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Tharp's Thoughts Weekly Newsletter

September 17, 2008 — Issue #390  
  
Hot Off the Press

The Definitive Guide to Position Sizing Is Here!!!

Article

Blueprint to Success by Melita Hunt

Workshops

October Workshops

Trading Tip

Online Trading Platforms – The Tools of the Trade Part II by D.R. Barton, Jr.

 

Hot Off the Press

Van's Definitive Guide to Position Sizing is finally here! 

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Feature

Blueprint to Success

by
Melita Hunt

When it comes to the topic of trading systems, the number of systems available in the marketplace today is probably in the hundreds, if not thousands for you to choose from “Enter on the green signal and exit on the red” seems to be the most common factor among them. Seem familiar? So with all of these holy grail systems (and that’s their marketing words, not mine) to choose from, how do we separate the wheat from the chafe?

And more importantly, what if we don’t need to? Based on the feedback that we have received from clients, heading down the path of pre-existing packaged systems seems to have caused much more stress than success.  There is much more to trading success than just following red and green signals.

From the mouths of champion traders in Market Wizards and also in Van’s books, it is espoused that the best thing to do is to create your own system. But where on earth does one start? Many people do not feel that they are capable of creating their own system and that could possibly be because they have a misconception of what a system actually is.

And in addition to a system, there are actually many other important pieces to the trading puzzle. In fact, an entire business plan should be created and numerous systems can then be incorporated into this plan.

About three years ago, Van decided that he would restart his Super Trader program and in preparation for that, we discussed the most important things that a Super Trader needed to do to become a successful and consistently profitable trader. Van had been teaching these things for many years, but he decided that it was time to put the steps into some semblance of order. Before he knew it, he had almost 100 tasks that would need to be accomplished. There were a number of them based around systems but in addition, there was so much more that had to be considered.

The tasks ranged from psychological work to creating the all important business plan, learning how to position size correctly and ultimately how to develop not one, but numerous trading systems that would fit in with the big picture.

For the first time ever all of the concepts that Van teaches were compiled into one format. He started with the most important factors that would make the greatest impact on trading success, and progressed through stages that ended with an ongoing work schedule for continued success.

I thought that the material was incredibly valuable and should be made available to many more people than just the Super Traders. So to introduce these 100 tasks to more clients, a new workshop was born –Blueprint to Trading Success.

Initially, we decided that 100 tasks would seem like far too many to complete and people would get disillusioned or frustrated with the process, but like any profession, it really takes diligent study and practice to be sufficiently qualified as a trader, just as it is in any endeavor. However, Van worked through them and culled them into a workable and viable collection of questions and tasks that could be delivered and discussed in class. 

I believe that Van asks the right question when coaching clients by starting with a simple “Who Are You?” which is the basis of the Blueprint Workshop.

This simple phrase can set you up to take the path of greater trading success simply by determining who you really are, what you want to accomplish and what it will take to reach those goals.

The phrase is simple but the process is more of a journey. Of course, a small group environment with Van leading the planning is the ideal situation to work through this process. But for our readers who can’t make it to a workshop, I’d like to share just some of the topics from the workshop.

Assessment, Business Planning, Objectives and Key Systems

  • What are my strengths as a trader, business owner and a researcher?
  • Do my favorite indicators really represent the market? Why or why not?
  • How well does my personality fit trading?
  • What was my best year ever?
  • What am I willing to tolerate in terms of possible loss?
  • What are my trading edges

Market Selection, Strategy Preparation and Development, Systems, Testing and Position Sizing

  • How will I measure the risk to reward ratio of each trade?
  • How do I define a sector and what is my criteria for moving in?
  • Will I have multiple strategies or multiple markets?
  • How does my knowledge about charts translate into a low-risk entry?
  • How will I know if I am wrong on this trade?
  • How will I get my initial R-multiple distribution?
  • What position size will I use to test my system?

Self-Assessment, Self-Work, Top-Down Approach and Applying Objectives

  • What are the top five issues that I have as a trader?
  • What does my dream life look like?
  • What is  an incident that has bothered me? How does it affect my trading?
  • Which of the ten tasks of trading am I resistant to doing?

These are just a few of the areas that are covered in the extensive Blueprint for Trading Success Workshop. If you are really ready to put together a viable business plan for your trading, then this workshop is the answer. I believe that there is something in it for everybody and miraculously the trading systems seem much easier to develop after they have been through this process and have their blueprint in hand.

It is one of my favorite workshops because I have seen the huge difference that it has made to the many people that have already attended.  I want to encourage people to come along and get a taste of all of Van's concepts and this is the best resource to do that. I hope you'll join us for the experience one day.

The Next Blueprint Workshop is coming soon. See below.

 

Workshops

October Workshops

October 11-13, 2008

Cary, NC

Blueprint for Trading Success

"This is the best conference I have ever attended. This is the hardest conference I have ever attended. I had to ask myself some of the most difficult questions I've asked in a long time...Van and Mel are not just great trading coaches, they are great people. You are a breath of fresh air in an industry full of hucksters." —S.W., Rancho Mirage, CA, Past Attendee

October 15-17, 2008

Cary, NC

ETF 101 Workshop

"Excellent course for understanding ETFs and how to incorporate them, both short-term and long-term into your trading plan. Ken is an excellent instructor with a terrific commitment to making sure everyone understands the material. He is one of the best, if not THE best trading and system design instructor I know." R. Freeman, CA

 

Trading Tip

Online Trading Platforms – The Tools of the Trade Part II

by
D. R. Barton, Jr. 

It’s not the floor, it’s the dancer.
--Workshop attendee lamenting a debate on trading platforms

After spending a weekend with an incredible group of people at the E-Mini Index Futures course, I thought it would be good to jump back into our discussion about online trading platforms.

One issue for everyone to remember – we talked extensively this weekend with new traders and some folks with extensive experience. And, we kept coming back to how important it is to MANAGE THE TRADER, not just the trading tools. Even the best tools have their effectiveness reduced or eliminated if used inefficiently. Van (and his continuing groundbreaking work) is part of every course we do!!

More than any other project, I need your help to assist in putting together some observations, comments and hopefully some tests that will help us draw some objective conclusions about which platforms fit which traders and investors best.

Help with the Scoring

I think it would useful if we put together some sort of scoring system (a rubric, as they call it in school these days).

My intention is not to say this platform is great and that one stinks, but rather to find the ones that are best suited for the various needs that traders and investors have. Here’s a starting point:

Day Traders’ Needs

  • High level of data reliability

  • Data speed

  • Robust platform

  • Excellent charting tools

  • Good intraday watch lists and scanners

  • Efficient order entry

  • Very low commission costs for large numbers of shares / contracts

Options Traders’ Needs

  • Good options chains across various strike prices and expirations

  • Valuation tools

  • Tools that handle "what if" for various spread, strangle, condor, lemur and other strategies

  • Low commission rates for multiple options

Swing and Longer Term Traders' and Investors’ Needs

  • Broad range of research and analysis tools

  • Good “per transaction” commission rates

  • Excellent charting tools

  • Good end of day watch lists and scanners

How you can help? Let me know if I’ve left out key characteristics of your trading or investing style (or if your style needs its own category). Also – please keep sending in those comments on what works and doesn’t work for the online platforms that you use now or have used in the last year!

Send your comments to drbarton “at” iitm.com. 

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 wrote the main article this week. She'll be back next week with her inspirational corner.

Melita Hunt is the CEO of the Van Tharp Institute and a regular contributor to the weekly newsletter. 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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Copyright 2008 the International Institute of Trading Mastery, Inc.

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Tharp Concepts Explained...

 

- Psychology of Trading

- System Development

- Risk and R-Multiples

- Position Sizing

- Expectancy

- Business Planning

Learn the concepts...

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Free Downloads

Handbook for Traders and Investors

 

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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.

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Check out Dr. Tharp's Blog:

smarttraderblog.com  

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