Trading Nest

Ed Seykota

b. 1946 · Futures · Known for: Pioneering computerised trend following

Strategy you can use

EMA Crossover Trend System

A simple exponential-moving-average crossover with ATR stops and strict position sizing, inspired by Seykota's early computer systems.

Style
Systematic trend following
Timeframe
Daily
Markets
Futures, stocks, crypto
Level
Beginner

1. Setup

  1. 1Plot a 15-day and 150-day exponential moving average (EMA).
  2. 2Compute 20-day ATR for stops and sizing.

2. Entry rules

  1. 1Go long when the 15 EMA closes above the 150 EMA.
  2. 2Go short (or flat) when it closes below.
  3. 3Optional: only take signals when price is above/below the 150 EMA.

3. Exit rules

  1. 1Exit on the opposite crossover.
  2. 2Protective stop at 3× ATR from entry, trailed as the trend extends.

4. Risk management

  1. 1Risk ~1% of equity per trade (stop distance sets the size).
  2. 2Expect a 30–40% win rate; profits come from a few big trends.

Common mistakes

  1. Abandoning the system during drawdowns.
  2. Tweaking parameters after every loss (curve fitting).
  3. Ignoring your own psychology.

An educational interpretation of publicly known principles, not the trader's exact proprietary method. Backtest and paper-trade before risking real money. Not financial advice.

The story

Seykota was one of the first to run trading systems on punch-card computers in the 1970s and was profiled in Market Wizards.

He is known as much for his views on trader psychology as for his systems, often saying that everyone gets what they want from the market.

Lessons for traders today

  • Trend following works when you stay consistent.
  • Your psychology shows up in your results.
  • Keep losses small and accept that most trades are small.