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Tharp's Thoughts Weekly Newsletter

May 28, 2008 — Issue #374  
  
Trading Education

Van's Two Core Home Study Programs

Article

Make Friends with Your Inner Interpreter by Van K. Tharp, PhD

Coming Soon

Van Presenting in Munich, Germany This Summer!

Trading Tip

Oil and Gas – Crudely Speaking Part II by D.R. Barton

Trading Education

Peak Performance Home Study

 AND 

Developing a Winning Trading System That Fits You Home Study

 

Peak Performance Home Study

The Ultimate Home Study Course for Traders. How you think when you make and lose money. Stress reduction. How not to repeat your mistakes. Trading unemotionally. Contains five books and four CDs.   
...more info

 

The Developing a Winning Trading System To Fit You Home Study

Who should study this program? Anyone who wants to develop their own trading system or anyone who wants a better understanding of how to make more profits trading any market under any conditions. 
...more info

 

Feature

Tharp’s Thoughts Classic

Make Friends with Your Inner Interpreter

by
Van K. Tharp

Some of you may have seen this exercise before, but our experiences change over time so exercises like this are worth repeating. 

Think about some problem you have with your trading.  It could be almost any problem.  Perhaps you have trouble taking profits too soon.  You might get angry when a trade gets away from you.  Perhaps you frequently second guess yourself.  Whatever your problem is, write it down.  You can apply this exercise with almost anything that you think might be a problem.

Once you have that problem, write down several statements about the problem.  Why do you think you had the problem?  What caused it?  What’s your reaction to the problem?  Your statements could be almost anything.  You might say things like: “Why do I keep doing that?” “That behavior just shows that I’m stupid.” “I just can’t seem to control myself.” “The problem is really nothing, but it just seems to continually repeat itself.”  

These statements are all your interpretation of the problem.  In fact, without this interpretation, you probably wouldn’t even have a problem.  Thus, perhaps it’s important to now work with your inner interpreter.

You need to use your imagination with this exercise.  Be willing to play like a child.

1.  Now that you have listed a problem and some statements about it, ask yourself how you can best explain the way the problem happened.  Perhaps you’ve already done that with one of your statements.  If not, that’s your next statement.  Write down what you hear.  In addition, notice the qualities of the voice making the statement.  Where do you hear the voice—which direction does it come from?  Whose voice is it?  Is it your own?  Is it someone else’s voice?

 

2.  Now find two more problems and repeat step number one.  Make sure that the problems have some emotional significance for you.

 

3.  Look at the three statements you’ve written about how your three problems happened.  What do they have in common?  Notice how permanent and how pervasive the statements are.  Also notice the overall personality behind the voice.

 

4.  Rewrite the three statements and make them more optimistic, specific to a time or occasion, and to the place that they happened.  Also make them impersonal so as to separate them from your behavior.

 

5.  Let’s assume that a part of you—your inner interpreter—is responsible for these statements.  Where does this part of you seem to live?  Notice, once again, where the voice seems to come from.

 

6.  Think of this part of you as a friend that you created for some positive intention.  Thank your part for helping to bring you to where you are today.  It’s really been a friend to you and you need to acknowledge it.

 

7.  Once again, now that you are in communication with your inner interpreter, ask it to come up with some even more positive excuses for your three experiences.

 

8.  Move your interpreter voice to some other part of your body—say your right shoulder. Change the tone of the voice.  Make it sound like a cartoon character or a famous celebrity that you like.  Try moving it again and giving it still another new voice.  Listen to that voice go over your new excuses and perhaps some even more optimistic ones.

 

9.  Notice how you feel about your interpreter now.

 

10.  Now let your inner interpreter go to where it feels best.  That may be its original spot or it may be some new place in your body.  Give it the voice you find most reassuring.

If you get stuck in this exercise, it is okay to make up an interpreter.  When you do so it will still have a beneficial effect.   In fact, you really never make up anything.  When you make something up, you are just bringing it up from your unconscious mind.

You’ll find that you suddenly have much more control over your feelings when you do this.  Your interpretations are never reality.  Instead, they are just judgments, feelings, or beliefs about some particular event.  They feel real because they give you an emotional response.  But emotions have nothing to do with reality.  They are simply coming from you.

The nice thing about such interpretations is that they are changeable.  They cost nothing to change, but give you tremendous benefits.  It’s now time to put your inner interpreter on your side.  After all, it is your friend.

Here’s how one person, let’s call him Bill, went through this exercise.  When he thought of a problem, it was the criticism he got from his spouse whenever they talked about trading.  He could hear her voice in his head, saying, “trading is nothing but gambling — it’s a waste of time and has no redeeming values."

When Bill wrote down some statements about the problem, he came up with the following.

• I married the wrong woman.  She’s an idiot and she just doesn’t understand.

• Her parents instilled an old work ethic in her and trading doesn’t fit that work ethic—that’s why she gets upset.

• She wants security and she doesn’t feel comfortable when I tell her about trading.

He noticed that the voice was kind of high pitched and always seemed to come from the right side of his head.  It even seemed to be coming from an elevated position down into his head.  When he repeated the exercise with several more problems, the voice had the same qualities and came from the same place.

When he tried to move the voice, he first put it in his throat and made it raspy.  This didn’t feel comfortable at all.  However, he didn’t have any problem moving it between his eyes and giving it a child’s voice.  This seemed very comfortable.

When he made new, more optimistic interpretations of situations, he found that it was quite easy when he kept the voice in this position.  As a result, he decided to give his inner interpreter a new home.  Now this part seems to appreciate him much more and gives him very few problems.

Try this interpreter exercise at least once a week for the next four weeks.  Notice what happens after you do it and keep practicing.  You could be adding a very valuable tool to your life.

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.

 

Coming Soon

Attention Europe!

Van Tharp Is Presenting in Munich, Germany this August

"This should be the first course that everyone attends. It makes me look at the big picture of who I am and what I want out of trading." --Attendee of recent Blue Print Workshop

Blue Print for Trading Success August  4-6 Germany
Peak Performance 101 August 8-10 Germany

Click here for more information, pricing and hotel information

 

Trading Tip

Oil and Gas – Crudely Speaking Part II

by
D.R. Barton

 “Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble... to give way to hope, fear and greed.” 
—Benjamin Graham
 

Last week we talked about price behavior at extremes. Most traditional analysis breaks down when we get too far out on either tail of the bell curve.

And yet, we take a whack at traditional analysis to see if it makes any sense in a market that has clearly been in “extreme” territory – crude oil. Last week, I mentioned that anecdotally, it has been on everyone’s mind (or at least it’s derivative – gasoline – has been).

Let’s jump right to a very interesting chart – crude oil on a 60 minute bar chart.

The chart is fairly self explanatory. There is an old saying that markets form “V” bottoms and rounded tops. If that old saying holds true, then the rounded top that started to form as I was writing Part I of this series last week could be the beginning of a technically overdue correction.

The issue with the crude market is that outside forces (political, geo-political, etc.) can have drastic effects. So anyone looking to time the top needs patience, small position size and wide stops. 

I’ll end this week with a quick look at a topic where it’s surprisingly difficult to find definitive data: What is the breakdown in the cost of a gallon of gasoline? Based on several sources, here are the best ranges I could find:

• Tax per gallon (U.S. Only): 18.4 cent Federal excise tax, plus, an average of 27 cents of state taxes (including sales and environmental taxes). 

• Refining costs: ranging in estimates from 8% up to 22%.

• Transportation, storage & marketing: about 4.5% to 8%.

• Cost of crude oil: at $3.80 per gallon – 72% or $2.74.

These numbers come from a combination of resources including the U.S. Department of Energy, the U.S. Energy Information Administration, and articles from the Washington Post, Wall Street Journal and CNN.com.

I provided these numbers because the number one question I’ve been asked by folks when discussing the article is, “What goes into the price of a gallon of gas?”

Interestingly, in 2006, with gas at an average of $2.43 per gallon, taxes made up almost 19% of the cost; now it’s down to “only” 12%. Clearly the price of crude oil is dominating the cost right now, but that’s not always the case. As we found out when Katrina shut down key refining plants on the Gulf coast, refining, distribution and storage costs can fluctuate based on supply and demand.

But despite high historic prices in the U.S, prices here remain relatively low compared to other countries around the world. Many oil producing countries subsidize gas prices, so countries like Venezuela, Nigeria, and most states in the Middle East have prices well below the cost of production (to stimulate economic growth and gain political favor). On the other end of the scale, most European countries have heavy gas taxes; the average price for a gallon of petrol in the UK is now $8.56 and in many Scandinavian countries, it’s north of $9.00 per gallon. 

Oil based products are only one part of the broader commodities picture that has been under extreme inflationary pressure recently. And as long as we’re all filling up the gas tank and heading into a national election, energy costs will continue to be a hot topic.

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.  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

Melita is home from the hospital and doing better, though she isn't back to article writing just yet. However, she continues to update her blog. Check her progress at the blog address below.  

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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