Editor’s Note: Dr. Van Tharp’s content is timeless and our goal is to continue to share his material with our readers. Today’s tip is material from a past article,
Although it’s difficult to grasp, did you know that nobody actually trades the market? Instead, you always trade your beliefs about the market.
Keeping this in mind, among the steps Van has laid out for becoming a great trader, one is most critical:
First, assess your beliefs about trading and about yourself.
Today, let’s look at a few other key steps that are all about YOU.
Do a complete self-assessment.
In order to do this, you must understand the following:
- How your personality type impacts your trading.
- How to develop the personal responsibility that you must have as a trader and assess yourself on it.
- How to assess your beliefs and values.
- And you must understand some of the key issues that might really interfere with your trading.
Determine your objectives for trading.
System experts know that understanding your objectives thoroughly is half the battle in developing a system, yet most people have never taken the time to even consider what their objectives might be. Thus, you need to determine exactly what you want out of your trading system.
We’ve found that most traders and investors are missing one key ingredient in their objectives—financial freedom. For example, at a recent workshop, one of the attendees told me that he had made a 1,000% return in 2005. That’s right, 1,000%. However, that trader was missing this critical ingredient. Because he didn’t have any objectives on what it meant for him to be financially free, in terms of profit-taking, it’s probably the difference between whether or not all of that profit will be put to good use or lost in future trading.
Learn what your personal edges might be and how they set you apart from the crowd.
Having an edge in the markets isn’t just a slight advantage; it could be the pivotal difference in your success. So, it’s very important to list your edges in your business plan and to be able to capitalize on them. Discover the key edges that almost any investor has over market makers or institutional investors. Or if you are a CTA, hedge fund, or portfolio manager, learn your particular edges.
Select your trading market.
Are you going to trade stocks? Are you going to trade futures? Are you going to trade mini-forex or real forex through the big banks? Are you going to do options on any of these? Whatever you select must take into account the big picture and what is likely to happen in the next five to ten years.
Prepare to develop a strategy.
This involves doing an extensive study of the primary markets that you wish to trade. It also involves developing realistic but challenging goals for your performance. And you must determine your current beliefs about the market you wish to trade and the strategies that must work.
Do something on a regular basis to really improve your discipline and emotional control.
This is the step that will separate you from other traders and launch you toward top trader status. We at the Van Tharp Institute have a lot of suggestions along this line and the most important is working through our Peak Performance 101 Workshop.
A new session starts in September and is just one in a series of Peak Performance courses aimed at assessing and utilizing the YOU factor in your trading.