The Van Tharp Institute

June 29, 2005 — Issue #226

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In this Issue:

Feature Article

Understanding What You Want as a Trader/Investor By Van K. Tharp

Market Mastery Special Subscribe to Market Mastery, Get Six Important Back Issues As a Bonus.
Trading Tip

Swing Trading – The Best of Both Worlds? by D.R. Barton, Jr.

Coming Workshops Learn Swing Trading from Two Pro's, Chicago, August 26-28, 2005 Chicago IL
GREAT NEWS!

Van's Book Hits Amazon's Best Books of 2004 list! 

Feedback

Comments on Business Planning Section of Day Trading Book 

View this newsletter on-line, or read back issues

 

 

Feature

Understanding What You Want As  Trader/Investor

By

Van K. Tharp, Ph.D.

Why do you trade or invest?  Stop and think about it.  Ask yourself, why am I doing it and write down whatever comes up for you.  You might say, I want to manage myself and not have someone looking over my shoulder.  You might decide, “I want freedom.”  Another response might be, “I want to make good money” or “it’s a personal challenge.”  Whatever your response is, notice the feelings involved.

Now let’s continue the exercise.  Whatever your response was, ask yourself what will that get you.  For example, if you want to trade for the “freedom” of being your own manager, then step into that sense of freedom and notice what you want from having freedom.  What will that get you?  And, again, just notice your response.  Perhaps you want security or less conflict or more peace of mind.  Just notice what you want.

You might continue that exercise a few more times, each time noticing what it is you want.  And each time notice what comes up when you step into what you want and notice what having that might get you.

A typical sequence might go… I want “the freedom do be my own manager.”  When I have freedom, that will get me “security to depend upon myself and create my own outcome.”  And that will get me a feeling of “abundance and even more freedom.”  And when I step into abundance I know I want “peace of mind and happiness.”

It’s interesting when people do this exercise, they always seem to end up in what I call a “core” state.  Core states depend to be quite spiritual – things like “unconditional love,” “peace of mind,” “joy and happiness,” etc. all seem to come up as what people are looking for.

So now that you’ve done this exercise, let me point out something to you.  Even though most of you have not done much mind training, you were probably able to step into one or more of those states, just by my suggesting it.  If that was the case, then ask yourself, “I’m doing these things to obtain some mental state that I can just step into?”  What does that tell you?

Let’s say you want happiness and security.  Well, just step into that state and notice what it’s like.  For example, remember a time when you were happy and step into that memory.  Now ask yourself, don’t you think it might be easier to get the trading results you want from that state?  That’s why we always say, “be, then do, and then you’ll have.”  If you think you need to be successful as a trader to get the mental state you want, then you’ve got it backwards.  Step into the state first.

Incidentally, in the Peak Performance Workshop, in the first day, you’ll EXPERIENCE at least 15 different ways to help you step into the mental state you want.  There are even more exercises for doing that in the Peak Performance Course.  But I’ve already told you how to do it.  What if you just did it and then notice what happens when you live in that state?  Or do you think that things have to happen to get the mental state you want?  If you do, then you are buying into one of the great illusions that most people have, but that’s another story.

About Van Tharp

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.

 

Trading Tip: 

Swing Trading – The Best of Both Worlds?

by  D. R. Barton, Jr

“The optimist proclaims that we live in the best of all possible worlds; the pessimist fears this is true."

                                                            --James Branch Cabell, author

Long-term position trading and intra-day trading each have their own advantages.  Many people gravitate to one camp or the other and very few people trade in both of those worlds.  But the intermediate time frame, what most folks call “swing trading”, may just be the best of both worlds.

Long-term trading (also called position trading) has several advantages.  Once the trade is entered, it can usually be managed with very little time and effort.  A check once a week may be all that is required.  In addition, people who are effective in long time frames usually get that way by finding really large winners every once in a while.  Catching a long-term trend and riding it for a big return is the style of trading that has made many of the best-known traders famous (and wealthy). 

The negative aspects of long-term trading usually include a low percentage of winners, long-term market exposure (and the accompanying inherent risk of being in the markets), and the need for a greater starting equity because more capital is required to live through the longer and deeper drawdowns that are typical of this type of trading.

Day traders have several things going for them, as well.  Their high frequency of trade typically results in a smoother equity curve with lower drawdowns.  Day traders have lower risk levels (because they do not hold trades over night) and are afforded higher leverage as a reward for this reduced risk.  Successful day trading systems typically enjoy higher winning percentages than longer-term systems.

Day trading has its disadvantages, of course.  Higher leverage combined with greater trading frequency means that negative expectancy systems get punished faster and harder.  Day traders rarely catch monster moves, but subsist on smaller more consistent wins.  And day trading certainly can be time consuming on a daily basis.

Swing trading fills the gap between these time frames and enjoys the benefits of both of the styles described above.  Swing trading is loosely defined as trading to take advantage of the intermediate trend, typically 2 – 10 days.

Swing trading has the benefit of high trade frequency, which can help to smooth equity curves.  Many types of swing trading capture a higher percentage of winners than the typical position trading strategy, while keeping the benefit of requiring little to no intra-trade baby sitting.  With swing trading, we get the increased frequency with monitoring that can typically be done outside of trading hours.

And while there are few traders who combine position trading and day trading, I know many day traders who also swing trade and find the styles very complimentary.  I also know long-term position traders who add a swing trading component to their portfolio so they can smooth out their equity curve, especially in choppy or directionless markets.

Next week we’ll talk about some of the swing trading styles that are working in today’s markets.

 

D. R. Barton, Jr. will be teaching the upcoming Proven Tactics of Swing Trading Course, August 2005 and is a featured speaker in the Van Tharp Institute Course, Make Money Work for You

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 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.

Coming Workshop...

Proven Tactics for Swing Trading

Profitable Trading that Fits YOUR Schedule

Presented by Brad Martin and D.R. Barton

  • Learn the Pro Traders' Secrets for Capturing Huge Profits in Bear or Bull Markets
  • Become Skilled at Swing Trading - the Trading Style That Fits Into YOUR Schedule
  • Don't Lose a Bundle by Holding Stocks During The Last Market Decline! Find Out the Master Traders' Alternative to "Buy & Hold"
  • Discover the Detailed Trading Strategies that Win in Today's Markets

Learn more...

Register Now

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Great News

Amazon's Best Books of 2004

Safe Strategies for Financial Fre-edom Made
Amazon.com's Best Books of 2004 Top 10 Editor's Picks: 
Investing and Personal Finance!

 

Want to see?...click this: Top 10 Editors Picks Investing 

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Feedback: 

"I purchased two of your books as soon as they came out and I was very impressed. I did not purchase "Financial Freedom Through Electronic Day Trading" because, quite frankly, I was never interested in being a Day Trader. 

Because of numerous references in other books and your Market Mastery newsletter [referencing]  the business plan section in this book [Electronic Day Trading Book], I broke down and purchased the book. It is truly a gem and should be required reading for ALL traders. You just used the wrong title!

"I know of no other book on business planning that provides such relevant information for the trader. Not even Pristine Day Trader (which markets a video on business planning) comes close. Great job. Please do more on this subject."
--Bill Johnson

More..

Editors Note: In addition to the excellent business planning information in the Electronic Day Trading Book, we also offer an audio series called  Business Planning For Traders And Investors.

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The Van Tharp Institute Will Be Closed Monday July 4th in Observance of the Independence Day Holiday.


Quote of the Week

Those who won our independence believed liberty to be the secret of happiness and courage to be the secret of liberty. ~Louis D. Brandeis

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Dr. Van Tharp's Trading Discussion Forum
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Ask questions, share ideas, information and feedback with Dr. Tharp and other like-minded traders and investors. 

 

 

 

 

 

 

 

 

 

 

 

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