If find it fascinating that when I talk about the ABSOLUTELY most important things related to trading sucess, I get the most negative comments. There were several examples in my psycholgical laws.

First, when I talked about personal responsibility, the most critical aspect of success, I basically said that you are totally responsible for what happens to you because you created it. What happened? People strongly disagreed. Its mystical nonsense-- was the typical comment.

Second, I've said you can only trade what you believe and that what you believe creates your reality. I even gave my favorite quote from Harry Palmer which says that "If you believe you create your reality, then you do. And if you believe you don't, then you won't, which means you did." Again, people strongly disagreed.

Third, when I said that everything was psychological. It has to be because it all comes from your beliefs and your mental state, people again got upset.

And lastly, when I talked about the Secret (which really is a restatement of those laws), I was again accused of mystical mumbo jumbo.

However, these are the core principles of success. I won't accept anyone into my supertrader program unless I'm sure that they've at least accepted these principles. Sure, we do a lot of work around business plans and systems. But none of it works until you understand how you create your own experience and how you can only trade your beliefs about the market.

However, I can also accept that if you believe otherwise, you are right. Why, because you create your reality through your beliefs and until you understand this, you can easily become a victim of others or the system. You only start to have control over the process when you accept this.

Posted by Van K Tharp at 12:18 AM | Permalink | Comments (10) | TrackBacks (0)

I like to play the small tournaments. In fact, the site I play at has bonuses if you are one of the better players in the small tournaments. Well, the first day of this month, I played in four of these tournaments. I won 2 of them and placed second in one and third in the other. So then I was curious to see how I ranked. I just spend five hours and did very well, so I thought I should rank in the top ten. To my surpise, I didn't even rank in the top 250.

On about the 18th of the month, I noticed that the leader in that category had about 16,000 pts. When you win one of those little tournaments, you get 18 pts and second gets 14 pts., so I could work backward and see how much he'd played. I determined that it took 1.25 hrs to finished either first or second on the average. This means he had to placed 1st or second in 1000 tournaments (and 1250 hours) to get that many points. I figured out that if he slept four hours each night I and played three tournaments at a time (coming in first or second in all of them), then he could have gotten that many points. My edge is really figuring out the players and using logic and expectancy. And even then I only come in first or 2nd or about 1/3 of them. If I played in three at a time, all I could do is play expectancy and not have any particular edge.

Anyway, I thought something SMELLED and I wrote the site about it. The answer back was even more shocking. They said that some people play as many as 12 simultaneous tournaments. So if he played 16 hrs a day in 12 tournaments and won more than half of them, he could get that many points. But I can't even imagine playing that much. You are basically be making a decision every few seconds. But apparently that is what some people do. And I personally think it is insane.

And if people do insane things in poker, it really would amaze me to see what they do in the markets.

Posted by Van K Tharp at 12:02 AM | Permalink | Comments (2) | TrackBacks (0)

It's interesting because I've been talking about this law for a long time, but it's recently attracted popular attention because of a DVD called the SECRET. The Secret was already a best selling DVD in Amazon, but that has been reinforced even more by discussions on the Larry King and Oprah shows. Wow..

So what's an example of the Secret as applied to trading. If you want to be right and you constantly focus on avoiding losses, you'll end up getting lots of losses. I can even explain how this works...I call it the Loss Trap. If you focus on avoiding loss, you'll get losses. What will happen is that when you get a loss, you won't get out at your stop level because you don't want a loss. So you'll hang on, hoping it will come back. And when the loss gets bigger, it becomes even harder to take, so you don't. And eventually when the loss becomes big enough, you become a long term investor and try to just ignore it. And generally, the more the loss grabs your attention, the bigger it will seem.

I had another example brought to my attention recently. I did some real estate deals that turned out badly. A small investment that was supposed to bring me a 25% return or better, started costing me 100% per year and as I got upset at that, its started costing 200%, And it wasn't like a trading investment where I could just get rid of it. The more money I lost in the deal, the more I'd get angry at the person who put me in the deal and the worse it seemed. And suddenly, I realized that my experience was part of the law of attraction. What I was focusing on...being a victim of a lousy partner... was what I was getting. As soon as I realized that, I started focusing on how lucky I was to be getting out of the investments and all the lessons I'd learned. Last weekend I got offers on two of the houses and was just told by my broker that there was a lot more interest in the remaining houses.

Bottom line... what you you focusing on as a trader? Whatever it is, that's what you are probably getting in your life. So start focusing on what you desire and be grateful for getting it. It's an amazing force and it works in trading just as much as every other area of your life.

Posted by Van K Tharp at 05:45 AM | Permalink | Comments (5) | TrackBacks (0)

I've been working on the software review chapter of the Definitive Guide to Position Sizing for about two weeks now. I started the chapter with the idea that if you wanted position sizing software, you really had two choices. The first choice was to learn to program yourself In Excel and do everything in Excel. And that's still an option.

The second choice was to find someone to help you custom develop software for your trading business. The latter choice amounts to a several hundred thousand dollar commitment with no guarantee that you'd have anything but a software mess at the end.

However, after looking over reviews of a number of packages, looking at the web sites, and in a few cases, actually looking at the software myself. I think there is hope out there. I was actually suprised at the number of packages that have been developed by people after reading Trade Your Way to Financial Freedom.

There are some fairly good simulators out there -- Market system analyzer and Trade Sim both come to mind.

There is software with bulit in systems plus position sizing that requires little programming. MT Predictor and OmniTrader both come to mind.

There is some software that allows you to play with some pretty good systems, optimize, and do both simulations and position sizing with very little programming requirements. Here the software of choice seems to be Trading Blox (Turtle or Pro editions.)

There are two packages at the $3000 level that allow you to develop much of what you need if you are willing to program.. These including Trading Blox Builder and Mechanica Standard. Trading Blox has the advantages desribed above, but if you need to get into programming, it looks like a steep learning curve. Mechanic Standard is the NEW windows edition of Trading Recipes, but with many improvements. Trading Recipes was very easy to program and my understanding is that Mechanica Standard will be equally easy and it includes a number of built in sysems.

And there are even high end packages designed for trading businesses -- Mechanica Pro and PowerST. These are both probably a better than spending a lot of money for custom software and both are being used now. Mechanica Pro has been in Beta Testing for four years and is currently involved in managing billions of dollars.

Anyway, my overall conclusions is that position sizing software has evolved a lot. I now believe that most of you can find some software package out there that is right for you and that does position sizing.

I'll have a lot more information for you when the Definitive Guide to Position Sizing comes out. When? I'm somewhat of a perfectionist, so my guess is 4 months after I finish it, but certainly some time in 2007.

Posted by Van K Tharp at 06:44 PM | Permalink | Comments (1) | TrackBacks (0)

The business section of USA on Friday had a feature article that said the Bull Market is just about over. They basically said 1) we've been in a four year bull markets since Feb 03; 2) bull markets seldom go beyond 4 years; and 3) the current uptrend of 9 months without a significant decline was almost unpecidented. And all that leads to a conclusion that the stock market is going down.

But USA isn't the only one. Steve Sjuggerud (whose 1-2-3 model finally turned from red to yellow light mode in January, signalling stocks will go up) now says we're in for a dismal 7-8 months for stocks Jeff Clark, who writes a trend following report called the Big Trend, also predicts a market downturn. Jeff isn't looking at trends at all. Instead he's looking for highly undervalued stocks that have the potential for a big move and if you look at what he's recommending, their charts look very "anti-trend."

So let's look at this four year bull market. First, it comes what might still be called the early stages of secular bear market in which valuations go down. And during the last four years, the PE ratio of the S&P 500 has actually gone down, confirming the secular bear effect. If this four year rally had come during a secular bull market it probably would have been 2-3 times as big. And this price rally comes during a time period when the dollar has moved down 15%, weakening the overall impact of the upmove. Furthermore, foreign stocks have generally outperformed the S&P500 by a wide margin.

So is the "bull" market over? If USA headlines say its over, then it probably has enough steam to at least last until all of this years pension money has flowed into the market (i.e., until May). Futhermore, I'm having trouble finding many negative efficiency stocks. But that says be long... it doesn't say run for the hills. So in my opinion, we're still in a huge secular bear market, but the current upmove (in which valuations are still going down), could easily continue through May.

But I'm just a psychologist/trading coach. I'm not a market predictor. What do I know.

Posted by Van K Tharp at 01:58 PM | Permalink | Comments (1) | TrackBacks (0)

Richard Dennis made a bet with Bill Eckhardt that he could teach his trading methods to anyone. However, what happened after that didn't answer the question. First, over 1000 people applied to be a Turtle and they were all given a short test. Second, the top 40 candidates were then screened with an in-person interview. Third, of the ten initially selected, some didn't make it. Sure, the Tutles as a whole are thought to indicate that Dennis won his bet. But if the bet involved teaching anyone, then it was clearly a failure.

I've always believed that if anyone can do something then you can teach someone else to do it to. But even I have certain requirements in my supertrader program. I'm looking for people who are committed, who believe that they create their own trading results, and who have enough money for trading for the program to make exonomic sense. My bias has definitely shifted to "if you have certain qualities, then you can be trained to be a great trader."

Posted by Van K Tharp at 04:46 AM | Permalink | Comments (3) | TrackBacks (0)