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Tharp's Thoughts Weekly Newsletter

October 22, 2008 — Issue #395  
  
Article

You Are the Holy Grail, Part 2 by Libby Adams

Trading Education

Psychology of Trading CDs

Trading Tip

Market Volatility Compresses Time by D.R. Barton, Jr.

Melita's Corner

The Ongoing Journey by Melita Hunt

 

Feature

You Are the Holy Grail, Part 2

by
Libby Adams 

In my previous article, YOU Are the Holy Grail, I wrote about the three expressions or aspects of YOU, using the analogy of a ship to make distinctions among the three versions of “you.”  I referred to them as “me, myself and I.” (Click here if you'd like to read Part 1.)

I as the BIG I is the omniscient character up in the crow’s nest of the ship with a higher point of view.  This is the Holy Grail that everyone is looking for…outside of themselves.  The me is the Captain, which is in charge of making choices and decisions.  Myself refers to the little “i”s.  The little “i”s are the saboteurs; they are the parts that have faulty subconscious programming. 

If the Holy Grail is YOU, then it’s imperative that you “Know Yourself!”  That phrase is the inscription that was written on the Oracle of Apollo of Delphi, Greece, 6th century B.C., so the notion has been around for a long time.

Why is it so important to know yourself?  That’s a fair question: your power and clear decisions come from within, from an inner self that is powerful and wise.  You must learn to use your strengths more effectively and at the same time develop an awareness of your weaknesses and learn how to overcome them.

Interestingly enough, you might automatically assume that you know yourself, but that definitely is not the case.  You actually have to study yourself! This is why there is such an emphasis on trading psychology at the Van Tharp Institute. 

An aspect of knowing your self is gaining an understanding of your personality type.  Your personality type can cause you to win or lose in trading; you might have heard Van and me discussing this on one of his Psychology of Trading CDs.

We discuss both the Myers-Briggs Type Indicator as well as the Enneagram.  I believe that between these two personality typology systems, all behavior can be accounted for.  The Myers-Briggs deals with “normal” behavior, and the Enneagram covers healthy, average and unhealthy behaviors.

Carl Jung, a noted Swiss psychiatrist, developed a theory of personality to explain the normal differences between healthy people.  He calls it your “psychological type.” Based on his observations, Jung concluded that differences in behavior result from people’s inborn tendencies to use their minds in different ways.  As people act on these tendencies, they develop patterns of behavior.  When YOU know your pattern of behavior, you can work at your peak.

Jung’s psychological type theory defines eight different patterns of normal behavior, or types.  These patterns of normal behavior result in preferences, which are divided into four groupings, or dichotomies.  It is vital to gain a very basic understanding of how your personality strengths and weaknesses impact your trading. 

In this article, I can only briefly introduce the four dichotomies of the Myers-Briggs: Extravert/Introvert; Sensing/Intuition; Thinking/Feeling; and Judging/Perceiving.  Each dichotomy has its inherent strengths and weaknesses that need to be understood through further study. Here, I will present a simple explanation of what each dichotomy reveals.

The Extravert/Introvert dichotomy has to do with where people (traders) prefer to focus their attention and get energy.  Extraverts are energized by the outer environment and people and like to talk things out.  Introverts are energized by their inner world and like to work out ideas by thinking them through.

The Sensing/Intuition dichotomy refers to the way traders prefer to take in information.  Sensates are factual and concrete and they focus on details and specifics.  Intuitives see the big picture and patterns. 

The Thinking/Feeling dichotomy has to do with how traders prefer to make decisions.  Thinking types are objective and solve problems with logic and analysis.  Feelers are subjective, display empathy and won’t make a decision until they assess its impact on people.

The Judging/Perceiving dichotomy addresses how traders deal with the outer world.  Judgers (having nothing to do with the word “judgmental”) prefer to operate in a systematic way, get closure and want control over their life.  Perceivers like to stay open to change and possibilities, and let life happen.

So, what does personality type have to do with trading?  Personality type influences your thoughts, emotions and actions.  Because your thoughts, emotions, and actions (TEA) drive your trading performance, they must be consistent with achieving good trading results.  Have you ever been in the market and not followed your plan because some emotion came up and seemed to take over your thoughts?  That’s one of those little “i”s at work.  That is a weakness that needs to and can be overcome.

Let me give you an example of how a personality strength/weakness can actually lead one astray and away from his/her system.  I was working with a trader a few months ago who was having difficulty following his system.  A lack of trust had arisen that was related to his being a thinker-type on the Myers-Briggs.  Usually, we see thinking and analysis as wonderful traits and positive assets for a trader.  However, thinking can be a double-edged sword.

For this trader, sometimes his thinking was causing him not to follow the rules of his system. When events transpired in the market, instead of just following his system, he would begin to over-analyze the situation.  The more he analyzed, he would come to the conclusion that he knew better than his system, and he would throw out the rules and consequently lose money.  We had to work with the part of himself that was relying on his own thoughts and over-analytical assessments instead of his tried and true (back-tested) system.  Through our work together, he learned to use his analysis to his advantage as well as trust his system to do what it was designed to do.

Both Van and I emphasize the importance of knowing your personality strengths. When you are armed with that knowledge, you can then capitalize on your strengths and eliminate your weaknesses.  Of course, it takes self-understanding and inner work.  However, the reward is that you then have a definite edge in trading.  Have you already discovered through your own experience that your personality weaknesses are costing you money? Are you ready to take charge and fully utilize the YOU that is your personal Holy Grail?

I have alluded to the Myers-Briggs as one system of personality typing.  There is another typology system called the Enneagram, which literally reveals a map of trading psychology.  It is important to be able to locate where you currently are on that map and to know how to move closer to your destination of consistently profitable trading.  I will write about the map of the Enneagram in a future edition of the newsletter.

About Libby Adams: Carol "Libby" Adams, Ph.D., D.D., author of Voices of Selves, is the Executive Director of the Academy of Self-Knowledge . She is a Master Practitioner of NLP (Neuro-Linguistic Programming) and specializes in Transformational Meditation™, a process she has developed and used successfully with hundreds of students over the past fifteen years. 

Libby has developed a 4-Part Webinar Series that goes into even greater depth on the subject of personality type and how it relates to your trading. To view a free introductory Webinar entitled Your Personality Type Can Cause You To Win Or Lose When Trading  go to www.transformationaltrading.com and click on FREE WEBINAR.

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Trading Education

Psychology of Trading CD Series

Learn more about your personality type and how it affects your trading, as recommended by Libby Adams in the above article.

 

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Trading Tip

Market Volatility Compresses Time

by
D. R. Barton, Jr. 

With the market daily range still at all time highs an interesting phenomenon is taking place—time compression.  What used to take days to play out in the markets is now taking hours or less.

The S&P 500 Average True Range (ATR) is running 80% higher than it was during the previous volatility heights of 2000.  And more amazingly, as a percentage of price, volatility (as measured by ATR) has been as high as 8.4% of price in the past week!!  The highest it ever reached in 2000 was 3.0% of price, and that was only for a day or two.

This volatility has literally compressed time.  If we look at the S&P hourly chart, we see AVERAGE moves that are as big as daily bars were just a few short weeks ago.  These are truly historic times.

Last week we talked about the importance of keeping history in perspective as we looked back at 25 year long trading ranges. 

But with this time compression that is taking place, it makes sense to keep an eye on shorter time frames, even if you are a longer term trader.  With that in mind, let’s look at a 60 minute chart of the S&P 500.

For the upside, the area around 986 will be a key resistance/breakout area.  An hourly close above this area should give the market all the reason it needs to take another look at the 1045 high from early last week.

The downside is a bit more ominous, as we see no real support until we get down to 865 and then 840.

The overriding theme on this chart for me is the range containment.  Currently, the market prices have been contained for the past week by the huge move up from Friday, October 10th and Monday, October 13th and the almost as impressive from Tuesday, October 14th to early on Thursday, October 16th.  This is giving us a multi-bar range compression that shows us a descending triangle.  A break of the triangle’s edges on a closing basis for an hourly bar should give us some additional near-term clues to market direction.

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”. 

D.R. is presenting the upcoming Professional Day Trading Strategies Workshop and Swing Trading Techniques Workshop.

Melita's Inspirational Corner

The Ongoing Journey

by

Melita Hunt

Last week I wrote about my journey from real estate investor to world traveler, and how I eventually ended up becoming the CEO of the Van Tharp Institute working directly with trading coach Dr. Van K. Tharp.

It has been a long, eventful journey in the last seven years, and I have thoroughly enjoyed working in the USA. I have spent years meeting and mingling with trainers, speakers, presenters, students and traders, and have enjoyed being a participant in these various roles as well.

I believe that it is a combination of my desire to travel the world, meet new people and learn new things that finally brought me to North Carolina and subsequently created my lifestyle. And in addition to socializing, one of my favorite endeavors is writing. So a few years ago, I suggested to Van that I would start writing a small inspirational column for our newsletter.

 I had no idea what I would write about each week, but I did know that I loved to write and had quite a knack for it. I also wasn’t aware that a year later I would have cancer to contend with as well. All I knew was that I wanted to share my thoughts, talk about my various adventures and present new ideas that interested me. And I kept doing it through thick or thin, regardless of the circumstances. More importantly, I wanted people to enjoy reading the weekly column as much as I enjoyed writing it. Whether they gained knowledge, learned something valuable or just loosened up and had a laugh, it was something that I enjoyed. Thankfully, our readers say that they enjoy it, too. 

So this week, having just returned from Australia, I have decided to share a joke with you. Aussies pride themselves on being jokesters so I hope that you enjoy this ditty in the way it is intended, and do not feel offended in any way.

So whether you are male or female, loosen up, have a laugh and remember: 

It is just a joke (…. or is it ?).

HE and SHE

The family picture is on his desk – ah, a solid responsible family man.

The family picture is on her desk – ah, her family comes first.

His desk is cluttered – he’s obviously a hard worker and busy man.

Her desk is cluttered – she’s obviously a disorganized scatterbrain.

He’s talking to co-workers – he must be discussing the latest deal.

She’s talking to co-workers – she must be gossiping.

He’s not at his desk – he must be at a meeting.

She’s not at her desk – she must be out shopping.

He’s having lunch with his boss – he’s on his way up.

She’s having lunch with the boss – they must be having an affair.

The boss criticized him – he’ll improve his performance.

The boss criticized her – she’ll be very upset.

He got an unfair deal – did he get angry?

She got an unfair deal – did she cry?

He’s getting married – he’ll be more settled.

She’s getting married – she’ll get pregnant and leave.

His wife is having a baby – he’ll need a raise.

She’s having a baby – she’ll cost the company more in maternity benefits.

He’s going overseas on business – it’s good for his career.

She’s going overseas on business – what does her husband say?

He’s leaving for a better job – he recognizes a good opportunity.

She’s leaving for a better job – women are undependable.

Quick Questions:

1.      Based on what you read above what are your real beliefs about men?

2.      Based on what you read above what are your real beliefs about women?

3.      Did anything in this list strike a chord? If so, why?

 

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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—Benjamin Franklin

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