The Van Tharp Institute

April 13, 2005 — Issue #215

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In this Issue:

Trading Tip

Does Anyone Day Trade Anymore? By D.R. Barton, Jr.

May Workshop

Professional Tactics of Day Trading Workshop

Feature Article Falling For the Cause (Goals From the Viewpoint of Cause and Effect) By Keith Cunningham
Real Estate

How To Make $100,000 and How to Lose $50,000 From The Same Property By Chris Anderson

Recommended Seven Tips for Peak Performance Trading CD
Listening In...

Examples of Trading Goals

View this newsletter on-line, or read back issues

 

Trading Tip: 

Does Anyone Day Trade Anymore?

Trading Tip

by  D. R. Barton, Jr.

“Confidence is that feeling by which the mind embarks in great and long honorable courses with a sure hope and trust in itself.”

-- Cicero

“If you have no confidence in self, you are twice defeated in the race of life. With confidence, you have won even before you have started.”

-- Marcus Garvey

I remember back in 1999 and 2000 when I’d walk into a Bar and Grill for lunch.  Most everywhere in the country, instead of ESPN Sports Center reruns, the TVs would be tuned to CNBC and people from all walks of life would be watching Bill Griffith hosting “Power Lunch.”  Bar tenders and truck drivers would share stock tips with each other.  And the cover of Newsweek showed a bull snorting underneath a headline that read something like, “Aren’t you rich yet?” 

Times have changed since then.  And the masses of uneducated, gun slinging day traders have been replaced by a more sophisticated lot of folks who spend time educating themselves.  And the traders of today stay in the game much longer, on average, than the shoot-from-the hip crowd of old.

Next week I’ll be describing some of the inherent advantages that day trading provides.  But this week, I thought you might enjoy getting into the head of the one of the best traders that I’ve met.

I’ve known Brad Martin since 2000.  Brad spent 14 years as a floor trader at the CME and CBOT and now has been trading seven years as an electronic day and swing trader.  I’ve had the opportunity to trade with Brad and model his trading strategies over the last five years.  The fruits of our efforts have resulted in two really incredible workshops that we teach together.  (You can find more about the workshops below.)  I’ve never met another trader who acts with more confidence and ease at his decision points.  There are several good reasons why Brad’s trading is so effortless, so let’s explore them a bit.

Brad knows exactly where he’ll get out if he’s wrong, before he ever enters a trade.  This may seem like a simple thing, but Brad has a unwavering sense of capital preservation and he uses strict risk control on every trade.  His dedication to preserving his capital is so ingrained that he never has to think or analyze anything at his decision points.  The decision was made before he entered the trade.  This absolute “get out point” is actually very liberating.  While Brad doesn’t like being on the wrong side of a trade, he knows that it’s part of his business and he does a great job of making his losses impersonal, neutral events.

Brad has a plan.  When Brad enters a trade, he knows exactly what factors will cause him to get out of a trade early, what things will tell him to stick around because the move could continue in his direction, and more importantly, what things are not going to influence him one way or the other.  One insightful workshop attendee (thanks to S.S.!) told the group that the amazing thing about Brad’s trading style is not the indicators and factors that he looks at, but rather all of the things that he chooses to completely ignore!  Brad knows the factors that give him an edge; he pays close attention to them, and doesn’t let outside distractions influence him.

Brad has confidence that comes from knowing his strategies work.  For many people, this seems like a very basic concept.  But I believe that most people who struggle with their trading do so because they don’t believe 100 percent in what they’re doing.  Brad makes decisions look easy, because they are easy for him.  Tiger Woods consistently drains tough putts in pressure situations because he’s done it before.  He has a mental and physical routine that works and is proven.  The same can be said for Brad’s trading.  Tiger doesn’t sink every putt, and Brad doesn’t make money on every trade.  But what they both do works, and because of their confidence, neither of them has to over-analyze the situation when it happens in the heat of battle.

I promised you earlier that I would tell you where you can learn more about Brad and his trading strategies that work.  For those of you who are interested in Day Trading, Brad and I have designed a workshop that gives you detailed written systems that can jump-start your trading.  And we take you through real-time simulations to help you learn these strategies in a hands-on fashion.  For more on this workshop click this link.

Brad and I have also put together a Swing Trading workshop that is really incredible.  It is filled with detailed trading systems that we both use.  And we teach those systems by taking you through trading simulations where you apply the strategies along with us on real market data – you start building your confidence right in the workshop!  For more on this workshop with Brad’s proven strategies and thought processes, click here.

D. R. Barton, Jr. will be teaching the upcoming Professional Tactics of Day Trading Course, May 14-16, 2005. 

He is the Chief Operating Officer and Risk Manager for the Directional Research and Trading hedge fund group. D. R. has been actively involved in trading, researching and teaching in the markets since 1986.  D. R. has created extensive and innovative new training products and taught extensively in many investment areas including intra-day trading, swing trading, and cutting edge risk management techniques. 

His writing credits include co-authoring Safe Strategies for Fin-ancial Fre-edom and co-creator and contributing author on Fin-ancial Fre-edom Through  Electronic Day Trading. He also writes a stock screening newsletter called Ten Minute Trader, has feature articles in Market Mastery, writes for Traders-U and is a regular contributor to Tharp's Thoughts.

Editors Note: Throughout the issues you will see certain words with odd spellings, such as Fre-edom and mort-gage. This is because spam filters are likely to block message that contain certain words and this is one solution.

May Workshop...

Day Trading Workshop Dates Announced!

Professional Tactics of Day Trading

May 14-16 2005

Phoenix, AZ

Register Soon and Qualify for a $500 Discount

  • Discover How to Make Huge Profits in Today’s Tough Markets.

  • Spend Three Days with Master Trader Brad Martin – Learn His Trading Beliefs and The INTIMATE DETAILS of His Trading Systems. 

  • Top system designer D. R. Barton will reveal the powerful yet simple system that provided a 100% return on equity in the difficult markets of 2002 (how many systems do you know that did that?). 

  • Insight on the special psychological tools that supercharge the performance of short-term traders. 

  • Dig into the fine points of winning Day Trading strategies in this fast-paced course. 

  • Become skilled with these strategies using our unique real-time trading simulations that allow you to trade what you learn.

 

Learn More ...     

Feature Article

Falling for the Cause

Goals From the Viewpoint of Cause and Effect

By Keith Cunningham

If you are like most people I know, every year about this time you begin to notice that all those New Year's resolutions you made are starting to fade and wither. Most of these resolutions were the same ones you made last year and the year before. Every year, after a few weeks, you start finding reasons and excuses to make exceptions and to fall off the wagon.

When you stop to think about it, we habitually break our promises to ourselves. Numerous studies have been done to help us understand why this happens and there are some very smart people who have come up with 100´s of tricks to help us achieve our goals. I think there are two primary reasons we quit working on our goals. The first is the erroneous belief that it must look a certain way by a certain time, otherwise, we think it's not working or not worth it. We think that if we go on this diet and start working out every day, then within a matter of just a few days we will be seeing results and that the process will be getting easier. When we don't see the instantaneous results we want, our brain helps us make the decision to quit by rationalizing that this is just not worth it.

Unfortunately, the root of most, if not all of our problems is the need for instant gratification and when we don't see instantaneous results, we tend to get discouraged and quit. When you stop to think about it, the world is not designed to give us instantaneous feedback - either good or bad. You don't get lung cancer after just one puff. You don't gain 30 pounds after eating just one donut, or even one donut a day for 3 weeks. You don't get into financial hock to the tune of $50,000 of cre-dit card debt in a month. You don't create a lousy relationship in just a week so it is irrational to believe that you will unwind these problems in a matter of a few days. The results in your life so far, both the good results and the ones you would like to see changed (the ones you made your New Year's resolutions about), happened as a result of continuous, daily actions. You did not go out and create the problems you now have overnight. And, you will not solve these problems over night, either.

Ordinary things, consistently done, produce extraordinary results!

Remember, Cause and Effect? Whenever the cause is missing, so is the effect. So, whatever it is you want in your life, check to see if the Cause is in place to produce the desired Effect. If it is, then it is just a matter of time and consistent, daily activity until you see the Effects in your life. Remember, Cause and Effect are not closely linked by time.

The second big reason people struggle with achieving their goals is we all tend to fall in love with the Effect and not the Cause. Everyone I know would love to be rich and skinny and in a wonderful relationship. Those are all Effects - and they are easy to fall in love with. The secret is to fall in love with the Cause. I don't know one successful person who gets up in the morning and does what they hate. Rather, every successful person I know is doing what they love. They may not have started out loving it, and maybe every single little thing about what they're doing is not their most favorite thing in the world, but big picture, they love what they're doing.

Successful people tend to fall in love with pleasing results, while unsuccessful people tend to fall in love with pleasing methods. If you don't fall in love with the Cause, you will wake up every morning dreading doing the things that will result in the Effects you desire, and I don't know anyone who can sustain themselves doing what they hate for more than a couple of weeks. If you do decide to fall in love with the Causes that will produce the Effects you want, you will achieve your goals much faster because we all perform better when we enjoy what we’re doing.

Re-look at your goals from the viewpoint of Cause and Effect. Are you slowing down because you are not seeing instantaneous results? Are you waking up in the morning dreading doing the things that will produce the results you want? If so, ask yourself these questions:

1. Do I believe I can make this goal come true?
2. Do I believe it is worth the effort?
3. How can I enjoy the things I will have to do today in order to move closer to my goal?
4. How would the person I want to be do the thing I am about to do?

I love what General MacArthur said: "Age wrinkles your skin. Quitting wrinkles your soul!"

A commitment you make to yourself should be no less sacred than a commitment you make to others!

You are in control of your destiny! Live the life you dream!

Namaste
KJC

About the Author: Keith J. Cunningham  is a well-known and charismatic speaker who has appeared at acclaimed seminars around the world including those of Tony Robbins and Robert Kiyosaki. Keith is committed to bringing to you the tools and concepts that will enable you to achieve the financial independence you desire and deserve.  He is a gifted and inspirational teacher who loves his subject and has the ability to convey theoretical and real-world knowledge to produce usable financing, investing, negotiating, and business strategies.   For more information on Keith and the programs he offers including Numbers Don’t Lie or the Business School for Entrepreneurs, please visit his website www.keystothevault.com or e-mail him at info@keystothevault.com

 

Real Estate

How To Make $100,000 and How to Lose $50,000 From The Same Property

by Chris Anderson, Ph.D.

At our new web site, www.GetPreconstructionDeals.com, I always get one specific question sent in after we announce a new preconstruction project: “So Chris, is this preconstruction project a good deal?” .  The answer that is expected back by the person is “yes this is a GREAT deal” or “no, I don’t think this is a very good deal”. 

Even though I am not trying to be flippant, my response back is usually along the lines of you could potentially make a lot of money from this project or you could lose a lot of money.  Boy, that’s a big help thinks the person asking the question.  In fact, it is quite possible that two people could invest in this project, at the same time, with one making a $100,000 and another losing $50,000 from it. 

If I’m talking to a person face-to-face about this, it is about at that this time in the conversation that their eyes glaze over and they really start to wonder about this so called “expert”.

So let me give an example of two hypothetical investors, Freddie the Flipper and Barbara the Buy & Holder, who both contract to purchase a preconstruction condo in Atlanta.  Suppose the condo costs $250,000 and requires 20% down at time the hard contract is signed.  Furthermore, suppose the condo will be ready 18 months after signing the hard contract.  The broker in charge feels very strongly about this project and is honestly convinced they will be worth $350,000 at time of closing.

Now this is Freddie’s first deal and he has heard you can make TONS of money flipping preconstruction projects.  Freddie does not have much money and takes out an equity line of cre-dit for the down payment.  Freddie has no intentions of closing this property but wants to flip so he does not have to pay closing costs.  All he can think about is that this very knowledgeable, and quite trustworthy broker thinks he will make $100,000 in 18 months.  He can hardly control his excitement.

Now Barbara the Buy & Holder is an old seasoned pro.  She has done 10 preconstruction projects in the past, has multiple long term rental properties, and does a flew flips of single family houses on the side.  When she enters the contract to purchase this property, Barbara thinks the values will keep going up but she KNOWS that she can get close to covering her monthly expenses if she has to rent it out.  She firmly believes in the area and believes this is a low risk investment.  She listens to the OPINIONS of the broker, agrees with him, but knows that nothing is certain.

Looking into our crystal ball, suppose we find out that at time of closing, the condo’s have actually dropped in price and only have a fair market value of $210,000.  There has been a temporary softening of the local economy and some people have been dumping their properties in a panic.  All expectations are that this is a temporary blip but we know that NOBODY can predict the future.

Freddie gets the call that he has been dreading.  It is now time to close on the condo and will require about $10,000 in closing costs.  He does not have it!  After consultation with his attorney, he realizes that there are two options: close the property or walk away from his $50,000 down payment.  Since he financed that down payment in a home equity line and it does not “feel” like he really lost the money (even though is monthly payments have gone up), he decides to walk away.  This finally releases him from months of mental anguish over this foolish mistake he has made.

Barbara on the other hand realizes that this is part of the game.  She is still very bullish on this project and simply closes and rents the condo and is losing about $50 per month net all expense.  No big deal for her.  Furthermore, she buys another condo from a really desperate seller who closes on it, then does not know how to rent it, panics, and sells for $200,000.  Two years later, Barbara sells these condos into a booming economy for $350,000 netting $100,000 from one and $150,000 from the other.

Yawn:  just another day at the office for a well prepared real estate investor.

I hope that this article has provided an example of how the outcome of an investment is MORE about the approach and thought processes of the investor rather than the investment itself.  I learned this in the area of trading from one of my mentors, Van Tharp, but it is equally applicable in all types of investments.

Chris Anderson is a leading authority on preconstruction real estate investing.  Get his 4 day e-mail course and a 33 minute video free today!  Visit www.GetPreconstructionProfit.com & www.GetPreconstructionDeals.com.

 

Recommended Listening:

Seven Tips to Be a Peak Performance Investor/Trader Audio CD

  • Learn about the most critical factor in your trading – you.

  • Learn how you can make sure that you create your future rather than just let it happen. 

  • You can only trade your beliefs about the market, not the market itself. 

  • Learn about the ten tasks of trading.  

  • Are you a trader or a long term investor.  

  • Learn to focus on low-risk ideas, on your risk-to-reward ratio.  

  • Learn what you must do to protect yourself with proper position sizing.  This is a must for everyone.

For only $49.95, this CD covers the seven foundations necessary for peak performance trading and investing. This material in this CD will become the cornerstone of your trading and investing education.

Learn More...

Listening in....

Excerpts from Dr. Tharp's Mastermind Discussion Forum

 

Examples of Trading Goals 
Author: S.S.

I read EVERYWHERE that a key to success is setting realistic goals regarding what one hopes to accomplish in trading, balanced against realistic constraints, etc. I've never been good at committing goals to paper, yet when I get a goal in my head, I achieve it. I'm having a hard time visualizing what a "good" set of goals (short, medium & long range) might look like, as well as what kinds of constraints I ought to have in place.

Would anyone be willing to share with me what their goals, constraints, etc. are? Once I start to get a picture of what these "generally look like," I'll have a much easier time of creating ones relevant to my own position.

Thanks in advance!

S.S.


Re: Examples of Trading Goals 
Author: Ken Long 

Some of my trading goals:

 

  1. Perform the ten tasks of trading daily

  2. Record and grade every trade for setup, entry, position size, exit and overall performance

  3. Read the commentary of John Mauldin, Van Tharp, Richard Young, Louis Navellier, Dan Ferris, Steve Sjuggerud, and DR Barton whenever it appears

  4. Write one trading observation a month

  5. Write one trading case study a month

  6. Read one book, analyze one system a month

  7. Read Nick Darvas's book once a year

  8. Redo Peak Performance exercises annually

  9. Benchmark performance 

  10. Net 5K a month in my Dad's IRA

 

Reply To This Message 

Re: Examples of Trading Goals 
Author: C.

Notice how in each of Ken's goals, there is a stated number and time frame.

C.

 

Editors Note: There were many great responses to this topic. Click here to read more...


Read the full, unedited thread on the forum,   link here

 

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