Tharp's Thoughts Weekly Newsletter
: Understanding Your Motivation Criteria, by Van K. Tharp, Ph.D.
: SALE on Ken Long's Workshops This July!
: The Earnings Recession No One is Talking About, by D.R. Barton, Jr.
$1,000 Discount on Ken Long's July Workshops!
Systems Thinking for Traders
Advanced Adaptive Swing Trading
July 15-17, 2016
This $1,000 discount is limited to the first 10 people* to sign up before June 10.
*There are now less than 10 seats left at the special price.
Expires June 10th!
When you act quickly, you can take these two advanced courses for $1,000 less than our early enrollment price. Our advanced systems workshops are priced at $3,995, or $3,295, with the early enrollment discount. The next 10 students who register will receive unheard of savings and pay only $2,295.
Dr. Tharp is excited about the two new workshops Dr. Long has developed! He wants as many people as possible to have a seat in the room alongside a growing list of Super Trader students who have already committed to taking these advanced courses.
Join this highly motivated, dynamic group of traders and be ready to learn from the best!
To find our more about what these workshops have to offer READ BELOW.
Understanding Your Motivation Criteria
by Van K. Tharp, Ph.D.
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People usually make decisions or judgments based upon certain criteria. Whether you are deciding what to have for lunch or who to marry, you have criteria for the decision that help you determine which way to go. For example, think about becoming a Super Trader — and let’s say you could consistently make 2% (or more) in the market each month no matter what the market type was. Think about how that would feel. So see yourself doing that, feel really good, and that could motivate you to take action.
Your criteria define and shape the state you are seeking — for example, you’ve just looked at how consistently make 2% or more each month trading might make you feel. Now, however, suppose you change the criterion of success to “consistently recognizing market types so I can make good money trading in bull markets.” What would that be like? Well, you might be happy with that criterion initially but then realize that during sideways or bear markets, you might not feel so good.
Your decision criteria might be similar to your values (see Volume 3 of the Peak Performance Home Study Course) but they are not necessarily the same. Criteria and values apply to different logical levels or metastates. For example, you might have different environmental criteria, emotional criteria, behavioral criteria, etc.
You and I could both have a value or criteria of transformation, but you and I would probably give a completely different meaning to the word transformation. I might say transformation leads me to a higher level of consciousness, and you might say transformation helps you change in some way. Those two criteria could result in very different decisions about transformation.
When you set some goal, such as to become a good trader, establishing useful criteria that will work for you is essential to the goal setting process. How you develop the criteria and the level at which you operate to determine if those criteria are met might be different for you than for anyone else. For example, if your criterion was success, you might define success as everyone saying “He’s successful” when they look at your trading performance. In contrast, someone else might say that success means, “Trade and watch my account grow 25% per year.” A third person might say, “Feel really good about myself.” These are totally different ways of evaluating success and they lead to totally different decisions and conclusions.
Motivation Criteria Step 1:
So let’s look at an exercise you might do to help you motivate yourself. This exercise will also help you determine your higher level criteria which tend to override lower level criteria.
Do the following:
- What would motivate you to try something new (such as join the Van Tharp Institute Super Trader program or anything else you might pick)?
Someone might say, “I really want the freedom I’d have as a full-time professional trader and I really want to transform myself to do that.“ (Freedom and transformation are the criteria).
- Next, determine what might cause you to stop doing that new activity, even if you were getting the criteria met that you identified previously. That is, why might you stop going through the program (or activity) even if you were experiencing the freedom and the transformation you wanted?
As an example, you might say, “I suddenly felt like I didn’t have enough money.” So in this case, money was a higher level criterion than freedom or transformation.
- Now, what would make you continue with the program even if the higher level criteria in step 2 stopped you?
It might be that, “I find I keep getting happier and happier as I progress in the program.” (increasing joy) Thus, happiness or joy could override not having enough money to continue.
- Now ask, “Even if I’m meeting all those criteria (such as being really happy for no reason), what would make me stop doing it again?”
In this case you might say, if someone I loved were really sick and I had to stop the new program/ activity to take care of them. (concern for loved ones)
Do this exercise for yourself and notice what criteria emerge. What you’ll see is your hierarchy of criteria. And based upon our examples above it might look something like this.
Lack of Money
||Concern for Loved Ones
Motivation Criteria Step 2
Another way of looking at your hierarchy of criteria is to see what would motivate you to try something new even if prior levels of criteria are not met.
- What would motivate you try something new (such as join the Super Trader program)?
You might think, “I’d do it if it were cheap, easy, and quick.”
- What if none of those criteria were met, however, what would still get you to try it or anything else that was new?
Your response might be, “If I were totally convinced I’d really make a lot of money doing it.”
- But what if the activity/program didn’t meet those criteria either (in steps one and two above), what would make you motivated enough to want to do it still?
You might say, “If I knew I was going to become more and more joyous until I was joyous for no reason at all, and that became my natural state.”
- And what if it still didn’t meet any of those criteria (in one through three), what would still motivate you enough to want to do it?
After some thought, your response sound like, “If I were convinced that my life depended upon it.”
So now we have criteria that are similar to the first exercise but slightly different. For example, you found a new lower level criterion of “cheap, quick, and fast,” and a new higher level criterion of “my life depends upon it.” That illustrates the value of taking two different approaches to eliciting your criteria.
||Cheap, quick, and fast
||Make lots of money
||Happy for no reason
||My life depends upon it
So try both forms of the exercise for yourself. While the Super Trader program would be new for you, you can use anything that you might like to try - even some extreme activity like sky-driving or climbing Mount Everest. Once you’ve done the two exercises, I’ll show you how to apply the criteria you identified to motivate yourself. You can learn to break out of your habitual ways of being and help yourself get around self-made boundaries that you might take for granted.
Using Your Criteria to Change Your Behavior, Step 3
To begin the next step, select four locations on the floor which are large enough for you to stand in, side-by-side. These will correspond to your behavior, your motivation, your limitations, and your values. Values, in this case, will be your last location to stand in.
Step into the first location on the floor and identify some activity or behavior that you’d like to pursue but somehow, you have consistently stopped yourself from doing it. Let’s say it’s something like exercising regularly or working on yourself for continuous self-improvement.
Once you’ve done that, step into the second location on the floor and then identify the criteria you have that motivate you to want to do those behaviors.
- For exercise, your motivation criteria might be to “become healthier and look more muscular.”
- Your motivation criteria for personal transformation might be “to have more choices in my life.”
Now, identify the details about the criteria you selected. These might include the modalities (visual, auditory, or kinesthetic) of your representation, the specific submodalities, or any metaprograms that are used to identify each criterion (if you are familiar with metaprograms).
- For the first example, you might see a stronger more vibrant you from a few feet away. So you are dissociated seeing your new self as you might look in the future.
- In the second example, you might feel that you always have options to resolve any problems you encounter. So you feel yourself being fully capable of moving freely in all directions in every situation.
Next, move to the third location and determine the criteria that stop you from behaving in the desired way. Since these criteria override the initial motivation, these will be higher level criteria.
- For example, you might say: “I stop exercising because I keep injuring myself and then it’s hard to get back any momentum after I have healed.”
- Or for self-work, you might say: “It keeps bringing up painful feelings. I just don’t want to go there.”
Now move to the fourth location and determine what criteria would cause you to continue the behavior despite all of the limiting criteria. Ask yourself, “What’s more important that would cause me to override the limiting criteria that stop me?”
- For improving your health, maybe the criteria sound like, “I need to keep exercising because I have a responsibility to take care of my family and be there for them.”
- Or for the self-work, “I must continue to work on myself because I want to be happier and enjoy life more.”
And when you have these criteria, notice what you did to elicit the last criteria you came up with.
- For example: maybe the idea of being responsible for your family came from a movie you visualized of them trying to cope without you and how difficult it would be for them if you were not providing your support. Seeing that movie makes you feel terrible.
- Being happier and enjoying life more comes from recalling past times that you’ve worked on yourself and the feeling of relief and joy you felt when you overcame a long standing belief or feeling that had been blocking you.
In the next step you will practice some leveraging. Go to location 1 and anchor the behavior you want. To anchor the behavior, say some word and squeeze your hand as you imagine yourself behaving in the new way. Once you have done that, bypass locations 2 and 3 and go right to location 4. Here apply your highest criteria to the behavior to override the limitations.
- For example, for exercising consistently you might say, “By exercising I’m providing a good example for my family and making sure that I will be at my best physically for them.”
- And for continual self-improvement, you might say, “Each painful encounter that I come across will help me achieve a greater level of awareness and increased happiness.”
Now step into location 3. From that location, find a way to achieve the desired behavior that will match the criteria on all three levels. In terms of exercising, could you find a new routine that would be less physically stressful and also make you healthier and stronger so you could provide for your family? In terms of working on yourself, could you see yourself addressing painful issues and then becoming more joyful as a result of going through them? Make sure that you create the new vision in a way that matches your elicitation of your highest level criterion in location four.
I don’t usually include exercises like this in my articles but this process could help a lot of people do some things they have been avoiding or putting off. If you like this process let us know how it worked out for you by emailing van @ vantharp “dot” com. We’d appreciate your feedback.
About the Author: Trading coach and author Van K. Tharp, Ph.D. is widely recognized for his best-selling books and outstanding Peak Performance Home Study Program—a highly regarded classic that is suitable for all levels of traders and investors. You can learn more about Van Tharp at www.vantharp.com. His new book, Trading Beyond The Matrix, is available now at matrix.vantharp.com.
Three July Workshops
INFINITE WEALTH — July 8-10
Twelve Benefits You’ll Receive from the Infinite Wealth Course
- You’ll learn about the five-step method to becoming infinitely rich in much more detail. Moreover, you’ll develop a personalized plan for you.
- Become wealthy on the inside so that it will appear on the outside. You’ll develop a personal plan and learn how to overcome your personal roadblocks so that you can get started immediately.
- Learn several principles involved in becoming wealthy and learn how to make those principles ingrained in your body so that they become part of your behavior. That’s one of the real secrets to wealth. Not the knowledge but having the knowledge be a part of who you are.
- You don’t have any assets right now? We’ll also show you 15 steps to increase your income by 1000% within the next five years. And, you need very little to get started.
- You’ll learn "financial intelligence". You’ll learn to think like the rich instead of like the poor or the middle class. Even if you have money, it’s important to think like the rich or you could lose it all. That knowledge will include a simple strategy to get rid of all of your debt within 5 to 7 years, including your mortgage. How close to infinite wealth would you be if you didn’t have any debt?
- At the end of the course you’ll be able to access a wealth building state of mind that will help you achieve your dreams.
- We’ll help you determine your purpose in life and use that as motivation to do what is necessary to achieve Infinite Wealth.
After all of these years, you’ll finally understand the one simple decision you need to make to start moving toward the fast track and out of the rat race.
- You’ll learn to overcome years of conditioning by the school systems, by your banker and by your accountant.
- You’ll learn to rethink your finances. Some of you could be infinitely rich within a year.
- Learn the difference between working for money and money working for you. If you’re self-employed, you’re still working for money. This system is so tight that it actually explains many of the problems that most traders have— they’re self-employed and they are thinking with the mentality of the self-employed. Learn to think like a business owner.
- In the New Infinite Wealth Workshop, you learn how to develop resiliency so that when you achieve any sort of setback, you will bounce back easily and be able to continue on track toward infinite wealth.
- In addition, we will be emphasizing the psychological tools to make sure you can follow the steps we are going to give you.
SYSTEMS THINKING: How to Use Systems Thinking to Improve Your Trade Craft — July 12-14
How will you benefit from attending this Systems Thinking Workshop?
- Learn to plan your trading business and plan your trades more effectively for achieving the results you are trying to generate.
- Improve the probabilities for your success in trading
- Find out what key questions to ask in order to challenge your established market beliefs, logic, and mental structures for trading.
- Create a series of useful tactical checklists for daily and weekly use so you don’t miss common crucial items and keep your trading efficiency very high.
Gain invaluable lessons from practicing systems thinking.
- Identify the few critical states in price action and how to plan how to take advantage of those when you find them.
- Develop your situational awareness skills by simply paying attention to what’s happening in order to evolve your strategy as well as exploit new opportunities.
- Understand how to construct trade scenarios in order to anticipate possible outcomes and reduce the chances for a “surprise”.
- Clarify your objectives and understand how your long term plans, your big picture process, and expecting the unexpected, all support you getting to those objectives.
- Feel more confident in your trading regardless of what the markets are doing.
- Improve your decision making processes for faster execution with results more aligned with your goals.
- Ultimately – feel better about your trading and improve your returns.
These are all things that are the natural outcomes of a systems thinking orientation as applied to trading. These are the things that the members of the tortoise community of practice and the chatroom have been doing to improve their trading on explicit systems developed by Ken and through the community collaboration.
This new three-day workshop will not only have extensive pre-work that will give you a head start on the material, but Ken will have dozens of practical exercise for the class which he has already field tested within his trading group. All of the exercises and three days of presentations will focus on helping you realize how important this mindset is for your own trading and developing your systems thinking orientation and how to capitalize on this important factor.
In this new 7 minute video, Dr. Ken Long provides a mini-lecture on how systems thinking helps traders. He explains how systems thinking helps them understand what’s happening now, identify where they’d like to go, and how to think about the methods, processes, and means to reach those objectives. Ken makes the complex concepts around these subjects understandable if not simple. In the upcoming Systems Thinking workshop, you will learn the habits of mind that help you evolve, that help your systems evolve, that help you maintain and even develop new edges — all as the market continues to evolve.
ADVANCED ADAPTIVE SWING TRADING — July 15-17
In this new three-day workshop, Dr. Ken Long will present a series of advanced, adaptive trading systems that work well in the swing period holding time-frame – from two days to two weeks.
Adaptive trading systems have rules and rule parameters that adjust to market conditions and price conditions rather than remaining constant.
They both mechanical systems and adaptive systems work well, they just work differently. Mechanical rules are more easily understood, are easier to program, and they are easier to execute. Mechanical rule-based systems typically do not adjust to changing market conditions and therefore are out of the market at times when the condition criteria are unmet. These are the kind of systems detailed in the Swing Trading Elearning Course.
Adaptive rules require a better understanding by the trader of price action, of self and of the market. These systems can also take more time to monitor and to execute.
In this 18 minute video, Ken answers some of the most frequently asked questions about this new course.
Click Here To Learn More
Combo Discounts available for all back-to-back workshops!
See our workshop page for details.
The Earnings Recession No One is Talking About
by D. R. Barton, Jr.
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Over the past few weeks, I’ve talked multiple times about the sideways nature of this market and how we’ve been in a trading “box”. Tuesday’s big up day did little more than lift us off the lower edge and take us right back into the middle of that box:
Last week in this space I talked about the counterbalancing forces that are keeping the markets in this box. On one side, we have the continuing narrative of central banks providing a safety net for the market and on the other side is the continuing global economic slowdown highlighted by the shrinking growth numbers in China, the dropping exports levels from South Korea (considered a proxy for health of global trade) and importantly, the serious drop in corporate earnings here in the U.S.
Let’s look a little closer at what’s happening to earnings.
The Earnings Game, U.S.-Style
I believe traders and investors need to understand the single most important aspect of quarterly earnings reports: the absolute numbers and their trends matter much more over the long-run than whether a company “meets earnings estimates”. If you listen to the financial media, you might think meeting or missing estimates during earnings season mattered more but — what matters most is the level of the numbers and their trend over recent quarters.
Let’s step back and talk about a very simplistic and useful way to analyze earnings releases. When earnings are announced, there are three main pieces of information that I focus on
- The Top Line: Revenue or Sale
- Did the quarterly top line meet, beat, or fall short of expectations?
- Relative to last year (very important) and last quarter, where is the top line now?
- The Bottom Line: Earnings or Net Income
- Did the bottom line meet, beat or fall short of expectations?
- Relative to last year (very important) and last quarter, where is the bottom line now?
- Are there unusual events included in the bottom line? (Companies usually report earnings excluding one-time events like special tax write-offs, acquisition expenses, etc.)
- Is the guidance the same as before or is the company guiding higher or lower now?
- This question applies to both revenue and earnings.
Short Term vs. Longer Term Price Movement
Absent groundbreaking news, these three factors will drive the price reaction. For me, the real utility of analysts’ estimates (usually reported as a consensus) is listening for what’s expected. If results are significantly different than expected — then a “surprise” can really move a stock’s price.
In terms of short-term “price reaction to earnings”, all of the three earnings reporting categories are not created equally — one stands out. A big or unexpected change in guidance for the next quarter and/or the rest of the year will trump all other results when it comes to price reaction. That effect has been particularly pronounced in recent quarters.
The impact of these earnings related items, however, is often short-lived. Fundamental analysts will tell us that earnings drive the price of the stock in the long term, and therefore earnings drive the market. From this “macro fundamental” perspective, the recent broad based earnings trend should give us cause for caution in the market.
The well-respected data firm Factset tells us that 95% of all S&P 500 companies have reported earnings this time around and earnings for all the firms that make up that index are down -6.8% versus the same quarter last year. With so few companies left to report, it’s now a certainty that this quarter will mark a decline in Year-over-Year (YoY) earnings. Factset reports, “The first quarter marked the first time the index has recorded four consecutive quarters of year-over-year declines in earnings since Q4 2008 through Q3 2009.”
Why is Almost No One Talking About the Earnings Recession?
The classic definition of a recession is two consecutive quarters of contraction in growth. By that definition, we’ve been in an earnings recession for almost six months now.
So — if earnings drive stock prices, why is so little being said about the earnings recession? Very simply — it is not good news for the financial media / brokerage / mutual fund complex — so it’s only brought up when absolutely necessary.
Corporate earnings aren’t the only market driver. Far from it. But they are an important indicator of the health of the companies and therefore, the economy. Until the earnings picture turns around, it will be hard to turn the economy as a whole into a robust growth phase, so it’s important to keep your finger on the pulse of this economic indicator and important market pricing component.
Your thoughts and comments are always welcome. Please send them to drbarton “at” vantharp.com — I always appreciate hearing from you!
About the Author: A passion for the systematic approach to the markets and a 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".
TRADING BEYOND THE MATRIX
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Swing Trading Systems E-Learning Course
Ken Long's systematic approach to swing trading with 5 distinct trading systems. This course has over 10 hours of instruction with significant follow-along documents included for students to download.
Review the videos as many times, and as often as you like, for one full year. Plus, you receive a bonus workshop at no extra charge—Dr. Van Tharp's Tharp Think Essentials!
If you are interested in both this video home study program (featuring mechanical, rule-based systems) and our new Advanced Adaptive Swing workshop (adaptive trading systems have rules and rule parameters that adjust to market conditions and price conditions rather than remaining constant) you benefit by buying both at the same time.
When you register for the workshop you can get a 22% discount on this home study.
The home study is not required to attend the workshop, however, an understanding of the systems in the the video home study may help a less experienced trader better understand the more advanced trading style which will be presented in the workshop. The systems, however, are totally different and the Advanced Adaptive Systems Workshop does not build upon the systems in the home study.
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.
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