The Van Tharp Institute

September 14, 2005 — Issue #237

Home   | Workshops  | Products  | Contact Us

www.vantharp.com


Do Not 'Reply.' Click Here To Email Us.

Tharp's Thoughts Weekly Newsletter


Thank you for subscribing to "Tharp's Thoughts"

In this Issue:

ETF Workshop Learn To Spot The Flow Of Big Money Quickly!
Feature Article

Act in Spite of Fear, By T. Harv Eker

Peak 101  Workshop Seven Money-Making Benefits for Consistent Profits, Smaller Losses, And Less Stress.
Trading Tip

Advanced Trading by Getting Back to the Basics, By D.R. Barton, Jr.

Special Report Reports by Van Tharp: Self Sabotage Re-examined, Part One and Two 
Listening In Risk/Reward Ratio 

View this newsletter on-line, or read back issues

Exchange Traded Funds Workshop

Exchange Traded Funds are funds that reflect the big sectors of the market. You don’t have to watch a lot of stocks to determine what the big funds are doing.  Instead, you just have to know what a few select funds are doing to determine what’s going on.

"It's been exhilarating! I found Ken to be extremely clear and structured in his explanation and presentation of his systems, beliefs and techniques. Awesome information for traders of any level of expertise." J. L. Serra

 

Feature

ACT IN SPITE OF FEAR

By T. Harv Eker

The formula for manifestation in our physical universe is known to be "thoughts lead to feelings, which lead to actions, which lead to results." Most people have plenty of thoughts and feelings, but the breakdown for many seems to be the ability to take "action." The culprit, of course, is fear. That is why to succeed in life you must cultivate the trait of courage.

Courage is "taking action is spite of fear." In fact, you can only experience courage in the face of fear. Fear is our greatest obstacle to living happy, peaceful and powerful lives. The true definition of fear is "anticipation of pain." Since anticipation is based in the future and the future only exists in our imagination, fear does not exist in reality. It only lives in our head. 

Therefore, it is our own protective mind that prevents us from taking the actions necessary to attain our dreams. As the cartoon character Pogo so appropriately states, "We have met the enemy and he is us."

The protective mind is like an over worried mother; it is constantly creating "doom and gloom" scenarios, trying to scare the heck out of us, in the hopes that we won't try anything new. Its favorite words are "what if." "What if this happens? What if that happens?" Even though none of these things have actually happened, and chances are none of these things will ever happen, this "soap opera" script continues to blare loudly in our head. 

Unfortunately, we tend to take this mind trick as gospel and our wonderful ideas of growth and opportunity, become full of uncertainty and doubt. Recognize that our protective mind is not necessarily to be believed; its agenda has nothing to do with making us happy or successful, but only keeping us in a place that is safe, secure and familiar. 

Unfortunately many people wait for their fear to subside before taking action. Big mistake! It is not necessary to get rid of fear in order to act. It’s not necessary to “kill” the cobra! The more effective strategy is to learn to "tame" the cobra of fear by acknowledging the feelings and then taking action anyway. Fear itself holds no real power over you. You and you alone give fear its power. If you allow fear to stop you, it will. If you recognize it as the protective part of you, doing it's job (far too well), you can simply say to your mind, "thank you for sharing" and then proceed into action. 

Realize that successful people have fear. Successful people have doubts and successful people worry. The only difference between those who succeed and those who don't is that successful people act in spite of their fear, doubt, and worry. So can you! 

The darkness of fear begins to disappear in the light of action. Because your protective mind (where fear resides) lives only in the past or future, fear cannot exist in the present moment. Actions, however, only exist in the present moment, meaning that in the midst of focused action, fear dissipates. 

The voice of fear is not you. It is only a conditioned "recording" from the past projecting into the future. Once you can recognize that you are the one playing the tape and not the tape itself, you are free! 

Ask yourself, "What would I do, if I absolutely knew I could not fail?" The answer will give you a good indication of what you would do and who you would become if you lived based in heart and spirit vs. fear! 

EXERCISE

Think of your dreams, your relationships, your career, your time, your recreational activities, and your environment (where you live and with whom you associate). Where in your life are you letting fear, doubt or worry stop you from taking the necessary actions for happiness and success? What would you do if you could not fail? From this day forth, begin to act as if you could not fail and watch as miracles unfold! 

Declaration: 

I act in spite of fear, doubt and worry!
I take action towards my happiness and success! 

For Your Freedom,

 

T. Harv Eker
Best-Selling Author 
Secrets of the Millionaire Mind

President of Peak Potentials Training

Reproduced with permission from the Millionaire Mind E-Lesson written by T. Harv Eker, president of Peak Potentials Training. Look for a offer very soon to attend one of Harv's Peak Potential Training events as a guest of Dr. Van Tharp's.

 

Peak Performance Training

The Best Course Van Tharp Offers 
for Dealing with Trading Issues, 
Like Fear, are the Peak Performance Courses. 


Learn to Manage Fear, Develop Discipline and Trade with Less Stress.

Peak Performance 202 is sold out, but we have a seat waiting for you in Peak 101. 

Workshop
Peak Performance 101
Peak Performance 202

SOLD OUT

 

Back to top

Trading Tip: 

Trading Tip

Advanced Trading by Getting Back to the Basics

by  D. R. Barton, Jr.

This past weekend I had a real treat lecturing at the How To Develop A Winning Trading System course with both Van and systems guru Chuck LeBeau.  Because of the nature of the audience, we were able to dig more into the subtle points of system design.

This was lots of fun, and while we dug deep, it was interesting that on several different occasions the in-depth studies brought the discussion back to real basics – Van’s Ten Tasks of Trading.  I think it’s instructive to review a couple of those occasions with you.  I’ll cover one this week and one next week.

Early in day one, we had zipped passed position sizing basics and were talking about the philosophical foundation for some of the best position sizing algorithms.  The discussion quickly moved to whether one should ever skip a trading signal. For example, if you had some outside influences that were affecting your trading psychology, should you pass on trading signals that are generated?

“Isn’t that showing a lack of faith in your system and your discipline?,” one attendee asked.  This brought us to an important trading task:  the daily self-assessment. There are undoubtedly traders out there who are so disciplined or so mechanical that they can trade through any type of adversity.

For the other 99 percent of us, taking a break from trading when we are at a psychological low point is the most prudent thing to do.  But how do you know whether you should employ a “psychological stop” in your own trading regimen?

The only way to know for sure is to keep track of a daily self-assessment.  Compare your self-assessment rating to your trading record and see if trading low-points (e.g. equity draw downs) are positively correlated to low self-assessment scores.  If so, then apply a systematic way to reduce or eliminate your exposure when you are at low psychological points.  Said another way, stop trading when your self-assessment drops below your pre-determined minimum required for good trading.

Next week we’ll look at how you can use another of Van’s Ten Tasks of Trading to help you honor your stop loss point.

Until then, here’s a reminder to review the Ten Tasks of Trading yourself.  You can find them in Volume #1 of Van’s Peak Performance Home Study Course.  If you consider yourself a serious trader or investor or a serious student of trading or investing, then RUN don’t walk to the this link  for the Home Study course.

There’s still time to sign-up for the Peak Performance 101 seminar where Van will take you through his flag-ship course in person.  Click here for more information on this great course.

D. R. Barton, Jr. 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.

 

Special Report

Self  Sabotage - Two Reports of Self Sabotage

Click here to read page one of each report, or to order. 

Listening In... 

Risk/Reward Ratio 
Author: Francis
Date: 09-06-05 19:13

Hi,

I was wondering for stocks that are making all time high, how am I going to calculate the risk/reward for the trade?

Reply To This Message 

Re: Risk/Reward Ratio 
Author: PMK 
Date: 09-06-05 19:30

Are you proposing going long and expecting an extension of the trend, or short and expecting a retracement?

Risk and reward are always proportional to recent volatility, so I do not see why an all-time-high makes any difference to any other trade, except that no-one can have a losing position in a stock that is making one.

I would use a combination of recent volatility and recent support/resistance levels to estimate risk and reward in either case. For example, for a long trade at the all-time-high if the stock retraces back beyond the previous all-time-high peak (outside the normal volatility of the stock in question), then this would be a sign the trend has finished, and the trade is a loser.

A reward target could be some percentage of the difference between the latest and previous highs, or some multiple of the risk being taken.

Hope this helps

Paul

Reply To This Message 

Re: Risk/Reward Ratio 
Author: Chris B
Date: 09-07-05 16:38

Risk can also be based on the stop level you chose when you put the trade on. As PMK says, this has nothing to do with new highs.

Reply To This Message 

Re: Risk/Reward Ratio 
Author: Francis
Date: 09-08-05 04:25

Hi, 
I am proposing going long on an all time high and not waiting for retracement.

I understand the risk part as it depends on where I put on my protective stop loss( which is also where I think the stock have to go to let me know I am wrong).

As for the reward part, you mentioned difference between the all time high and a previous high. Do you set that difference as the reward part?
Btw, what is the reason behind setting the reward as the difference between the all time high(most recent high) and a previous high? I do not see the reason to set that as the reward part as, if the stock kept going higher and higher and the pervious high before the all time high will not have any potential influence on the stock anymore(not like support/resistance etc).

The reward part came to me as I was doing some stocks and I had to place protective stops around $10 away from a $30 stock which made an all time high and I realized that my reward/risk ratio could be real bad as the risk part is large. 

I am not talking about position sizing here on the risk part but purely the difference between the stock price I bought and the protective stop price.

Thanks for the help people.

Reply To This Message 

Re: Risk/Reward Ratio 
Author: PMK 
Date: 09-08-05 08:39

Francis,

The markets can be thought of as a wave (with noise), and therefore a lot of the time there is some sort of rough relationship between the amplitude and frequency of the troughs and peaks.

As you mention, the stock could go to the moon after making an all-time-high, but it will still get there in a wave rather than a straight line. Using the difference between the current high and the previous high as a ballpark target figure is simply assuming that the 'wave' will not change amplitude much in the near future, and is therefore a reasonable profit target.

I do not exit positions simply based on a profit target, but rather use them to tighten stops on profitable positions. This is my interpretation of letting profits run as much as possible, but taking them when the chance for further profit is greatly reduced (in my opinion).

Hope this helps

Paul 

Click here to read more, and participate on Van's Trading Forum, a place for traders and investors to share ideas and learn from each other

 

Do Not Reply to this email using the reply button as the email address is not monitored. Please click this link contact us:  suggestions@iitm.com

The Van Tharp Institute does not support spamming in any way, shape or form. This is a subscription based newsletter. If you no longer wish to subscribe, Unsubscribe Here. 

Back to top

.

.

.

 

.

.

.

.

.

.

.

 

.

.

Quote of the Week

F-e-a-r:

F-false 
E-evidence 
A-appearing 
R-real. 


~Author Unknown

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

Back to top

.

.

.

.

.

.

.

.

Share this newsletter with a friend!

.

.

.

.

.

.

.

.

.

.

.

.

Did You Know...

Van Tharp is featured among Jack Schwager's original Market Wizards. 

The Market Wizards books are cited by top traders as essential reading. 

Here's a direct link to  Amazon if you want to learn more about it. Market Wizards

.

.

.

.

Back to top

.

.

.

.

.

.

 

.

.

.

.

Back to top

.

 

.

.

.

.

.

Dr. Van Tharp's Trading Discussion Forum
 
www.mastermindforum.com

Ask questions, share ideas, information and feedback with Dr. Tharp and other like-minded traders and investors. 

 

 

 

 

 

 

 

 

 

 

NEW CONTACT INFO:

ph: +1 919-466-0043

fx: +1 919-466-0408

Mail: 102-A Commonwealth Court, Cary, NC 27511

 

Back to top