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Tharp's Thoughts Weekly Newsletter

January 30, 2008 — Issue #357
  
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Article

Some Will Love You—Others Will Hate You.  So What! by Van K. Tharp Ph.D.

Education

Something for Everyone in March

Trading Tip

Uncertainty - The Ugliest Word in Trading and Investing – Part V by D.R. Barton, Jr.

Melita's Corner

Einstein Returns by Melita Hunt

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Feature

Some Will Love You—Others Will Hate You.  So What!

by Van K. Tharp Ph.D.

I often get comments from people on how others on the Internet (Blogs, chatrooms, etc.) perceive me and the services we offer. For example, I recently saw a comment in a chat room in which someone said, “I really loved Van Tharp’s book, Trade Your Way to Financial Freedom. I’m thinking about attending one of his workshops. Have any of you attended one of his workshops and what did you think?” The response was probably the most amount of “hate” comments about Van Tharp that I have ever seen. The comments included (and these are just my memory of them):

Van Tharp cannot trade and he doesn’t know what he is doing.

Van Tharp is a fraud. He claims he models things with NLP, but scientific fact has already proven that NLP doesn’t work.

You should get comments from people who’ve attended a workshop a long time ago and find out the impact that it has had, rather than just comments from people who are excited about it. (It was clear to me that none of the people commenting on the question had attended one of my workshops.)

 In addition, I was totally amazed at the misinformation that was being spread. I was somewhat hurt and upset by the comments and then I remembered the advice of an old friend.

That old friend was particularly good at relationships with women. He always seemed to have one around who was devoted to him. When I asked him what his secret was, his response was, “Van, I understand that a third of the women in the world will like me; another third will probably hate me; and the last third probably won’t care at all. My secret is that I concentrate on the third that like me.” I thought that was excellent advice.

What I’ve realized over the years is that it also applies to the business of coaching traders. Some people will love what we do with traders; some will hate it; and others won’t care one way or another. My job, of course, is to really concentrate on the first group, those who love me and my work. And it was obvious to me, that all of those people who responded to the question 1) had not attended any of our workshops; and 2) belonged to the two groups who either don’t like me or don’t care.

Nevertheless, perhaps some of you saw those responses. And I think for the benefit of those of you who respect me and value what I teach, I should respond to some of the comments that were made.

Statement 1: Van Tharp cannot trade and he doesn’t know what he is doing.

This statement was definitely true twenty years ago. Part of the reason that I started modeling traders is because I had made every mistake in the book. I used to think that if I put on a trade, someone called Wall Street and told everyone to do the opposite. But then I decided that it was me and that I wanted to find out what I was doing wrong. All of the research that you now have the benefit of comes from that personal exploration.

However, I also found, as I was doing the research, that there were a lot of people like me and they wanted help turning things around. My personality type is that of an INFJ. People like me tend to be authors and therapists. And I was really drawn toward helping people. As a result, I chose the path of a trader’s coach. And that doesn’t leave me a lot of time for trading.

And by the way, there are great performers and there are great coaches. Mike McCarty, who has taken the NFL's youngest team to the NFC Championship game in just two seasons, never was an NFL player. Nor was Mike Holmgren or Vince Lombardi – two other great coaches who coached the same team. Coaching and performing are two entirely different skill sets. And just to give another example, look at Tiger Woods’ two famous coaches, Butch Harmon and Hank Haney. How many major golf tournaments has either of them won? None, but they coached someone to become the greatest golfer in the world. 

Generally, coaching skills and player skills are quite different. And at this point in time, I’ve coached many people who have taken millions of dollars out of the market. That being said, I do trade IITM’s retirement income money. All of our employees have trusted me to manage the money rather than trade it themselves. And the administrator of our account, when he gives his annual talk to our employees, always tells them how lucky they are to have me managing it.

Statement 2: Van Tharp is a fraud and science has already proven that NLP doesn’t work.

I’ll let you decide for yourself about the first part of this comment, but I really have to comment on the second part. All my life I’ve wanted to model the best – to figure out how things work and help others improve. I majored in psychology because of that desire, but found that (in the 1960s) human beings were treated like black boxes and all you had to do was figure out how to stimulate them in the right way and you’d get the behavior you wanted. I thought that was total garbage, so I got my Ph.D. in biological psychology. I really wanted to get inside and figure out what was going on. But once again, my study was all about stimulating the brain  (with this electrode, scalpel, or drug) to find out what responses you get. And I knew it was much more than that.

When I finally studied NLP, I began to get what I wanted, the science of modeling success and the science of change.  In my 25 years as a coach, I’ve done a lot of NLP change work. And my experience is that I can make a major difference in someone’s experiences of life with just a few minutes of NLP work. And that’s happened over and over again. 

In my opinion, psychology is gradually moving into what is important. And to my knowledge, there is no “scientific evidence” at all to prove that the major tenants of NLP is wrong. In fact, the evidence strongly supports the work of NLP. But that could be the topic of a book.

Statement 3: Find out the long term impact of Van Tharp’s workshops before you take any recommendations.

Overall, I agree with this statement and at the same time take a slight exception to it. The long term impact is very important. But the long term impact will only be there if one continues to apply the learning from the workshop. 

Let me give you one example. In the late 1980's I starting coaching a young man. At the time, he was trading a personal account of about $20,000. I used to spend two days with him once or twice a year for about four years. At the end of the four years, he had a $50 million dollar hedge fund – a pretty dramatic rise in success. (By the way, don’t think that coaching with me will get you that kind of success because it varies depending upon who you are, what you want, and your own personal commitments). However, after four years of coaching with me, he decided that he didn’t need any more and our relationship ended. He started doing research on the market, spending about $5 million on that research. I was not involved in coaching him at all while he was doing it. At the end of the research, he concluded that “trend-following didn’t work” and gave back all of the hedge fund money. What’s ironic is that his trading method was very short term and had nothing to do with trend following.

A good coach can teach people the fundamentals and then continually remind them to follow those fundamentals. But when the coach is no longer working with them, is it fair to say that the coaching didn’t work? Look what happened to the Green Bay Packers when Vince Lombardi left. They went 29 years without being in the Superbowl. Was their poor performance after Vince Lombardi left still his fault?

However, I’ve discovered that a strong psychological foundation to trading can have a lasting effect. That’s why I request (but never demand) that my Super Traders spend the entire first year in their program doing major psychological work. Such work builds a foundation that has the potential to last a long time even when I’m no longer the coach. In a follow-up article to this one I asked my Super Traders what type of benefits they had received by doing my work. I will share their answers with you at a later time. 

About Van Tharp: Trading coach, and author, Dr. Van K. Tharp is widely recognized for his best-selling book Trade Your Way to Financial Freedom and his outstanding Peak Performance Home Study program - a highly regarded classic that is suitable for all levels of traders and investors. You can learn more about Van Tharp at www.iitm.com.

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Trading Tip

Uncertainty - The Ugliest Word in Trading and Investing – Part V

by D.R. Barton, Jr.

“Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.” --George Soros

I went sailing today.  But I was on a sidewalk in the middle of my hometown when I was “riding the wind”!

Of course, I didn’t mean to go parasailing.  I was just expecting to go out for my morning jog.  I had on a floppy hooded sweatshirt and very loose fitting waterproof sweatpants (perfect for catching the wind).

On the way out, the wind was hitting me sideways so I really didn’t notice it too much.  But in the turnaround leg of my jog I was running with the wind to my back.  As I turned to head home, I did so right when a monster gust of wind came.  It caught my floppy clothes, stood me straight up and almost knocked me down. 

I was startled by the force.  It was so unexpected and so strong, as a 45 – 50 mile per hour wind can be.  But fortunately, I kept my balance and headed home. 

I must admit that I felt a little bit vindicated when I got to within a block of my house.  Our neighbors have a little Papillion dog (just like Van and Kala’s!).  The poor little dude was out for his walk and wearing a loose fitting doggie-sweater.  Another big gust came and hit him full force on the side, knocking him right off his feet!  After a  little yelp, he hopped back up, and no harm was done.  But at least I knew I wasn’t imagining how strong or unpredictable this force of nature can be.

And so it is with our trading and investing.  Strong and unpredictable forces are lurking, ready to affect the markets and our positions.  These market-moving events are one of the components that combine to infuse uncertainty into the markets.

Since a big market-moving event happens today (the FOMC announcement about what the Fed will do with interest rates), it may be useful to review this particular breed of uncertainty.

Price Shocks and Dancing with Uncertainty

Many times, news hits and price takes off.  The best we can do is to have our stops in place and manage the trade.  Perhaps, if stops aren’t hit, one can even re-evaluate the trade and make adjustments to expectations if the news has fundamentally altered the environment.  I wish there was a magic bullet for dealing with earnings pre-announcements, political coos, and interim Fed actions (like we had with the 75 basis point cut last week).  The best we can do is be aware that these things happen (and with greater regularly than we expect), and keep proper position sizing and stops in place.

And while there are many news items that unexpectedly send price shocks through the market, there are also plenty of types of “price shock” news that we know of ahead of time – like today’s Fed announcement, scheduled earnings announcements for stocks, and scheduled government reports that we can prepare for ahead of time.  But the type of preparation differs depending on the time-frame of our trading.

Short term and day traders.  If you have positions that you hold for 48 hours or less, the time around Fed announcements and other pre-planned price shock news is very important and could be critical.  Even the most benign Fed announcements can significantly increase volatility on the afternoon of the announcement.  Earnings announcements that meet expectations can still be colored by the companies’ forward-looking assessments. In general, the best strategy for short term traders is to be out of the markets during times of known price shocks.  These are almost always coin flip situations, and with the fast information flow of today, it’s really tough to get any kind of an edge.

Intermediate term and swing traders.  If you’ve entered a trade and expect to be there for a couple of weeks to a couple of months, then a Fed announcement or earnings announcement alone shouldn’t be the sole reason for jumping out of a trade.  But if you are close to exit point or anticipating a new entry at the time of potential price shock news, you may consider getting out a day early or delaying an entry by a day so that you don’t get caught on the wrong side of a market reaction.  A special note for 2 – 10 day swing traders: it’s usually best to manage individual stock positions so that you don’t plan on being in a trade during an earning announcement for your stock.

Longer term and position traders.  If you’re holding positions for several months or several years, then price shock that comes from a Fed announcement, a government report or an earnings announcement is more of a nuisance than anything else.  For long-term traders, the only consideration might be to not take a new position on a Fed announcement day, or just prior to an earnings announcement for your stock since the news could send you in the wrong direction quickly.

In general, Fed announcements are minor disruptions in the market, though occasionally they have a big impact.  They’re really much more important for the financial media than for traders and investors.  But a prudent plan for handling these periodic price upsets can add to your bottom line.

We will continue to delve into uncertainty and 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

Einstein Returns

by Melita Hunt

Last week I wrote about the importance of creating a new level of thinking to resolve problems, prompted by an Einstein quote. So continuing with that theme, I would like to say thanks to the people that were game enough to send me in their “problems” last week. Some of them were much longer and more extensive than I was expecting, so instead of just picking one email, I am going to take the time to answer all of you in personal emails because I feel that each issue that was raised requires individual attention. Please give me some time to do this because I am off to Mexico for my third round of treatment next week and cannot promise that I’ll get to them quickly, but I will reply to each and every one of you. That is my gift to you for taking the risk and reaching out.

For today’s article I am going to touch on a “thread” or a familiar theme that resonated through some of the emails. Can any of you guess what it was?

Okay, other than trading?

In addition to trading mishaps, the theme that resonated clearly as I read through many of the “problems” was how HARD people tend to be on themselves. It was no surprise to read because we hear a lot of people’s problems in the trading field every day and often it is the same thing over and over again. Unfortunately there is a misconception that most people are out there making a ton of money in the markets, and you may feel that you are the only “Dufus” that is making mistakes and not winning big. Therefore, there must be something wrong with you (and this doesn’t just apply to trading).

I’d like to change your perception on that right now. Just shifting out of “bad me” to “wonderful me” will make a world of difference. And it’s NOT that hard, unless you decide that it is. And if that’s the case, then you are obviously getting more value from being negative about yourself and maybe deep down you really don’t want to change. It’s all a choice.

Here is just a smidgeon of lines from some of the emails:

1. I don't trust me. My confidence is shaken by my trading history.

2. I have conflicting beliefs that always seem to stop me as soon as I hit an obstacle.

3. I sense that great things are possible and want to adjust my thinking of myself as a failed entrepreneur who needs a day job.

4. All the stops I may calculate or write down I do not act on, so I suffer the big draw downs.

5. I am sabotaging myself, but refuse to consciously admit that profit could be easily obtained.

6. I want to get to a point where happiness and enthusiasm are my default emotion, rather than irritable and aloof.

7. I get what I want, then manage to lose it, and now, at 48, losing it and living under money pressure ain't that comfortable. 

8. How can I feel that I deserve success and remove/delete the feeling that it's ok to be punished?

How many people out there resonate with some of these comments? There are probably a LOT of you. So to all of the people that are out there calling themselves hopeless or failures or feel that everything that you do is “wrong”:

  1. You are not alone…and
  2. It’s time to stop it.

When Einstein said: We cannot solve problems with the same thinking we used when we created them. He didn’t mean that you had to visit a shaman, or learn how to levitate; he simply meant that to resolve the problem, you’ve got to be willing to think differently. And you need to have the willingness to do whatever it takes to make that happen.

And although you are unique as an individual, you are just like everyone else when it comes to carrying problems. So stop making such a big deal about how bad things are.

In the eight examples given above, observe some of the language that was used:

Don’t trust me, confidence is shaken, beliefs that always seem to stop me, failed entrepreneur, suffer, refuse to consciously admit, irritable and aloof, lose it, losing it, remove, delete, it’s okay to be punished.

To think differently, then you’ve got to let go of limiting beliefs. Sometimes it is as simple as just recognizing them and changing them, especially if there is no “charge” on them.

Example: “I don’t trust me.”

     Recognize that it is not an empowering belief.

     Change the belief “Of course, I trust myself.”

However, if there is any emotion or “charge” on the belief, then it needs to be dealt with or released before the belief can be changed. Or the new empowering belief just won’t stick.

Changing them is easy; it is finding the real underlying belief and tension that may take the work. To delve further into beliefs, you should ask yourself what, where, when, how, who questions:

  • What makes me not trust myself and is it true?

  • How do I know it’s true?

  • Where else does it show up in my life?

  • When am I most likely not to trust myself?

  • How do I feel when I don’t trust myself?

  • Where did this start?

  • Who would I be if I didn’t have this belief?

  • What do I have to do to trust myself?

By asking yourself different questions and probing, in some cases you may find out where the original problem really comes from, or you may just get an “aha” moment along the way. Bingo.

But sometimes, the problem isn’t the thing that you think it is. It is actually way beneath the surface and that’s when you may need support or help in digging further and you may need third party assistance in releasing the emotions or “charges” that are associated with it.   

It means that you’ve got to choose to take the time to read the books that cover these topics, perhaps learn NLP, or do Van’s Peak Home Study Program. It could mean going to a class or speaking to a therapist or joining Libby Adams coaching program. One of the most effective ways to shift beliefs is to do it experientially and taking risks outside of your comfort zone. Stretch yourself to places that you haven’t been before and watch your beliefs start to shift. There are a myriad of ways to do it. I am happy to share details of classes that I’ve been to if it is of interest to people.

And what is the MOST important thing to do on the journey? It is learning to forgive yourself along the way.  

Forgive yourself for the choices that you’ve made that took you off course. Forgive yourself in advance for the inevitable mistakes that you are going to make. This is a journey. You will choose, learn and shift at your own pace. Give yourself encouragement along the way. Just do it consciously.

And right now, just for the fun of it - write down ten things that are great about you, and do that everyday for the next week.

Isn’t that much more empowering than continually telling yourself all of the things that you are not good at? Here are my ten:

I am a great writer. I am a great friend. I am great at smiling.  I am great at telling funny stories. I am great at making money. I am great at sleeping late. I am great at shopping 'till I drop. I am great at multi tasking. I am a great traveler. I am a great person.

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

Feedback

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Copyright 2008 the International Institute of Trading Mastery, Inc.

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