Tharp's Thoughts Weekly Newsletter

The Van Tharp Institute   -  www.vantharp.com

July 11, 2007 — Issue #329

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In this Issue...

Workshops

Peak Performance Workshops in August include a dinner with Dr. Tharp

Article

Striving to be a Quitter, by Ed Pomicter, M.D.

Trading Education Learn the Tharp Concepts
Trading Tip

Hidden Gems in Barchart.com, by D.R. Barton, Jr.

Melita's Corner

It Could Be Worse…, by Melita Hunt

 

Workshops

 

AUGUST

SEPTEMBER

Peak Performance 101

August, 18-19-20
Saturday-Sunday-Monday

Proven Day Trading Strategies

September 15-16-17
Saturday-Sunday-Monday

Dinner with Dr. Tharp, Monday, August 20th blank
Peak Performance 202

August, 22-23-24
Wednesday-Thursday-Friday

Swing Trading Techniques  One-Day Add-On

September 18
Tuesday

Book Now for the $5,000 Combo

Register for Both 

Register for Day Trading Only

Register for Swing Trading Only

 

 

Feature

 

 Striving to be a Quitter

by Ed Pomicter, M.D.

Quitters never win and winners never quit.
- Vince Lombardi

Wrong. According to Seth Godin, extraordinary benefits accrue to the tiny minority of people who objectively assess their situation, stop if they are on the wrong path, and refocus their efforts and resources on their real goals.

  • Quit the wrong stuff.

  • Stick with the right stuff.

  • Have the guts to do one or the other.

Twice in two weeks I was told about Godin, a business writer whom I had never heard of. His books Purple Cow and Permission Marketing came up during a marketing class that I was auditing. Then my best friend, an entrepreneurial business owner, stuck a copy of The Dip in my hand. The world was giving me a message. So, I read and re-read The Dip over the course of a couple of days. His message resonated with me both in respect to my efforts to change careers, as well as in my efforts to become a great trader.

Godin describes two major effort/reward curves that we experience in life. When effort and reward are closely correlated for a time, but then increases in effort lead to little if any increase in reward, we experience the Cul-de-Sac.

 

The second curve describes increasing effort garnering increasing reward until a plateau, a decrease, or a dip, in rewards presents itself and persists until enough effort has been exerted that there is again a sharp increase in the reward per effort. This is the Dip.

The Dip is the road to success and disproportionate reward.  It is the dip, the drop in the reward, the hard slog, the series of losing trades in a system, which is the ally of successful people.  The dip is just too painful and demoralizing for most people and this is where they quit and leave the game.  The Cul-de-Sac is where most people settle.  Here they hope for improved rewards down the road without having any action plan.  They remain in mediocrity because quitting is too painful.

Godin maintains that there is good quitting and bad quitting.  Good quitting is used by winners to abandon their losing tactics quickly.  This is quitting within a plan, such as the stop loss in a trade, or taking a system off-line if its performance falls outside expected parameters.  It is also quitting before you invest too much time and too many resources, such as abandoning a system that does not fit your beliefs or recognizing that you would rather do something else with your capital.  Reassessing your goals and purpose, and then quitting the things that are not supporting your mission is good quitting.

Bad quitting is reactionary or panic quitting.  It is selling your position when the pain is great, such as panicking because you did not have an exit plan or did not stick to the plan you had.  It is quitting when the going gets tough because you never completed a business plan for your trading: a map of the expected course to your goals. 

Society trains us to equate quitting with failure.  In reality quitting is failure only if you are quitting the path to your dreams.  Quitting unrewarding efforts is the key to focusing your energy and achieving your goals.

Looking at my life in relation to this book, I found a nice way to explain my desire to change my career.  I am an anesthesiologist by trade.  I have chosen a career with a classic Dip pattern of effort with proportional reward (i.e. praise, grades), followed by a dip (i.e. premed, medical school, residency) followed by a rapid rise in reward.  What I recognized early in my practice, which I had not foreseen, was that the result was a new plateau.  My reward was directly linked to my effort.  There was very little ability to leverage my skills and knowledge.  It took a lot of further effort to get any small incremental increase in reward.  The Dip was followed by an elevated Cul-de-Sac.  Most people I talk to can only see that I got through the Dip and cannot imagine why I would switch careers after getting to where I am.  They say,

“But you’re a doctor.  You spent so much time and money.  How could you give up medicine?”

Sunk costs and ego are common reasons for people to not quit a Cul-de-Sac in their lives.

I am in the process of quitting, keeping one foot in the Cul-de-Sac to support my family, but the other foot is in the Dip, learning the profession of trading. I am short-cutting through the Dip as much as possible by learning from the best, utilizing a coach, using a written plan, trading with systems that tell me when to quit on an individual trade as well as when to quit or suspend the system, and focusing on my mission and goals. Losers in the market, the majority of market participants, are taking shortcuts of a different kind. They are not studying. They are not looking at themselves as the source of their success or failure. They are not utilizing the best resources available because they are hesitant to commit time and money to their own cause. Since they are not committed, they will quit when the going is hard, at the bottom of their individual dip. I can see the upslope of my curve looming ahead of me, across the dip. I know that I just need to keep moving with commitment and desire, and I will be on that upward slope.

There is much to glean from between the covers of this little book. Reading it will provide additional insights into your trading business and systems, your relationships, and your life.

Godin, Seth. The Dip: a little book that teaches you when to quit and when to stick. Portfolio, 2007.

Edward Pomicter, MD is traversing the Dip with the assistance of IITM’s Super Trader Program while organizing a Registered Investment Advisory firm. His job as a board certified anesthesiologist in private practice currently pays the rent. In addition to being an avid father and husband, he assists his wife, Thora, in her job as Executive Director of the International Academy of Self-Knowledge, an affiliate of IITM. Ed welcomes your feedback at Ed@CountDeMonet.com.

Trading Education

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  • Business Planning

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Trading Tip 

Top Notch Internet Resources Part XII –  Hidden Gems in Barchart.com

By D.R. Barton, Jr.

Thanks once again for all of the useful links and e-mails that keep coming in!  If you haven’t sent your favorite sites in yet, please see my e-mail address at the bottom of the article.

Today we’ll re-visit a site that we discussed six weeks ago – barchart.com.  Back then, we were looking at the on-line charting part of the site.  I only gave it a tepid review because of its cumbersome user interface.  But I also promised to look some of the buried treasure in the site in a future article.  That brings us to today…

And I almost didn’t write this article because the treasure can be VERY buried.  It continues to be a very tough site to navigate.  I had taken some notes during my previous tours of the site.  But try as I may, I could not find the part of the site of that I was looking for – one that compares the results of different simple trading strategies applied to individual stocks.  But at long last, I found it.  And I’m happy to report that it was worth the effort.

Barcharts.com has a bunch of useful features for analyzing individual stocks.  If you type a symbol in the box on the home page of barchart.com, you will go to a fairly innocuous quote page that has some useful quote information for various time frames.

Once on this quote page, the hidden treasure lies in the navigation menus down the left-hand side of the page.

There are nine different technical areas listed there plus four fundamental pages.  I won’t delve into each one, but will only touch on the most interesting.

First is charting which I talked about in an earlier article.  The charting is useful and certainly more than adequate, though it does suffer from a weak user interface as I discussed in an earlier article.

The other two menu items worth noting are one labeled “Performance” and the other labeled “Projection.”  We’ll dig into the “Performance” section next week.

The “Projection” page is a very useful tool that I highly recommend.  This page shows a price ladder with 44 different data points included so that you can see where certain technical mileposts lie for each stock.  It includes obvious ones like 52 week highs and lows.  But it also gives several different varieties of Fibonacci retracement levels and the location of key moving averages.  In addition, it gives projections of where certain moving averages will cross over, and at what points momentum oscillators like RSI and stochastics will become overbought or oversold.

For those well-versed in technical analysis, it is a very useful tool that gives a great single look at the technical landscape for a given stock.  It is essentially a daily version of the intraday price ladder that we teach in our e-mini course.  It is much more cluttered and less focused, but useful nonetheless.  For an example for Microsoft (MSFT), you can go to http://charts3.barchart.com/procal.asp?sym=msft .

Next week we’ll look at the intriguing “Performance” section of barcharts.com.  Keep sending in your favorite sites to drbarton@iitm.com.  And let me know if you’ve found this discussion useful! Until next week…

Great Trading!

D. R.

About D. R. Barton: 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 where he is one of the most widely read and followed traders and analysts in the world. 

He is a regularly featured guest analyst on both Report on Business TV,  and WTOP News Radio in Washington, D. C., and has been a guest analyst on Bloomberg Radio.  His articles have appeared on SmartMoney.com and Financial Advisor magazine.

 

Melita's Inspirational Corner

It Could Be Worse…

by Melita Hunt

This week I was intending to write about my London trip, our workshops and the great clients that I had the pleasure of spending the week with. This included a fun night out to the Below Zero Ice Bar (which is completely made of ice). However, that story and those photos will need to wait until next week because right now it’s 6 am and I am sitting in La Guardia airport, barely keeping my eyes open.

After the first leg of my trip home from London, I unexpectedly found myself as a guest of the JFK airport terminal in New York. The second and shortest leg of the trip (back to Raleigh, North Carolina) had been cancelled. I was given a variety of reasons ranging from bad weather to a broken radar and when I called Van to see if he had made it home, he hadn’t either and was told that it was mechanical problems (he was delayed in Boston). However, Van did manage to get a hotel (albeit his luggage wasn’t with him), but there were no vacancies at any of the hotels in New York for me. So the airport became my temporary home. 

Van and I had a laugh about it all by phone. What else could we do? And he suggested that I do one of the lessons from A Course in Miracles, which is simply asking the universe what lessons I could learn from the experience. That wasn’t too hard to do.

I had already befriended a 17-year-old Welsh boy named Ollie who was traveling for the first time on his own, and then we happened upon a Ukrainian grandmother named Galina, who looked extremely lost.

Before long I was looking like the Pied Piper surrounded by world weary travelers. We all hung out together for the night, watching each others bags etc…and working out what to do to make the stay as comfortable as possible, but there was not much chance of that.  With cement chairs and cold, hard floors to use as our beds, most of us were destined to be awake all night.

Am I the only one that wonders why the biggest airports in the USA (that constantly have delays and cancellations) don’t have at least some semblance of amenities or comfort available for their regular guests? Even a small section of carpet would have sufficed. I felt particularly sorry for the people who were there with young, tired children.

Before long, my computer and cell phone became the headquarters for others to contact their relatives and all in all we had quite an interesting global bunch. Aussie, Welsh, Ukrainian, Brazilian, Mexican, Japanese and English. Welcome to America!

And as we made our way from JFK to La Guardia at 4 am for the final flight home, the airport looked like a homeless shelter with bodies scattered everywhere under makeshift newspaper blankets and suitcase pillows. 

However, that just made me think about all of the people that were caught up in Hurricane Katrina, the Thailand tsunami, and even the people that live at the Honduras dump that I saw some weeks ago. How did they feel?

This was simply a 24-hour inconvenience for me, with less than ideal conditions. But I still had shelter, food, friendship and a home to go to. In the scheme of things I have nothing to complain about, things could have been much worse.

Got to go, that was the final boarding call…       

 You can contact Melita at mel@iitm.com

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