Having a solid week thus far
7 wins/3 losses & +7.5 roi% on margin going into my Friday trading (a.m. & my '1 & done' ruleset for each trading instrument I trade for Friday).
------------------------
His stuff may be very expensive; but he outlines how to be successful in the trading business...
This is Van Tharp dude. I realize his prices are insanely expensive. Better to buy his book and then purchase 10 sessions with a trading psychologist (sports/performance pyschologist).
Work on 'rooting' out the issues in trading that are keeping you from being as efficient as you can be. I am obsessive about this and constantly work on it because everything about my innate personality is not suitable to be a daytrader.
Below is his email today.
------------------------------------------
Maybe 2 out of 100 traders will do what is described below. If they do it well--over several years they can then go about accumulating real wealth. Doesn't have to be millions of dollars per year either.
Wealth can be acquired and one may live in very nice areas of the world without excessively high cost of living while still traveling whenever you feel like it.
Oh yea; read the following website everyday
http://heartiste.wordpress.com/category/marriage-is-for-chumps/
and get yourself 'fixed.' The best $750.00 I ever spent was in 1986 at age 19 getting a vasectomy. Staying single along with not reproducing is 80% of acquiring wealth if you are not making millions per year.
Also, rent and use all of the extra initial capital investment and extra monthly expenses of a decent house (property taxes/upkeep/etc) and use it to generate excess roi%.
--------------------------
The Psychology of Trading
Tharp Think starts with your personal psychology, because trading is entirely psychological. Van often says, âYou do not trade the markets; you only trade your beliefs about the markets.â If you start trading a system before understanding the beliefs and mental states (like fear) that drive your behavior, youâll make mistakes.
Youâll break your own rules and sabotage yourself. Youâll make irrational decisions based on whims, and your trading will end up being inconsistent at bestâdisastrous at worst. If, on the other hand, you understand your own psychology, youâll be able to clearly articulate your objectives, create a position sizing⢠strategy that gets you to those objectives, and develop a system that fits you.
After researching thousands of traders over many years, Van has found four key psychological traits that top traders usually have in common.
They take complete personal responsibility for everything in their lives, including their trading.
They have a deep sense of commitment. They tend to have a particular psychological âprofileâ (to find out more about psychological profiles, click here).
They actively work on their personal issues. Your psychological profile reflects your general personality, much of which youâre born with, but the other traits can be developed. If you donât have the prototypical trader profile but develop an intimate knowledge of how your own mind works, youâll be better off as a trader than those who do have the profile but continue to stumble across the market landscape wearing their blindfolds.
Youâll be able to see that landscape clearly and chart a purposeful course across it because youâll have articulated clear objectives that fit you.
System Development
If youâre going to trade consistently, you need reliable, productive trading systems. Trading systems constitute a set of parameters and rules that guide your trades.
Because your psychology is so integral to your trading, you will be able to best trade systems that reflect your beliefs. Even if a system works amazingly well for someone else, it may not necessarily work for you. If the rules of that system are based on beliefs you donât share, youâll never follow them, and if you donât follow the rules of a system, your trading results will be haphazard and arbitrary.
Professional traders aim for consistency.
Position Sizing⢠Strategies and Risk
Tharp Think emphasizes the critical importance of position sizing strategies in meeting your objectives. Those objectives could focus on capital preservation or taking a lot of risk and making a huge return.
Very few people understand that no matter what your objectives happen to be, your position sizing⢠strategies meet those objectivesânot your trading system. Position sizing strategies answer the question, âhow much?â throughout the life of a trade.
There are as many objectives as there are traders. Some traders may focus on minimizing riskâon not having drawdowns bigger than some percentage of their account valueâwhile others may be out to make 1,000% or more per year.
Still others might want a combination of both; they might, for example, aim for profits of 40% with drawdowns no bigger than 15%. Whatever the objectives, your position sizing⢠strategy achieves them.
Considering how critical position sizing strategies are for successful trading, youâd think that every trader would focus on them, but the truth is, most individual traders and even many professional traders donât think much about position sizing, if theyâve even heard of the term.
They think that diversification, asset allocation, or a trading system is the key to market success. But as weâve said, position sizing strategies are much more important than any of those.
True, a great trading system makes it easier for you to apply effective position sizing strategies to achieve your objectives, but you achieve those objectives primarilythrough position sizing strategies.
In fact, an average trader using a Holy Grail system could devastate an account by neglecting position sizing strategies or using inappropriate ones.
The Fundamental Laws of Trading
Van believes that there are three Golden Rules of Trading:
Never open a position without knowing exactly where you will exit that position;
Donât open a position unless your potential reward is at least twice the size of the pre-determined risk;
Carry out those rules by cutting your losses short and letting your profits run.
If you understand these three concepts along with position sizing strategies, you should be able to effectively use any valid trading concept: fundamentals, band trading, trend following, mean reversal trading, etc.
Expectancy and SQN
How do you know if your system is effective? The answer is actually pretty simple: your system should show a positive expectancy.
You can define your gains and losses in terms of your initial risk, 1R. For example, if you exit a trade after earning triple the amount of your initial risk, your trade profited 3R. If you lose an amount equal to your initial risk, you lost 1R.
Once your system has generated a number of trades, youâll have a series of R multiples that represent your profits and losses. This series of R multiples forms a distribution of results, and the mean of that distribution is the systemâs expectancy.
If the systemâs expectancy is positive, itâs profitable; if itâs negative, itâs costing you money, and you should stop trading it right away.
Recently, Van developed a proprietary measure for trading system quality called the System Quality Number®, or SQN®, which measures the relationship between expectancy and the variability of results for a trading systemâs R-multiple distribution.
The better the SQN score for a given system, the easier it will be to use position sizing⢠strategies to meet your trading objectives.
Treat Your Trading Like a Business!
Learning to trade is different from learning to ride a bike; itâs more like learning a profession. Unfortunately, most traders think they can just close their eyes, pick stocks, sit back and let the money roll in. But it doesnât happen that way, and eventually, new traders figure that outâoften painfully.
Successful trading takes a tremendous amount of planning, skill and trainingâjust like any business venture. Essentially, your trading should be viewed as a businessâbecause it IS a business. And if you want that business to be profitable, you need to understand the parts of your business, you need a good plan, and you need the discipline to follow the plan.
If you're looking for a quick and easy way to make money in the markets, even Tharp Think wonât help. There is no "silver bullet solution" to trading success. The best way to trade effectively is to learn and adopt Tharp Think principles, and that takes commitment, time and effort.
Traders who learn Tharp Think and apply the principles in a disciplined way will be able to transform a hobby into a profitable business venture.
Peace & Blessings!
Vice-Chancellor Hedvig Von Dikkeman V
7 wins/3 losses & +7.5 roi% on margin going into my Friday trading (a.m. & my '1 & done' ruleset for each trading instrument I trade for Friday).
------------------------
His stuff may be very expensive; but he outlines how to be successful in the trading business...
This is Van Tharp dude. I realize his prices are insanely expensive. Better to buy his book and then purchase 10 sessions with a trading psychologist (sports/performance pyschologist).
Work on 'rooting' out the issues in trading that are keeping you from being as efficient as you can be. I am obsessive about this and constantly work on it because everything about my innate personality is not suitable to be a daytrader.
Below is his email today.
------------------------------------------
Maybe 2 out of 100 traders will do what is described below. If they do it well--over several years they can then go about accumulating real wealth. Doesn't have to be millions of dollars per year either.
Wealth can be acquired and one may live in very nice areas of the world without excessively high cost of living while still traveling whenever you feel like it.
Oh yea; read the following website everyday
http://heartiste.wordpress.com/category/marriage-is-for-chumps/
and get yourself 'fixed.' The best $750.00 I ever spent was in 1986 at age 19 getting a vasectomy. Staying single along with not reproducing is 80% of acquiring wealth if you are not making millions per year.
Also, rent and use all of the extra initial capital investment and extra monthly expenses of a decent house (property taxes/upkeep/etc) and use it to generate excess roi%.
--------------------------
The Psychology of Trading
Tharp Think starts with your personal psychology, because trading is entirely psychological. Van often says, âYou do not trade the markets; you only trade your beliefs about the markets.â If you start trading a system before understanding the beliefs and mental states (like fear) that drive your behavior, youâll make mistakes.
Youâll break your own rules and sabotage yourself. Youâll make irrational decisions based on whims, and your trading will end up being inconsistent at bestâdisastrous at worst. If, on the other hand, you understand your own psychology, youâll be able to clearly articulate your objectives, create a position sizing⢠strategy that gets you to those objectives, and develop a system that fits you.
After researching thousands of traders over many years, Van has found four key psychological traits that top traders usually have in common.
They take complete personal responsibility for everything in their lives, including their trading.
They have a deep sense of commitment. They tend to have a particular psychological âprofileâ (to find out more about psychological profiles, click here).
They actively work on their personal issues. Your psychological profile reflects your general personality, much of which youâre born with, but the other traits can be developed. If you donât have the prototypical trader profile but develop an intimate knowledge of how your own mind works, youâll be better off as a trader than those who do have the profile but continue to stumble across the market landscape wearing their blindfolds.
Youâll be able to see that landscape clearly and chart a purposeful course across it because youâll have articulated clear objectives that fit you.
System Development
If youâre going to trade consistently, you need reliable, productive trading systems. Trading systems constitute a set of parameters and rules that guide your trades.
Because your psychology is so integral to your trading, you will be able to best trade systems that reflect your beliefs. Even if a system works amazingly well for someone else, it may not necessarily work for you. If the rules of that system are based on beliefs you donât share, youâll never follow them, and if you donât follow the rules of a system, your trading results will be haphazard and arbitrary.
Professional traders aim for consistency.
Position Sizing⢠Strategies and Risk
Tharp Think emphasizes the critical importance of position sizing strategies in meeting your objectives. Those objectives could focus on capital preservation or taking a lot of risk and making a huge return.
Very few people understand that no matter what your objectives happen to be, your position sizing⢠strategies meet those objectivesânot your trading system. Position sizing strategies answer the question, âhow much?â throughout the life of a trade.
There are as many objectives as there are traders. Some traders may focus on minimizing riskâon not having drawdowns bigger than some percentage of their account valueâwhile others may be out to make 1,000% or more per year.
Still others might want a combination of both; they might, for example, aim for profits of 40% with drawdowns no bigger than 15%. Whatever the objectives, your position sizing⢠strategy achieves them.
Considering how critical position sizing strategies are for successful trading, youâd think that every trader would focus on them, but the truth is, most individual traders and even many professional traders donât think much about position sizing, if theyâve even heard of the term.
They think that diversification, asset allocation, or a trading system is the key to market success. But as weâve said, position sizing strategies are much more important than any of those.
True, a great trading system makes it easier for you to apply effective position sizing strategies to achieve your objectives, but you achieve those objectives primarilythrough position sizing strategies.
In fact, an average trader using a Holy Grail system could devastate an account by neglecting position sizing strategies or using inappropriate ones.
The Fundamental Laws of Trading
Van believes that there are three Golden Rules of Trading:
Never open a position without knowing exactly where you will exit that position;
Donât open a position unless your potential reward is at least twice the size of the pre-determined risk;
Carry out those rules by cutting your losses short and letting your profits run.
If you understand these three concepts along with position sizing strategies, you should be able to effectively use any valid trading concept: fundamentals, band trading, trend following, mean reversal trading, etc.
Expectancy and SQN
How do you know if your system is effective? The answer is actually pretty simple: your system should show a positive expectancy.
You can define your gains and losses in terms of your initial risk, 1R. For example, if you exit a trade after earning triple the amount of your initial risk, your trade profited 3R. If you lose an amount equal to your initial risk, you lost 1R.
Once your system has generated a number of trades, youâll have a series of R multiples that represent your profits and losses. This series of R multiples forms a distribution of results, and the mean of that distribution is the systemâs expectancy.
If the systemâs expectancy is positive, itâs profitable; if itâs negative, itâs costing you money, and you should stop trading it right away.
Recently, Van developed a proprietary measure for trading system quality called the System Quality Number®, or SQN®, which measures the relationship between expectancy and the variability of results for a trading systemâs R-multiple distribution.
The better the SQN score for a given system, the easier it will be to use position sizing⢠strategies to meet your trading objectives.
Treat Your Trading Like a Business!
Learning to trade is different from learning to ride a bike; itâs more like learning a profession. Unfortunately, most traders think they can just close their eyes, pick stocks, sit back and let the money roll in. But it doesnât happen that way, and eventually, new traders figure that outâoften painfully.
Successful trading takes a tremendous amount of planning, skill and trainingâjust like any business venture. Essentially, your trading should be viewed as a businessâbecause it IS a business. And if you want that business to be profitable, you need to understand the parts of your business, you need a good plan, and you need the discipline to follow the plan.
If you're looking for a quick and easy way to make money in the markets, even Tharp Think wonât help. There is no "silver bullet solution" to trading success. The best way to trade effectively is to learn and adopt Tharp Think principles, and that takes commitment, time and effort.
Traders who learn Tharp Think and apply the principles in a disciplined way will be able to transform a hobby into a profitable business venture.
Peace & Blessings!
Vice-Chancellor Hedvig Von Dikkeman V
