Don't Get Stuck Trading Eggs

Ed Seykota likely wouldn't have made $4.2 billion by just trading eggs...

Seykota got his first job on Wall Street in the early 1970s. As an analyst, he covered the egg and chicken market.

Like many junior analysts, Seykota was far from an expert in the field he covered. And he struggled to give investors advice on trades he knew little about.

So he took a risk. He approached his bosses... and asked if he could use the computers to recommend trades.

But at the time, computer systems were generally reserved for accounting departments. And the tech and accounting teams didn't take kindly to the idea of an analyst using their equipment to test unproven strategies.

Seykota had hit a dead end, but he didn't give up on the idea...

Instead, he found another brokerage... one where folks weren't so worried about who used the computer.

Seykota finally had the room to test his latest theory – that a commodity's past price trend could predict its future trend.

For six months, Seykota spent his weekends running simple back tests. As it turned out, his theory was correct.

And he knew it could make him a lot of money...

Seykota branched out on his own and began applying his strategy to customer accounts. One soared from $5,000 to $15 million over 12 years. Seykota himself built a fortune of more than $4 billion.

And the strategy was fairly simple. He was mostly just following the trend.

While the strategy evolved over his 50-year career, the main idea remains the same...

"The trend is your friend."

You're probably familiar with that line. But there's a second half of the saying...

And it separates a world-class trader like Ed Seykota from the many failed analysts we've seen over the years...

The trend is your friend, until the end, when it bends.

Seykota understood that the trend's existence won't guarantee success in momentum trading. You also need to know when the trend is breaking... and know how to get out fast.

Our research shows that once a stock doubles, it's basically a coin toss whether it will double again or not.

So knowing to follow the trend is only half the battle...

That's why we use Uniform Accounting – our proprietary method for eliminating accounting "noise" – to filter out the companies whose trend has broken. It improves our odds of beating the rally.

Following the trend is good enough to keep up with the market...

But the only way to truly outperform the boom is to know which stocks will drive the market higher... and avoid the ones due for a pullback.

Regards,

Joel Litman
September 24, 2025

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