Home Workshops Products Contact Us

View this newsletter on-line, or read back issues

   

Tharp's Thoughts Weekly Newsletter

April 09, 2008 ó Issue #367
  
Coming Soon

Peak Performance 101 and 202

Article

Time for a Self-Assessment by Van Tharp, Ph.D. 

Trading Education

Peak Performance Home Study Course

Tax Tip

Urban Myth and Taxes by Jim Crimmins

Melita's Corner

Van's New Glossary of Trading Terms

Coming Soon

Peak Performance 101 and 202

Presented by Van Tharp

 

-
Peak Performance 101 April 19-21 Cary, 
North Carolina 

Dinner at Dr. Tharp's Home, Monday, April 21st

Peak Performance 202 April 23-25 Cary, 
North Carolina 
-

Learn More

 

Feature

Time for a Self-Assessment

by
Van K. Tharp, Ph.D.

One of my primary roles as president of the International Institute of Trading Mastery, Inc. is to be a coach to some of the best traders and investors in the world.  And, just like any coach, I focus on making sure that the people I am working with are following the fundamentals.

In 2008, we are starting the second major downleg (in my opinion) of a huge secular bear market.  Real inflation (see www.shadowstats.com) is running over 12% (16% if you use M3, the total growth of money in the country); the U.S. dollar is declining in value; the Federal Reserve commissioned a report that says the U.S. is bankrupt, and we have a monstrous credit crisis in our midst.  However, crisis can also mean opportunity. But these are very difficult markets, as are most bear markets, and you must be able to follow the fundamentals of your craft.

With peak performance trading in mind, I decided to develop a quick 15-point questionnaire for you to evaluate yourself.  Take it yourself and pass it on to your friends. Iím sure youíll all get some insights about your performance.

Answer each question with a true or false answer. (Click here for a print friendly evaluation.)

1) I have a written a business plan to guide my trading/investing. ____
2) I have read Safe Strategies for Financial Freedom, the 2nd Edition of Trade Your Way to Financial Freedom and I keep up with Tharpís Thought.  As a result, I think I understand the big picture.  (A true answer doesnít necessarily mean you agree with my viewpoint on the big picture.) ____
3) I am totally responsible for my trading results, and, as a result, I can continually correct my mistakes.  (If part 2 is false, all of this is false) ____

4) I can honestly say that I do a good job of letting my profits run and cutting my losses short

____
5) I have at least three trading strategies that I can use that fit the big picture.  ____
6) For trading strategy one, I have collected an R-multiple distribution of at least 50 trades (i.e., from historical data or live trading). ____
7) For trading strategy two, I have collected an R-multiple distribution of at least 50 trades (i.e., from historical data or live trading). ____
8) For trading strategy three, I have collected an R-multiple distribution of at least 50 trades (i.e., from historical data or live trading). ____
9) For each of my trading strategies, I know the expectancy and the standard deviation of the distribution. ____
10) I know how each system will perform in each of the following types of markets: up-quiet, up-volatile, sideways-quiet, sideways-volatile, down-quiet, and down- volatile. ____
11) I have clear objectives for my trading.  I know what I can tolerate in terms of drawdowns, and I know what I want to achieve this year. ____
12) Based upon my objectives, I have a clear position-sizing strategy to meet those objectives. ____
13) I totally understand that I am the most important factor in my trading, and I do more work on myself than any other aspect of my trading/investing. ____
14) I totally understand my psychological issues, and I work on them regularly.  ____
15) I would consider myself to be very disciplined as a trader /investor.  ____
16) I do the ten tasks of trading on a regular basis.  If yes, on the average, how many days per week do you do it?  Give one point per day. This one can count up to five points because it is so important.  ____

Okay, now give yourself one point for each true answer.  And be honest with yourself. Since question 16 counts up to five points, your total score can be as high as 20.

Fill in your score here: _______.

Now letís take a look at how you rate.

15 or more. You have the makings of a great trader/investor, and you probably are doing very well in the market, even this market.

12 Ė14.  You have a lot of potential, but you are probably making some major mistakes and for many of you, these may be psychological mistakes.

9 Ė 11.  You are way above average, but you havenít graduated to the big leagues yet.  You are like a high school football star, trying to move to the NFL.

6 Ė 8.  You are better than the average investor on the street, but you have a long way to go to hone your skills.  You probably need to really work on yourself, on your discipline, and on your trading strategies. 

5 or less.  You represent the average trader/investor.  You probably want someone to tell you exactly what to do and then you expect to make big profits based on the recommendation.  And when it doesnít happen, you look for a better advisor or guru to help you.  Guess what?  Ö it doesnít work that way.  But, if you at least answered true to question 12, then you have some potential and, if you are willing to commit yourself to excellence, you could move to the top of the scale in a few years.

Suggestions for Study

I'm not trying to give you a sales pitch here. But for those who will want to know... If you need help with business planning, I recommend the Business Planning CD Series.

If you need help understanding why you are the most important factor in your trading, then I recommend the Peak Performance material, either the home study course or the workshop.  If you havenít done this course yet, I strongly recommend that you do it now.  Stop trading and do the course, especially if you are not making money trading. (And it's ok to start with either the home study or the workshop that is just around the corner).

If you donít understand strategies and expectancy, then I recommend that you do the Systems Home Study Course.

And again, I'm not trying to give you a sales pitch. I just have the utmost confidence that these tools will help you like I've seen them help so many other traders over the years. 

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.

 

Education

Van Tharp's Masterpiece

Peak Performance Home Study 
for Traders and Investors 

Learn More About 
Peak Home Study

Tax Tip

Urban Myth and Taxes

by  Jim Crimmins

Haste makes risk when it comes to filing federal tax returns.  Trading is a fast-paced business where the race often goes to the swift of mouse. But when it comes to filing your federal income tax return, that same rush to meet the April 15th deadline may cost you tax savings and increase your chances of an IRS audit. 

In the best of all worlds, your tax return would be buttoned up,  complete, correct and maximized for tax savings by tax professional each year and filed well before the Ides of April. But those of us living in the real world know that life rarely presents such best-case scenarios. 

Traders, by virtue of our unique trader tax status, have more complex returns than other taxpaying individuals. For instance, when you elect the mark-to-market accounting method for the first time, we need to prepare IRS Form 3115 (Application for Change in Accounting Method) and assure that your opening and closing figures are accurate. If you did not elect MTM, your tax specialist needs to accurately capture your wash sales, which is no small feat in itself. 

Since many traders rarely pull their annual tax accounting data together before the end of the first quarter, it leaves a very short window in which to prepare a complete, accurate and tax-advantaged return by April 15th. But filing an incomplete, hastily prepared or downright sloppy return is one of the quickest ways to attract undue IRS attention. Instead, file an extension.

Extension Risk an Urban Myth

By filing Form 4868 (Application for Automatic Extension) by the April 15th deadline, you allow yourself an extra six months to complete a buttoned-down, accurate return. But beware: the extension does not apply to the taxes you owe; you must pay at least 90% of the tax-due figure (itís required on Form 4868) by the April 15th deadline. 

If you fail to pay in a timely fashion, the IRS will rule your extension invalid and youíll likely face late filing and late payment penalties, as well as interest on any late payments (this does not apply, of course, if you are due a refund). For this reason, some traders prefer to pay 100% or more of their tax bill just to be on the safe side; any overpayment rolls easily into this yearís quarterly estimated payments. 

It is an urban myth that filing an extension increases your odds of an IRS audit; a valid extension simply pushes your return deadline to Oct. 15. No stigma or red flags attached. Many traders routinely file extensions year after year and use the extra time wisely to organize their books, consider their tax strategies and fully capture such items as business expenses and home office deductions. 

In fact, it actually may be advisable for some traders to file an extension and delay filing their return until after the April 15th rush, when IRS scrutiny drops off and examining agents are reassigned to other tasks. This scenario almost certainly benefits those filing for a refund due to trading losses on Form 1045 (Application for Tentative Refund), an IRS target category. Another advantage: if youíre strapped to make your first-quarter estimated payment this year, you can increase your tax payment for last year to cover it when you apply for an extension on last yearís return. 

Conversely, filing a sloppy, hastily prepared return does increase the likelihood the IRS will want a closer look, especially now that the feds have revitalized their enforcement efforts. The IRS is particularly interested in self-employed taxpayers, a group it considers the worst of the tax scofflaws. 

Are You Audit Bait? 

What are your chances of attracting a dreaded IRS audit? In 2006, total individual returns audited increased more than 6%, from 1.2 to 1.3 million, the largest number of audits since 1998. The revitalized enforcement corps roped in a record $48.7 billion, up 10% from the previous yearís record haul. 

Audits on individuals with incomes of $1 million or more were up in fiscal 2006 nearly 33%, from 12,800 to 17,000, covering about 6% of taxpayers in this category. Tax scrutiny also increased for taxpayers with incomes between $100,000 and $1 million, where audits were up 18% overall, from 219,000 to 258,000, covering nearly 1.7% in that category. Even those earning less than $100K annually saw their odds of an audit increase 4%, from 996,000 to just over 1 million, covering just shy of 1% of taxpayers in this category. 

Time is money. A tax extension is a great way to ensure that we both have the time to save you money on your federal and state income taxes.

About Jim Crimmins: Jim Crimmins is the founder and President of Traders Accounting. Jim worked with one of the largest and well-known educational organizations of the stock market where he became a master on entity structuring and developed a network of experts in the trading arena. 

Jim has become a nationally known speaker on tax strategies, entity structuring, and lifestyle change. He delivers over 30 talks a year throughout America as well as speaking in several chat rooms each month.  You can learn more at TradersAccounting.com.

IITM Third Party Clause

Melita's Inspirational Corner

Melita Is Traveling This Week

Melita is midway between traveling back to the US from Sydney, and also stopping over in Mexico for a round of treatment. She will be back next week.

This week instead of her article, you can check out a new addition for our website: Van's new Glossary of Trading Terms. Click here. 

 

Melita Hunt is the CEO of the Van Tharp Institute. If you would like to keep up with Melitaís 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

Feedback to Dr. Tharp and the Van Tharp Institute

Everything that we do here at the Van Tharp Institute is to help you improve as a trader and investor. Therefore, we love to get your feedback, both positive and negative!

Feel free to click below to leave us any comments so that we can serve you better.

Click Here for Feedback Form

 

Do Not Reply to this email using the reply button as the email address is not monitored, your email will not be seen. Please click this link to 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

To change your e-mail Address, click here

Or, paste this address in your browser: http://www.iitm.com/privacy_policy.htm

 

The Van Tharp Institute
102-A Commonwealth Court, Cary, NC 27511 USA
800-385-4486 * 919-466-0043 *  Fax 919-466-0408

Back to top

Copyright 2008 the International Institute of Trading Mastery, Inc.

.

.

.

.

..

Quote:

"The value of identity of course is that so often with it comes purpose". ~Richard Grant

.

.

.

..

.

.

.

.

.

.

.

.

.

.

..


Trade Your Way to Financial Freedom

.

.

.

.

.

..

.

Back to top

.

.

.

..

.

.

.

.

.

.

.

.

Tharp Concepts Explained...

 

- Psychology of Trading

- System Development

- Risk and R-Multiples

- Position Sizing

- Expectancy

- Business Planning

Learn the concepts...

 

.

.

.

.

.

.

.

.

.

.

.

.

.

.

~

~~~~~

.Back to top

~

~

~

~

.

.

.

.

.

Free Downloads

Handbook for Traders and Investors

 

~

~

~~

~

Free Trading Simulation Game

A computerized version of Van's famous "marble game."

It is designed to teach you the important principles of proper position sizing.

Download the 1st three levels of the game for free. Register now.

~

.

.

.

.

 

.

.

~

~~~~~

.Back to top

 

..

.

.

.

.

.

.

.

.

.

Check out Dr. Tharp's Blog:

smarttraderblog.com  

~

 

..

.

.

.

.

.

.

.

.

 

..

.

.

.

.

.

.

.

.

Share this newsletter with a friend!

..

.

.

.

..Back to top

.

.

.

.

~

~.

.

...

Share this newsletter with a friend!

~.~~~

~