Tharp's Thoughts Weekly Newsletter (View On-Line)
Two Excellent Trading Systems Workshops in October:
Forex Systems and Swing Systems
In just a few weeks we will host the Forex Trading Systems workshops with two days of live trading and a three-day Swing Trading Systems Workshop.
They are scheduled back-to-back so you can attend both with just one trip!
The Forex Trading Systems Workshop teaches three specific trend-based trading systems. These systems can be traded in various timeframes and can be traded across a wide range of currency pairs and has two days of live trading as optional add-ons.
The Swing Trading Systems workshop teaches you five robust swing systems. Learn to systematically trade ETFs and large caps to reap the benefits of their big numbers.
We can already feel the energy in the air that the dynamic duo will create!
You'll leave these workshops packed with new ideas, excited about trading and with new connections with like minded traders!
It’s All Made Up
As Byron Katie would say, “Who would you be without your story?” My goal for every Super Trader 1 candidate is to realize that your experience of life is all made up. When you get that, you can either make up something much more useful or you can go beyond it – like Neo did in the original Matrix movie. That idea is a little difficult for most people to digest, but I’m going to help you at least understand that it is all made up. As a result, why don’t you just make up useful things?
So let’s get into the idea of making up reality. This might be a new idea for some readers but as I’ll explain, it certainly is not a new topic.
First, linguists have long studied language which involves symbols representing things. Alfred Korzbski in 1931 gave a paper at the American Association for the Advancement of Science in New Orleans in which he made the most famous statement, “The map is not the territory.” He later expanded upon this concept in his famous book Science and Sanity (1944). Korzbski’s purpose for publishing his work in this area was to help people put more precision into language and make it more exact so that the world within would more closely resemble the external world. In other words, he wanted to help make science more exact.
Linguistics is the study of how language is a symbolic interpretation of reality and is internally created. Noam Chomsky in his 1957 doctoral dissertation pointed out that we handle the vast amount of information impinging upon us by generalizing, deleting and distorting. Basically, people take similar input, delete much of it, then they distort and generalize the rest. It’s no wonder that one’s internal map of reality is not the real territory.
Korzbski’s key principle that “the map is not the territory” also became a fundamental presupposition of NeuroLinguistic Programming. First, you have a sensory experience of the world. Your perception is not the energy that is out there, it is how your sense receptors translate that energy internally. For example, the reason you see colors is because the eye has cone cells that translate light into red, green and blue images and all of the other colors that come from mixing those together. Then your brain re-presents the color information to you.
Here’s a demonstration of how the representation process works with a simple example. Let’s say you hear the word dog. What do you picture? Everyone reading this has a different picture in mind. That’s because the word dog is symbolic and you use the symbol to RE-PRESENT information to yourself (differently than others) as a representation of the outside world. But your representation is not the outside world. It’s just a representation.
For example, NLP training includes learning the NLP Precision Language model which covers one topic called nominalizations. When you turn a process or a verb into a noun as if it is an object, you’ve nominalized it. The rule for nominalizations is that if something seems to be a “thing” but you cannot put it in a wheel barrow, then it is a nominalization.
While this article is full of such nominalizations, let’s look at an interesting and easy to understand example - reality. There is no such “thing” as reality because you cannot put reality into a wheel barrow. And yet this whole article is about how internal reality (a nominalization) is not the same as external reality.
Reality is a process whereby you believe some things are real. The process of reality is ongoing. We talk about reality as if it is a thing but it’s a process that has been turned into fixed thing, a nominalization. I’ve given you a brief picture of how internal reality is created (with more to come) and we just assume that it is not the same as the energy impinging upon us that we call external reality. But external reality is a process made into a noun. It doesn’t exist.
Before we get into the more interesting aspect of this and how your “reality” is created, let me just mention that some aspect of almost every major religion says that our reality is made up. For example, in Hinduism it’s called Maya, that vast illusion. Buddhism, which really sprang from Hinduism actually uses the same word Maya. Maya must be seen through to attain liberation of the soul. Sufism (a branch of Islam) and the more mystical aspects of Judaism also talk about the illusory aspect of reality. For example, I found the following quotes.
The veil between man and God is not the world, is not the throne of God, it is the illusion of "I", pass beyond yourself and you are there. Anywhere the illusion of "I" exists is hell, anywhere "I" is absent is heaven. – Asrar al-Tawhid
We do not see things as they are. We see them as we are.
– The Talmud
Christianity is one of the more difficult religions to find a quote about illusion, however, it is a central theme of A Course in Miracles (ACIM). ACIM was written to help people understand the misinterpreted message of Jesus. The preface to the course says the following:
Nothing real can be threatened. Nothing unreal exists. Herein lies the peace of God. – Introduction to A Course in Miracles.
Essentially, this means that you make up everything that can hurt you – but they are all illusions. The first two lessons in the course workbook state:
Lesson 1) Nothing I see means anything.
Lesson 2) Everything I see has the meaning I give it.
So let’s see, we have linguistics, NLP, and portions of major religions saying that our experience is illusion. Let’s see how much further we can take it.
Neurosemantics and Reflexivity
Dr. L. Michael Hall has taken NLP a step further and formed the new field of Neurosemantics. In his many books he talks about this core way we make up our reality and then we take it one step further through what he called REFLEXIVITY. This means that the mind is constantly reflecting on itself. We are meaning makers and we are constantly reflecting on the meanings we make, giving them higher level meanings. Out of these meanings and interpretations, we create our reality.
This is how the process works.
Say you hear a sudden, loud noise which elicits a startle reaction in your body. Notice how all of this already is much removed from the actual experience. Both noise and startle reaction are nominalizations. They don’t exist but we choose to make them things in our language.
So now you might react to what happened and say: “That scared me.” Again “that” doesn’t exist. Rather, a process of energy waves generated a nervous system response (that we call sound) which was turned into a thing … a loud noise. In addition, a simple reflex action was interpreted as being scared. So now the noise and reaction takes on a whole new reality.
Then you might reflect on that and as a result, you might say, “I’m scared.” You have just solidified your process of experience by calling yourself an “I” and you have identified yourself by saying “I’m scared.” You now have an identity level belief (an “I am” statement which tends to be relatively strong on the beliefs hierarchy).
And then you reflect on that at which point you could say “I don’t ever want to be scared again.” Now you are jumping into the future (which doesn’t exist) trying to do something to prevent something from happening that you just made up -- being scared.
The reflexivity doesn’t stop there but goes on. Next you might decide. “People who make loud noises are not trustworthy.” This may seem like a huge jump but you have probably made this sort of leap before in your life.
And then you reflect some more and might now say: “X (who made the noise) is untrustworthy.” So where did that meaning come from? I assume that you can remember making similar leaps in judgment at some time in your life.
And now you might reflect some more and say, “I don’t trust X (who made the noise).” You can probably see how the reflexive mind might make this jump. But where is the evidence for not trusting someone that made a loud noise? The closest statement to what actually happened so far is that a loud noise elicited a startle reaction. The rest of it was just the mind reflecting.
But the mind doesn’t stop and now it might say “X is dangerous.” It’s only one more small self-reflection jump now to say “The world is a dangerous place.”
What if you reflect like this all the time? What if something as simple as a noise and a reflex action quickly leads to the self-reflection “The world is a dangerous place.”?
Another level of self-reflection might just lead to “I’m depressed.” But what actually happened? A loud noise (nominalization) and your physical reaction to it (another nominalization) has now been turned into a very serious identity belief of being depressed.
Hopefully, this helps you see into how the mind works, at least just a little, to make up an illusory word that most people take quite seriously.
One of my Super Traders just sent me a weekly report in which he stated:
“This has been a very challenging week. I was confounded on all sides with difficulties and challenges and now I find myself feeling quite depressed.”
Based upon what you have just read, you should be able to understand that this person made up his reality. Can you see the representations, nominalizations, and reflexivity in that statement? Here are some of them: challenging, week, confounded, I, on all sides, difficulties, challenges, myself, and depressed. He made all of that up.
My goal is to help you really get that your “story” -- no matter what it is -- is manufactured in your head. It’s all your beliefs and interpretations. In fact, everything in your head is totally made up. So make up something useful. As an example, my Super Trader above could just as easily develop some meta-statements and ideas about the world that are more useful such as:
- Everything is perfect.
- The world is full of wonderful gifts and opportunities for which I am grateful.
Now if you really understand what I’ve said in this article, you can apply it to trading. As I have said before:
You only trade your beliefs about the market, not the market.
And all your beliefs are made up.
Many of you, in your reflexive thinking, are finding counter-examples to suggest that everything is real, not made up.
“When we perceive that the only difference between us is our beliefs, and that beliefs can be created or dis-created with ease, the right and wrong game will wind down, a co- create game will unfold and world peace will ensue”--Harry Palmer, Resurfacing.
So What is Real?
When people in my Super Trader program become aware enough to really get these ideas, I give them a lesson to do in which they strengthen their connection to their Inner Guidance. See Chapter 10 of Trading Beyond the Matrix for a lot more information on this.
Once this communication channel is clear, it can become a source for helping you solve additional issues, helping you make decisions, and even helping guide your trading. For example, I sent a copy of the first part of this article to one Super Trader who has been working on this lesson and this was the dialogue he had with his Internal Guidance after reading the article.
ME: I just finished reading Van’s article about how our reality is illusory; it’s all made up. It was excellent. It supports ACIM and at the very least explains why I can never experience reality as it is.
IG:- Please tell me more.
ME: - I can never experience reality because I am constantly referencing it to my past experiences, which makes it something other than it really is. I experience what I expect.
IG:- That's interesting, but it is nothing more than a bridge, a step closer to understanding that it's all a dream.
ME: - You mean that I am “living” in a dream and nothing is “real”?
IG:- How do you explain me? Who or what am I?
ME: - You're my internal guidance?
IG:- Explain that in your real world
ME: - I can't.
IG:- Am I an allusion? Am I a figment of your imagination?
ME: - No.
IG:- Then explain me as best you can.
ME: - You are my connection to universal intelligence; God.
IG:- And if you can't experience reality what can I do for you?
ME: - You’re the only way that I'll ever glimpse reality. I realize that you are the only constant in my life. Always guiding me and always looking after me.
IG:- So if I'm real and everything else is an illusion, isn't that the same as living in a dream. Isn't that just a matter of semantics at best?
ME: - I guess so. I just never really connected to it in the way that I just have. You are my only reality. everything else is an intricate web of illusion that's probably been crafted by my ego. But I don't care if that last part is true or not. In a flash of inspiration I realize how real and supporting you are. Thank you for that. I Love you so much for patiently being there (tears in my eyes).
IG:- You know that you are welcome. I love you too.
ME: - I know I shouldn't be apprehensive, but I've just realized something that is truly breathtaking… Now that I realize that I’ve lived my life based on illusions I feel that I can't rely on anything without running it past you. You are my reality right now.
IG:- You're right. You don't need to be apprehensive. I have always been there for you. I will always be there for you. You have now created a greater bond with me. And just as a parent helps its child walk so I will teach you how to tune into your intuition more and more. Eventually you and I will act as one.
Of course, you can only understand this article and the above dialogue through your world of symbols and whatever filters you bring to it. So you could be saying, “Wow, that’s amazing, I never thought of it that way.” And that’s one sort of meta-filter for looking at it.
On the other hand, you could be saying, “Van is off his rocker publishing this stuff and what does it have to do with trading?” But that’s just another meta-filter. And we could trace this as follows.
1) See lines on page.
2) Interpret them and words and symbols and then RE-present the imagery to yourself.
3) Read something that you interpret as really clashing with a strongly held belief.
4) Have strong emotional reaction as you say, “That is wrong. I’m right.”
5) Reflect on that reaction by saying, “Van is wrong.”
6) Reflect on that by saying, “This is all crazy.”
7) Reflect on that by rejecting the whole article which might include a few things that you actually thought were useful initially.
8) Reflect on that by saying “Van is really losing it."
And hopefully the self-reflection doesn’t go any further than that. But if you really understand this, the implications for you are incredible.
Combo Discounts available for all back-to-back workshops!
See our workshop page for details.
Supply and Demand Wins...Again
When I prep my third through sixth graders for their statewide economics competitions, I help them learn to reason through questions they have never seen before. Understanding price dynamics is a key concept for economics and it’s really not that complicated – it always comes back to supply and demand. Once students understand that scarce products or services cost more, and that those that fewer people want cost less, the questions and test problems become quite clear.
In the real world, outside factors may delay or accelerate the end result but the inevitable value balance between supply and demand always wins out in the long run. And such is the case with the beguiling pricing of crude oil in today’s markets.
Wait a Minute – Isn’t There Political Unrest in Russia and the Middle East?
Crude oil prices usually react strongly to events that could disrupt the flow of product from key producers or regions. And that’s why today’s low crude prices have many analysts and traders scratching their heads.
Currently, we have not one, but two serious potential geopolitical problems. Russia’s bellicose stance toward the Ukraine has brought on escalating economic sanctions against the Russian state. These threaten to slow down production in the third biggest oil producing country through artificially imposed demand restrictions.
And problems in the Middle East with the Islamic State in Iraq and Syria (ISIS) could broadly hurt oil production in this oil-rich region.
Yet with all of these negatives actively playing out, little or no fear seems be reflected in crude oil prices lately. In fact, in the last five weeks, price hasn’t even been able to sustain a run above the 200 day moving average:
Why the Subdued Crude Oil Pricing?
Even though world events would make traders and investors worry about a “risk premium” being placed on the price of crude oil, it just hasn’t shown up. And the reason can be found in our old friend – supply and demand analysis.
On the demand side, despite seemingly infinite central bank liquidity infusions and hyper-accommodative monetary policies, global growth still has not picked up. As an example, the World Bank’s mid-year assessment dropped the 2014 GDP estimates for both the emerging markets (from 5.3% to 4.8%) and for the total global economy (from 3.2% to 2.8%). If the estimates prove correct, 2014 will mark the third straight year of sub 5% growth in the important emerging markets, which are supposed to be leading the charge in global economic expansion.
With disappointing global economic growth on one side, the supply side has presented the markets with a much different story. Production outside of OPEC continues to climb and fuel the new oil boom. Check out the chart from Dr. Ed Yardini over at Yardini Research:
Non-OPEC output continues to climb and is now right at 150% of the output from OPEC countries.
And even more surprising is the next chart. The once tight oil and gas production in the U.S. continues to expand more rapidly than anyone could have imagined just a few short years ago. And for those of us who remember angst over the U.S. production decline of the 1980 and 1990s, the fact that the U.S. has overtaken Saudi Arabia and Russia as the world’s biggest oil producer is an outcome that almost no one would have predicted - even a decade ago. Do you remember all of the concern about being past the “Peak Oil” point? Now take a look at the chart of U.S. production for the last thirty years:
So crude oil prices are lower than analysts and traders could expect given the current turmoil in top oil producing regions. If you need a good explanation on why this is happening for your next cocktail party conversation, just ask one of my third grade students…
As always, your thoughts and comments are always welcome - please send them to drbarton “at” vantharp.com.
Our Next Matrix Insight Contest has Begun!
We want to hear about the one most profound insight that you got from reading Van's newest book, Trading Beyond the Matrix, and how it has impacted your life.
We have updated some of the rules since the last contest, so please read them carefully before entering:
- Each essay should be around 1200 words.
- The ideal entries will focus more on a single transformative insight as opposed to “the whole book was transformational”.
- Dr. Tharp and the VTI team will pick the top 5 best entries from the submissions and our newsletter readers will vote to choose the top winner.
- The winner receives one free VTI foundation workshop; (*foundation workshops include the Peak Performance 101 workshop, How to Develop A Winning Trading System That Fits You, and the Blueprint for Trading Success workshop.) The winner may choose one of these workshops (valued at $2,995) or substitute any single VTI product priced at $795 (or below) of your choice.
- Over the duration of the contest, we will choose our favorite entries and publish them in our weekly newsletter, Tharp’s Thoughts. All entries appearing in the newsletter will receive a $50 coupon (increased from $20) which can be used on any VTI product or service.
If you would like to enter, send an email with your essay to firstname.lastname@example.org.
If you haven't purchased Trading Beyond the Matrix yet, click here.
For more information about the contest, click here.
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