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Tharp's Thoughts Weekly Newsletter

September 10, 2008 — Issue #389  
  
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The Definitive Guide to Position Sizing Is Here!!!

Article

What to Do with Conflicting Parts by Van K. Tharp, Ph.D.

Trading Tip

The Commodity Swoon Continues – A Visual Take by D.R. Barton, Jr.

Melita's Corner

Getting Into Perspective by Melita Hunt

 

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Tharp’s Thoughts

What to Do with Conflicting Parts

by
Van K. Tharp, Ph.D.

In Part One of this series we talked about how many schools of psychological theory involve the notion that individual personalities are made up of many different parts. And as I indicated in that article, it doesn’t matter if this is true or not. What is important is that using the idea that we are made up of many different parts is USEFUL. It is very useful to identify these parts to have a better understanding of yourself. Also, often times different parts of ourselves are in conflict, which causes a multitude of negative situations. If you did not do the exercise from Part One, please do that now. (Click here to link to that article.)

So let’s say you have discovered you have certain conflicting parts. What do you do about them? The exercises for resolving conflict are give in Volume 3 of the Peak Performance Home Study Course, but I thought I would give you another example of the value of such negotiations. The following example comes from one of my clients whose name has been changed to provide anonymity. 

Henry had made great progress in his trading, but he was convinced there was some part of him sabotaging his trading. And he just didn’t know who it was. However, he had given me several clues. First of all, he said that his father was an alcoholic who had left the family when he was an adolescent. Part of the progress Henry made had come from forgiving his father. Nevertheless, Henry was convinced there was a self-sabotage part. For example, he said that sometimes he would avoid taking system trades and at other time he would take trades that were not part of his system—yet when he did so, he knew he would probably lose. 

I asked him to do the parts party. He said that when he tried to bring up his parts, the first one to come up was a blank slate.  He said he couldn’t get much information out of the slate; it was just there and it seemed to demand to be there. And since he couldn’t get any information out of the slate, he just stopped looking for the self-sabotage part. 

Here’s how the exercise progressed:

Tharp: Let’s first bring up your trader part and put it in one hand. Then bring up the part of you that is sabotaging your trading and put it in the other hand.

What happened was a swashbuckler first appeared in his right hand and his father appeared in his left hand. The swashbuckler was clearly the trader, but when I asked him what he was trying to do for Henry he responded, “Provide excitement.”

Henry: [The other part is] my father. When he was intoxicated in public, people we knew, successful people, would laugh at him. I guess this part of me is just trying to prevent me from being like those successful people who laughed at him. Actually, when I think about it my father and the swashbuckler have been working together. My father tells him how to trade and the trader (swashbuckler) is just doing it.

Tharp: But you’ve already been successful in your career. Who was responsible for that? You are very organized. Perhaps that blank slate was responsible for that organization. Why don’t you put your trader part and your father part together on one hand (he puts them in his left hand) and bring out the blank slate. Now ask the blank slate what his intention is for Henry and if he has been the one who was responsible for your success in the past.

Henry: He’s been my organizer part. He’s like a bulletin board that I organized all my engineering projects upon. And now that I’m asking him, I’m sure he was responsible for my past successes as an engineer.

Tharp: Now, negotiate between the blank slate and the trader. Would the swashbuckler be willing to give up trading if he could find more satisfactory ways of obtaining excitement that the other parts will support? And under those conditions will the blank slate be willing to take over the trading role and provide his high level of organization?

Henry (after thinking for a few minutes): The swashbuckler has already come up with a number of ways to get excitement that the other parts can support. And since the other parts support him, in fact applaud him, he is quite willing to give up trading to the blank slate. And the blank slate is willing to take over the trading role. He says he was just waiting until he was told to do so.

Tharp: How do the other parts feel about that?

Henry: The father part objects because he’s afraid that I’ll become like those people who laughed at him.

Tharp: Would he be willing to support the new organization if the other parts agreed to dedicate your trading success to your father? And will the other parts agree to do that?

Henry: Wow, the other parts are really excited about that! And so is the father part. 

Tharp: Good, and the father part could also look for new ways to celebrate your father.

Henry: Yes, he feels really good about that!

Tharp: And how do all the parts feel now?

Henry: Excellent! I’m sure this will work.

Intention of Parts

Quite often a trader will come upon a part, such as the father part sabotaging trading in the previous example, that they cannot imagine as having a positive intention for themselves. In the example given, my client had already done a lot of work forgiving his father for leaving the family when he was young or he would have also had a hard time dealing with this part. As a result, I want to re-emphasize that you created all of your parts. You would not have created any parts had you not had a positive intention for doing so at the time. In the example, the mental image of the father was part of who this person was, and his job was protecting his image. Many people have parts representing people in their past that they have trouble forgiving. Remember that this particular part of you is not that person. It is your internal representation of that person.

Certain parts have a strong influence on a person’s self-esteem. These self-esteem parts—such as those parts of you that represent people you have trouble forgiving—are very hard to deal with by yourself. Second, most of these parts block your true perception of who you are by providing you with a lot of fear and anger. Yet even these parts have positive intentions.

Excerpted from the Peak Performance Home Study Course.

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. 

Trading Tip

The Commodity Swoon Continues – A Visual Take

by
D. R. Barton, Jr. 

There are lots of things going on this week in the markets, and I wanted to share some thoughts on those with you, but I didn’t want to let our discussion on trading platforms fall too far behind either!  So we’ll pick that up next week.

The commodity markets are really in a tailspin, and a few items are definitely worth comment here.   Let’s look at crude oil and gold.  First up is a crude oil chart that we’ve looked at several times during our summer series on the peaking of crude oil prices.

You’ll notice several things about this chart:

  • It smashed through all of the blue (“acceleration”) lines that I drew in less than two weeks when it started to fall.

  • From the triple bottom (Dec ‘07, Jan & Feb ’08) price around 85, crude has now dropped below a 0.618 retracement.

  • Crude is now trading significantly below its 200- day moving average.

  • It is fast approaching the $100 support level with the “Maginot line of support - $85 looming.” 

Corn is more than 30 % off of its July highs and gold is making new 10 month lows; the commodity swoon is quite widespread!   Here’s a chart that I like, which shows how much oil an ounce of gold will buy.

I smashed the weekly data together here so we could see quite a few years back.  Gold currently buys only half as much crude oil as it did back in early 2002. 

Significantly, crude oil is very near the psychologically important $100 per barrel support zone.  Gold has fewer key technical support areas to lean on until it gets down below $700 per ounce.

Long term, I think the fundamentals for both of the commodities is bullish, but for now, only technical exhaustion (or outside forces like terrorist strikes, etc.) seems to be a likely vehicle for reversing the slide.

Until then, keep those comments coming to drbarton “at” iitm.com and let me know your favorite trading platforms and why you like them (or the ones you tried that didn’t pan out)!

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

Getting Into Perspective

by
Melita Hunt

The other day I was listening to a weather report about a hurricane and people were saying how relieved they were because it had been downgraded from a category two to a category one. Yet a couple of days later, the same people were in a panic when a tropical storm was being upgraded to a category one. In both cases it was going to be the same stage storm (category one) with equivalent damage expected, but in one case it was considered to be a downgrade whereas in the other it was considered an upgrade. I guess it depends on how you look at things.

It's all about perspective.

One person could look at their old Mercedes as a classic, whereas someone else might see it as just an expensive car.

A wife may see an overseas trip as a big indulgence of a lifetime, whereas her husband might just see it as equivalent to his third overseas business trip in a month and he’d rather stay home.

One person could consider their new 4 bedroom abode as the best house they have ever lived in, whereas someone sees the 10,000 square foot house down the street as their ideal home.

You both want the best for the kids, but one parent thinks that they should be an “A” student to receive praise, whereas the other parent praises any little accomplishment.

A trader thinks that it is important to spend a couple of hours studying the markets each night, whereas the spouse thinks that this silly hobby costs money and intrudes on family time. 

But how often do we allow our difference in perspective to affect someone we love negatively?  Have you ever felt that you are just not on the same page anymore? Well it happens. We like being right about the things that are important to us.

When we first meet someone, we try to agree with everything that they say. We go out of our way to enjoy the same hobbies and laugh at their jokes. Eventually, if we stay together we find that we have similar ideas and values and also appreciate and respect one another’s differences. Some may even agree to spend a lifetime together.

Inevitably, there are going to be some disagreements and arguments. But it is when the arguments become familiar territory that we need to stop and take a look at what is really going on. 

I doubt that most people actually dislike the other person. It probably just comes down to a difference in perspective.

I remember Ken Long telling me once that he created a trading system from a perspective of everything he knew to be right about the markets. He also chose to create from the opposite perspective and subsequently put together a trading system with every bad and negative belief that he had about the market. Both of them were successful systems. But the one that was the opposite to what he thought about the market became the most profitable.

So how do you know if you are right? How do you know that your perspective is the correct one?

It is only when we choose to stop being “right” about everything that we know and start to listen and see things from other people’s perspectives that a whole new world opens up. And it could be just the change we need.

Melita Hunt is the CEO of the Van Tharp Institute. If you would like to keep up with Melita’s progress regarding her 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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Two Reports of Self Sabotage

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Copyright 2008 the International Institute of Trading Mastery, Inc.

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