There is a fundamental NLP presupposition that if one person can do something than anyone else can also do that same thing. Tony Robbins once argued that there were probably certain limitations to this, such as you couldn’t expect a really short person to be a basketball star. But after he said that, Spud Webb (who was about 5 feet 7 inches tall) won the NBA slam dunk contest in 1987.
Well, I operated under the assumption for many years: that I could just teach the various models we’ve developed and anyone could achieve trading success as long as they cleared enough blocks to be able to install the models. In fact, my first Super Trader program, which started around 1995 was simply a two-year program in which you could do up to four two-day consulting sessions with me (which involved clearing out psychological blocks) and attend all of our workshops that were given during that period (about 4-5 of them). We charged $50,000 for the two years (i.e., $25,000 per year) and even though the price of our current program goes up yearly we still haven’t come close to that annual price level yet.
I’m a modeler and I became very interested in modeling those who achieved the most success in the program. What did they do that the others did not? Topics came up like willingness to do massive psychological work (versus not being willing); developing a business plan to guide their trading (which a few did), and many other things. So as I learned more about what it took to create success in trading, the Super Trader program evolved and I have begun to see the program as a series of models. TOTE is one model construct that comes from NLP and is very useful.
NLP TOTE MODEL
The TOTE model comes from Miller, G., Galanter, E., and Pribram, K. Plans and the Structure of Behavior (1960). It was one of my favorite books as an undergraduate psychology student and it was also a favorite of the developers of NLP who used it as a basis for modeling.
TOTE is an acronym which stands for Trigger Operate Test Exit.
The basic operations are shown in the figure below.
A test-trigger starts the process (i.e., you raise a glass of water to you lips); you do some sort of operation (i.e., drink the water); and at some point you test some idea (i.e., is the glass empty and/or am I still thirsty?). If the test is passed, then you exit and perhaps move to another operation; if not then you continue the operation (drinking).
A new operation might be as simple as filling the glass again, because you are still thirsty and the glass is empty. So we have a simple example of nested TOTES as shown in the diagram.
What is great about TOTE loops is that the motivation for the loop comes from within the loop. A TOTE loop is controlled by a goal and not some external stimulus.
The TOTE model can also be used at a higher level for determining how a rather large task is accomplished. First, as in all systems, there is an input and an output. Then goals and evidence for meeting those goals are determined in the TEST process. Here you ask, what’s desired and how do I know I have that?
Input: What kind of input does the model attend to? If the input is inadequate, you will probably never reach the goal in an adequate way.
Output: What type of goal is the model attempting to achieve. How are these goals represented internally (what’s the map)?
TEST: What is the goal and what is the evidence (criteria?) for meeting the goal. Often in human beings the evidence is a simple submodality change.
The second box is a series of actions and responses to a problem (i.e., not having the goal). These are the operations of the TOTE. You establish what you want and how you will know that you have it. Then you’ll perform a series of operations until you meet the evidence for having it. In the Operations box, you are essentially asking:
What sort of mental and behavioral steps are necessary (according to the model) for one to implement choices and thus reach the goal?
If there are also obstacles to achieving the goal, the initial operations are not enough, then how do you map out the challenges in a useful way?
Once you’ve mapped them out, how do you find and select the appropriate choices to deal with the challenges to meeting the goal?
And, it must determine (probably through nested TOTEs) at what logical level it needs to operate. Thus, the Operations can include many nested TOTEs.
To make the TOTE effective, you need what NLP would call well-formed goals (business consultants often call these SMART Goals though they are slightly different). A well-formed goal has the following characteristics:
The goal is stated in positive terms. It is practically and logically impossible to give someone the negation of an experience. For example, I don’t want to be so fearful of missing a signal in the market. IF that’s what a person states, then ask “what do you want instead of that?”
The goal is defined and evaluated in sensory based terms. (Ongoing, short term, and final, long term). You must be able to measure and determine the progress being achieved. And, although this might be an internal state change, you still need to evaluate it in terms of something that is measurable. Thus, you need to establish two sets of tests for the outcome. One for the setting in which the change is made and another for the setting in which the change will be applied. Ask: “How will I know that I have achieved the outcome”?
The goal is initiated and maintained by the person or group who desires the goal. Smart goals must be assignable, but when you are talking about personal change — that doesn’t work; it’s abnegating responsibility. For example, a business goal might be that you want employees to stop complaining about accidents (notice this is negative). So you first have to ask “what do you want? An example of a positive response is “achieving a perfect safety record each month.” Then rather than say, “Employees need to be more careful” you need to set up specific outcomes that are in the control of the person making the request. “What would demonstrate that you have the resources necessary to get your employees to follow protocol so there will be fewer accidents?”
The goal is made to preserve the positive by-products of the present state. If you want to give up a habit, such as smoking, then you need to make sure that you can maintain the positive reasons why you smoke. For example, people may smoke because it relaxes them and because it reminds them to breathe more deeply. If someone gives up smoking, they may find they are tense and cannot relax so they will probably resume the habit. You also need to determine what will happen when they adopt the new behavior, perhaps there will be consequences of the new behavior that are very undesirable. For example, you want to make a lot of money trading. You do that but then suddenly find you are becoming a heavy drinker or a compulsive spender. What’s going on to produce that new behavior? Or what was going on with the hold habit that prevented the new undesirable behavior from occurring? To understand all of this, you really need an accurate map of the system.
The goal is appropriately contextualized to fit the ecology of the surrounding system. People usually say that they want the outcome under all conditions and at all times but quite often, that’s not appropriate. As a result, you must determine “What is the context in which the outcome is wanted? And what is the context in which the outcome is not wanted?” For example, you might feel that you need to set boundaries around yourself to make sure that you are respected. But what are the boundaries? And would you want them to occur under all conditions. Another example might be that you want to discipline your children, but under all conditions? Are there situations where you want them to be spontaneous and you wouldn’t discipline them?
TOTE Model of the Super Trader Program.
I once drew a couple of mind maps to show how complex the Super Trader program had become and you can see these below. (A mind map is a visual representation created around a single concept, drawn as an image in the center of a blank page, to which associated representations of ideas such as images, words and parts of words are added.)
Then I applied some simple NLP models to these mind maps and reduced them to a set of nested TOTEs as in the following diagram.
So the test for the program is that you adopt all of the modeling work VTI has done on what great traders do. Here are the primary models for the ST program. (Notice if you have adopted all of these models.)
Tharp Think Beliefs (which includes critical concepts like R-multiples and the SQN® number. (click here for a brief overview of each concept)
The Top Tasks of Trading (Detailed in the Peak Performance Home Study course)
How to Develop a System that Fits You
Adopt VTI systems that work (workshops/playbook)
Develop your own systems
Can operate in most(all?) market types
How to Position Size to Meet Your Objectives
Winning the Infinite Wealth Game
Preliminary (not fully developed) — how to understand market type
Preliminary (not fully developed) — understand systems thinking
In order to you to adopt those models effectively, we believe that you have to raise your consciousness so we help you do massive self-work. Our mission at VTI is “transformation through a trading metaphor” and this is what ST1 is all about. Here are the evidence criteria for increased consciousness (which is the second set of tests in the model above):
12 Evidence Criteria for Increased Consciousness
At least 350 on the Hawkins scale (ideally 500)
Happiness test score consistently over 65
Excellent Ongoing Awareness of Beliefs/Emotions/Thoughts
Awareness of your key strategies
Convincer (what modalities/how many times)
Motivation (what submodalities)
Decision Making (especially are criteria appropriate?)
Awareness of your values and what drives you.
Awareness of your parts and an absence of inner conflict.
Awareness of anything else that might have you automatically doing non-useful things unconsciously
Clear all non-useful beliefs at the identity level or higher
Awareness of beliefs
Releasing the Charge
Clear all screts since secrets are just issues with charge for you (it’s the charge that makes it a secret). When the secret is clear, it will 1) no longer be considered a secret; or 2) you will totally forget it existed.
Strong relationship with Inner Guidance
Regular dialogue with Inner Guidance (so it can continue to raise your consciousness)
Guided by strong purpose/vision
Document five major transformation (when you accomplish 1-11 above you will probably already have them) so that you can handle anything else that comes up in trading. Put these into an article to help others.
To meet those criteria, we take you through a series of Nested TOTEs, where the operations to meet those criteria and to learn the models include:
Learn Tasks of Trading
Mental State Control
Parts and Conflict Resolution
Learn Mind to Muscle for Tharp Think
Understand spiritual beliefs
Contact with Inner Guidance
Transformation Mediation/Preparation for TfM 28-day course
Understanding Winning Strategies for Key Parts
Trader Reinvention Game
Raise Happiness Score 20 points
Really get shadow parts
Really understand how what’s out there is a projection.
Begin to understand “the perfection of the what is.”
Understand Mind to Muscle
Understand Key Strategies, including convincer, motivation, and decision making
New Infinite Wealth Workshop
Learn the Infinite Wealth Model
Learn that Wealth is an inner game and clear blocks
Learn Mind to Muscle of Key Wealth Principles
Become a Blessing Giver
Strengthen/Develop Inner Guidance Connection
Clear Major Relationships (Parents/Spouse)
Provide you with a key tool in your transformation
Get/Give a Minimum of 400 blessings each year that you are in the Super Trader program. This is major and provides the impetus for many of the transformations.
If 20 people are in a workshop and 10 are blessing givers, then you could get/receive 30 blessing each day.
Thus you will need about 14 such workshop days to meet this criterion each year.
At the summit you could easily have 35 attendees, 30 of who are blessing givers. So each day you would give receive 65 blessing. If you stayed for 9 days, you would give receive about 585 blessings. This alone should be enough of a reason for you to attend the summit if you are a super trader student.
Systems Thinking Workshop
Make useful maps and realize they are not the territory.
See the interactions between everything.
Have useful tools to look at and simplify the complex.
Be able to adapt to the interactions between self-system-market as they constantly change.
Peak Performance Course/Lessons in the Super Trader Program
Mind to Muscle Tharp Think principles.
Understand the Metaprograms that run you unconsciously.
To learn how you motivate yourself and get a basic introduction to risk in volume 1 of the Peak home study.
To finish Volume 1, be able to calculate R-multiples values, understand risk, and know how to duplicate success. Get the psychological, risk, and position sizing experience from playing all levels of the game at various levels of efficiency.
To determine at least 400 identity beliefs from about 20 parts and see if they are useful and have charge.
To help you understand the stressors in your life and increase your wellness and health through diet and exercise.
To continue to reduce your stressors and to be able to monitor your thoughts and feelings through our simulated trading game.
Do a Life Review Exercise to get an idea of what’s impacted you and how much plus get an idea of the many miracles that have occurred in your life.
To understand the impact of beliefs and values on your life, and to do a value elicitation.
To help you with goals and any obstacles that might prevent you from reaching your goals, including internal conflicts.
To take you through a process to resolve your internal conflicts plus review the entire content of volume 3 of the Peak Course.
To help you understand mental state control, all of the procedures you have available to do that and to notice the major charges you have remaining. Also to begin to release charges.
To Use the Peak 101 feeling release method to release charge.
To do the Work of Byron Katie so you understand how you project your beliefs, and that beliefs are all made up and only useful in a limited number of contexts. At this point all your charged beliefs should be cleared. You will be doing 50 JYN worksheets and about 300 One Belief at a Time worksheets. You need to take Peak 203 before doing this lesson.
To use the Felix Process to rid yourself of your remaining problems and issues.
To indicate that you understand your decision making strategy, convincer strategy and motivator strategies so you become more independent in your thinking. You probably should take Peak 204: Mental Strategies before doing this lesson.
To determine any flaws in your various strategies and fix them.
To complete your Infinite Wealth Plan. You should take the Infinite Wealth Workshop before doing this plan.
To play the Trader Reinvention game, find the winning strategy of a number of parts and plan for ST2. You should probably take Peak 202 at least once (maybe twice before doing this lesson).
To demonstrate your five transformations and demonstrate to Van that you have raised your consciousness enough to move into ST2.
To Mind to Muscle Korzybski/NLP principles.
Finally, you reach the application TOTEs. The criteria for these tests include:
Develop a Business Planning Handbook to Guide You
The Blueprint Workshop provides a very thorough outline for this.
Trading Beyond the Matrix also has a guideline.
Develop/Adopt three non-correlated systems that work in different market types
Super Trader Playbook, which includes most Super Trader systems plus systems from old technical workshops that we no longer teach.
Various Technical Workshops (examples include Day Trading Systems, Forex Trading Systems, Trading in Bear Markets, etc.).
Be able to trade profitably with at least 95% efficiency
So this is an example of taking a very complex system and reducing it down so you understand what to do and how to do it.
We have developed five models and have several models under development (including the evolution of the Super Trader program itself).
There are twelve evidence criteria for increased consciousness.
We have eleven ways to increase your consciousness/adopt the models with as many as twenty-one subheadings.
About the Author: Trading coach, and author, Dr. Van K. Tharp is widely recognized for his best-selling books and his 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 www.vantharp.com.
March Dates Have Been Added and Are Confirmed
Register now before the holiday season gets hectic.
The Christmas season is a time of year that has a different vibe, regardless of one’s spiritual leanings. The pace around us quickens. Expectations rise. And for those of us who can see past the blatant commercialization that seems to accost us from all directions, some of the joy and love of the season seeps in.
I’m expecting snow this weekend in Delaware – that certainly seems seasonally correct. Family members are calling to arrange visits for later in the month. And we have a few decorations set out that provide a pleasant reminder of our personal reason to celebrate. My kids are coming home from college and med school this weekend; so when combined, I can say that I’m certainly in a state of joy. It’s a nice place to be.
The markets usually manage their own form of “joy” at this time of year as the optimism of the populace seems to bleed over into stock prices. This observation is backed up by the fact that the S&P 500 index has provided positive returns in 49 of the past 65 Decembers for a win rate a little above 75%.
The January Effect, in December?
Many readers have heard of the January effect where small capitalization stocks have historically outperformed their large cap brethren during the month of January (I last wrote about it in this space in 2013). This big outperformance by the small caps was very clear in the second half of the 20th century with Hirsch and Hirsch reporting in the Stock Trader’s Almanac that small caps far outpaced big caps during January for 40 out of 43 years between 1953 and 1995. During that time, small caps gave an absolute performance improvement that was staggering. The Wall Street Journal reports a small cap outperformance of 5.1% vs large caps during the decade of the 1970s. Said another way, a $100,000 portfolio invested in small caps would return $5,100 more than one invested in only large caps during the month of January. That’s a huge single month edge.
Since then, it seems like everyone has jumped on this band wagon and the edge has steadily diminished down to only a 1% edge in the 1990s. There is good news on the small cap outperformance front, however, because the Hirsch father and son team have reported that the January effect is still in working… it’s just working earlier.
Since the 1987 crash, if you move the January Effect start date back to December 15th, the phenomenon has continued to work wonders. The numbers show a small cap outperformance from December 15th to December 31st of 85% (3.5% vs. 1.9%). The effect remains viable though less strong if held through the middle or end of January. And since 2011, we’ve seen the small caps build on that outperforming tendency with four out of five years showing strong outpacing.
In short, this is a seasonal tendency with a strong track record that is built on a broader foundation of overall market strength in December. Like all seasonals, it doesn’t work every year but this one merits a close look - perhaps it’s worth a trade with your normal risk parameters attached.
One Big Question
This year, there’s one additional big question – will this seasonal tendency work again after the small caps have outperformed their large cap cousins by so much since the U.S. elections?
The seasonals and the current fundamentals argue “Yes”.
One reason small caps have outperformed since the election last month is the promise of tax reduction from the Trump White House and Republican Congress. The thought process is simple: smaller companies pay a higher effective tax rate than larger companies so any tax relief will make a bigger impact on small companies’ bottom line.
So if you think the market believes such tax relief is coming, this play makes much fundamental and seasonal sense.
I always welcome your thoughts and comments. Please send them 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".
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