Tharp's Thoughts Weekly Newsletter
: The Art of Responsibility by L. Michael Hall
: Day and Live Trading and Trading in a Bear Market This November!
: Sell ‘Em on Rosh Hashanah – A Wall Street Adage that Works by D.R. Barton, Jr.
Back-to-Back Trading Workshops in November
Day and Live Day Trading and Trading in a Bear Market
Day Trading and Live Day Trading with instructor Ken Long
Dr. Ken Long begins this workshop by teaching you two day trading systems, which he calls the Frog and RLCO. Through his lectures you will gain an understanding of each system's interpretations of the market's movements, rules, and variations.
Ken has been 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?
Learn how to trade these two great day trading systems, with Dr. Ken Long's expert guidance. After three action-packed days of instruction, you can opt to stay an additional two days and trade these simple-yet-profitable systems live! Students will see in real-time how these systems work in the markets, with an experienced and successful coach in the room.
Trading in a Bear Market and Down Markets with instructor Mark McDowell
This workshop helps you learn how to think about trading broad bear markets and trading an asset class, sector or even one symbol that is moving down in bear mode. For a major bear market, think equities in 2008-2009. For a down move, think oil in 2014-2015. Imagine having had some ways you could have effectively traded those periods. Major bear markets don’t come that often but “lesser” down moves can be found almost anytime – including during bull markets. Start using the information from this workshop when you return back home — and also be prepared for the next big bear market.
||Study in depth the concept of a bear market.
||Learn what a bear market truly is and learn several ways to define and measure the bear market type.
||Know when a bear market type might be starting and how to know when it might end.
||Learn 5 trading strategies suited for bear market conditions.
||Learn how options can be especially useful for bear market types.
Read our interview with Mark McDowell from last week's
Newsletter: "Bear Markets Here and There"
To register or to see the full workshop schedule, click here.
The Art of Responsibility
L. Michael Hall
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Introduction from Dr. Tharp —
Personal responsibility is the cornerstone of everything I teach. The first one to three years of the Super Trader program involves clearing out non-useful beliefs and reprogramming yourself so that you can function at a high level as a trader. And it’s also about clearing out a lot of fear-based beliefs so that you can be happier and increase your level of consciousness. None of that is possible unless you accept personal responsibility for your experience in life.
One level at which everyone can understand responsibility is on mistakes. Your trading system has a set of rules. When you don’t follow the rules, it’s a mistake. And if you don’t have rules, then everything you are doing is a mistake. Even with rules, most traders probably trade somewhere below 80% efficiency. When you make two mistakes in ten trades, you are at 80% efficiency and that may be a low enough level to destroy the positive expectancy of a system. Below 80% will turn a winning system into a losing system. Rather than acknowledge their mistakes, however, most people just blame the markets or decide their system is no good. But until you acknowledge your mistakes, you are not being responsible for them and you cannot fix them.
Personal responsibility was the topic recently of a free newsletter I subscribe to called Meta-Reflections by Dr. Hall and though his article is not about trading, it is very enlightening. We are reprinting it with his permission. This is the fourth article in a series on responsibility and you might want to read all of them. Pay particular attention to the last paragraph.—Van K. Tharp, Ph.D
Is there an art in living a responsible life and stepping up to taking responsible actions in one's life? There is certainly a strategy— the strategy begins with identifying, accepting, owning, and embracing your powers (Meta Reflection #35). It also involves recognizing the seductive power of irresponsibility which seems to trap so many people (#38). Here the strategy of what to do, and the knowledge of how to do that begins to blend into the art responsible living. First comes the understanding and knowledge that requires learning to recognize and avoid the irresponsibility seduction. At this point, you develop the competence of resisting blaming—blaming life, others, government, parents, history, human nature, and on and on. And this arises when you have learned and actually practiced stepping up to develop your innate powers.
A story. This week I received scores of emails which were sent to the HOA (Home Owners Association) distribution of 30 home owners in my neighborhood. Those of us on the board had discovered that we had several unexpected expenses with the water system, the pump house, etc. and so we sent out a
letter inviting a full neighborhood meeting. In response to the problem that we identified, three emails came back, hastily written, full of blame, accusation, and threats. [All] three blamed the builder, two of them threatened legal action, and the other was very "preachy" shouting about how stupid all the rest of us were, unable to understand things, and guilty of fraud! "It stinks of fraud" the home owner wrote.
Now being on the board and having seven hours at the Houston airport ... I responded to each of the three persons who were heavily infected by the virus of blame. I framed my responses that we all need to have calm and reasonable minds as we addressed the problem and that the task before all of us was to first gather information about the facts before jumping to conclusions. It all started when the president of the association sent out an email asking for $100 from each home-owner for some additional expenses that arose. You would have thought he had asked for $10,000 given the intensity of the accusations, blaming, and insults by three of them! Several pipes had broken and were repaired and the cost was an expense to the HOA and whether anyone agreed with the cost or the problem, the bill was ours and had to be paid. As a legal entity, that's just the way it was.
But the emails were full of charges of "abuse of power," "it's not my problem," "I didn't agree upon the person who did the repairs," "how much longer do we have to put up with this incompetence?" "It stinks of fraud." This is what I decided to respond to. It wasn't that I wanted to use email to establish the facts of the case—that is scheduled for a meeting at the end of the month. I mostly wanted to call attention to the process itself. I wanted to make the point: If this is the way we solve problems, nothing will be solved, we will just have a shouting match.
Did that resolve things with the three blamers? No. Instead one decided that I had "lectured" him about being cool and collected and who was I to do that? Another wrote numerous mind-reading statements [VKT- mind reading is where you believe you know what the other person is thinking based upon their behavior] saying that I wanted to intimidate them to be quiet and not express their opinion. Another charged me with trying to manipulate the upcoming meeting by forcing people to take turns and not talk over each other, "That's pure manipulation" he wrote.
All of this made me reflect on the theme of what is the Art of Living Responsibly? Here's my reflection so far: I think the art comes in from one's character and one's state. Responsible people know and quickly acknowledge when they make a mistake. They say so. And depending on the circumstances, try to make things right. Living responsibly means recognizing that we have responsibilities that are both personal and social. As a social being in multiple social contexts, how I conduct myself means making responses in both dimensions.
The art of living responsibly also includes being challenging and confronting. Are we really responsible when we let bullies or big-mouths intimidate people? Do we not have the responsibility to help create a context or culture where we can bring out the best in each other?
In the midst of the flurry of emails, five of the home owners chimed in. Four were very polite and validated the points I was making about being respectful. One, however, "yelled" at the three blamers accusing them of being loud and throwing an adult size tantrum. He "yelled" in the email by writing in ALL CAPS! USING BOLD TEXT AND EXCLAMATION MARKS WHEN HE REALLY WANTED TO MAKE A POINT! I wrote him privately thanking him for his intention while pointing out the contradiction - "You are blaming them for blaming." [VKT: This is a good example of someone’s shadow part coming out which we talk about in Peak 203].
Two others wrote to me, saying that they appreciated my courage to stand up to the neighbor who had threatened to sue just about everybody in the neighborhood. But one asked, "Are you afraid he will sue you?" When I asked, "Are we not responsible for the quality of conversation in our community?" he acknowledged that, "well yes, but..." and then proceeded to say that he was not the kind of person to do that. He would prefer a low profile.
All of this speaks to the subject of the art of responsible living and how we hold ourselves and others responsible for our actions. Some seek to escape from responsibility, some are irresponsible and blame everybody and everything else for problems (real and imagined), and some passively accept responsibility but out of weakness, not strength, others accept and own responsibility as a matter of duty, and others see response-ability as a resource and a means of changing the world. I want to be increasingly more in that last category. How about you?
L. Michael Hall, Ph.D.
The Art of Responsibility
Reprinted with permission
Meta Reflections #39: September 7, 2015
Dr. Hall is known as a prolific writer with 30 some books to his name, more than 100 published articles and is recognized as a leading NLP Trainer and developer of many models, most notably the revolutionary Meta-States model and more recently the Matrix model. Learn more...
Combo Discounts available for all back-to-back workshops!
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TRADING BEYOND THE MATRIX
The Red Pill for Traders and Investors
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Breaking the Trading Matrix
After reading your two books, Trade Your Way to... and Super Trader, I was really eager
to get my hands on your new book, Trading Beyond the Matrix. Yet, frankly, given my non-religious and
non-spiritual beliefs, I had trouble completing the book the first time I read it. Even now, I can’t say I
have become a spiritual man, yet I can say that I have taken the first step on a journey of self-discovery
Trading Beyond the Matrix is not a book to read. It is a book to be practiced every day. I have done
belief evaluations on Tharp Think and adopted most. I am in the process of matrix reprogramming
according to the blueprint you provided in the book. Today, I would like to borrow the “matrix”
metaphor from you and express my understanding of the trading matrix.
“The Matrix” is a great movie and an excellent metaphor for trading. In my mind, there are three levels
of matrix to break if I want to become a truly successful trader.
The first one is easy money matrix.
Every trader, myself included, is attracted to trading because of the lure of easy money. You read about
legendary traders who make $1 billion in one day, or a next-door mom who picked a couple of stocks
and become a millionaire, or even a teenage trader sensation. You think to yourself: how hard can it be?
Buy low, sell high, quite simple, right? When you look at a chart, you begin to see patterns and profits,
lots of it. It seems the trading profit is just around the corner waiting for you to pick it up.
When you open an account to rake in the profit, you find the process is really a snap. You don’t need a
million dollars to start trading. On the contrary, you can use your credit card to fund your forex account
with as little as $100. They've made it so easy that anybody can do it. You don’t need five years of graduate
or medical school, or four years of college, or even a day in kindergarten.
The financial establishments make it so easy to trade, you ask yourself, "Why didn’t I start this earlier?"
Armed with super confidence in your own intelligence and luck, you are all set to make a killing in
stocks/futures/forex/options or whatever market you set your eyes on.
In reality, over 90 percent of traders in leveraged markets lose money and 60-80 percent of stocks
traders lose money depending on the studies. For the same reason that the billion-dollar casino's design is
NOT to make you (the gambler) rich, the financial market isn’t designed to make everyone a millionaire.
In reality, should everyone make money, the system would collapse.
You, as a trader, have to break the easy money matrix and ask the hard questions, "What do I have to
enable me to compete against and win over hundreds of thousands of professional money
managers/traders, or even millions of other investors/traders just like me?"
If you still believe your intelligence and luck are the keys for your success. Then, good luck. You really
need it. When you start your quest to collect millions, the seemingly unlimited profits suddenly
become elusive. You begin to lose money or worse, you start to win, which inflates your expectations.
You take a real plunge, and oops…the profit evaporates. After a while, you may ask why everyone else
is making money while you are losing. You may conclude that they must have found the Holy Grail, a
secret code, a perfect order in the market that allows perfect timing, or a perfect stock before it leaps
Whatever it is, you decide to find it. You spend days, months, or even years studying company reports,
plotting trendlines, conducting backtests, yet the Holy Grail remains to be found. Hey, it's the Holy Grail;
it is supposed to be buried deep, camouflaged well, and painstakingly guarded. But you are tough and
persistent, you are determined to uncover it, possibly at the cost of spending your whole life chasing it.
Well, this is the matrix of the Holy Grail, thinking that the only way to achieve market success is a secret
method to minimize or even eliminate loss.
The bad news is that there is no such Holy Grail. The good news is that once you break this matrix and
face reality, you can spend your energy and resources on the real valuable aspects of trading.
To me, it is the RED principles.
R is the risk control: proper trade management to align your trading
objective with the position size and system performance.
E is proven edge: sufficient number of trade
distribution with a positive expectancy under right market conditions.
D is discipline: consistency in
trading can only be achieved if the beliefs of the trader match those of the trading system, and traders
are aware of and able to overcome behavioral biases rooted in our psychology.
The RED principles are not cute slogans to hang on the wall. They are tools and measurements to
monitor my status, to reveal my behavior, good and bad, and to track my progress.
If you implement the RED principle or its variations, you can steady the ship, possibly achieve some
degree of profits. But you still feel there is something missing. You still make trading mistakes and the
true potential of your earning power remains to be unlocked.
Welcome to the third matrix, human psychology.
To survive and function as human beings, we accumulate many behavior and cognitive traits that are not
exactly suitable for trading. Behavioral finance reveals our biases collectively in dealing with financial
decisions. For an individual trader, we have to go through awakening and transformation processes as
it was elaborated on in the Trading Beyond the Matrix.
I can only achieve wizard trader status after completing this transformation. This is the biggest matrix to
break and also a life-long journey to embark for self-discovery and self-mastery. Trading is one way to
measure my progress on this journey.
Now, as in the movie The Matrix, Neo can only be shown the door, he must go through it on his own.
You have led us to the door, it is up to each and every one of us to go through the door and find what
we are looking for.
Thank you, Van, for leading and showing the door to me! And happy journey to you too!
Thanks to Mr. Lee for entering his essay into the Matrix Contest
Sell ‘Em on Rosh Hashanah —
A Wall Street Adage that Works
by D. R. Barton, Jr.
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The Jewish New Year celebration Rosh Hashanah ended Tuesday night (Sep. 15) at sundown. With that revelry over today, we’ll take a look at an old Wall Street adage — “Sell ‘em on Rosh Hashanah and buy ‘em on Yom Kippur.” Yom Kippur is a Hebrew holy day known as the Day of Atonement which happens a week after Rosh Hashanah. This year, it’s on Wednesday, Sep. 23.
As we have done for more than a decade in this Trading Tip Section of the Tharp Thoughts newsletter, we’ll take a look at another one of Wall Street’s favorite seasonal bits of advice to investors — this time for the month of September. Before that, however, here is a sampling of previous seasonal pieces of advice we have confirmed or busted in past articles:
The January Effect: Claims that small cap stocks outperform large cap stocks during the month of January.
Findings — It worked well through the 1980 and still has a slight edge. Since the 1987 crash, however, a significant edge comes now by moving the period back to the last two weeks of December. We should probably rename it “The Last Half of December Effect…”
The First Five Days: Claims that the direction of the first five days of January provides a useful indicator for stock performance for the rest of the year.
Findings — This one was busted. Since there’s no requirement for the size of a move, even a one penny improvement would supposedly tell us what the rest of the year will do. If we add a filter that requires the move to be more than just random noise, the whole analysis falls apart. Ignore this one.
The January Barometer: Claims that as January goes, so goes the rest of the year.
Findings — We busted this indicator too. The January Barometer worked decades ago, but since 2000, following this indicator would have given you a loss of 8.5%.
The Halloween Indicator (or Sell in May and Go Away): Claims that November through April are the best six months for investing and holding positions for those months outperforms holdings between May through October.
Findings — This one really works and it works well. Peer reviewed studies confirm “the best six months” premise across dozens of countries and in time frames going as far back as 1694!
Back to “Sell ‘em on Rosh Hashanah . . . ”
In general, this saying encourages the respectful setting aside of investment concerns so that one might properly concentrate on worship during this most introspective time in the Jewish calendar. Rabbi Michael Katz also suggested that this saying reflected Lord Rothschild’s admonition to buy on the sound of the cannons and sell on the sound of the trumpets. The parallel comes from Rosh Hashanah being a joyful new-year’s celebration and Yom Kippur is a more somber Day of Atonement.
Regardless of your spiritual practices, it turns out that this stock market adage works well. We have two pieces of research that help confirm this seasonal advice.
First, using the Dow Index dating back to 1915, Birinyi Associates conducted a study selling stocks on Rosh Hashanah and buying them back on Yom Kippur. The strategy averaged a gain of 0.62% - which is not bad for an average seven day holding period. In contrast, buying the Dow Index on Yom Kippur and holding it for fourteen weeks to the year-end over the same span of years produced an average return of just 1.99%.
Second, in a peer reviewed paper by Yatrakis and Williams published in the journal Advances in Business Research, the researchers took an interesting look at the nine different combinations of selling 1, 2 or 3 days before Rosh Hashanah and buying back 1, 2, or 3 days after Yom Kippur. Their data ran from 1907 to 2008 and excluded the two years when the exchange was closed during all or parts of the test period – 1914 (WWI) and 2001 (9/11 closure). They found that all 9 scenarios produced positive returns and that 5 of nine produced statistically significant returns. They also found no statistically significant difference between the first 50 years and the second 50 years of the study showing that the effect has not been diminishing.
So here we have another seasonal tendency that actually works!
When seasonal strategies have provided a proven edge over a long period of time, it makes sense to pay attention to them. Remember always, however, that just as with a positive expectancy system where every trade doesn’t make money, seasonal strategies that work don’t produce a profit every year either. And this year especially, the Rosh Hashanah / Yom Kippur tendency requires caution because of an atypical influence - the Fed announcement on interest rate policy tomorrow (Thursday). Be on guard!
I’d love to hear your thoughts and feedback – just send an email to drbarton “at” vantharp.com.
About the Author: A passion for the systematic approach to the markets and lifelong love of teaching and learning have propelled D.R. Barton, Jr. to the top of the investment and trading arena. He is a regularly featured analyst on Fox Business’ Varney & Co. TV show (catch him most Thursdays between 12:30 and 12:45), on Bloomberg Radio Taking Stock and MarketWatch’s Money Life Show. He is also a frequent guest analyst on CNBC’s Closing Bell, WTOP News Radio in Washington, D.C., and has been a guest on China Central Television — America and Canada’s Business News Network. His articles have appeared on SmartMoney.com MarketWatch.com and Financial Advisor magazine. You may contact D.R. at "drbarton" at "vantharp.com".
NEW! Swing Trading Systems E-Learning Course
We are excited to announce that our new Swing Trading Systems home study course is now available! Learn with Dr. Ken Long as he teaches his Swing Trading Systems Workshop via streaming video!
This new e-learning course includes Ken Long's Swing Trading Workshop, 5 swing trading systems and a bonus workshop featuring Van Tharp on Tharp Think principles. The course also includes extensive downloadable files to support your learning.
You can complete this course at your own pace, from the comfort of your own home or office, and access the materials as many times as you wish during your 1 year subscription period.
Take a look at this video from Ken to learn more about this course.
We have extensive information about the Swing Trading System e-learning course, including how to purchase...click the link below!
In this fourteen minute video, Ken runs through a “day in the life” of the chatroom. He selects specific trades and lessons to debrief from the chatroom log on Thursday, September 3. This gives you a flavor for the kind of exchange you get in real-time during his Live Trading workshop next presented in November.
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September 16, 2015 #751
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