and he would sit there and and doze off. Well, he knew that I liked cookies to snack on cookies, you know, like cuz cuz we would sometimes go to a grocery store and he'd say, "Oh, what do you want to buy?" You know, get, you know, get some food. And so I would, you know, I'd always get some cookies to snack on. Well, one day after I'm sitting in back forever and I come out and he'd been just been ignoring me forever, but still we would go for walks on the beach. We'd talk about trading at this point and we were getting to be friends a little bit. Uh, and he was trying to instill in me that I need he said, "You know, Dave, one reason you're probably not as successful as you could be is because you're limiting yourself." And I said, "Yeah, well, okay, if you say so." So one day he said, "Okay, let's let's go down to Foodland." And Foodland is a grocery store. So in the evening and so we take a drive down to Foodland and I'm getting like perturbed that I'm with this guy now like for four months and he just barely even recognizes me. Um so we're going to Food Land. He says, he could tell that I was feeling a little miffed and a little discouraged. says, "Dave, why don't you buy yourself some cookies when we're in food land?" I said, "I'd love to buy some cookies." And you know, how many cookies can I buy? And he said, "As many as you want. Buy as many cookies as you want." I said, "Really, Ed? As many cookies as I want." He said, "Yeah, as many cookies as you want." So, it's like trying to be my buddy. So, we go into Foodland. Soon as I get in the door, I go up to the manager's desk and I say, "I want to buy every single cookie in the entire cookie row in the whole store." And this man's paying for it. He turned green. And the guy, the manager says to me, "Are you serious?" I said, "Yeah." He said he going to buy me as many cookies as I wanted, and I want to buy every cookie in this store. And Ed Ed lives by his word. He's a commodity trader. if he says buy a million beans at such and such a price, he's going to stick to it cuz that's what he said and I knew that. And so we bought every single cookie in the entire store and the guys brought these big pallets out, you know, and we they put them all in the back and when we left there was not a single cookie. It was an entire row of a grocery store, you know, all the cookies in the grocery store because he he gave me his word. I thought he's trying to teach me to have no limitations, you know. He says, "I can buy as many cookies as you want. You sure I double check it? You're paying for?" Yes, every cookie. you know, and I don't know what it cost him like $10,000 or something, which might not have been, you know, not a whole lot for him, but still, he never expected that. And but he was a man of his word. He kept his word. And then we, you know, he said, "What am I going to do with all these cookies?" I said, "Dad, why don't you donate them to, you know, the homeless shelter or something?" I said, "They're shelf stable. Someone will pro." And so he does. And then they interview him for the Maui newspaper like this benevolent guy donates cookies to us. >> He got the benefit out of it. >> Yeah, he got a big benefit out of it, you know. But ever since then, he never ignored me and and I gained his respect, [laughter] you know. So, >> how did how did you put all these cookies in his car? What happened? We didn't we kept them in back of the store and the next day the the vans came from the homeless shelter or the the the church or whatever and picked them up and took them away. >> Got it. [laughter] Funny story. >> But that's uh that just you know two things you know don't limit yourself and always keep your word you know or that story. >> Perfect. Well great Dave. Um that's going to be fun on Friday uh 48 hours from now. Um you'll be a great podcast guest. If I can already say that now. >> Well, I hope that I can say something that will help your audience either trade better or not lose as much money or be a better person psychologically. Thanks everybody for listening. This is the end of part two. I want to once again thank Dave for coming on to the open interest series. I know this has been a first for him. It's been fantastic speaking with him for the first time. I really enjoyed it and I'm sure that you can learn something valuable about trading from the conversation that I've just had with Dave. So, we'll also include some of the most important points and summarize them in our show notes. As ever, if you have any questions, please contact us. We're always happy to respond and we will I want to thank you again for listening and see you next time. Thanks for [music] listening to Top Traders Unplugged. If you feel you learned something of value from today's episode, the best way to stay updated is to go on over to iTunes and subscribe [music] to the show so that you'll be sure to get all the new episodes as they're released. We have some amazing guests lined up for you. And to ensure our show continues to grow, [music] please leave us an honest rating and review in iTunes. It only takes a minute and it's the best way to show us you love the podcast. [music] We'll see you next time on Top Traders Unplugged.