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NEW Workshops added for 2018!
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Tharp's Thoughts
Inbox Mentoring
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Feature: Designing My Trading System:
Part 1 — The Importance of Trading Edges, by G
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Workshops: $700 Early Bird Discounts Expire Soon On Sydney Workshops!
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Tips: Volatility Instrument Implosions Spook the Market, by D.R. Barton, Jr.
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We cannot promise Van will be making this trip next year. Why not take the opportunity to learn now from one of the leaders in Trading Education.
Our mission at the Van Tharp Institute is to help people transform themselves, and the Peak Performance 101 Workshop is the key workshop we use to teach people how to do it.
If you learn how you control your trading results, you've accomplished something that will help you immensely, plus, this workshop is also a prerequisite to applying for our Super Trader Program.
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Designing My Trading System:
Part 1 — The Importance of Trading Edges
by G
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Editor’s Note: G (who requested anonymity) is a client with an engineering background who has been working on developing trading systems for the last several years. He details his observations and insights from that process in this five part series of articles.
Background and Context
I started experimenting with intraday trading in 2013. It took two years of enduring consistent trading losses and marking up thousands of charts to figure out what I really wanted. Early in 2015 I decided I needed to create an intraday trading approach that would meet three intertwined objectives: offer a high daily ‘Expectunity’; produce consistently reliable monthly profits; and run tolerable weekly drawdowns. A few months later, I stumbled across a design metaphor capable of solving many of my trading problems and meeting my trading objectives.
During 2016 and 2017, my prototype trading system underwent dozens of minor design changes in response to daily manual tests. Two years of iterative system design was a lot longer than I expected, however, after countless months of trading losses, I was far more interested in evolving a robust trading process than I was in putting an unreliable system into production.
Those two years of design work have finally paid off. Maniacal focus on improving system performance has resulted in a trading system that I can now trust to produce over 100 trades a day with a daily SQN score ranging between 6 and 10. I plan to automate this system in 2018 because during testing, I discovered more methods to trade than I have eyes and hands to trade manually.
My progress as a trader would not have possible without Van Tharp Institute workshops and subsequent support offered by the staff there. These five articles are a small way for me to express my deep gratitude to the VTI instructors and to the Super Traders who helped me change my thinking during the last few years. The five articles highlight the topics that had the largest impact in developing an approach to trading that fits me well and performs better than I thought possible. Topics include: (1) Trading Edges; (2) Asymmetric Returns; (3) Trading Metrics; (4) The Trader’s Unconscious Mind; (5) Observations about Trading Systems.
Part 1: The Importance of Trading Edges
Five years ago, I had never heard the term “trading edge”. A wide search on the subject led me to conclude that effective trading edges have three essential dimensions.
(1) EDGE CREATION
A trading edge is created by a harmonious combination of choices made by each trader to exploit recurring market inefficiencies and thereby create a long-term mathematical advantage. The unique objectives, beliefs, and skills of each trader are key to all edge choices and to integrating the edge into an effective trading methodology.
(2) EDGE REQUIREMENTS
Sound logic is the foundation upon which all statistical trading edges rest. The effectiveness of a given trading methodology depends on the soundness of the logic. The highest level of confidence comes from the application of logic and math to a chosen market. Psychological and mathematical edges require compatible position sizing strategies to be most effective.
(3) EDGE DETECTION
The elimination of trader errors (mistakes in Van’s parlance) and common psychological trading limitations are required for a trading edge to be detectable on an on-going basis. The ultimate test of trading edges that work is the production of trading results that could not have been obtained randomly. The standard VTI tests for non-random performance are: a consistently positive expectancy for the trader applying a trading system during a particular market condition and a sustained SQN score of greater than 2.5.
While researching trading edges, I realized that the more common pitfalls you avoid, the more edges you have relative to other traders operating with less awareness. Van offers traders eight such ‘pitfall’ edges via a Kindle book Eight Edges You Must Have: Your Written Trading Plan — all of which are aptly labeled “must-have edges.”
Van defines a trading edge as a skill or a belief you have that enhances your probability of making money. Of the eight edges that Van cites in the book, position sizing strategies intrigued me the most. It took me a couple of weeks of study to understand the variety of position-sizing methods and the implications of those methods using SQN scores. Using the SQN score to assess Risk-of-Ruin scenarios is a massive time-saver and confidence builder for traders who understand R, Expectancy, and SQN. All the simulations required to estimate your Risk-of-Ruin have been done for you and are contained in Van’s book The Definitive Guide to Position Sizing Strategies. There’s a substantial and sustainable edge available to any trader who absorbs the
concepts in this invaluable book.
Other Experts on Edges
A surprising insight for me in Jack Schwager’s Market Wizards was that most of the top traders he interviewed are 1-trick ponies: they do one thing — and they do it very well. Their success was built upon their ability to discover what others overlooked. I concluded that ‘doing one thing well’ would immediately simplify my trading life and could eventually evolve one thing into an important trading edge.
In his book A Man for All Markets, Edward O. Thorp outlines the three edges he developed to enable his consistent winning at casino Blackjack: (1) an innovative but uncomplicated numerical edge; (2) a bet size that varied with the odds; and (3) a system that could be executed in a simple fashion to minimize the number of side effects. Thorp’s edges worked seamlessly together, and his frequency of use was as high as his time allowed. These three edges stacked to create a player’s edge so effective that the gaming industry had to change their Blackjack rules to re-establish their house edge.
Identifying My Edges
Most successful traders have several edges, some broad, some specific. Early in the development and testing of my trading system, I documented those edges that I believed would be material to trading success. Writing down my most important edges and diagramming their interaction made them real enough to power me through two years of challenging, solo development work on my trading system.
A long-term mathematical edge is typically produced by creating a relatively stable distribution of asymmetric returns. With 50% win-rates, such asymmetries can be generated by “cutting your losses quickly and letting your winners run,” the central axiom for generating positive expectancy in trading systems.
I believe a trading methodology doesn’t have to be original to be extremely successful. An edge can come from flawless execution, from avoiding getting left out of important trades. Another edge can be created from how a trade is implemented which is often a more important edge than the trade idea itself. Lastly, I concluded that a single edge doesn’t have to be a killer or “very significant.” For high rates of return on capital with this kind of edge, however, the frequency of use needs to be high.
My most important trading edge is the highly asymmetric distributions of returns method I developed. In his book AntiFragility: Things That Gain From Disorder, Nassim Nicholas Taleb outlines clear advantages of being deliberate in designing trading systems with highly skewed upside payoffs that stem from small, limited risk positions. The next article in this series will explain why skewed distributions of financial returns occur and will highlight a number of ways to create asymmetric returns from the Power-Law distributions that underlie all market pricing.
– G
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Did You Miss The Cryptocurrencies Webinar?
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Volatility Instrument Implosions Spook the Market
by D.R. Barton, Jr.
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Last week, the U.S. market had its first correction in two years. There was the proverbial weeping and gnashing of teeth. In fairness, however, the correction was the fastest in history from an all-time high… but it was still just a correction.
I knew how bad sentiment was when three different TV programs asked me provide analysis five different times last week. But what amazed me most was how so many people came up with the wrong reason for the fast market implosion.
Many pundits said that rising interest rates was the force driving the market down but that's really unfounded. On the worst down day, financial stocks - the very companies that would benefit most from rising interest rates — had the biggest losses while utilities, the sector that would be hurt the most by rising rates, had the smallest loss of all sectors. So clearly, the correction was not about rising rates.
Others said the market was worried about the growing national debt from the tax reform bill. Like traders and investors came to the realization that something affecting the next three generations of Americans caused a market slam the first week of February? Not likely. No, the market was spooked by the unwinding of the inverse volatility trade — even though this shift has been expected. The tax reform bill pushed it back by a few months but I wrote about this not long ago. I even held a webinar recently on "The Great Unwind" and the coming volatility.
The Short Volatility Implosion
Volatility is natural and like most natural phenomenon, it runs in cycles. But the market volatility “cycle” had been stuck in ultra-low gear for a long, long time. Actually, the markets had the lowest volatility of all time in 2017. That very fact pushed a number of institutions to make big bets in some relatively new volatility related instruments. For almost a year, institutions were piling into short volatility Exchange Traded Funds. When volatility returned over the past five or six trading days, those instruments simply imploded.
And implode they did! This chart of XIV is just stunning:
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The bursting of the inverse volatility trading bubble and the deconstruction of all seven major inverse volatility funds are what caused this market correction. As you can see from the chart, most of this short volatility trade has unwound. In fact, Credit Suisse is closing the XIV — Tuesday, February 20th will be its last trading day.
In one of the most interesting quotes about the consequences of the short volatility trade that I have seen, the insightful columnist Matt Levine from Bloomberg said:
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“We have talked a couple of times this week about the unpleasantness experienced on (last) Monday by investors in inverse volatility products like XIV (the VelocityShares Daily Inverse VIX Short-Term ETN, an exchange-traded note issued by Credit Suisse) and SVXY (the ProShares Short VIX Short-Term Futures ETF, an exchange-traded fund). These products were bets that volatility would go down. On Monday volatility went up. Specifically the VIX (the CBOE Volatility Index) went up by 116 percent in one day. The people who had bet that volatility would go down lost almost all of their money. That is altogether fitting and proper. When you bet that a thing will happen, and the incredibly extreme opposite of that thing happens, then you should lose your money. You can
complain, but we don't have to listen to you.”
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A Market Now in Transition
Monday and Tuesday of this week have brought some welcome stability to the market, however, volatility still lingers. Before the market opened on Wednesday, an important indication of inflation (the Consumer Price Index) flashed a number which was higher than expected. This led traders to believe that with price inflation rising faster than expected, the Fed could raise interest rates faster and/or more often. In response, the Dow sold off 500 points in three minutes flat. So the narrative of the Fed driving the market (once again) is starting to rear its ugly head. If the market rebounds in the regular trading session on Wednesday as I expect, the Growth Narrative will still have some influence but we are transitioning into a rather unusual “dueling narratives” period. More on
that interesting scenario in a future article.
Your thoughts and comments are always welcome - 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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February 2018 - Cary, NC
Click the title of the workshop to see more about each.
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Presented by Van Tharp
with co-presenter RJ Hixson
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February 17-19
Saturday-Monday
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Presented by Van Tharp
and RJ Hixson
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February 21-23
Wednesday-Friday
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March 2018 - Sydney, Australia
$700 Early Bird Discounts Expire Soon!
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Presented by Van Tharp
with co-presenter RJ Hixson
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Do You Answer Yes To Any Of These Peak Performance Questions?
Peak Performance 101 not only helps you implement Dr. Tharp’s model for peak performance trading, it also helps you overcome self-sabotage. You’ll be able to free yourself from internal conflicts that keep you from performing at a peak level. For example:
- 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 the personal criteria you need, so you have trouble entering trades?
- Do you get anxious about the market or about risking your money, so that you have trouble pulling the trigger?
- Do you get excited about the market, or do you get distracted and fail to follow your system's rules?
- Does a losing trade take your energy away for the next trade, or conversely, does a winning trade make you confident about the next trade?
- Is your trading (or your life) ruled by the "negative" emotions of fear, anger, or greed?
- Are you constantly losing money because you don’t have a strong plan to guide your trading, or because you simply don't follow the plan you created?
- Do you have a performance ceiling where you fall apart or stop doing well? Do you earn $100,000 and then just seem to stop trading? Or, do you reach the million-dollar plateau and then start losing heavily?
If you answer "Yes" to any of these, then this is the workshop for you.
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Presented by RJ Hixson
and Van Tharp
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March 13-15
Tuesday-Thursday
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Do you want bigger and more consistent profits from the market?
If you want consistency and would like to make profits from the market, you'll want to attend this three-day workshop. We'll show you little-known, closely guarded secrets that you're not likely to find unless you accidentally stumble upon them yourself.
Are you a low-risk investor who just wants to make small, consistent profits each month with only an occasional loss? We can show you how to develop a system that will allow you to develop a unique methodology that will give you that kind of consistency!
Are you a gutsy trader who'd like to make yearly profits of 100%, 200% or even 1,000% per year? Although risky, it is possible, and we can show you how to do it! The interesting thing is that you can do it in such a way that the only money you're risking is the money you've already made from the market. That's real leverage!
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March 23-25
Friday-Sunday
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What You Will Get In This Course
Beginning on Day 1, you’ll learn what the real Wealth Game is and, more importantly, what it isn’t. You will discover:
- Who decides the rules in the wealth game
- What money really is and why it doesn’t even matter
- What is holding you back from creating infinite wealth in your own life
- How different people think about money and why it matters
- The single greatest method for infusing positive beliefs about wealth into your being
- How to achieve infinite wealth in 7 simple steps
We’ll finish the day by playing a game that’s designed to get you thinking about the game of wealth in a much different way and to look at your patterns of behavior when it comes to money. You’ll learn more about yourself…your beliefs about money, and what’s possible (or not) just by playing this game.
On Day 2, we’ll start with a quick review before I share with you the exact same steps I took to create infinite wealth for my family and myself. You will learn how to model my success and achieve real freedom for yourself. We begin by discovering how to:
- Become debt-free in less than 7 years, including your home, cars, credit card debt, student loan debt and more, all on your current income
- “See yourself” infinitely wealthy with the same visualization techniques my Super Traders use
- Invest in yourself to increase your income by 1000%
- Use tax expectancy to your advantage as a trader and investor
- Create inner wealth to achieve the freedom you seek
At the end of the day, we’ll again play the game to reinforce new wealth-building concepts while continuing to think of infinite wealth as a game to be played.
Day 3 begins with a review of the previous day’s notes and discoveries before we cover more in- depth inner work. Before you leave the workshop, you will know how to:
- Overcome your weaknesses while fostering your strengths with SWOT analysis
- Come back from a set-back, all with a unique mental resilience tool
- Begin each day with a clear intention, simply by removing your limiting money beliefs
- Use the matrix model to achieve infinite wealth
- Get your life purpose in alignment with your financial goals
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April 14-15
Saturday-Sunday
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Participating in the Oneness Awakening Course is an extraordinary opportunity to benefit from some of the important journeys Dr. Tharp has taken to transform his life.
The course has become a fundamental tool in Dr. Tharp's mission to help his clients succeed. Don't miss a chance to learn more about how you can become more aware, positive, calm, centered, and successful.
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Presented by Gabriel Grammatidis
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April 21-23
Saturday-Monday
Brief description available now. More info coming soon.
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Presented by Gabriel Grammatidis
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April 24-25
Tuesday- Wednesday
Registration open now. More info coming soon.
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Do you remember the big swings up and down lasting over several months in metals and energies (such as precious metals and oil)? Why don’t you trade moves like these in your preferred timeframe at a time during the day that fits you? I have a strong belief that in these trending markets following the trend is key. Why? The stronger the trend the more counter-trend traders are attracted into the “Market Traps” that are set-up by the specific patterns of my three systems.
Getting stuck in any of the traps can be a very painful experience – benefiting from it is a lot more fun. Do not miss the big number of opportunities presenting themselves to you now and in the years to come. Take your trading to the next level! Join us for this three-day workshop and leave prepared to trade the system right away.
Plus, we will offer Two days of live Futures trading so you can trade the systems live!
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April 27-29
Friday-Sunday
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Check out Ken's 4-minute video referenced in our feature article today where he touches upon a variety of trading edges to consider.
In this new three-day workshop, Dr. Ken Long presents a series of advanced, adaptive trading systems that work well in the swing period holding timeframe — from two days to two weeks.
In addition to the robust seven patterns found in the RL Framework, Ken will also teach at least three other swing trading systems:
MaxPain Range Compression System
In any given two-week period, some stocks and ETFs will be down. If you compare all of the issues that are down, some of them are down more than others. These are the issues with “max pain”. Of that max pain group, some of them are very near their 10 day lows — they have not yet started to recover. These are the ones who have range compression. MPRC symbols have a higher probability of popping than other groups and Ken has effective and simple ways to take advantage of these situations.
Autoframer System
For this system, Ken starts with the assumption that every symbol has a reward to risk relationship with its 10 day high and 10 day low. The potential long reward is the distance from its current price to its 10 day high and the risk is the distance from its current price to its 10 day low. Ken will stalk very closely those symbols with the greatest reward to risk ratio within those parameters. That idea is so simple that you might not think this system would work well but if you thought that, you would miss out on nearly daily opportunities.
Daily Squeeze Play System
While prices do not move reliably in a cyclical pattern, volatility tends to move much more cyclically. Periods of low volatility are typically followed by periods of high volatility. With an effective way to find symbols that have had low volatility recently, Ken has developed an effective system that captures those volatile moves out of the narrow price ranges.
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Presented by Van Tharp
with co-presenter RJ Hixson
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Presented by Van Tharp
and RJ Hixson
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May 22-24
Tuesday-Thursday
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CryptoCurrency Trading - Super Trader Exclusive
Presented by Van Tharp
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June 19-21
Tuesday-Thursday
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Options Trading
Presented by Chuck Whitman
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June 23-25
Saturday-Monday
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Options Trading Advanced
Presented by Chuck Whitman
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June 27-28
Wednesday-Thursday
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Presented by Van Tharp
with co-presenter RJ Hixson
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July 17-19
Tuesday-Thursday
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August 11-13
Saturday-Monday
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August 14-15
Tuesday-Wednesday
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Presented by Kim Andersson
Profit When Price Goes Nowhere: How to Successfully Trade Sideways Markets In Every Time Frame
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August 17-19
Friday-Sunday
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Presented by R. J. Hixson
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September 14-16
Friday-Sunday
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Presented by Libby Adams and RJ HIxson
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September 18-21
Tuesday-Friday
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Presented by Van Tharp
with co-presenter RJ Hixson
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October 12-14
Friday-Sunday
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Presented by Van Tharp
and RJ Hixson
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October 16-18
Tuesday-Thursday
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Presented by Gabriel Grammatidis
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October 20-22
Friday-Sunday
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Presented by Gabriel Grammatidis
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October 23-24
Tuesday-Wednesday
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Presented by Van Tharp
and RJ Hixson
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October 26-28
Friday-Sunday
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Exciting New Work from Van Tharp
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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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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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