Home Workshops Products Contact Us

View this newsletter on-line, or read back issues

   

Tharp's Thoughts Weekly Newsletter (View On-Line)

February 18, 2009 — Issue #411
  
Article

E-Mini Futures – Leveraged, Liquid and Easy to Love by D.R. Barton

Trading Education

Definitive Guide to Position Sizing, Offer Expires Friday

Trading Tip

Mindfulness—Connecting to Excellence in the Moment by Ken Long

Mailbag

How is Maximum Adverse Excursion Determined?

 

Feature

E-Mini Futures – Leveraged, Liquid and Easy to Love

by
D.R. Barton

 

Having just made the 14 hour flight from Sydney, Australia to San Francisco, I was decompressing in the local airline lounge before another 5+ hour flight back home to the East Coast.

Then, I heard a booming voice coming from one of the business cubicles next to me.  The voice was so unmistakable, he might have well been saying one of his famous catch phrases like, “Back-back-back-back…” or spouting one of his wry nicknames like Andre “Bad Moon” Rison or Jake "Daylight Come and You Gotta" Delhomme.

It was world renowned sportscaster Chris Berman, who through knowledge, hard work, humor and sheer force of personality has become the face (and voice) of the ESPN sports network.

I just couldn't pass up saying hello to someone who has entertained and informed me and countless others through the years.  He was as affable in person as on screen.  He asked about my travels and told me he was heading back home.  It was time to catch his flight and he took off.

Then 20 seconds later he came around the corner and said, “If my Dad were here, he would want me to do a proper introduction.”  He asked my name and then chatted about the Pebble Beach Pro Am where he was just participating in the tournament.  He even agreed to a picture, which I said was for my son (but we both knew was for me…).  And he even graciously overlooked a conversational faux pas on my part. 

It’s hard to know too much about a person from a brief description, but I hope you have gained some added insight and appreciation for this Ivy League educated star who is the best known sports caster in America.

To be honest, it’s easy to see how a man like this can rise to the top and stay there.  He’s genuine, caring and really knows his stuff.

This brings me to a guy who shares many parallels with Mr. Berman.

Another Ivy Leaguer – This One a Market Maven

Just after my conversation with Chris Berman, my mind leapt to another Chris—this one, my good friend and business partner Christopher Castroviejo.  Christopher has many of those characteristics that I had just admired about Chris Berman—a caring guy who is genuine and truly knows HIS stuff.  A 37 year Wall Street veteran, he’s really the pro’s pro when it comes to trading.

I want to tell you a bit more about Christopher and his background because it’s a very interesting story.  Then we'll find out his current take on the market conditions and trading the index E-Minis intraday. 

A Market Maven in Every Sense of the Word

I’ve had the pleasure of trading with many different professional traders.  Christopher Castroviejo is at the top of that heap, but that experience didn’t come overnight.

As I mentioned earlier, Christopher has spent 37 years in and around the markets.  His resume and track record on Wall Street became something of legend: stints with Smith Barney, J.P. Morgan, a partnership at Bear Stearns, financial consultant for The Vatican Bank to name a few. Christopher was hot and getting hotter. Some highlights include turning $10,000 into $178,000 in four weeks, 8 straight years of 43% compounded profits as a top hedge fund manager, a sleek Manhattan brownstone and a spacious summer getaway in the tony Hamptons.  Christopher even struck up a friendship with his money making idol, billionaire George Soros (to be honest, the people Christopher has worked with in the field is a veritable “who’s who” of Wall Street elite). 

Along with multi-million dollar wins, there were a few huge losses; in just six short weeks, $10,000 became a cool million, and quickly nothing but air. And, in one monumental transaction gone wrong, Christopher lost $15 million dollars in just a few months…$1.5 million of it his own money. But, unlike the Vegas poker player who can’t leave the table, Christopher learned from the missteps as well as the wins. “You have to reinvent your performance all the time. I used to see the business as just about orchestrating wins, but the rational way of thinking about it is really about controlling your losses.”

Anyone who has read Jack Schwager’s Market Wizards series (the first of which featured a chapter on Van) knows that many of those top drawer players became the traders they are by learning lessons in their own personal “trials by fire.”  Christopher has certainly been through his own version!

Today, Christopher is an active intraday and swing trader and he continues to manage money for a select list of Wall Street insiders.

I have learned so much while trading, working, teaching, and managing money with Christopher.  So I asked him to share a few insights with us.

What are your thoughts on current market and trading conditions?  

There is a preponderance of government announcements and programs (and announcements about programs!) these days.  People anticipate help, run prices up, and then we get a short term top when reality sets in.  January 28th was a great example of this.  The key thing to trading the “hard right edge” of the chart is to understand where you are relative to the recent history of the price movement.  If you have a road map of where you’ve been, it's much easier to react to where you are in the moment.

You’re a big fan of multiple time frames.  How can traders use that concept intraday?  

I look at the markets in terms of finding key decision points.  Using multiple time frames helps me to make better decisions.  I can trade against a short term move or trend if I know that there are key points on a larger time frame that indicate a high probability for a change in direction.  It’s like fading a small ripple during a change in the tide.  Once or twice a week, we get set-ups for really great trades on the 5 minute time frame by understanding what’s going on in a 60 minute chart.

You watch the market internals closely during the day.  Tell us a little about that.

I think that it’s very important to understand the market’s language.  The market internals, indicators like Tick, Trin, Put/Call Ratio and the Advance/Decline line, give us a good understanding of the market’s sentiment.  While skillful traders can capture short term moves that go against the market internals, there are times when internals can tell you that trades against them don’t stand a chance.

What one or two key concepts have you found that separate top traders from the rest?

Two things stand out to me.  The first is the ability to act decisively in the face of discomfort (or fear).  The second key characteristic is focus.  Being able to filter out all of the market noise and focus on the one or two key things that matter at any given time.  Of course, those key things change from time-to-time, and that’s where the experienced trader uses his skill to determine where to concentrate her or his effort.

Christopher is a master at several aspects of intraday trading and is particularly skilled in the application of key level support/resistance and Market Profile. 

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”.  

 

Trading Education

DEFINITIVE GUIDE TO POSITION SIZING

Because Size Really Does Matter in the Markets, 

Van Tharp's Definitive Guide to Position Sizing

Position sizing is that portion of your trading system that tells you “how many” or “how much.”  How many units of your investment should you put on at a given time? How much risk should you be willing to take? Aside from your personal psychological issues, this is the most critical concept you need to tackle as a trader or investor.

Trading Tip

Mindfulness—Connecting to Excellence in the Moment

by
Ken Long

No generation of people has had more things available to get in the way of finding excellence in the moment.

We are so busy and distracted by our lifestyle that we are never in the moment. We are always somewhere else.

When we are at work, we are thinking about dinner. At dinner we are thinking about the game tomorrow.

On vacation, we are thinking about work. Watching TV we are thinking about vacation.

Our cell phones, iPods and game stations all create a pseudo-reality around us and take our attention away from where we are and what we are doing. we don't attend to the food we are eating, and jam calories down our throat. On the exercise bicycle we are distracted by earphones and TV screens so that our heads are effectively disconnected from our bodies.

We talk AT our children like objects at a distance, and are advised by experts to schedule time for family meetings and get together's.

Should I need an agenda to talk to my kids about anything?

I was in line to get a sandwich when I experienced excellence in person in a very visceral way today. It reminded me to seek connection in each and every moment to what is going on, to turn off the chatter and the attention traps that divert the senses.

The nice lady at the counter in our college cafeteria was not very well educated, nor very polished in appearance. She was surrounded by movers and shakers of higher education studying deep, profound theory. They were so caught up in thinking elsewhere they had no time to see her and the quality of her work. She was eager to please and was committed to providing the best customer service she could possibly provide. She was fully engaged and committed to her task. She knew what questions to ask and wasted neither words or motion in preparing sandwiches. Her skill and economy of motion were art.

Not wanting to engage with a member of the great unwashed, the ladies in line in front of me made it a point to blurt out their order in a single complex thought-paragraph, fighting to get their words in edgewise so that the lady would not have an opportunity to intrude into their head space. They couldn't wait to get back to their own conversation. The sandwich maker was un-fazed and was perfect in creating their sandwiches, which they took without a hint of acknowledging they just shared time and space with another human being. They never saw her.

When it was my turn, she had the opportunity to ask me every questions she wanted to ask. I let her guide me through our process of building a sandwich together. When it was done I thanked her and remarked that she'd done one heck of a job during this lunch hour madness and that I appreciated her service. We shared a smile.

I never enjoyed a sandwich as much as I did this afternoon. I turned off the monitor, unhooked the phone, and just ate the sandwich and attended to every bite and taste. It was perfect.

The nice lady in the sandwich shop reminded me today about where to find excellence in the world. It's all around you, if you will look. Where is your excellence? How do you express it everyday and in every way? Are you open to it in the here and now or are you planning to get it tomorrow or wherever else your attention has wandered?

About the Author: Ken Long, a retired Lieutenant Colonel in the U.S. Army with a Master's Degree in System Development, is currently a professor of tactics and logistics at the Army's Command and General Staff College. He has developed the Tortoise Method of mutual fund switching, a trading system that takes about five minutes each week with a goal of outperforming the S&P 500 Index.  Ken is founder and Chief of Research of Tortoise Capital Management, www.tortoisecapital.com.  He is a trader and writes a daily and weekly market assessment for mutual funds and exchange traded funds. He is a proud husband, dad, and ju jitsu practitioner. Read more of Ken's essays at http://kansasreflections.wordpress.com.

IITM Third Party Clause

Mailbag

How is Maximum Adverse Excursion Determined?

Q:  I have just read the 2nd edition of "Trade your Way" and I still don't understand how maximum adverse excursion is determined. Is this an estimate of what earlier trades have done? How can you determine the MAE upon entering a trade when that trade obviously has no history? The way I read the explanation made it sound as if it was the maximum intraday excursion—does this change from day to day or what? Thanks. Jerry

A: When the trade is over look at the maximum excursion against you. If the trade was always profitable, then it is zero, but when it becomes a loss, it is an adversion excurion. The maximum (expressed as an R-multiple) is the MAE.

Say you enter into a trade at 10 with a stop at 8. You never get stopped out and you eventually sell at a profit of $5. However, during the first two weeks of the trade, the price got as low at $8.50. Your MAE is $1.5. And since R = $2, the MAE is 0.75R. —Van

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 2009 the International Institute of Trading Mastery, Inc.

.

.

.

.

.

.

Quote:.

"Rejoice in the things that are present; all else is beyond thee." ~Montaigne

..

..

.

.

.

.

.

.

Trouble viewing this issue?

  View On-line.

.

.

.

.

.

.

.

..


Buy Now

.

.

.

..

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

..

.

.

.

~

.

.

Share this newsletter with a friend!

..

.

.

..Back to top

.

.

.

.

.

.

.

.

....

Share this newsletter with a friend!

~.~~~

~