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Tharp's Thoughts
Weekly Newsletter
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Feature: How to be a Trading Genius:
What are you doing with your money today?
by Van K. Tharp, Ph.D.
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Video: Update on long-term view / CrudeOil and EURUSD from Gabriel Grammatidis
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Workshops: June & July Workshops That Qualify You To Apply for The Super Trader Program
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Tips: Systematic Approach (Compatibility Mode)
by D.R. Barton, Jr.
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Reach Your Peak Trading Potential This June
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How to be a Trading Genius:
What are you doing with your money today?
by Van K. Tharp, Ph.D.
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One of the key exercises I have my Super Traders do is a full life review. The essence of the exercise is to write down as many memories as you can for each year of your life. Furthermore, you also look at the beliefs you formed in each year of your life. When confronted with this exercise, most people might say something like, “Well I can’t possibly remember what I did or what happened in 1986.” Also, I don’t believe people who want to use the excuse, “I’m old and I can’t remember anything” because I can do the exercise at 70 years old. While there are some obvious tricks to help you with the task of remembering what happened when (not the topic of this
article), one of my recommendations is that you write down significant data points for each year. These might include such things as the value of wages, the prices for a house, a car, and a few other things for each year of your life. A good source for this information is the website www.thepeoplehistory.com.
Even though I have done a life review before, I’m currently repeating the exercise (before I forget everything, lol) and I’m finding it very revealing. As I have been working on my life history, I became interested in the price of things per decade so I composed the following table. The table starts with the year I was born and then goes through the start of each decade until the present. While I’m sure about the price of a postage stamp and the level of the S&P 500, I’m not as sure of the other prices — but I think they are all generally accurate.
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One could make some interesting conclusions from the table. First, I looked at the percent of annual income it took to make major purchases. The price of a house ranges from 2.4 times to 4.7 times the median family income. The larger numbers have occurred more recently but houses have also been getting much larger. Furthermore, the price of a car has ranged from about 40% of a family’s median yearly income to as much as 61% recently.
I then decided to look at the gross increase of prices over the last 70 years. Median family income has gone up 2,331%. The price of gas and the price of a postage stamp have not increased as much — both being about 1,600% even though a postage stamp really stands out to me as being expensive today. The data, however, show that higher gas prices (and this doesn’t count when gas was over $4/gal recently), have actually not been that much of a comparative economic burden on us.
Car prices are interesting because they have gone up slightly more than wages, however, perhaps that has something to do with some of the really high-priced cars available today. For example, my Tesla costs about four times the median price of a car in 2017.
And then let’s look at the two things on the list that might be considered ways to build wealth — your family home and the stock market. First, the average price of a house has gone up over 4,000%. That increase has far outpaced wages and that’s despite little change in home prices in the decade periods from 1990 to 2000 and from 2010 to 2017. Still, if you bought a house in 1946 for $5,600 and put down say 20% ($1,020), then you would have watched the house go up to $8,450 in just four years. That really means that you made a $2,850 profit on your $1,020 investment — not a bad deal. Had you invested in the S&P 500 during that time, you would have lost money.
Look at the next 10 years, however, when the price of a house went up about 50% and the S&P 500 went up 244%. Yes, there were some bad decades for the S&P 500 such as 2000 to 2010 but in most decades the S&P 500 goes up. Finally, the average price of a house went up 42 times over the last 70 years, but the value of the S&P 500 went up over 132 times in the same period.
Today we are in a strong bull market that could last a while (not a prediction) and that could make everyone look like a genius. As a result, here are a few Tharp Think beliefs that could make you become that genius:
- Before you enter into a trade, always know your initial risk point which tells you when you are wrong. Have a stop order on that initial risk (which I call R for short).
- In a bull quiet market, assume that it could last a while and you want your rewards, if possible, to be several times the size of your risk. So be patient and let the trend make your profits. In a bull market like we have today, you can’t know where it will go but I’ve have stocks in my portfolio that have gone up 10% — 40% in just the last month.
- Buy what’s going up. It’s pretty simple.
- If you make an average of say 2R per positon over the next year, you’ll be up 50%. And that will probably outperform most people.
If trading is really that easy, then why aren’t most people market geniuses? Let’s look at two more Tharp Think beliefs for an explanation.
- A trading mistake is when you don’t follow your rules. Let’s say you make 2 mistakes each month and that each mistake costs you 2R. If you are up 50R at the end of the year, but have 24 mistakes at 2R each, then your net result will be only +2R at the end of the year. You will have lost 96% of your potential profit to your mistakes. Some people repeat the same mistake over and over and I call that self-sabotage.
- Finally, there are at least six market types that each have a direction component and a volatility component. The market directions are: up, sideways, and down while the volatility conditions are either quiet or volatile. If you apply the full set of Tharp Think beliefs to any one particular market type, it becomes quite easy to design a great trading system. Expecting that one trading system works well in all market types, however, is insane. Thus, you need a different way to apply the beliefs in the context of different market types.
That being said, what is the easiest market type for anyone to make money investing? Obviously, it’s a bull quiet market like we have today. That’s where buy and hold comes into play. And my version of buy and hold is 1) buy what’s going up and 2) trail with a 25% sell stop. Then minimize your risk by risking only about 1% on each trade which means that you can be fully invested with about 25 different positions. There is only one other rule and that’s stay fully invested until the market turns to bear with at least normal volatility. Watch volatility first and then as it picks up be wary of the bear. It’s easy to monitor market type because we give it to you in
the first newsletter each month.
So why am I saying this? Right now, we have a very strong, bull quiet market — the easiest market type in which to make money. In addition, there are several other reasons to consider being in the market.
- First, since 2010, the S&P 500 is up over 100% but the decade isn’t finished.
- We have had decades when the market is up over 300%.
- Interest rates are very low so people will pick stocks over bonds.
- And with our high debt, we cannot afford allowing interest rates to go much higher so your stock positions have a huge edge right now.
- Furthermore, most investors have been staying on the sidelines so far in this market, hence the low volatility.
These are the kinds of market in which the average person can look like a market genius just by buying what’s going up with a 25% trailing stop. Hold positions until the stop is hit or until the market type changes. Don’t risk more than 1% per position which means you will have up to 25 different positions.
And with all the money you start to make, start investing in yourself so that you are ready when the market type changes, be that a month from now or a decade from now.
This is not a prediction. I don’t know when the market type will change (and it will) but I know how strong the market is now. I’m not recommending anyone buy anything specifically either. Find 25 different stocks that are all going up and stick with major names of solid companies. Most of them are doing quite well.
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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.
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PEAK PERFORMANCE 101 June 2-4
Peak Performance 101 is Dr. Tharp's core psychological workshop, and his most transformative course for over 20 years. If you want to know how great traders think, behave and act so you can achieve consistent and profitable results, without stress, then this workshop is for you. You will not only learn what makes a great trader great, but you will also discover what is holding you back. There are many ways you could be sabotaging your market experiences: overtrading, not pulling the trigger, over confidence or lack of confidence, or just making mistake after mistake. Van Tharp designed this workshop to help you break down barriers, as well as teach you specific tasks and
strategies that will improve your trading results overnight.
Workshop Objectives
Students will learn and begin to understand each of these objectives after attending Peak Performance 101:
- How great traders approach their craft and learn a daily procedure that resembles what they do.
- How you create your own experience in the market and how you are responsible for the results that you get.
- Become more aware of some of your own psychological issues that affect your performance as a trader/investor.
- Learn about expectancy, position sizing strategies and the power of big R-multiples through a simulation game. This game is also designed to help you observe your emotions in a setting in which only a small amount is at stake compared with what you will face in the market.
- Learn some of the variables that affect your emotions and how you can gain control over them.
- Learn to overcome self-sabotage through exercises done in the class.
- Students will get guidance on how to develop an ongoing program to work on themselves using the Super Trader Program as a model.
- Students will leave with a plan to make the maximum use of the workshop.
- Participants in this course will get to meet and network with some really great people who a lot in common with each other.
Peak Performance 101 is the prerequisite course for any other workshop in the Peak Series. This workshop is also a qualifying event for those interested in applying to the Super Trader Program. Peak 101 this June will be your last opportunity to attend before the Super Trader Program price increase in July.
Attend all three June workshops and get an extra $900 discount!
PEAK PERFORMANCE 202 June 6-9
Workshop Objectives
This workshop has a team of instructors who will be focused on meeting these objectives:
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- To teach you how to obtain greater control of your life and to give you a broader perspective of what is possible.
- To teach you how to create your own experiences and how you are responsible for the results that you get
- To help you use “Big I” to solve what seem like issues and keep you on course. To make you aware of some of your own psychological issues that affect your performance as a trader/investor.
- To teach you about games and the factors that affect games:
- Level of awareness
- The ability to make up rules
- Game domains
- Game rules
- To teach you your “Winning Strategy” and how - although it has been responsible for your successes - it holds you back from doing even more.
- To give you a procedure to re-invent yourself using advanced psychological principles.
- To allow you to meet and network with some really great people who have a lot in common with you.
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PEAK PERFORMANCE 204
Modeling Great Trading Through Mental Strategies June 10-12
Workshop Objectives
The material presented in this new, advanced workshop is poised to make a dramatic impact on your life. While in attendance, you will gain understanding about how you are the central character in your story, and how you really create this story, and see how you can ultimately play an active role in shaping your own life. By thoroughly exploring how each of us uses mental strategies and the sequencing of thoughts, you will have the groundwork to continue to hone your skills throughout the workshop and beyond.
Learn the Mental Secrets for Getting What You Really Want!
Attending this cutting-edge workshop can translate into real profits and successes for you. The material presented in this three-day workshop will be information you can use to improve your life and increase your effectiveness, and is not the sort of thing that you can learn anywhere else.
This workshop is likely the only one of its kind, with such unique and powerful concepts geared toward traders — all in one place! Most importantly, the material presented is also quite practical, including plenty of exercises so you can incorporate the strategies you learn right into your daily life with ease. When you leave the workshop, these important strategies will become part of you.
Advanced Mental Exploration
If you have successfully completed Peak Performance 101, you have met the primary prerequisite to attend this course. However, we want to caution you that this workshop involves advanced mental exploration. You must be open to what goes on in your mind to appreciate the depth of this workshop. We will be doing a lot of work with sub-modalities so you should also have at least a little experience working within this framework.
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The Super Trader Program has several openings available at our current rate. However, at the end of July the rate will increase. If you are considering joining we encourage you to get your application in now to "beat the rush" of new applicants that come in as the deadline approaches.
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Presented by Van Tharp
with co-presenter RJ Hixson
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Presented by Libby Adams and RJ HIxson
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June 10-12
Saturday-Monday
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Presented by Van Tharp
and Rebecca Price
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August 5-7
Saturday-Monday
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August 8-9
Tuesday-Wednesday
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NEW! Trading in a Sideways Market
Presented by Super Trader graduate Kim Andersson
(more information about this workshop will be added soon)
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August 11-13
Friday-Sunday
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There is a possibility Dr. Tharp will be holding workshops in Europe this fall. More to come as that develops! When we confirm that location we will release dates for Sept, Oct and Nov.
The Super Trader Summit is in December.
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Update on long-term view / CrudeOil and EURUSD
from Gabriel Grammatidis
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Gabriel recorded this eight minute video over the weekend (before the French election) to update you on his analysis on the long term trends in crude oil and the Euro / US Dollar pair.
After recently testing the critical $54 level, (the entry point for Gabriel’s long term trade), crude oil’s price fell off significantly. Gabriel describes how this busted pattern is likely to continue evolving (pullback first, then lower) to his eventual target of $20.
In August of 2016, Gabriel wrote about the long term EUR/USD trade based on a consolidation that began in mid-2015. Gabriel uses the monthly bar chart of EUR/USD to describe the development of a decent pullback to previous resistance levels. This month might
offer another setup bar for going short.
Whether he is looking at monthly bar charts or intraday tick charts, Gabriel finds plentiful recurrences of certain price patterns because of their fractal nature. The trading systems he teaches in his workshop produce profitable trades based on chart patterns in numerous timeframes for currency pairs, major indexes, and commodities.
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Systematic Approach (Compatibility Mode)
by D.R. Barton, Jr.
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I have always loved to play basketball and still do today. I was a very good shooter in high school. As I’ve added a few years to my age, however, I am finding it tougher to compete with the 20-somethings athletically. Ah, but I can still shoot it well so I find plenty of playing time.
And just recently I became an even better shooter by following Van’s example by modeling the best in the business. As a result, I adopted a much better shooting system and I have improved my shooting significantly — especially in my free throws shots. What I lost was even more important because the thing I gave up can creep in and disrupt almost anything we do. More about that below.
Here’s a fun question for you: Without looking up the answer, who is the best professional basketball free throw shooter of all time?
It’s okay if you guessed Steph Curry of the Golden State Warriors. He’s the reigning two-time MVP of the NBA and has an incredible 90.1% free throw accuracy, the best among active NBA players. But Curry does not have the top spot. In fact, his 90.1% is only good enough for fourth on the all-time best list.
Number 2 on the all-time list is Steve Nash with a 90.4% career average. So who has the top spot? Pro basketball’s best free throw shooter grew up 15 miles from my house — and her name is Elena Della Donne.
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Della Donne played college basketball for the University of Delaware (the school where I earned my MBA) and during her first three years playing for the Chicago Sky of the WNBA, her free throw percentage was 93.8%. She’s not just a better free throw shooter than the best men of all-time — she’s a MUCH better free throw shooter than anyone else. Della Donne’s career number is 3.4% higher than Nash’s 90.4% figure. That 3.4% difference is also the percentage distance between Nash and the 35th shooter on the list. That’s domination.
Della Donne breaks down her free throw shooting system into three steps:
1. Find the dot (the mid-point of the free throw line, for alignment)
2. 90-degree angle with her shooting arm (she says, “Make an L” for kids)
3. Lift & Flick (describing her shooting motion)
Della Donne adds one thing to the end of her routine, she always repeats “You’re going to make it” to herself just before she shoots. This last step could be the most important part of her whole process — replacing any emotions or stray thoughts with a positive statement.
Systematic Approach, From Basketball to Trading
I’ve always been a fan of using a systematic approach in the markets. For all of the successful traders that I’ve studied or met, even the most “intuitive” of them have at the core of their trading process a very systematic method to tapping into their intuitive thoughts. And while this systematic approach brings a great many advantages to trading, we’ll concentrate on just one today — eliminating less useful emotions from our trading decisions.
#1 System Advantage
There are many advantages of understanding and following a systematic approach to the markets — efficiency, repeatability and many others. Today, let’s look just at what I consider the main advantage of systematic trading — controlling your emotions.
A recent article in the Harvard Business Review by Francesca Gino, a professor at Harvard Business School had the very direct title: “Don’t Let Emotions Screw Up Your Decisions.” Truer words were never spoken for traders. In the article, Dr. Gino takes readers through two complementary studies where subjects were exposed to processes designed to give them either neutral or angry emotions before they go through a decision making process. I’m sure you and I could have guessed the outcome — angry subjects made measurably worse decisions than their neutral emotion counterparts. Both studies used the scientific method to confirm what common sense (and Dr. Gino’s
article title) tell us — emotions screw up decisions.
Overcoming Emotional Decisions by Using a System
I’ve always believed that on every trader's journey, emotions are nice companions but lousy guides.
This phrase is meant to remind us that life would be pretty darned boring if we never experienced any emotions. But more importantly in trading, decisions made when we are in a non-productive emotional state will likely produce results we don’t like. That’s where a great trading system comes to the rescue. It gives us a framework to calmly and coolly evaluate situations and make the right moves..
I’ve often seen traders (especially those newer to the game) become emotional because they treat each individual trade as a “make or break” proposition. Treating every single trade as if our self-esteem (or our net worth) depended on the outcome of the trade creates a belief framework which brings many emotions into the equation. With many emotions come poor decisions.
This plays out most commonly when we’re emotionally invested in a trade and our “need to be right” bias kicks in. When a trader needs to be right and a trade takes a turn against him or her, very often the trader will hold on to the losing position hoping for a turnaround instead of getting out at the pre-defined contingency exit. This eventually sets them up to take a much bigger hit than was designed in the original plan. (Van has written about this process a number of times and calls it the “loss trap.”)
On the flip side, when the “need to be right” trader finds a position with a modest profit that starts to move down just a bit, the trader quickly exits the trade with a small profit. This way, the trader can say they were right by making money — even when the potential for a much bigger profit was a good probability.
What To Do Instead
Tapping into a systematic approach allows us make decisions without emotional interference with the process.
Working within a systematic structure allows us to think about each trade as a smaller part of bigger whole. If we have a 60 percent chance of a win according to our system’s history, when the 40 percent scenario plays out, we know that’s just part of the game and we move on to the next profit opportunity.
Dr. Gino wrapped up her article by encouraging readers to insert a “pause step” between times emotions run high and those instances when we have to make an important or complex decision. Van has given traders many great tools for this step in his top tasks of trading. His methods for achieving the proper mental state for each task of trading (entering trades, researching, mental rehearsal, etc.) is the best I’ve seen.
I’ve gone through Van’s Peak Performance home study course in its entirety multiple times and every time I do, I learn something new. Every time it also reinforces important and valuable thought processes. My favorite mental state for trading is a combination of relaxed alertness combined with resourcefulness. Like Elena Della Donne’s recitation “I’m going to make it” before shooting a free throw, I use Van’s anchoring technique to clear my mind and get me ready to trade or research.
I always enjoy hearing from you. Let me know your preferred mental state for trading or investing. Please send them to drbarton “at” vantharp.com
Great Trading,
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' 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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FREE Book!
We pay for the book, you just pay for shipping.
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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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
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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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