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More opportunities to achieve Peak Performance this January.
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Tharp's Thoughts
Inbox Mentoring
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Feature: Lines on a Chart and Worst Case Contingency Planning by RJ Hixson
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Tips: Margin Debt — Dangerously High?, by D.R. Barton, Jr.
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GDPR: Read Our GDPR Statement
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Van Tharp’s signature three-day workshop, Peak Performance 101, is built around helping you identify winning trading beliefs and behaviors based on the model of successful trading that Dr. Tharp has developed from his 30 years of researching the top traders in the world. You’ll also learn how to incorporate these useful beliefs and behaviors into your trading back home.
There will be 2 opportunities to take this workshop in the coming months, in London this October, and in Cary, NC this January.
Scroll down to read more about this workshop below.
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Lines on a Chart and Worst Case Contingency Planning
by RJ Hixson
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Have you heard about the "monster" hurricane heading towards our coast in the southeast United States? This may not be big news in your part of the country (or in your country) but it has dominated the news cycle here for the last week or so. The arrival of a major hurricane is a big natural and a big media event so we read about it on every news site or hear about it on the radio and TV.
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A few distant clients have asked in the last week what hurricane conditions are like here. Well, a weak hurricane or one that only brushes our area dumps rain and generates strong winds. These indirect hits seem like worse-than-normal stormy weather but nothing catastrophic. People don’t think much of it and carry on fairly normally. A year or two ago, one of the area universities played a football game during the middle of such a storm. On the other hand, the local universities have cancelled all their games for this weekend. A major hurricane like Florence hitting the area has significant immediate and lingering effects.
People Remember Major Hurricanes
Hurricane Fran was the last major hurricane that came through this area in 1996. It brought sustained winds of 60 and 70 mph (100 to 110 kph) with gusts of almost 80 mph (128 kph). What’s that like? For one, it’s very loud. It’s like riding down the highway with all your windows open except you’re sitting in your house with that same level of noise in every direction. I remember hearing loud cracks and pops every few minutes throughout the night that Fran came through. We imagined lots of branches being broken but awoke to find much worse — many of the pops were trees breaking in half. In addition, rain came down as hard as in a strong thunderstorm — except that it came down that hard for 10-12 hours. 10 inches (25 cm)
of rain fell in that 24 hour period.
After the sky had raged all night, the following morning’s calm was almost disorienting. We couldn’t drive. No one could drive because branches and downed trees covered driveways and streets so my wife and I went for a walk. We found many people were walking around silently amazed by the strange sights of destruction everywhere.
At that time, we lived close to a large shopping mall which we found partially submerged. I remember how bizarre I felt seeing an ice machine, the kind that sit outside of gas stations, floating slowly through what used to be one of the busiest intersections in Raleigh. The high winds and flying debris damaged buildings everywhere. We also found out later through news reports how many houses had been damaged or destroyed by falling trees.
For most people, life got back to mostly normal fairly soon after Fran. Many neighborhoods had electrical power restored in two or three days but some of our friends lacked power for one or even two weeks. The cleanup of branches and uprooted trees went on for months. Some buildings that had been flooded and houses with trees on them were beyond repair and were demolished.
The Value of Contingency Planning
The approach of hurricane Florence reminded me of the value of worst case contingency planning. Even though we have had a full week a warning to prepare for the hurricane, I have noticed feeling some stress this week and am glad I’ve done my contingency planning well ahead of time. Worst case contingency planning helps you consider how you would respond to scenarios you hope never happen. For us, a worst case scenario for Florence could mean lacking electricity for a week or two and a severely damaged house or office. If this were to happen to you, what would you do about your trading?
You could just figure out how to respond to emergencies when they happen. In fact, that’s probably a good way to make a poor decision given the stress you are likely to face. You would be far better off considering how to respond to contingencies well ahead of time. This allows you to use your imagination in a peaceful setting. With such an approach, you can picture all sorts of emergencies that might affect your trading and then creatively conceive effective responses.
We study this topic in some depth at the Blueprint for Trading Success Workshop. We go through a number of areas where “bad things” could adversely affect your trading. For traders in the southeastern part of the US, hurricanes are on that list. One “nice” feature of a hurricane is that you know it’s coming for about a week. Other contingencies like earthquakes strike suddenly and leave no time for preparation — only responses.
You can think through what kind of situations and circumstances might adversely affect your trading business and categorize them into groups. During Blueprint, we consider about a hundred different scenarios for events that affect you and your family, your computer equipment, your environment (like your office, home, city), the markets, and a few other categories. After contemplating what could happen in each of these categories, you consider how you would respond to each scenario with three possible actions. In an unstressed environment, you have more freedom to be creative and come up with many options. You won’t have access to the ability to think up many options under a great deal of stress. In those situations, adrenaline
starts pumping which takes blood away from the brain which reduces your ability to think creatively. As a survival mechanism, adrenaline prepares the body for action/reaction. Having a worst case contingency plan allows you to focus on actions — smart actions you have already creatively thought through ahead of time.
You can imagine that after visualizing hundreds of adverse events and coming up with three potential reactions to each one, putting this down on paper makes for a big section in your business plan. Is it really worth all that effort? Weigh for a moment how a hurricane, a car accident, a computer crash, or brokerage announcing bankruptcy could each, in the worst case, cause your trading account to blow up. If you can imagine that happening, then investing some time beforehand on how to respond effectively to these contingencies crafts a high positive R-multiple trade.
Take that trade and be prepared!
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About the Author: R.J. Hixson is a devoted husband and active father. At the Van Tharp Institute, he researches and develops new products and services that help traders trade better. He is the lead instructor for several VTI workshops and a co-instructor alongside Van Tharp in the Peak Performance workshop series. He can be contacted at “rj” at “vantharp.com.”
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Margin Debt — Dangerously High?
by D.R. Barton, Jr.
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Every week I look at thousands of charts so when a graphic hits my screen that I think is particularly useful, I like to pass it on. Since some people are starting to talk about margin debt levels in the U.S. stock market lately, the following series of charts provides an interesting and educational picture.
Margin debt is just money that traders and investors borrow to buy stocks. In the US, most retail account holders can borrow 100% of their account balance to buy additional stocks at fairly low interest rates. Some analysts like to measure margin debt as they believe it’s a way to gauge market participants’ risk appetite. I’ve read recently in some articles that certain analysts are worrying about the all-time absolute highs of margin debt right now.
Margin is at Record Highs — Is That Dangerous?
Ed Yardini of his own eponymous research firm puts outs consistently interesting looks at various market aspects. Recently, he looked at this very issue of margin debt because many people use it as a proxy for the amount of leverage (and therefore additional risk) that traders and investors are using. If there’s too much margin, they fear that could indicate a market bubble — and a subsequent crash.
Let’s look at the first chart to check historic levels of margin debt with the current amount:
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As we can see, margin debt is higher in absolute terms than it was at the market tops in 2000 and 2007.
In the next chart, Yardeni shows the level of margin debt in terms of a broad market stock measure. You can see the rapid runup in margin rising faster relative to stock price advances during the 1998-1999 bull and in 2007:
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Now, look at the sideways direction of the line for the last ten years. Since the 2007 top, margin has merely kept pace with the stock market price runup during the current bull.
To put a finer point on that notion, this last chart shows the year-over-year percent change for margin debt:
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We can see that the enthusiastic use of margin was greatest leading up to the Internet Bubble in 2000 and not quite as big – but still significant – leading up the Real Estate / Debt Bubble in 2007. Over the last years of the ongoing bull market, however, margin use has remained quite muted.
The Bottom Line
Margin use right now actually looks like pretty darn healthy during a time of strong market growth. If you’re looking for signs of a rapidly inflating market bubble, the current level of margin isn’t a prime candidate for such a signal.
I always enjoy hearing your thoughts and comments! Please send those to me using drbarton “at” vantharp.com
Great trading and God bless you,
D. R.
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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 Networks’ Varney & Co. TV show (catch him Tuesdays at 9:30 a.m. EST), on Bloomberg Radio Taking Stock and MarketWatch's Money Life Show. He is also a regular guest analyst on CNBC World, CNBC's Closing Bell, Fox Business Network’s Cavuto Coast to Coast and Making Money with Charles Payne and the China Global Television 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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Due to Hurricane Florence the How To Develop Winning Trading Systems workshop will be rescheduled.
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The How to Develop Winning Systems Workshop teaches you what you need to know to develop your own system. The material you will learn is not market or time-frame specific. So whether you trade stocks, futures, currencies, gold, etc., or
whether you place 50 trades per day or 50 trades per year, you will learn all of the components that work in any system. With this knowledge you can both modify existing systems to fit you or the market type better, or master your own system development. Two locations to choose from, Cary, NC TBA and London, England in October!
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Presented by Libby Adams and RJ Hixson
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September 18-21
Tuesday-Friday
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We are on watch in order to make final decisions about having this workshop as scheduled. We will determine before the end of this week.
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October 2018 - LONDON, ENGLAND
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Presented by Van Tharp,
with RJ Hixson
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October 12-14
Friday-Sunday
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Do any of the following sound like you?
- Are you always looking for a new trading system? Or, are you always trying to improve the one you have?
- Do you find your trade setups never quite fit all of your criteria so you have trouble entering trades?
- Do you get anxious about the market or get anxious about risking your money so that you have trouble pulling the trigger?
- Do you get excited and ignore your rules or do you get distracted and fail to follow your system's rules?
- Does a losing trade take your energy away from the next trade or conversely, does a winning trade make you confident about the next trade?
- Is your trading (or your life?) ruled by fear, anger, greed, or shame?
- Are you constantly losing money?
- Do you lack a strong plan to guide your trading or do you fail to follow the plan you created?
- Do you have a performance ceiling where you fall apart or stop doing well consistently? Does your account reach a certain size and then it plateaus or you start losing money at that point?
If you answered yes to any of these questions, then you are experiencing some form of self-sabotage. But don’t worry, these are some very common patterns for traders and you can overcome them in order to reach your potential. This workshop will help you identify and resolve the underlying conflicts causing these patterns — as well as leave you with the tools to address conflicts that come up in the future for you.
It's been Van Tharp's cornerstone workshop for over three decades. Read more to learn the benefits you will walk away with.
Peak 101 will also be taught in Cary, NC this January. See details under January's workshop schedule.
Peak Performance is also a very important workshop to put on your calendar if you want to qualify for and apply to the Super Trader Program.
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October 16-18
Tuesday-Thursday
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The How to Develop Winning Systems Workshop teaches you what you need to know to develop your own system. The material you will learn is not market or time-frame specific. So whether you trade stocks, futures, currencies, gold, etc., or
whether you place 50 trades per day or 50 trades per year, you will learn all of the components that work in any system. With this knowledge you can both modify existing systems to fit you or the market type better, or master your own system development.
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Presented by Gabriel Grammatidis
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October 20-22
Saturday-Monday
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Presented by Gabriel Grammatidis
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October 23-24
Tuesday-Wednesday
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The Theory: All You Need to Know About Forex
Gabriel will spend most of the workshop teaching his trend-following systems. The first half day is spent to go over the specifics of trading the Forex market and cover such topics as:
- Why trade Forex?
- What are the advantages and drawbacks of trading Forex versus other instruments?
- What are the main market characteristics, and who are the Forex market participants?
- What methods work best in the Forex market?
- All you need to know about Forex trading sessions and the currency pairs.
- How are Forex chart characteristics different than stocks or futures?
- What do you look for in a Forex broker? What do you avoid?
- Why Forex may actually be the best market for new traders to learn trading.
- What are the trading edges that work in Forex?
- The Method
Gabriel teaches three specific trading systems. All three are trend-based; you can see the price action patterns in the price charts. His systems can be traded in various timeframes and can be traded across a wide range of currency pairs. Attendees of Gabriel’s workshops enjoy swing trading the systems using primarily 5-min ,15-min, 60-min and daily candle charts. The trades tend to evolve over a timeframe of anywhere from several hours to a couple of days (or even weeks, in the case of strong trends).
Two additional days of live forex trading side-by-side with Gabriel is available as well for hands on trading experience.
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October 26-28
Friday-Sunday
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In this workshop, you begin to build your plan that includes specific, actionable steps you can begin as soon as you get back home. Here are some of the benefits of attending the workshop:
- Assess your beliefs about trading and about yourself so you can leverage your useful beliefs and eliminate the ones that are holding you back.
- Learn how to steer your entire system development process through your objectives.
- Find the key ingredient that most traders and investors are missing in their objectives that will make you thrive financially.
- Create a business plan with 3 trading strategies compatible with the big picture so your trading results are consistently profitable.
- Learn the 8 critical areas of contingency planning that most traders find out about the hard way (i.e., the expensive way). Developing plans for contingencies minimizes the risks to your trading business that could otherwise wipe you out.
- Discover how to leverage the strengths of your personality type and minimize your personal challenges to improve your trading.
- Learn how to cultivate the most important attitude required for successful trading.
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Presented by Ken Long
Monday includes instruction plus live trades
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November 10-11-12
Saturday-Monday
Note schedule change.
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Exciting New Work from Van Tharp
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November
15-17
Thursday-Saturday
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Super Trader Summit
For Super Traders Only
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January 2019 - US
This Peak 101 will be presented back-to-back with two other workshops.
Hold on booking travel until we announce those dates.
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Presented by Van Tharp,
with RJ Hixson
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January 18-20 (tentative)
Friday-Sunday
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FREE Book!
We pay for the book, you just pay for shipping.
When you add the free book to an item already being shipped there is generally no extra shipping charge (of course, depending on your location).
Read Van’s Latest Book —
TRADING BEYOND THE MATRIX
The Red Pill for Traders and Investors
Eleven traders tell their stories about transforming
their trading results and lives, in this 400 plus page book.
Below is a brief video on how powerful this book is to traders.
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GDPR COMPLIANCE:
The European Union General Data Protection Regulation (GDPR) went into effect on May 25, 2018 and is designed to allow individuals to more effectively control their personal data. At The Van Tharp Institute (IITM, INC) , client information is private and confidential; we do not share, trade, or sell to anyone. We never have. You may ask us at any time to unsubscribe. We keep your information safe. If you’d like access to your information just ask. You receive this information from us because you opted into the Van Tharp newsletter either through direct registration or registration through our Tharp Trader Test.
Cary, NC Workshop Information
For a list of nearby hotels for our Cary, North Carolina locations,
click here.
Book your flight arriving to the Raleigh-Durham International Airport (RDU).
When traveling to a three-day course, it's best to arrive the evening before.
To help determine your arrival and departure times, see:
Questions? Click Here to Ask Van...
CONTACT US
This is a supplement to our subscription based newsletter, Tharp's Thoughts.
800-385-4486 * 919-466-0043 * Fax 919-466-0408
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