Ed Seykota is a world - class trader and can be regarded as one of the top trend - followers. As revealed by Michael Covel in his book "Trend Following", he increased the client's $5,000 to $15 million in 12 years, a 2,500 - fold increase in returns.

Seykota attributes his success to good money management, timely stop - loss, and a self - developed technical analysis system. He believes that fundamental analysis is just a psychological game, merely putting together publicly available market information to have a minor effect.

An admirer of Seykota deeply studied his methods and combined with his own trading experience to compile a series of practical trading tips:

1. Order of Importance of Elements: Long - term trend > Current chart pattern > Finding good buying and selling prices. To understand the market, one needs to clarify the long - term trend, chart patterns, value areas, and market dominators before considering the trading position. For example, I prefer bullish chart patterns such as ascending triangles.

2. Stop - loss and Profit Lock - in: Set protective stop - loss when entering the market and move the stop - loss as the trend develops to lock in profits. Since trading profits and losses are unpredictable, and the extent of a favorable market trend is uncertain, moving the stop - loss can help capture major trends and maintain the initiative.

3. Set Stop - loss Before Trading: Assume you might be wrong before trading and identify the position where "price breaks the trading setup", that is, where significant losses may occur, and set the stop - loss there. This concept applies to all trading scenarios like breakouts.

4. Adapt to Market Changes: The market is constantly changing, with various fluctuations and patterns, and there is no universal strategy. It is recommended to defend during adverse market conditions. For example, trend - followers need a good risk - management strategy when entering a range - bound market. Also, adjust strategies according to market conditions, such as staying away from chaotic markets, buying low and selling high in range - bound markets, and looking for breakouts in low - volatility markets.

5. Make Stop - loss Effective: Although there is a trading plan and stop - loss setup, it is easy to interfere with the stop - loss in real - time trading. Exiting the market when the price is unfavorable but has not reached the stop - loss seems to reduce losses, but actually breaks the plan and makes the stop - loss ineffective. One should respect the stop - loss.

6. Fund and Risk Control: Speculative funds should not exceed 10% of liquid funds, and the risk of each trade should not exceed 1% of the account funds. A small risk proportion can better withstand asset fluctuations; otherwise, it is easy to over - focus on funds and exit prematurely. The proportion of funds invested varies from person to person, and the principle of being able to sleep peacefully can be used to judge risk controllability.

7. Limited Role of Fundamentals: Trend - followers should focus on prices, as fundamentals have limited effects. First, fundamentals may deviate from prices, and correct fundamental analysis may not lead to profitable price movements. Second, by the time fundamental news is released, the best entry point may have passed. Third, it is difficult to manage risks based on fundamentals, while it is relatively easier for technical traders.

8. Avoid Ineffective Advice: Trading is a matter of probability, and mistakes are common. When hearing absolute terms like "guarantee", one should stay away from the speaker, who may have ulterior motives. Professional traders use more uncertain terms because the market is unpredictable.

9. Use Pyramid Trading with Caution: Pyramid trading means gradually adding positions as the market moves in your favor, which seems promising but requires caution. First, there should be at least 2R of unrealized profit to withstand pullbacks. Second, determine the exit point, such as using Donchian channel breakouts as triggers, adjusting positions according to risk and profit, and clarifying the exit method.

10. Comprehensively Consider Trading: Trading is like running a restaurant. One cannot only focus on entry but also needs to consider aspects such as the risk of each trade, trade management, exits for profitable and losing trades, and the trading market.

11. Execution is Key: The concept of trend following is simple, but execution is difficult. Since the market is not always in a trending state, losses may occur most of the time. Without proper expectation management, one may think trend following is ineffective. After finding an advantageous strategy, firm belief and discipline are needed for execution.

12. Find Your Own Style: Traders need to find a trading style that suits them. Otherwise, they may abandon the existing strategy at a certain point and seek a new one, which is costly in terms of time and effort.

13. Accept Trading Randomness: Although trading results are random, it seems contradictory to long - term profitability. However, like a casino, although some lucky gamblers may win, the casino's skill advantage ensures long - term profitability. In trading, technical methods and patterns are the advantages for long - term profitability.