I said that I'd use this Blog partially to answer questions. Well, the first one is quite interesting. It's "How do I discover, first, and then set to achieve, second, what is truly that I want to be?"

The universe gives you a real clue about this and that is to do what you love to do. However, sometimes this is difficult to find unless you undertake a core program of working on yourself.

First, there are a number of such programs and I'd recommend you start on it. And when you reach the point at which you can say to yourself, "Wow, I've got a lot of stuff to work on, then you'll know you've made some progress."

I'd almost call this a spiritual journey. And what you will find happening is as you progress along the journey, you'll just gravitate toward what you love to do and be.

Incidentally,my friend John Strelecky has put out a book and a video on the topic of why are you here and what are you big five in life. This program is an excellent starting point for finding your passion.

Posted by Van K Tharp at 10:21 PM | Permalink | Comments (2) | TrackBacks (0)

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)

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)

I've talked about inefficiences, about how people play a trading game and a money game according to rules made up by someone else, and even trading fundamentals which most people have trouble following. All of this leads to psychological rule #11 -- people will do the opposite of what it takes to be successful.

I even think this might apply to trading recommendations. For example, Steve Sjuggerud likes to recommend what is highly undervalued, hated, and starting to go up. The more something fits that criteria, the more people are not likely to take the recommendation. He gives the example of rare coin recommendations about which he says people say "I've taken most of your recommendations except those coin ones."

Now contrast that with what some analyst might say on CNBC. He or she might say, "My favorite stock is XYZ" and people will flock to it in droves. In fact, some good short term traders say they listen to CNBC just to find ideas to short....the one's people flock to in droves.

My guess is that the closer a recommendation is to a "Holy Grail" recommendation, the less people are likely to take it. As a matter of fact, I made one in one of my posts here. I didn't give any specifics, but what I said didn't even produce any comments. And that makes me feel even better that I've invested in that area.

And I expect that some of you might even comment... what was it. But if I told you, you wouldn't act on it anyway.

Posted by Van K Tharp at 10:36 PM | Permalink | Comments (2) | TrackBacks (0)

Trading is a game with certain rules for winning and certain rules for how the game is played. And if you don't know this, then you are playing by other people's rules and probably have little chance of winning. Who makes up the rules? The answer is the people with the most money at stake.

Now, if this is all new to you and you'd like to know the rules you are playing by, then I'd suggest that you spend a day reading back issues of the Wall Street Journal and perhaps a week listening to CNBC. You also might go to the bookstore and pick up a couple of the most popular trading books (my books won't work for this purpose). When you'd done with all of this, then write down what you think the rules for trading might be.

Your rules would probably be something like:

1) Success is created by picking the right stock.
2) Find them and hold them.
3) Diversification is the key to not losing money.
4) Some stock pickers are better than others and they must have a magic secret.
5) If you found this secret, you could make millions in the market (even with a $5000) account.
6) And if you trade, you need to make lots of trades, because the costs become much lower.
and winning in the market involves making 100s of millions of dollars.
7) It doesn't take a lot of work to make money in the market, you just have to find the right investments or the right money manager.

If you haven't figured out that trading is a game, then you are probably playing by these rules. And they are dangerous. Most people lose money playing by them because they were designed (by the people who made them up) to make them a lot of money.

However, once you understand that trading is a game, you can (within limits) make up your own rules for how to play the game and especially your own rules for how to win the game. People who do this usually become winners. And if you'd like to understand a set of rules that you just might be able to win with, then I'd suggest that you look at the new edition of Trade Your Way to Financial Freedom.

Posted by Van K Tharp at 03:32 PM | Permalink | Comments (2) | TrackBacks (0)

I've stated this rule before in prior posts, but I'm restating it again because it is an import rule as well. You can look at earlier posts for more about this subject. However, I wan't to make two important subpoints here. First, you can only trade a system that fits your beliefs, so you must look at those beliefs carefully. Are they valid beliefs? Are they your beliefs? And while you can find facts that support every belief and usually have them or you wouldn't have the belief, you need to ask yourself, "Are my beliefs useful? Do they help me make money?" (And making money may not be your criteria for usefulness).

Second, beliefs that are supported by strong emotion are usually difficult to change if they have a strong charge on them due to some psychological trauma. Even if you decide they are not useful, they'll be difficult to release. You must release the charge on them first before you can change them. And this is part of what is necessary to eliminate self-sabotage.

Posted by Van K Tharp at 04:03 PM | Permalink | Comments (0) | TrackBacks (0)

Some people have asked me, "how can I get to the depths of my self-sabotage and clear it out?" Well rules 7 and 8 both address that. First, you need self-responsibility. You need to say, "it's me. I created this." That means taking ultimate self-responsibility.

Second, you need to examine your emotions. Most people who are attracted to trading tend to be very logical and tend to avoid their emotions. This actually requires years of avoiding looking inside at what's going on inside. It takes practice and it takes much more practice to undo the habit. So start looking at your emotions and notice how much of your behavior is control by your emotions.

Third, you need to start a practice of working on yourself. One example is my Peak Performance Course. People tend to go through it once, but it is a lifetime exercise, not a one time exercise. And the first time through most people totally skip what they need to work on the most.

Fourth, you need to be totally honest with yourself. Any blame, justification, or guilt will tend to keep you from seeing the solutions.

And lastly, you need to commit to a lifetime of working on yourself. I've been doing it for over 25 years and I'm just now discovering elements of self-sabotage and that includes elements that I have not been willing to look at before. At it's not that I suddenly have insights, because that happens on a regular basis when you commit to working on yourself as a lifetime work.

Ans who knows, by commiting to a lifetime of working on yourself, you might save yourself lifetimes.

Posted by Van K Tharp at 07:39 AM | Permalink | Comments (2) | TrackBacks (0)

Whenever I work with a client who is having problems with self-sabotage -- such as a psychological ceiling, a lot of fear, procrastination, perfectionism, etc. -- I always know that the problem is NEVER what the client thinks it is.
Usually, I run through a check list of things such as:

1) Does the client understand Tharp fundamentals?
2) Does the client have a business plan?
3) Does the client have a decent system, with an acceptable expectancy?
4) Does the client have a have emotional reactions?
5) Does the client follow the ten tasks of trading?
6) Any trading trauma?

And the list goes on and on. And for some people, I need to check everything.

My experience always is that something like not executing trades properly is the result of some emotional trauma that usually happened in the first five years of life. And most of the time the client has totally forgotten about it. But when the experience is relieved of its charge, then he or she can do the things necessary to correct the problem.

Posted by Van K Tharp at 09:11 AM | Permalink | Comments (2) | TrackBacks (0)

Let' me repeat the title. Repeating the same mistake over and over again is self-sabotage and still holds, even when you don't know you are making a mistake.

So let's look at when you don't know you are making a mistake. If you blame something/or someone else, you won't recognize how you made a mistake. If you justify what happened (oh, the market is really crazy!), then you won't know you are making a mistake. If you blame yourself (I'm a stupid idiot!), then you won't know you are making a mistake. You must recognize what your contribution was and call it what it is.

And what are example of big mistakes. Entering a trade because someone else tells you about it. Entering a trade without a system. Entering a trade without a predefined exit point. These are mostly what I call "Tharp" fundamentals and I could go on and on, but they are all mistakes.

And when you repeat them, its really terrible.

Posted by Van K Tharp at 09:52 PM | Permalink | Comments (0) | TrackBacks (0)

One of my current areas of research is in the area of trading mistakes. What the average R-multiple of a mistake? Do some mistakes have more impact than others? While I don't know the answer to the last question yet, our preliminary results suggest that a mistake might be worth about -4R. So just think about it. If you have a system with a 1.2R expectancy that generates about 50 trades per year, then you can expect to make about 60R in the year. But if you make 1 mistake per month (1 mistkae per four trades), at the end of the year you'd have 50R in profits less the impact f your mistkaes (48R). Your net results is +2R -- pretty terrible. Yet you only made one mistake per 4 trades, so on that basis you are 75% efficient. However, in terms of R you only got 2R out of a possible 60R generated by your system, so you about 3% efficient.

The key to your success is clearly moving from 4% efficiency to 100% efficiency. Most people spend a lot of time trying to improve their system. But quite often it's not the system at all -- it you. What's your efficiency?

Posted by Van K Tharp at 10:53 PM | Permalink | Comments (2) | TrackBacks (0)

Psychological reserach over the last 20 years has proven that human beings are very inefficient decision makers. This is because we have so much information to process that we must use shortcut mechanisms to deal with it all. Psychologists call these mechanisms judgmental heuristics and I've documented a lot of them in the new edition of Trade Your Way to Financial Freedom. However, the key to my coaching is help you make yourself as efficient as possible. I think the trend of Behavioral Finance-- to try to predict the market through understanding these inefficiencies.-- is ridiculous.Your job is to make yourself as efficient as possible and you can do that through eliminating mistakes, but that is the topic of rule 4.

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

My second psychological rules is that success requires commitment. If you are 100% committed to success then the universe will help you create miracles to get it. But if you are not committed, then you will find lots of distractions that will seem like major roadblocks.

I've seen this over and over again with my client and I won't acept someone in our supertrader program that I do not believe is committed. I know when they have it that they succeed in the program and if they don't there will be no success.

Posted by Van K Tharp at 09:32 AM | Permalink | Comments (0) | TrackBacks (0)

I thought it might be interesting to do a series of rules of the next posts on the Blog. I thought, I'd do 10 psychological rules, 10 business planning rules, 10 system development rules, and perhaps 10 miscellaneous rules. That might fill this Blog for some time. Won't promise that I'll post that much but let's start out with the first of the 10 psychological rules.

RULE 1: You create your trading results. If you assume that you are totally responsibile for your trading results, then you'll be continually eliminating mistakes. If you blame your results on someone or something else... if you justfiy your results... if you blame yourself, and any of 1000 other things you could do besides taking totally responsibility for your results, then you'll be hinding mistakes and repeating them over and over again.

But the way, most of you can probably buy into this rule when I phrase it this way. But when I say correlaries of this rule (i.e., everything is psychological or you are totally responsibile for your results) then most people will tend to disagree. Nevertheless, it is all the same. And it is the NUMBER ONE RULE. When you master this one, you have a chance.

Posted by Van K Tharp at 02:30 PM | Permalink | Comments (0) | TrackBacks (0)

What's your trading efficiency? Well if you have a system that gives you 80R in a year, but you only capture 40R in profits (losing the rest in mistakes), then you are 50% efficiency as a trader.

And from what I've seen that might not be that bad. Many traders are so inefficient that they can turn a winning system into a losing system. That means the system might give you 80R, but you make so many mistakes that you actually lose money.

You might not take some trades.
You might take some discretionary trades that lose money.
You might not keep your stops.
You might get out of a winning trade too soon.
You might not plan for some worse case contingency that comes along.

And all of these mistakes can make you a very inefficiency trader. And most inefficient traders repeat the same mistakes over and over again.

Posted by Van K Tharp at 08:06 AM | Permalink | Comments (5) | TrackBacks (0)

What's your trading efficiency? Well if you have a system that gives you 80R in a year, but you only capture 40R in profits (losing the rest in mistakes), then you are 50% efficiency as a trader.

And from what I've seen that might not be that bad. Many traders are so inefficient that they can turn a winning system into a losing system. That means the system might give you 80R, but you make so many mistakes that you actually lose money.

You might not take some trades.
You might take some discretionary trades that lose money.
You might not keep your stops.
You might get out of a winning trade too soon.
You might not plan for some worse case contingency that comes along.

And all of these mistakes can make you a very inefficiency trader. And most inefficient traders repeat the same mistakes over and over again.

Posted by Van K Tharp at 08:06 AM | Permalink | Comments (5) | TrackBacks (0)

The following comment was just added to my previous post, and although the author doesn't realize it, the comment proves my point as well. So here is the comment.

OK so if I have the world's most rock solid psychology how does that aid me on knowing where to buy and sell? Obviously you need a good method too right? Or what if I have terrible money management practices i.e. I take a dollar profit, but use 3 dollar stops? That won't work either. So all 3 are important. I disagree that psychology is 100%.

The only reason someone could post this comment is because they believe that all three areas are important. Whatever you believe, you are right. And that proves my point that everything is 100% psychological. One of the keys to everything, and it forms the basis for my consulting about systems, is that you can only trade your beliefs about the market. Those beliefs (whether you made them up or were indoctrinated in them or actually adopted them because they seem useful) are the basis for everything.

Here's an interesting quote from Harry Palmer, the founder of Avatar. "If you believe you create your life out of your beliefs, you are right, unless you don't believe that, it which case you won't, which means that you did."

Posted by Van K Tharp at 05:28 PM | Permalink | Comments (3) | TrackBacks (0)

Some people say that trading is 10% system, 30% position sizing, and 60% psychology. While I agreed with that assessment at first, I now believe that trading is 100% psychology -- 100% mental. Here's why?

First, I'm an NLP modeler. To duplication success you have to find a number of successful people and determine what they do in common -- what are the common tasks? And then, in order to teach others to perform the tasks the same way, you need the three ingredients of each task. Those ingredients are the beliefs (isn't that mental), the mental states (isn't that mental), and the mental strategies (also mental).

Let's take the simple task of picking up the phone and acting once you see a trading signal. We're not robots, because we have to process that signal. And this is what happens. First you must see the signal and then you must recognize that is it a familiar signal that you should take. Then, because we act from feelings, we must feel good about it. And then you act. Recongizing that it is familiar and feeling good proven that even the simple task of acting on a signal is psychological/mental in nature.

Bottom line -- trading psychology is very, very important to your success.

Posted by Van K Tharp at 10:46 PM | Permalink | Comments (3) | TrackBacks (0)

Transform: To change markedly the appearance, form, nature, function, or condition—usually for the better.

Transformation is an interesting phenomenon. In the transformation process, your external circumstances may not change at all. That is, you may still be a trader, trading the same markets with the same system. Yet somehow, your experience of trading seems different. Why?

Transformation occurs as you break down your boundaries of who you “think you are” and expand them. For example, as you go through the process of releasing the feelings or emotions that you have stored deep inside, transformation can occur. As you develop useful beliefs about yourself, the transformation process will occur. As you move from relying on beliefs that you have learned and feel protective about i.e. “this is just the way it is” and move to relying on what you instinctively “know” deep inside - transformation will be occurring. As you move through the process of self-discovery, and learn more about yourself, you will start to transform.

Transformation doesn’t just happen to you (although it can, but this is usually when life changing events occur). It takes work and an ongoing commitment from you. Ultimately, this means that you will trade better because you will trade with less ego involvement.

But most importantly, transformation means that your entire life will move forward. The circumstances that surround you will not necessarily change, but how they appear to you and how you respond to them will be significantly different.

Posted by Van K Tharp at 02:01 PM | Permalink | Comments (2) | TrackBacks (0)

Obviously, if you make a mistake and it turns into a winner, you'll count that too. It's a positive R value, rather than a negative one. But these are the most deadly because they make you think it's okay to make a mistake. And even when you count winners in your mistakes, I still think you'll find that the average mistake is worth 2-4R against you.

It's a little like poker. Let's say I'm betting with an AK in my hand and an AK on the board. Someone is better against me with pocket sixes. (This actually happened). I raise their bets and they still call. Their bet is absolute ridiculous. First, they might think I'm bluffing, but if they paid any attention to me they'd know I'm a conserative player and I usually have something if I'm betting. Thus, they have to know they are behind in the hand.
Secondly, there are only two cards left in the deck (two sixes) that will beat me. They have a about a one in 20 chance of beating me but they are still calling my bets. Really dumb. But what happens. On the river another six comes up and they win a huge pot. I'm a little upset because an idiot with a lot of luck beat me. But they are reinforced to do the same thing over and over again to win a big pot. However, THEY WILL LOSE 19 out of 20 times.

That's what happens in the markets when you make a mistake and you make money. You are reinforced to do it again. And that's why its so important to keep track of your mistakes.

As for the person who said this is not a useful exercize.... we'll my job as a coach is to teach people what works. Typically, people who don't do what the coach says are kicked off the team. However, free coaching, when you are not on a team, usually isn't valued. I once told a firm that if they kept doing what they were doing they'd go bankrupt. They disagreed and went under ($11 million lost) in about six months. Perhaps if they'd paid me a million for the adivce they'd still be in business.

Posted by Van K Tharp at 08:43 PM | Permalink | Comments (1) | TrackBacks (0)

To trade well you need to overcome the emotional hurdles that tend to get in the way. This means having a business plan, having systems with well documented rules that are tested, and then having the discipline to follow those rules. When you have this, then you have a chance to follow the discipline that will lead to success.

However, everyone has emotions that tend to get in the way of following your rules. This comes up occasionally in long term trading. It's comes up much more in swing trading. And it's very noticeable in day trading. And then when you really notice it -- or at least I do -- is in playing poker. You have a few seconds to make a decision but you are still getting over your feelings from when someone else made a stupid bet against you and was rewarded on the last card with an exceptional stroke of luck. You did everything right and that person was rewarded.

That's a lot like following your system...overall, you'll make money. But sometimes the trade just goes against you. However, in the short term it just feels like that other guy did something stupid and was rewarded and it's not fair. But they key here is to make sure that you don't do anything stupid while you're feeling emotional to ruin the next hand. And this is one of the main challenges of poker and of good trading.

Posted by Van K Tharp at 04:43 PM | Permalink | Comments (1) | TrackBacks (0)

Do you consider yourself "lucky" or "unlucky" or neither? Well, psychological researchers got two groups of people, a lucky group and an unlucky group. Each group was asked to skim through a magazine and count the number of pictures in a magazine. However, on one page of the magazine, about a third of the way through, one of the pictures had the following printed on it. "Stop counting now there are 67 pictures."

The results were quite interesting. People in the lucky group found the picture and stopped counting. Those in the unlucky group didn't. The results, in my opinion, prove even more how your beliefs shape your experience of reality.

Posted by Van K Tharp at 03:47 PM | Permalink | Comments (4) | TrackBacks (0)

One of my favorite quotes comes from Harry Palmer, the founder of Avatar. Harry makes the following statement.

"You experience what you believe, unless you believe you won't, in which case you don't, which means that you did."

That statement is the essence of understanding my comments below on beliefs and the market. It also is the essence of the statement that you don't trade the markets, you simply trade your beliefs about the market.

Posted by Van K Tharp at 11:24 PM | Permalink | Comments (0) | TrackBacks (0)

All of my comments on the economy and the big picture have to do with my beliefs. Thus, statements such as 1) the U.S. is bankrupt; 2) Gold could climb as high as the Dow Jones Industrials; 3) the dollar could be 35% overvalued right now; 4) a recession is right around the corner, etc. are all MY BELIEFS.

If you don't believe them, then they should have no impact on you except to say, "Van is really out there!" If you do believe them, then then impact they have upon you will depend upon the "meaning you give them" and "the amount of charge (emotional energy) you have on each of them. For example, these beliefs with a lot of charge might be interpreted to mean, "The world as I know it is coming to an end and there's nothing I can do about it. I'm doomed." And then you feel depressed.

However, that's not the way I take it. I look at those beliefs as indicating what could happen and I'm constantly looking for information to prove me wrong (or that the scenario is starting to play out). I also believe that every crisis has within it lots of opportunity...so I'm looking for opportunities to profit. And I also know that some of it is real (i.e., the US has a debt and future obligations of $67 trillion) while other things are just what might happen in the future as a result of that debt. For example, I believe we're in a secular bear market that will last another 10 years, but if valuations (PE ratios) start to move up, then I'll know that I could be worng.

So everything I say is my belief. It's not reality. It's just a filter to reality. And it's meaning for me is the meaning I give it. And the same also holds for you.

Posted by Van K Tharp at 11:11 PM | Permalink | Comments (0) | TrackBacks (0)

In response to my comment that part of the reason we trade is the challenge of losing, one person commented, "Who wouldn't want to win 100% of the time?" But if this was your response, then I think you missed the point of my discussion. Yes, everyone would like to step into a situation in which you could never lose. But how long would you continue to regard it a challenge? How long would it hold your interest? Perhaps you are driven by money so you'd trade until you had a billion dollars...or even 100 billion. But at some point, you'd decide, "What's the point?"

It's the challenge of being the best that drives people. And if there is no challange, you 'd move on to some other endeavor that creates a challenge. I certainly wouldn't play poker if I won every hand. I'd find it boring. And if I made money on every trade, I'd probably trade enough to have a comfortable income and that's it...I'd find some other challenge.

In fact, I aleady play poker with a group of people at an entirely different skill level. So to keep it somewhat challenging, I basically tell them that I'll never bluff. And even then I still win most of the time and as a result, it doesn't have the same charge as when there is the possibility of losing everything on a given hand.

Think about it because what I'm talking about says a lot about the human condition.

Posted by Van K Tharp at 05:56 PM | Permalink | Comments (0) | TrackBacks (0)

Self-sabotage is making the same mistake over and over again. The problem is that many people who do this don't even know they are repeating the same mistake. Why? Because (1) they can blame someone else for their results -- It was my broker's fault. Or (2) they can justify the results -- My system is no good or its hard to make money in this market. Or (3) they can even blame themselves without recognizing the error by saying something like, "I'm a stupid idiot."

If the problem is something like constantly overtrading or not keeping your stops or entering on a whim, etc.,then deciding you're a stupid idiot does nothing to fix it. Stopping the mistake is what fixes it. Or dealing with the underlying problem is what fixes it. And that's what we do at www.iitm.com. We help you recongize mistakes, fix them, or deal with the self sabotage.

Posted by Van K Tharp at 05:06 PM | Permalink | Comments (1) | TrackBacks (0)

If you can easily develop a system that makes 121R in a YEAR, then why don't most people make 100% each year?
The answer to that question is simple. PEOPLE MAKE LOTS OF MISTAKES. I define a mistake as not following your rules and if you don't have a business plan or written trading rules then everything is a mistake.

So here is how it works. Let say each mistake is worth 2R. Suppose you make 1 mistake each week. In a years time, you make 104R worth of mistakes. If your system only makes 121R - then because of mistakes you only make 17R. And most people, during a large drawdown, usually abandon the system totally and think they cannot trade it.

With that in mind, my whole Peak Performance Program is designed to teach people how to avoid repeating mistakes. And if you keep making the SAME mistakes, then that's what I call self sabotage. But that's another story.

Van

Posted by Van K Tharp at 12:50 AM | Permalink | Comments (2) | TrackBacks (0)