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Tharp's Thoughts Weekly Newsletter

January 16, 2008 — Issue #355
  
Education

Something for Everyone in March

Article

Commitment by Edward Pomicter, MD

Workshops

Van Is Teaching Workshops in Singapore and Australia

Trading Tip

Another Look at the Markets – A Caution About Bottom Picking by D.R. Barton, Jr.

Melita's Corner

How Do You Feel? by Melita Hunt

Trading Education

March Workshops

  • Peak Performance 101

  • How to Develop a Winning Trading System

  • Blueprint for Trading Success

  • ETF and Mutual Fund Techniques

Early Enrollment Discounts and Combo Pricing

Click Here for Details

 

Feature

Commitment

by Edward Pomicter, MD

Several months ago I wrote an essay on my transition from the practice of medicine to a career in trading (click to read).  One piece of feedback to the article suggested that if I were really committed to trading as a career and being a successful trader, I would dump my old job and jump into trading full time.  This is a belief that I have heard before, and I wanted to explain my beliefs around this topic as they may be useful beliefs for you to adapt in your own life adventure.

There is often a perception that time spent in an activity or the apparent effort involved in doing something, defines whether or not you will be successful in that endeavor.  One of the beauties of trading is that you can design systems that meet your goals and success is not necessarily dependent on time or visible effort.  My goals involve much more than being a successful trader.  They involve my physical, mental, and spiritual health; time with my wife and children; sharing my skills with others; having flexibility of my time and location; freedom to pursue ideas and interests as they come up, and so on.  Therefore, my goal is to design systems that will facilitate achievement of these goals.  To this end, I design systems that work within the time constraints of my current regimen of two jobs, medicine and trading, and which allow me time for my other goals.  When trading can comfortably support me financially, I will have the freedom to drop medicine if I want to and fill that open time as I want.  So, look at what your life goals are, and build the systems and structure that will support you now and in the future in achieving those goals.

Additionally, I have commitments to friends, family, and business partners involving my continued practice of medicine for the time being.  One of the lessons that Libby Adams teaches in her 28-day course is the idea of de-commitment.  It is fine to withdraw yourself from a commitment as long as it is a conscious decision.  Life changes, you change, and adaptation needs to take place.  For me, currently, I do not want to or need to alter the commitments that I have made, so I structure my trading commitments with fulfillment of these other commitments in mind.

Capitalization and cash flow are the lifeblood of any business.  The reality for me is that with the commitments that I have made to my family to provide a certain lifestyle of our choosing and the financial commitments that I have made in the past (and am still paying for), my current capitalization would require extraordinary annual returns.  To make such returns would involve risk levels that I am not comfortable with and skills that I do not currently possess.  Before depending on trading income alone to support me financially, I need to have enough of a cushion of money to sustain my lifestyle and fulfill my obligations, as well as enough capital to reach my trading income goals at risk levels that are within my comfort zone.  When I put pressure on myself to reach a certain dollar goal with my trading, psychological errors can start to creep in that do me no good.  I work best if I focus on the process.  Know yourself and be honest with where you are now in your psychological development around money and trading.  Then work within those limitations as you simultaneously work to eliminate them.

The nature of the trading business is that there are a few big winners and lots of losers.  In anesthesiology, I could be at either end of the win/lose spectrum and do pretty well financially.  Nassim Nicholas Taleb explains this phenomenon very nicely in The Black Swan (recommended reading).  The benefit of having an income source that is relatively dependable is that it gives me the freedom to really master trading and move myself to the winning side of the game with little chance of catastrophic failure that would eliminate me from it.  So I am keeping my day job until I have really proven myself to myself in trading.

Commitment to being a professional trader is taking on the beliefs of a successful trader.  For me, immersion in trading is not one of the necessary beliefs.  Based upon those beliefs around successful trading, I then take action that supports them and is in alignment with them.  I need to follow the 10 Tasks of Trading that Van has defined, practice the system building and trading skills that IITM teaches, and be disciplined daily in my approach to the markets.  Figure out what your beliefs are that define success and then take action in alignment with them.

It is great if you can throw yourself full time into trading, if that is what you really want to do.  You are fortunate if you have the financial resources and other supports to do so.  Go for it.  On the other hand, do not feel that you need to take specific actions in order to be a successful trader.  Learn about yourself, define your beliefs and goals, see how all of the pieces fit together, and then make a plan to execute.  I feel that the more thought out your plan is, and the fewer stresses that you put on yourself around achieving your goals, the more likely you are to succeed.  Just my beliefs, but our beliefs are really all that each of us has to work with.

So I continue on my path, having submitted my application for registration as an investment advisor, finalizing my business plan for managing money, trading my systems, and learning from the market.  Good luck on your path.

P.S.  Book recommendation of the month is the classic The Battle for Investment Survival by Gerald M. Loeb.  There are pearls of wisdom on almost every page.   Loeb was a partner at E.F. Hutton, so I wonder if his thinking influenced Chuck Lebeau during his tenure there, and in turn influenced IITM’s approach to trading education.  I am not sure that I would have seen or appreciated his wisdom prior to working with Van and achieving a consciousness about how our beliefs affect our trading.

Edward Pomicter, MD, is an active member of IITM's Super Trader Program and is organizing a Registered Investment Advisory firm. His job as a board certified anesthesiologist in private practice currently pays the rent. In addition to his medical duties and trading activities, Ed is a devoted father and husband. His wife, Thora, is a teacher at the International Academy of Self-Knowledge, an affiliate of IITM. Ed welcomes your feedback at Ed@CountDeMonet.com.

IITM Disclaimer

Workshops

Van Tharp is coming to Singapore and Sydney

(Note date change in Sydney Workshops from February to March)

March 1-2-3

Peak Performance 101

SINGAPORE

March 7-8-9

How to Develop a Winning Trading System That Fits You

SINGAPORE
March 14-15-16

Blueprint for Trading Success

SYDNEY   

Australia   

March 28-29-30

How to Develop a Winning Trading System That Fits You

SYDNEY   

Australia   

Click Here for a Full Schedule and to Register Now

 

Trading Tip

Another Look at the Markets A Caution about Bottom Picking

by D.R. Barton, Jr.

“Whether the knife falls on the melon or the melon on the knife, the melon suffers”  --African Proverb

Lots of really good stocks are looking cheap: homebuilders, banks, even some tech stalwarts (Apple is 20% off its high made just over two weeks ago).

The markets are generating such interest and movement that I’m compelled to postpone our series on uncertainty for another week.

Comments from the European Central Bank sent markets scurrying today, with gold and the Euro taking big drops in a very short time.

The American equities market (S&P 500, at least) is trying to stay in positive territory for the day; if it does, it would form a doozy of a double / triple bottom.  See the chart below.

In this chart, we see some moderate divergence in the traditional MACD indicator.  In addition, the S&P (and all of the other major indexes) came into the day showing oversold or strongly oversold in weekly, daily, and hourly time frames.

But here’s where things get tricky.  Playing double and triple bottoms is a strategy that is not for everyone.  It is a swing trading or intermediate trading strategy.  However, it is tempting for trend players and long-term investors to look for any excuse to start buying all of those juicy stocks that look like they’re on sale.

I’ve already started to see articles about how undervalued so many sectors are.  But there is a better way than “catching a falling knife.”

The research that Van and Steve Sjuggerud have done, along with many others, shows a better way – wait for the trend to resume in your direction.  Whether you’re buying value in the Benjamin Graham / Warren Buffet style or looking for good bargains in any other way, research has shown the prudent method is to wait for the uptrend.

In our book Safe Strategies for Financial Freedom, Van wrote about Steve’s picks while he was running the portfolio at the Oxford Club.  They found that he could make great value-oriented picks even better if they waited for the stocks selected to be in a clearly defined uptrend before buying.

Waiting for the stocks to move 4 – 6 weeks in your favor drastically improved the performance of an already impressive portfolio.  Steve makes it part of his three rules of stock investing (buy hated assets, buy excellent value, only enter when uptrend resumes).  And it should be part of your trading model also.

With all of the “bargains” out there right now, it pays to be patient and not try to catch the falling knife.  Better to be in cash than be another lesson from an African proverb (see opening quote).

Next week, we will continue to delve into our series on uncertainty again as we look at quantifying it, ignoring it, transferring it and living with it.  And I would love to hear your stories on dealing with uncertainty.  If you’ve had an experience dealing with uncertainty that provided a great learning, a vexing question, or just a good belly laugh, please forward it to me:  “drbarton” at “iitm.com.”  Let me know if I can use the story (either anonymously or credited) in a future article.

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  He is a regularly featured guest  on both Report on Business TV,  and WTOP News Radio in Washington, D. C., and has been a guest on Bloomberg Radio.  His articles have appeared on SmartMoney.com and Financial Advisor magazine. You may contact D.R. at  “drbarton” at “iitm.com”. 

 

Melita's Inspirational Corner

How Do You Feel?

by Melita Hunt

When Jiminy Cricket told us to let our conscience be our guide, I wonder if he assumed that everyone would know how to do that readily. How do we know when it’s our conscience talking? And how do we determine what is right and wrong in the first place?

Did Jiminy mean that we should listen to the voices that come into our head? That could be a scary thought, especially if there are conflicting voices in there. Or did he mean to trust how we feel about a certain situation?  

Last week as I was driving to Florida, I spoke to Van while I was on the road and he recommended that I take a look at a book called The Astonishing Power of Emotions (Let Your Feelings Be Your Guide) regarding my current illness and how I was thinking and feeling about it. I have enjoyed other books by the authors Esther and Jerry Hicks, (although I am still a little gun shy about the claim that the information comes from a group of higher beings named Abraham. Perhaps this is true, perhaps not. I don’t know. But regardless of that, it certainly does not take away from the value of the teachings for me).

So I’m going to share part of the preface with you:

Now, what if someone told you that you do have a purpose in life and that your purpose is allowing more joy? And what if someone told you that the true measure of your success in life is your joy?  What if you were told that the inherent basis of your life is freedom and that not only were you born free, but because you have the freedom to choose your own thoughts, you always are free. What if it was explained to you that every time you reach for a thought that makes you feel better, you are, in that moment, achieving your purpose? 

And those words really resonated with me. I love to feel joy and create joy. The beginning of the book continues to talk about beliefs and how they are formed, which is in alignment with everything that I believe to be true. Ultimately, I believe that our feelings can be our guide as to whether something is right or wrong for us, if we just take the time to listen.

There is an easy question to ask: Does the feeling associated with this thought make me feel better or worse about the situation?

The book then goes into specific examples about life, health, work, money, family and issues that can tend to bring people down and how to turn these thoughts around or think new ones. I (of course) read the example about being given a frightening diagnosis and want to share some of it with you.

So imagine that you are facing a frightening diagnosis. Here are eight statements whereby you can test for yourself whether they make you feel better or worse. To do this exercise properly you really need to be aware of what your “gut” is telling you. Not your head. It is not what you “think” you should feel based on what you’re reading.

a. I should have taken better care of myself.

b. The options for treatment aren’t pleasant.

c. How did I get here?

d. I’m not going to let this get the better of me.

e. I will triumph over this.

f. There is no reason for me to struggle in any of this.

g. My well-being is inevitable.

h. All in good time.

So how many statements made you feel worse and how many made you feel better?

The answer should have been 5 (worse: a,b,c,d,e) to 3 (better: f,g,h) and that is because there were two trick statements in there to see whether you were thinking or feeling your way through the exercise.

The first three are obviously downers and many people would “think” that the next two (d and e) are positive statements, when in fact they are both holding onto the problem (or the thought of sickness as being bad) and there is resistance toward that thought. I am “not” going to “let this get the better of me” and I will triumph “over this” create a vibrational energy that isn’t heading towards joy.

Whereas the final three statements (f,g,h) create a feeling of surrender and acceptance.

The first time that I did it, I actually felt that the first 5 weren’t favorable, but my mind overruled my body and I “told” myself that d and e were supposed to be positive statements. My body knew otherwise.

Try it again if you would like.

Did you notice the difference in your body?

If so, practice it on some of the thoughts that cause you distress and start to turn them towards thoughts that make you feel better. Aim for joy.

And if you weren’t able to do this exercise, then perhaps you need to start getting in touch with your feelings because they do exist in there somewhere and they have more impact that you realize. Even an animated Disney insect knows that!

Melita Hunt is the CEO of the Van Tharp Institute. If you would like to keep up with Melita’s progress regarding her recently diagnosed lung cancer (she is a never-smoker). Please feel free to read her blog at www.myleftlung.com.

You can contact Melita at mel@iitm.com

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Copyright 2008 the International Institute of Trading Mastery, Inc.

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