The Van Tharp Institute

June 7, 2005 — Issue #223

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In this Issue:

News We are Moving to a New Building!
Feature Article

Change is Good!, By, T. Harv Eker

Recommended

Psychology of Trading CD Program 

Trading Tip

The Market is Wrong? by  D. R. Barton

Coming Workshops Learn Swing Trading from Two Pro's, Chicago, August 26-28, 2005 Chicago IL
Listening In...

Scaling Out

View this newsletter on-line, or read back issues

 

We're Moving....

The Van Tharp Institute is 
Moving to a New Building Tomorrow

Our new address is:
102-A Commonwealth Drive, Cary, NC 27511

Although we are planning a smooth transition, there may be slight delays with emails, phones, orders and shipping Wednesday, June 8 & Thursday, June 9th. 

THANKS in advance for your patience - from all of the team!

Feature

In conjunction with our big change, our feature article today is about change.

 

CHANGE IS GOOD!

By, T. Harv Eker

 

Sometimes we love change and sometimes we hate it. Regardless, it always takes a little bit of courage to leave something familiar and try something new. Why is change difficult for most of us? Because change necessitates that we move out of our comfort zones.

Since the ego, or protective mind's job is survival, it will always prefer safety and security over the untested and unproven. It likes to keep things the same. It has us believe "the devil I know, is better than the devil I don't know." In short, "if I stay with what I know and what is familiar, I won't get hurt." This belief system is simply not true and goes directly against the laws of nature.

Most people are not totally happy and successful, yet they continue to do the same things over and over hoping someday things will be different. Realize if what you've been looking for was where you've been looking, chances are you'd have already found it! Doing more of the same even harder and longer is not usually the answer. Being willing to change will usually create better results.

Since your inner world creates your outer world, one of the first steps in change, is changing your thoughts. By examining the way you talk to yourself and your beliefs around success, money and prosperity, you are in a position to consciously change any thoughts that are based in lack, fear and limitation. Because what you focus on expands, by intentionally thinking of prosperity, abundance and success you will attract those very things.

Change is natural. The universe is in constant motion, from the changing of the seasons; to the way plants, trees and flowers grow; from the rushing of the rivers, to the wind that blows. Life is always moving, always changing. In fact, the only constant in the world, the only thing you can absolutely count on, is change itself.

Therefore, utilize every change as a gift. Whenever change occurs, ask yourself "how can I use this change to my benefit?" If you lose your job, know that a new and better opportunity awaits you. If you lose a relationship, know that a new and better relationship awaits you.

The happiest and most successful people all share a critical characteristic – the trait of adaptability. Which means they have the ability to quickly adapt to new situations and circumstances. The idea then is to go with the flow and not only accept change, but embrace it as an opportunity to expand yourself and your life.

EXERCISE:

Today, make a list of all the areas in your life where changes needs to take place. Make sure your list not only covers the situations in your life, but also your environment and how you personally need to change. Start implementing those changes now! 

Declaration:
I am adaptable. I accept change easily and use it to my advantage.

For Your Freedom,

T. Harv Eker
Best-Selling Author 
Secrets of the Millionaire Mind

President of Peak Potentials Training

Reproduced with permission from the Millionaire Mind E-Lesson written by T. Harv Eker, president of Peak Potentials Training. Learn more about his fantastic new book, Secrets of the Millionaire Mind.

Editors Note: Throughout the issues you will see certain words with odd spellings, such as Fre-edom and mort-gage. This is because spam filters are likely to block message that contain certain words and this is one solution.

 

Recommended:

Psychology of Trading CD Series

You will learn the tools and techniques that you need to transform your trading and investing results.  Topics covered include: 

  • The Psychology of Discipline
  • Belief Change and Mental State Control
  • How to Fix Mistakes and Two Tasks of Trading--Rehearsal and Daily Debrief
  • Games People Play
  • Self-Sabotage
  • Creating Your Future by Goal Setting and Manifesting
  • Personality Type and Trading

The material in this CD series is one of the best overviews of the psychology of trading that Van Tharp has produced. 

Based on Van Tharp's years of experience working with traders and investors and modeling the best traits and characteristics of high performing investors. 

Only $249

It's one of the best investments you can make to your investment success.

Learn More

Order

Trading Tip: 

The Market is Wrong?

by  D. R. Barton, Jr

 

"Economics is extremely useful  --  as a form of employment for economists."

-- John Kenneth Galbraith

 "An economist is someone who sees something that works in practice and wonders if it would work in theory."

 --Ronald Reagan

The more I read the opinion of economists on economic journalists, the more I'm convinced that President Reagan had it right.

On Friday (6/3/05), the markets certainly had a bearish day.  The tech-heavy NASDAQ was off 1.5 percent and the Dow and S&P indices lost just less than one percent each.  Most pundits ascribed the drop to a weaker than expected employment report.  According to the Department of Labor, 78,000 new jobs were added in May.  This number was about 100,000 fewer new jobs than analysts had expected.  And it was a far cry from the 274,000 jobs added in April.

There were three main reactions by the economists and economic journalists:

1.  I told you so.  This was (and always is) the consensus response.  People who get paid for opinions can always rationalize those opinions. Past articles are used as proof they knew this was coming (even if the articles were six months ago). And Barron's, the Wall Street Journal, and other were certainly full of folks telling us they saw this weak jobs report coming, as well as its negative affect on the markets.  If they told me Thursday afternoon, that would have been a bit more useful…

2. I got it wrong.  This response is usually harder recognize, largely because the pundits only say this through silence.  Their articles don't include past prognostications.  Or they find something more interesting to talk about.  There are those exceptions who fess-up when they mess-up.  But alas, they are rare.

One such rare gentleman is Dennis Gartman.  He runs an exclusive daily newsletter, aptly called the Gartman Letter.  It is very expensive, and very worth it.  Dennis weighs in on macroeconomic news and the geopolitical landscape, as well the currency, commodity and equities markets.  In Monday's letter, he defers to an another analyst who got part of the employment picture right that Dennis missed.  And he says so clearly.  What a breath of fresh air!

3. The market got it wrong.  This is my all-time favorite response.  I read one of these responses over the weekend in an article about the jobs report.  (Name and article title withheld to protect the not-so-innocent.)  Most economists and journalists are too savvy to come right out and say that the markets were wrong.  They use words like "confused" or "muddled."  Such was the case here.  In this particular article, the writer implied that the markets were wrong because job growth was up year-over-year.  The market shouldn't pay attention to monthly changes because these monthly numbers are too volatile, and should not even be released in a perfect world, he argues.  Paying too much attention to the absolute monthly change in employment numbers made the market "muddled" on Friday, according to this writer.  That's strange, because to me, the market looked very resolute in its desire to head straight down on Friday.

I won't split hairs over whether employment numbers should be released monthly, quarterly or whatever.  But it IS unusual for a journalist to say that the absolute number shouldn't be released - only the percentage relative to this time last year.  This is akin to saying that market participants are too dumb to interpret raw numbers.  Which I guess is why the market wasn't smart enough to go the right direction on Friday…

Traders and investors are bombarded with data every minute of the day, it seems.  And very little of it really matters.  But keep your eyes open the first Friday of every month.  The monthly employment figures are currently a "market-mover", especially if there is a surprise (a significant difference versus what the analysts expect).  Don't fight the intra-day momentum created by these reports - unless, of course, your keen sense of economics tells you that the market got it wrong…

 

D. R. Barton, Jr. will be teaching the upcoming Proven Tactics of Swing Trading Course, August 2005 and is a featured speaker in the Van Tharp Institute Course, Make Money Work for You

He is the Chief Operating Officer and Risk Manager for the Directional Research and Trading hedge fund group. D. R. has been actively involved in trading, researching and teaching in the markets since 1986.  D. R. has taught extensively in many investment areas including intra-day trading, swing trading, and cutting edge risk management techniques. 

His writing credits include co-authoring Safe Strategies for Fin-ancial Fre-edom and co-creator and contributing author on Fin-ancial Fre-edom Through  Electronic Day Trading. He also writes a stock screening newsletter called Ten Minute Trader.

Coming Workshop...

Proven Tactics for Swing Trading

Profitable Trading that Fits YOUR Schedule

 Chicago, Illinois

August 26-28, 2005

Presented by Brad Martin and D.R. Barton

  • Learn the Pro Traders' Secrets for Capturing Huge Profits in Bear or Bull Markets
  • Become Skilled at Swing Trading - the Trading Style That Fits Into YOUR Schedule
  • Don't Lose a Bundle by Holding Stocks During The Last Market Decline! Find Out the Master Traders' Alternative to "Buy & Hold"
  • Discover the Detailed Trading Strategies that Win in Today's Markets

Learn more...

Register Now

 

Listening in....

Excerpts from Dr. Tharp's Mastermind Discussion Forum


Scaling Out 
Author: tm 

I understand (and know) why and how the scaling-in is very reasonable way to handle the size during the position but can somebody explain in what situation you see that "scaling out" is worth using?

My opinion/experience (at this moment is that it is more profitable to keep the position and close it immediately when things are getting against you than trying to keep the position by reducing it's size.



Reply To This Message 


Re: Scaling Out 
Author: FT

Your message suggests scaling out (reducing the size of your position) when the market goes against you. Another approach, that I use myself, is to scale out when the market goes in my favor.

You can think of it is a set of Profit Targets. I exit p1 percent of my original position when the trade shows 1R profit. I exit p2 percent of my original position when the trade shows 2R profit. I exit p3 percent of my original position when the trade shows 3R profit. I exit p4 percent of my original position when the trade shows 4R profit.

In my case I use very wide stops so 1R is usually more than $2000. Of course it fluctuates around with volatility and recent market action but the average value of 1R over the most recent 200 trades is certainly bigger than $2K.

I use (p1=50%), (p2=25%), (p3=12.5%), (p4=6.25%), (p5=3.125%), etc. Each time I hit a new profit target (a new integer multiple of 1R), I exit part of my position. A big fraction of trades hit the first profit target, a smaller fraction of trades hit both the first and second targets, a yet-smaller fraction of trades hit the first three targets, and so forth.

I don't know whether this method will fit your personality or not. After performing a lot of computer backtests, I decided that it does fit my personality.

Good wishes for calm profits, -FT 

Click  here to read more   posts on Dr. Tharp's Forum. 

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Dr. Van Tharp's Trading Discussion Forum
  www.mastermindforum.com

Ask questions, share ideas, information and feedback with Dr. Tharp and other like-minded traders and investors. 

 

 

 

 

 

 

 

Feedback 
Peak Performance 
Home Study Course

"I just finished Volume 5 of the Peak Performance Home Study Course...

"I can summarize my learning experience in one sentence: "All causation is mental." This isn't my quote but, for me, it exemplifies the power of the mind. Robert Kiyosaki interviewed Dr. Tharp on a tape that was included in the CashFlow 202 game. I was completely absorbed by the approach (so different from most trading commentary), that Dr. Tharp used in his thought processes. What held my attention was the similar 'it's in your mind' component of the BE - DO - HAVE equation that Kiyosaki teaches. I see crystal clear that the seed of the results we get in our lives is germinated first in our minds. The growth or death of that seed also depends on our minds. To me, in hindsight, it's obvious that the most important part of trading is the one doing the trading. The trader is completely controlled by the trader's mind.

"I heard it said once that, in healthy human evolution, we proceed from dependence to independence to interdependence as we grow and mature. This [Peak Performance] course has introduced ways to think dependently, independently, and interdependently; I believe there are useful ways to employ all three modes that will support successful trading.

"The course taught me the basics of fishing instead of depending on someone to give me a fish. The real benefit is the fact that the material can put the power of the material where it should be - between the ears. I anxiously look forward to reviewing the course, using it as a model to build my trading business, and studying further with Dr. Tharp's material.

"Hopefully, you find this useful and an encouragement to keep up the good work!" — Rick Redel