3 Suggestions to keep you safe regardless of what the market decides to do.
#889 May 9, 2018
  • Feature: Protecting Yourself In Today's Market, by Van K. Tharp, Ph.D.
  • Workshops: May's Peak 101 Discount Expires Today!
  • Tips: Preparing For A Strong Directional Move, by D. R. Barton, Jr.
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Simplify Your Trading Processes

Van Tharp’s signature three-day workshop, Peak Performance 101 is built around helping you identify winning trading beliefs and behaviors based on the model of successful trading that Dr. Tharp has developed from his 30 years of researching the top traders in the world. You’ll also learn how to incorporate these useful beliefs and behaviors into your trading back home.

Van Tharp’s work boils down to helping you understand how you can develop beliefs and habits to be a peak performing trader. In addition to your beliefs, mental states such as abundance and peace produce better trading results compared to fear or greed. You can eliminate trading mistakes and follow your rules for trading regardless of how you feel in the moment or whatever is making headlines. Successful trading is not about being right. It’s about cutting losses and letting profits run.

At the most basic level, people must trade by processing information. Most people are inefficient information processors to start with and have alot of biases, which influence trading decisions. Dr. Van Tharp documented as many as 25 common biases. However, most of them can be understood by realizing that trading and investing are very simple processes that human beings try to make much more complex.

To learn more about this this workshop, scroll down to our workshop's section.

Feature Article

Protecting Yourself in Today’s Market
by Van K. Tharp, Ph.D.
Van's Photo
I think every trader should have to read a warning prior to plunging into the markets. The warning should not be something naïve such as “Future results may not reflect past performance.” No, the warning should be much stronger. It should be something like:

Warning! You are biologically and culturally wired to lose a lot of money in the market over your lifetime. While people can prevent this fate by taking the right actions — both psychologically and system-wise — most people will fail to heed this warning!

I wish I didn’t have to write such advice but if this warning prevents a few disasters, it will have served its purpose. I know that most traders and investors, however, are disasters waiting to happen. Why? Let’s take a look at the two main ways most people play the markets.

1. Most people jump on the bandwagon when it seems hot and get off when it seems cold. This almost guarantees that they’ll lose money.

In Jack Schwager’s book on Futures Managed Trading: The Myths and Truths, Jack concludes that the average person who puts his money with a professional — even those putting their money with the best professionals — tend to lose money in the market. Why? Typically, that means that they put their money in when the manager reaches a new equity peak and withdraws the funds after a substantial drawdown, just before the start of a new trend toward a high equity peak. This tendency is also true of stock based funds so many of them will lose money even in good times.

2. People who have not placed their money with professionals are typically following someone’s advice — usually with disastrous results.

People are drawn to advisors primarily to learn what to invest in and when. Those two things have little to do with the secrets of making money in the markets. Instead, the secrets have to do with the following:

  • Having reasonable objectives. Most investors have no idea what they want.
  • Knowing when to exit a position in order to keep your expectancy as high as possible!
  • Knowing how big of a position to trade to meet your objectives. This is all about your position sizing strategy and the 'average' trader or investor has no understanding of what a position sizing strategy is or how to come up with one.
  • Having the discipline to follow the first three secrets.

Avoiding Any Coming Disaster

I have no idea when the stock market will start to go up, turn down, or if it will keep going sideways. Neither do you, nor does anyone else. Plenty of people have developed many creative ways of predictions and they guess but in reality, no one truly knows.

So what can you do? The following three suggestions will help keep you safe regardless of what the market decides to do.

First, determine how much you are willing to lose (your risk or R) before you enter a position. A good rule of thumb is to never risk more than 1% of your capital on any one position.

This does not mean that you should divide up your capital into 100 pieces — each amounting to a 1% loss if you lost everything in each one. Instead, it refers to the maximum loss in a position that you would allow before you get out. Suppose you have a $100,000 account and you are willing to risk 1% or $1,000. If Apple were at $150 a share and you were to exit if it dropped by $5, you could buy 200 shares ($1,000 equity risk ÷ $5 loss per share = 200 shares). Buying 200 shares of AAPL will use $30,000 of your equity but to protect your capital, you will exit immediately if it declines $5 and you hit a $1,000 loss.

Second, you need to know when to get out of a position to preserve your profit.

Once you limit your losses to $1,000, you might want your average gain to be at least $3,000. Thus, your rule might be to allow a loss as much as 1% of equity as long as a gain of at least 3% of your equity is possible. Once you hit your 3% gain, you are willing to go for a lot more as long as you don’t give back too much profit. One way you could preserve most of your profit would be to use a 25% trailing stop. In other words, once you’ve made $3,000, you might be willing to give back 25% of that but no more ($750) for the opportunity to achieve even bigger profits. This is where you get out to protect your profit.

Let’s see how this example might apply to a position with a larger profit. Let’s say someone had 300 shares of a $200 stock which they had bought some time back when the stock was $50. Therefore, this trader now has a profit of $45,000. According to our 25% trailing rule, they can give back 25% of the price ($50 on the $200 stock price or $15,000 on the position) in order to allow the position to get bigger. If the account had started at $100,000 before the purchase and equity reached $145,000, then giving back $15,000 translates to about only a 10% drawdown in equity.

The rules I’ve given are just samples. Here are two other variations —
  • When you reach a profit target, you can sell out much of your stake in a particular position.
  • When you reach a profit target, you can allow for a retracement of some percentage of your total equity — perhaps 5 to 10%.

Whatever rules make you comfortable are fine – but – make sure you have some rules to protect your profit.

Third, have enough discipline to follow rules one and two.

If you don’t have this kind of discipline, then you need to practice the exercises in Volume 4 of my Peak Performance Home Study course. Those exercises will help you with mental rehearsals and other skills to make sure that your rules are second nature to you.

If you practice these three keys, you can afford to stay in the stock market until we have a major correction. These are minimal practices of any speculative trader and if you don’t practice them, then you are risking the possibility of throwing your money away.
Watch this 4-minute video below to hear more about the objectives of our Peak Performance 101 workshop from Van.
Peak 101 Van

Trading Tip

Preparing for a Strong Directional Move
by D. R. Barton, Jr.
DR's photo
Greetings from the home of Joyce and Yates – the land of Guinness and Jameson. Yes, the Bartons are spending a few days in delightful Dublin, Ireland before popping over to London for the weekend. We just arrived and the combination of jet lag and a heavy touring schedule necessitates a concise note this week – but it’s a fairly important one.

Markets are poised for a break out of consolidation patterns and are heading back to strong directional movement soon. A couple of weeks ago, I showed you this pattern in the S&P 500:
DR Chart 1
That intermediate term consolidation pattern still remains in place. Tight consolidations on multiple indexes (both in the U.S. and globally) suggest breakouts can result in a trend period. Trends follow consolidations and vice versa.

To understand how this shift from consolidation to directional trend might play out, let’s look at a longer-term chart. Here’s the S&P 500 index using weekly bars:
DR Chart 2
Here is that same chart showing an intact trendline and also revealing how tight our current consolidation looks relative to a longer-term view:
DR Chart 3
You can see a confirming long-term uptrend channel also in the emerging markets ETF (EEM) from chart analyst extraordinaire Aksel Kibar :
DR Chart 4
What Next?

The compelling case for a bull run has received some technical damage as of late. If we were to break the combined support provided by the long term trendline and the 200-day MA, that would lead to a much deeper correction.

The fundamental case, however, remains very much in place for continued strong economic growth globally and very strong earnings growth in the U.S. In addition, we are still in a long-term uptrend and are still at or above the 200-day moving average. This means the most likely direction for our next major move remains to the upside.

What we know won’t happen is an indefinite consolidation so I continue to like patiently buying pattern bottoms for now.

I always love to hear your thoughts and comments — especially additional insights(!) - please send them to drbarton “at” vantharp.com

Great trading and God bless you,
D.R. Barton, Jr.
May 2018 - US
Three Opportunities in 2018 to transform
your trading and your life

MAY 18-20, CARY, NC ($700 Discount TODAY)
JULY 13-15, CARY, NC
Is this workshop right for you?

Peak Performance 101 not only helps you install Dr. Tharp’s model, it also helps you overcome self-sabotage. You’ll be able to free yourself from internal conflicts that keep you from performing at a peak level. For example, do any of the following sound like you?

  • Are you always looking for a new trading system? Or, are you always trying to improve the one you have?
  • Do you find your trade setups never quite fit all of your criteria so you have trouble entering trades?
  • Do you get anxious about the market or get anxious about risking your money so that you have trouble pulling the trigger?
  • Do you get excited and ignore your rules or do you get distracted and fail to follow your system's rules?
  • Does a losing trade take your energy away from the next trade or conversely, does a winning trade make you confident about the next trade?
  • Is your trading (or your life?) ruled by fear, anger, greed, or shame?
  • Are you constantly losing money?
  • Do you lack a strong plan to guide your trading or do you fail to follow the plan you created?
  • Do you have a performance ceiling where you fall apart or stop doing well consistently? Does your account reach a certain size and then it plateaus or you start losing money at that point?

If you answered yes to any of these questions, then you are experiencing some form of self-sabotage. But don’t worry, these are some very common patterns for traders and you can overcome them in order to reach your potential. This workshop would help you identify and resolve the underlying conflicts causing these patterns – as well as leave you with the tools to address conflicts that come up in the future for you.

If you’re really committed to trading success and willing to do whatever it takes, you’ll find that you've become a different person after this ground-breaking workshop and you’ll generate different results in your trading.

This workshop is the primary portal to apply for the Super Trader program. Rates for the Super Trader Program increase the first of August. Attend the May or July event in the US if you wish to apply for the program in time to get the current price before the increase.

June 2018 - US
The Basic and Advanced Options workshops have now been opened to the public (this workshop is traditionally a Super Trader Only workshop). However, to attend there are certain qualifications you must meet. Please call us at 919-466-0043 so we may speak with you regarding your level of experience trading.
July 2018 - US
August 2018 - US
The Forex Trading Systems Workshop teaches three robust Forex Systems. All three systems are based on the concept of trend-following. Each system is based on similar “ingredients,” but each has a different recipe to capture a different part of the trend. Consequently, the systems are complementary to each other and together offer several trading setups nearly every day of the year. Two locations to choose from, Cary NC in August and London, England in October.

Trading in a Sideways Market
No matter what time frame you trade or what method you use to measure them, Sideways markets happen between 59% and 65% of the time! And even though they appear a majority of the time, Sideways markets are rarely discussed, even in professional trading circles. Until now....
September 2018 - US
The How to Develop Winning Systems Workshop teaches you what you need to know to develop your own system. The material you will learn is not market or time-frame specific. So whether you trade stocks, futures, currencies, gold, etc., or whether you place 50 trades per day or 50 trades per year, you will learn all of the components that work in any system. With this knowledge you can both modify existing systems to fit you or the market type better, or master your own system development.
Two locations to choose from, Cary, NC in September and London, England in October!
October 2018 - US
November 2018 - US

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Cary, NC Workshop Information
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