In his various publications and workshops, Van stresses a set of important trading fundamentals that he calls “Tharp Think.” Tharp Think is a set of ideas and principles that he has found successful traders apply consistently. Some of them you have heard or read in other places but others I have only heard from Van. Having been in close contact with Van for many years now, I have experienced the usefulness of his principles first hand in many areas including when it came time to build my own trading systems for the Forex market. Van defined two areas of Tharp Think principles as (1) The Psychology of Trading and (2) System Development. Psychology and Trading Systems, however, are actually two sides of the same coin. How is that?

Having many useful beliefs about the markets and trading is not enough to make you a good trader — you also need a trading system with an edge. The corollary is also true; simply having a good trading system will not allow you to trade well — you also need useful beliefs about the markets, trading, and yourself (your psychology). You will be able to trade a system well if your beliefs align with the beliefs of the trading system. For example, if you are a band trader, you have many ideas about how prices move in relation to band but you may have great difficulties trying to trade a trend-following system. Your beliefs about the reasons and the ways price move are very different between these two kinds of traders and trading systems. The right system for the right trader, however, will work fine. Both band systems and trending systems work in the markets. Aligning underlying beliefs both about yourself and about your trading system is crucial if you want to be able to trade well.

Every trading system rests on a set of beliefs — whether the trader and/or system developer realizes this or not. You gain your first edge by simply being aware of the underlying beliefs of a trading system. A great system has many useful beliefs about the market and price behavior that create an edge — it also creates positive expectancy. As an example, trading against the crowd in certain circumstances can be an edge. Applying those beliefs about why that works by developing a trading system that generates a positive expectancy is an edge — the advantages your system has in the market. You want to find and develop an edge (or several) for each of your trading systems.

Based on your beliefs about the market and price behavior (edges), you can then define a set of clear rules for the trade setup. Here, the necessary setup conditions as well as the entry rules and initial stop strategy are solidified to define a low-risk trade so your system can reap the benefits of the core beliefs that form your edge. From there, you would add other important trading components such as the exit rules, filters and the position sizing strategy.

I have developed all of my Forex trading systems aligned with Van’s Tharp Think principles. Why? I have simply found that what Van teaches works very well in the markets. Van will teach his Tharp Think principles in the February Peak 101 workshop and I will teach how those principles apply in the Forex market with working trading systems — all using Tharp Think principles. For each of the three systems I teach, I provide the full set of beliefs behind the system, the specific market edges, the full detailed ruleset, and all other important system components (e.g. exit algorithms). You will need to know all this before you can fully “own” a system. Typically, however, you won’t get these elements reading blogs or buying a black box “system” off of the internet that tells you to buy on the green arrows and sell on the red arrows. Only when you know what the system is about and understand why it works will you start to be able to fully identify yourself with it — to truly own it. Once you do, then it becomes possible to flawlessly execute the system in an unconscious competent manner.

In addition to learning the Tharp Think principles, beliefs, rules, etc. for each Forex system, attendees will have a practical “hands on” training session. During a group simulation, we look for the patterns to trade the rules with charts as if live — using recent historical Forex data. This training includes spotting the setups as they develop in the charts, stalking for a proper entry, setting the initial stop, calculating the appropriate position sizing strategy, and applying the exit rules. All those elements correctly and consistently are important tasks for executing any trading a system if you have any hope of success. Finally, we will step together through my personal trading preparation process that I perform on a daily basis to mentally prepare for a successful trading day — which is — another Tharp Think principle.

During the Live Trading Workshop, you will deepen your understanding in all those areas in a live market environment.

Trading well is one of the most difficult tasks you are probably ever going to try to learn. If you have figured that out, help decrease the amount of time and increase the probability of reaching a consistent level of trading success with some of the best trading education in the world — for trading fundamentals and Forex trading.

Start evolving in your trading expertise and prepare accordingly for your success!

Good trading,

Gabriel Grammatidis

Current markets are getting more and more volatile (for recommendations to reduce your risk see Walk Away from The Shell Game to Play more Profitable Games, #746

As well see Gabriel’s 2nd article in Traders’ Magazine “Become a Hunter” that describes the Psychology of Trading of System1 as well as its’ rule-set (not the full ruleset taught in the coming workshop).

In Part 1 of this series, I gave some background information on setting process-oriented goals. In Part 2, we looked at the dangers of pushing yourself to use results-oriented goals too soon in your trading journey. I ended that article stating,

Today, we’ll dig into some guidelines for goal setting early in your trading journey — then in the Part 4 we’ll move onto to some suggestions for more seasoned traders and investors.

Let me start with an additional thought on what “early in your trading journey” might mean for you. Having had the opportunity to teach thousands of actual and aspiring traders and investors, I know that some people are just getting started. Others have been at it for a while.

Here’s a key point to add — that seasoned traders and investors need to hear: It’s important when learning a new trading strategy or applying an old favorite to a new instrument to treat yourself as a beginner at that particular strategy or instrument and focus on the process of trading until you’ve acclimated yourself. With that said, let’s jump in…

As I have said in previous parts of this series, results-oriented goals can be a powerful tool — when used at the right time and in the right timeframe. Let’s look at some guidelines for how to use goal setting at various stages along your learning curve.

The beginner. As with the learners that we looked at in earlier articles (a baby learning to walk or a teen learning to drive), traders and investors in the early stages of learning their craft should concentrate on the process of trading and learning the basics safely.

In addition to using very small position sizing, those new to the field should concentrate on the process. To do this, Van suggests that traders should do a daily debrief where they ask themselves one question, “Did I follow my system today?” If the answer is yes, then a reward is due whether money was gained or lost. The reward can be as small as a verbal pat on the back.

I remember Van teaching about this point in a Peak Performance live seminar in Cary two decades ago. The soundtrack is stuck vividly in my mind. Van said that if you followed your trading system today give yourself a pat on the back. If you followed your system and lost money, give yourself two pats…

That’s a powerful reminder about how important following your process is — at any stage in your trading journey.

The most useful results goal for a beginner is this: get to a breakeven rate at the end of “x” number of months. Note that I said “rate” not account level. If you have to earn back your losses to meet your goal, you put yourself in a position where larger risks or marginal trades must be taken to reach your goal. However, if you only strive for a breakeven “rate” then several weeks or months of breakeven performance will allow you to reach your goal. Then the losses you incurred up until that point can be counted as tuition, not a burden to be replaced. This really takes the pressure off of the beginner and allows you to concentrate on doing the right things — following your process.

A last useful tool for the beginning and breakeven trader is the use of a maximum loss cut off per day / week / month. If you institute a maximum loss level (and honor it!) you can avoid the type of downward spiral that I described in Part 2 of this series.

As George Leonard explains in his book Mastery (Penguin Books, 1992), the journey to mastery of a new skill is not a linear one. He illustrates this with a “mastery curve.” If you were to draw or graph your progress in learning a new complex skill (such as trading), it wouldn’t look like a straight line of constant improvement. Instead, you see a burst of dramatic improvement when you start out, as you are inundated with new information and become proficient in brand-new skills.

Sooner or later, however, your progress starts to level off as you learn to handle the basics, and improvement becomes less noticeable. These plateaus, or periods of stagnation, can be very frustrating, as you feel that you’re not really seeing any returns on your hard work. However, they are a natural and necessary part of the learning process.

In the next installment of this series we’ll look at some goal-setting guidelines for traders who have achieved consistent breakeven performance and how successful traders can use goals to make step changes in their results.

Your thoughts and comments are always welcome — please send them to drbarton “at” vantharp.com

Great Trading,

D. R.

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!

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.