Tharp's Thoughts Weekly Newsletter
Mental Strategies Versus Trading Systems, by Dr. Van K. Tharp
March has two locations: Cary, NC and Sydney, Australia
The New Bloomberg.com-Worth More Than a Casual Glance
by D.R. Barton, Jr.
Ken Long's High Caliber
Day Trading Workshop Coming In March
In this workshop, Ken Long teaches the FROG trading system and the RLCO day trading systems.
Ken has been an a long-time, active trader and observer of the markets. He's noticed the consistent habit of prices for particular issues to move a certain amount. Much like a frog jumps when it hears a loud noise, prices tend to move a certain amount before they pause or move again. Different frogs are able to jump different distances, but each one tends to jump about the same distance as it did last time. Would it be possible to know about how far a stock’s price would move on any given day? Ken’s frog system is a useful – and tradable - guide.
Attend the day trading systems workshop and learn the frog and RLCO systems. Stay on for two more days and trade those systems live alongside Ken!
For more information about both systems, click here.
To register or to see our full workshop schedule, click here.
Mental Strategies Versus Trading Systems
As I have been preparing my upcoming workshop on mental strategies, I was reminded of some of the introduction material on mental strategies in Volume 5 of the Peak Home Study Course.
I’d like to share some of this material with you today. Those of you who have recently taken the home study course will remember this but I bet it’s a good reminder to many others who may have forgotten it and I hope it is especially helpful to those who have not taken the course. Below is an edited excerpt of the material. —V.T.
One of the best traders in the world told me that he trades with a simple trend-following system. He has taught other traders how to trade that way, and in the process, he claims that they often develop systems that are more profitable than his. Yet, he feels comfortable following his system, so he sticks with it. And what about the other traders he trains? A few are successful, but most never complete his training. And none of his students has achieved the same level of profits as consistently as he has. Why? Traders produce success, trading systems do not!
I visited the office of another well-known trader and did a profile on him and several of his colleagues. What struck me was that several of the people in his office were not successful—even though they were trading with the same methods that he had used to make hundreds of millions of dollars. Why? Partly, it was because his mental strategy was quite different from those of his colleagues. And how you trade is related much more to your mental strategy than to your so-called “system.” In fact, if trading systems are so important, then how do you explain the lack of success of some of the people in his office? And, by the way, we teach systems at our workshops that are just as good, if not better, than this system.
Another well-known trader actually wants to teach people to be as successful as he has been. Thousands of traders are going his schools, yet he claims that only about 10% of his trainees will really be successful using his methods. And the record seems to support his claim—people go through the school, but few come close to his level of success. Again, we have examples of people who know a winning system and who are not that successful.
The reason that these top traders make money, while others who use their systems do not, is that systems don’t make money, traders do. That’s why the Peak Performance Home Study course, which focuses on YOU, is more likely to help you succeed than a book on systems.
Since the trader, not a system, is responsible for his/her own success, what is the purpose of a trading system? My research indicates that trading systems are an essential shortcut for human decision making. You will soon discover that most human decision-making strategies are complex and slow. For example, think about the last time you bought a car and had to decide on the make, model, color, dealer, etc. You probably took several days at minimum to decide on a car. Traders cannot afford that kind of time. They need a shortcut or system in order to make quick decisions.
Ideally, your system should signal a trade and you should go through a quick “see/recognize/feel/act” strategy and take the trade. That is, you see the signal, recognize that it is familiar, and because it matches what you are looking for, you feel good about it and act on it. This is the simple mental strategy for action mentioned in the tasks of trading. But most traders cannot do that! They were successful in business using a particular decision strategy, and they want to continue to use that strategy in the market. As a result, they see a signal to trade and then use their normal decision-making strategy to decide whether or not the signal is valid and whether or not to act on the signal. Their normal strategy does not work. They end up following their emotions, and they lose money.
For example, some people commonly develop a lack of confidence by deviating just slightly from the “see/recognize/feel/act” strategy described above. After they see a chart pattern that is a signal to trade, they add an auditory component—that internal voice that might be quite familiar to some of you. The internal voice says, “Are you sure?” The voice causes a feeling of uncertainty, which results in more internal dialogue and more uncertain feelings. Adding this one extra component, the auditory message, creates an auditory-feeling loop that builds up uncertainty and stops all action.
Sometimes, people who are good at generating options can find themselves with incredibly complex decisions to make. Their problem is selecting from the multitude of options available to them.
Decision-making skills are complex. People who can generate options easily and select the most appropriate one every time have certain special abilities. I now know that you can learn those abilities—the implications of which still astound me. I believe that any investor can win if he or she uses his or her mind properly, and nothing in my experience to date has given me any reasonable counter examples. Some people just operate at a level that requires a much greater degree of change in their thinking than other people.
There is a significant amount of information and detail that goes into understanding what a mental strategy is and many ways to incorporate these strategies into winning systems and successful trading. This excerpt is just the tip of the iceberg, but I hope it starts the process of understanding the concept.
Note: I originally wrote this excerpted material when I first wrote the home study course many years ago. I have continued to learn so much more about the process of mental strategies over the years and I’m excited about reintroducing this new workshop with advanced strategies!
I’ll be back next week with the Monthly Market Condition Update.
Combo Discounts available for all back-to-back workshops!
See our workshop page for details.
The New Bloomberg.com
Worth More Than a Casual Glance
by D. R. Barton, Jr.
Last Friday, I made my first trip to one of the shrines of American capitalism—731 Lexington Avenue, New York, NY—also known as Bloomberg headquarters. From the private traffic circle that separates the two buildings to the Silicon Valley-like free afternoon snack “pantry” (a buffet with everything from fresh fruits and vegetables to chips, cookies, sodas and six different blends of coffee), the whole place has the feel of a well-oiled machine.
I was there as an in-studio guest analyst on the Taking Stock radio show hosted by Carol Massar and Michael McKee. It’s great working with such pros including the effervescent Paul Brennan, who produces the show.
The show format is wonderful. You have 20 minutes of air time to dig into details with the hosts and it is such an informative and fun way to cover the markets. It is so different from the “short attention span theater” that TV interview spots have become. We talked about markets trending away from “grinding bull,” and dug into three big name stocks and the challenges each stock faces in the coming year. (You can download a podcast of the second half of the interview by searching iTunes for Bloomberg Barton Jr).
But the big news about Bloomberg today is the major make-over they gave to their already top-notch business website, bloomberg.com. Let’s dig into some of the useful items that I go there often to use.
Slick New Homepage and Oh-So-Much Content
Bloomberg’s new homepage is slick. It’s clean, accessible and wow, so many goodies. Most importantly for me market data is right at the top and easy to navigate.
What do I look for on a regular basis at Bloomberg.com? Here’s a quick sample:
- Bond data. I was visiting a friend who has run multi-billion dollar bond portfolios for banks and I was admiring his jaw-dropping personal trading room. His main workspace had twelve large monitors plus a mongo monitor for doing routine stuff like email, etc. But I noticed when he wanted to look at U.S. bond data for a quick snapshot of where things stood in the trading day, he didn’t go to one of his three trading platforms, he went to Bloomberg.com. And you can too; just hover your pointer over “Markets” then click on Rates & Bonds and voilà! Bond yields for three continents. Click on “More US Treasures” and you get the whole yield curve for three time frames.
- Scroll down to get TIPS, munis, Fed Rates and more.
- There is also a great array of international equities indexes that you can access from Markets – Stocks.
- Live Bloomberg TV at a click.
- Best place for “why is that happening” for energy, precious metals, agriculture and other less-followed markets.
- Last and certainly not least, Bloomberg Graphics. They have some really cool stuff, e.g.; what’s the best selling passenger vehicle in the U.S.? What car sectors are growing fastest and which are waning? Check out http://www.bloomberg.com/graphics/2015-auto-sales/ to find the answers. Be sure to scroll down and to see the cool morphing infographics.
Your thoughts and comments are always welcome. Please send them to drbarton “at” vantharp.com. Any new improved or “hidden gem” stock/commodity/financial websites that have caught your eye? Drop me a note!
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January 28, 2015 #718
Van's Top-Twelve Favorite Trading Books
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