Tharp's Thoughts Weekly Newsletter

The Van Tharp Institute   -  www.vantharp.com

July 25, 2007 — Issue #331

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In this Issue...

August Workshops

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

Article

When Goals Fall Flat, Part One by Dr. John Eliot

September Workshops Day Trading Workshop and Additional One-Day Swing Trading Workshop
Trading Tip

When Electronic Systems Fail:  Is Your “Disaster Plan” Up to Date? by D.R. Barton, Jr.

Melita's Corner

What is Self-Work, by Melita Hunt

 

August Workshops

 

Peak Performance 101

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

Dinner with Dr. Tharp, Monday, August 20th

Peak Performance 202

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

Book Now for the $5,000 Combo

 

Feature

When Goals Fall Flat

Part One

by Dr. John Eliot

Goal setting and dreams are critical. They spur us out of bed in the morning, resonate with our very being, and inspire us to great achievements. But, if we're not careful, they can also be rigid, artificial standards of a perfection we can never achieve or the source of meaningless tasks siphoning time from our greater abilities. Let your goals guide, inspire and set you free by avoiding the five significant downsides that cause happiness and success to escape even the most accomplished achievers. We'll cover three of these today and next week we'll continue this topic. 

A few months ago a gentleman named Henry came to visit me in my office at Rice University. He worked in sales. A tall, fit, attractive man wearing a crisp pinstriped suit with a bright, eye-catching tie — clearly successful. His visit was unannounced.

"Excuse me, Dr. Eliot," he said in a professionally polite manner as he knocked on a hinge of my open door. "Might I steal a moment of your time?"

I motioned him in, inviting him to have a seat as I fired off a last-minute email.

"If you're busy, perhaps I can come at a better time?"

"Not at all," I told him, swiveling my desk chair in his direction to focus my attention. "What can I do for you?" 

"Well, it's kind of a long story. I'm a pharmaceutical rep for Pfizer — a good one. In fact, last year I was the number one leading producer in the  United States. But I'm not happy. I'm miserable. I go to every Pfizer function religiously. I volunteer by mentoring younger sales reps. My boss thinks I walk on water; I've been taking night courses here at the Jones  School to work toward my MBA and my resume is the best in the business...but it just doesn't matter. It's killing me."

Henry then reached across my desk, thrusting his wrists toward me, palms up, as if tied together: "You've got to help me get these handcuffs off!"

He was exasperated. Here was a man earning (pardon my rough calculation) a couple million dollars in annual commissions, yet desperately seeking help. Odd? Actually, quite common.

As we talked at greater length, I discovered that Henry had fallen into the trap of relying on goal setting to navigate his career and define his success — to define him.

I see it in every line of business: bright, talented men and women who've had success or are working toward their next achievement but are stuck in the office 15 hours a day, who don't spend enough time with their kids or take vacations with their spouses, who don't enjoy hobbies, who don't exercise or eat right. They get caught up creating and checking off to-do lists for all of their personal and professional responsibilities. They're socially rewarded for their diligence or conscientiousness, but they long for a sense of freedom ... even a mere few minutes would be a reprieve!

Goal setting, as a tool, has its utility. We all need a compass. We all need a dream that excites the living daylights out of us, helping us spring out of bed in the morning with vibrancy and enthusiasm. If you hit your snooze alarm seven times before forcing yourself to the chore of trudging into the bathroom, looking forward only to a stiff cup of coffee, you clearly need some goals — positive, exciting ones enwrapped in a vision of the kind of lifestyle that makes you feel a sense of resonance with the world.

That's why I use the word dream. It resonates more with who we are and the fundamentals of human motivation. Dreams are about, at their core, feeling and emotion, passion and revelation. Dreams are internal standards you want to live by — guides ... not rigid outcomes to artificially judge yourself against.

In my work with top executives, surgeons, artists, and athletes, I see too many people held back by goal setting; people who use this tool to set laundry lists of exercises and meaningless accomplishment measures. They are unsatisfied with their careers, out of balance between work and life.

The reason? Goal setting has five significant downsides when it comes to happiness, exuberance, and a true sense of fulfillment:

PERFECTIONISM

Goals, by definition, are ideals — where you want to be and how you're going to arrive there. The disconnect is that the real world gets in the way. Plans and schedules are never absolute. Clients and colleagues change their minds. Weather rolls in unexpectedly. Politics emanating from  Washington shift after an election. The economy rises and falls.

If you ascribe to goal setting to set your course, it's easy to lock yourself into too narrow a definition of success. Write your goals down and review them feverishly every single day, and you'll miss opportunities, I guarantee it. Think of the billion-dollar products on the market that came about because of mistakes, that weren't planned out or systematically engineered, or weren't intended for greatness: Post-it Notes, Silly Putty, the microwave oven, Newman's Own foods, Velcro, Teflon ... the list is a mile long.

There isn't one path to excellence. In fact, the most successful people in this world twist along pronouncedly convoluted paths. In doing so, they also learn that success and perfectionism are not synonyms. For most, thinking that there is such a thing as perfect is a sure way to impede growth.

IMPATIENCE

The famous achievers in history have a number of psychological traits in common. Vision is first on the list. They can stretch their minds to look at existing problems in fresh and interesting ways, breakthrough ways; they can see through details, obstacles, and setbacks — loads of them. The rest of our population is stuck in the minutia.

When you orient your time and thinking around a list of goals, by definition, you pay more attention to the details. You constantly assess how much work is left to reach an end point, how close or far you are from your goals — you evaluate far too much.

Frequent comparison between where you are at this moment and where you'd rather be is not vision; it's impatience. Real vision is confidence, problem solving, understanding the bigger picture, not delaying happiness until you attain a certain measure of prosperity. Excess goal setting, in turn, doesn't lead to vision; it leads to increased frustration.

Take a baseball player, for example. If he sets a goal of hitting .400 for the season, he introduces pressure to monitor his "progress." Is he batting .380? How many more hits does he need to raise his average? How many more turns at the plate are left? Years of sports science research has shown that kind of thinking to be deleterious to on-field production. Constant evaluation ties performers up in knots. 

THINKING IN THE FUTURE

A funny thing about true visionaries: They don't actually spend much time thinking about the future. Contrary to popular conception, they aren't idealists always mentally wandering into fantasyland. Yes, they can see well down the road, but they use that ability to keep their motivation strong. When they arise in the morning, as they brush their teeth, they think of great things to come. When they fall asleep at night, it's to content musings of the enjoyable day ahead. And, when they run into roadblocks, they remind themselves of their potential. That's what effective goal setting is really all about! 

In between those brief moments, they actually have no idea what the future will bring. If you interrupt them at work, asking for predictions or odds, you'd likely receive a confused stare, or a retort: "Why are you bothering me with such nonsense? Can't you see I'm busy?" Busy thinking in the present, that is.

Top-level performance happens when you are engrossed in the moment, absorbed in the thrill of what you are doing.

Mozart once described the art of writing music as child's play. An interviewer, assuming him to be conceited, questioned the statement: "In other words, you're just that talented?" "No," explained Mozart, "concertos become art when you lose yourself in the process, like a child stringing cranberries onto a thread, one at a time, not paying attention to anything else going on around them, least of all their mother calling them for dinner."

If you want big accomplishments, unwavering happiness being one of them, you need to spend a significant portion of your workday absorbed, moment to moment, in the present. Goal setting takes you out of the present.

Next week we will continue with this discussion and cover outcome orientation, excess planning, and five subcategories of reverse psychology. 

John Eliot, Ph.D., is an award-winning professor with expertise in business and psychology. He is on the faculty at Rice University , and an adjunct professor at SMU Cox School of Business Leadership Center and the  University of  Houston . In 2000, he co-founded The Milestone Group, which provides performance consultation, evaluation, and training to business executives, professional athletes, and corporations nationwide. Dr. Eliot's clients have included Merrill Lynch, Goldman Sachs, Adidas, NASA, the United States Olympic Committee, The Texas Medical Center, The Mayo Clinic,  M.D.  Anderson  Cancer  Center , Little League Baseball, and hundreds of elite individual performers. His article was reprinted with permission from Nightingale-Conant.

September Workshops

Proven Day Trading Strategies

September 15-16-17
Saturday-Sunday-Monday

Swing Trading Techniques  One-Day Add-On

September 18
Tuesday

Register for Both 

Register for Day Trading Only

Register for Swing Trading Only

Trading Tip 

When Electronic Systems Fail:  Is Your “Disaster Plan” Up to Date?

By D.R. Barton, Jr.

We’ll return to our series on no-cost internet sites.  But today, with big volatility hitting the market, a key electronic trading execution conduit shut down.  There are some big lessons to be learned here that I want to capture while they’re still fresh.

This morning (Wednesday July 25, 2007), around 10:25 a.m. EDT, the Globex trading application that matches trades for the Chicago Mercantile Exchange shut down.   So anyone trading e-mini futures through that conduit could not place or cancel orders for about 15 to 20 minutes.

Typically, this would be a problem for any trader, especially day traders.  However,  this outage happened in the middle of a 20-point drop in the S&P index!  So it went from being a problem to a potential disaster. 

Here’s the setting: in reaction to yesterday’s strong down move, the market was making a relatively weak rally when a double dose of bad news hit: The Chrysler leveraged buy out debt refinancing was “postponed” (an euphemism for, “No way are we giving you $12 billion when the credit market stinks like week-old gym clothes").  Then existing home sales were announced and were much lower than already reduced estimates, so the market started tanking.

I really got to test out my disaster plan today.

First, I’ll tell you that I was fortunate to be short at the time of the Globex failure.  And trying to take profits off the board is not nearly as stressful as trying to get out of a trade that’s going against you.

But not having any control is stressful in itself.  I had my stop in the market and was just moving a profit target order when Globex died.  I got the “order rejected” message.  I tried a couple of more times and got the same message. 

Now it was time to hit the disaster plan:

  • I disconnected and reconnected my execution platform - order rejected.

  • I hit the speed dial button for my broker – it was busy.  That’s strange.

  • I picked up the number from inside my phone log to dial direct – still busy.

  • I try one more time – I get through, but am on hold.

  • With the market still moving in my direction, I can afford the time to shut down and restart the whole trading platform – order rejected.  

  • I finally get a pop-up message that Globex is down.  That explains why I can’t get through to the broker – thousands of others are in the same pickle I’m in.

  • I call the broker on another phone – on hold there, also.

  • Nothing to do now but keep hitting the exit button and hope that Globex will come back up – order rejected; order rejected; order rejected

  • Then, after what seemed like an eternity, “order filled”.

  • About 3 to 5 minutes later, the system finally gave a pop-up that Globex was back online.

I really learned several useful lessons this morning:

  • Following a pre-determined disaster plan gave me a sense of calm as I followed the steps much more so than if I had tried to come up with the steps to take at the moment of need.

  • Having a disaster plan doesn’t necessarily mean that I can avoid the consequences of the disaster, but I can take actions to limit the effects of the problem.

  • Sometimes, even when the plan is good and executed properly, there is nothing you can do to affect the situation.  With the exchange's communication conduit down, no trader could get through.  My last resort step would have been to hedge the position (for example to buy an ETF or leveraged ETF to offset part of the loss or lock in part of the profit).  That would have worked in this case because the stock exchanges weren’t affected.

  • Because we can’t always avoid disasters, position sizing has yet another dimension of importance, especially for highly leveraged instruments like futures, forex or options.  Ask yourself this question:  if some outlier type of event happens, could my account and my psychology make it through a loss that is 3 times bigger than my stop?  How about 5 times bigger or 10 times?

I was fortunate enough to gain some new insights while on the right side of the move this morning during the electronic failure.  I hope to use these lessons to prepare for the next hiccup that comes along.  Because come it will.

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

What is Self- Work?
by Melita Hunt

I was reading the foreword that Van wrote to the book Mind Traps this morning and the three stages that most traders go through before they become successful. Here is a portion of what he wrote:

People could go to hundreds of seminars about the market and still have little or no chance for real success. It is only when they start to work on themselves to assume that their financial performance has something to do with their beliefs, emotions and decision making skills that they see a real and permanent change in their performance.

In the first phase, they are typically looking for someone to tell them what to do what should I buy, when should I sell? In phase two they decide to look for the magical system or the “holy grail” that will signal the perfect entry into the markets, but this phase can last forever and software companies cater to this bias (giving people what they think they want and happily taking their dollars away from them). Both of these phases involve looking outside one self for the answers.

At some point, all successful traders and investors eventually realize that their financial rewards are a function of their performance in the market. In other words, whether or not you make money is directly attributable to you. As a result, in phase three they start looking inside themselves for the answers.

And this brings us to the topic of self- work.

Since I started this column I have had a number of clients write to me who have said that they come primarily from a thinking/engineering type background (their words, not mine) and that I “lose them” at times with the language that I use. They have asked me to expand on what I mean when I talk about “self-work” and the various ways to go about it. 

Self-work is simply the words that I attribute to working on your own psyche and inner-self. Whether we choose to acknowledge them or not, we all have feelings and beliefs that guide our behaviors. Some of them we are conscious of, but most are unconscious – and that’s why we’ve got to dig deep to find them.

It is certainly a topic that will take more than one article, so over the next couple of weeks, I have decided to write a series about it and will share some of my experiences, books I’ve read, and the various forms of self- work that I have personally done. It is a topic that I love and enjoy, and I believe that I have really grown as a person by digging deep within and finding out more and more about myself. And my outer world certainly reflects this growth.

I will also provide various exercises for you to partake in and it is your choice as to whether you actually do them or not. Some of the exercises may even seem really silly. And as a starting point, just notice how you reacted to the last sentence. Are you ready to do the work? Well this week, let’s just keep it simple. 

Take a piece of paper and write the numbers 1 to 100 downward in a column with the words: 

1. I am…

2. I am…

3. I am…

4. I am…

Then fill in the blanks as you go. For example:

1. I am a woman.

2. I am 39

3. I am happy

4. I am hungry

5. I am thinking too much

6. I am rich

One hundred may seem like a lot, but don’t think about it (and don’t change them after you write them). Trust me, after the first 20 or so, you’re subconscious will kick in and take over, so just let yourself free flow because it’s always the last 50 or so that get really revealing. There are no right or wrong answers and nor will there be anyone judging what you wrote. It’s just an identification exercise.

Next week we’ll take a look at what it all means. Feel free to send me some of your answers (if you dare).

Your self-work journey has begun. Relax and just enjoy it!

 You can contact Melita at mel@iitm.com

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