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

  • Article Project Marathon Update by R.J. Hixson
  • Trading Education Peak Performance Home Study
  • Trading Tip Crude Oil: The End of the Rally Is Near by D.R. Barton, Jr.
  • Workshops Back to Back Workshops: Peak 202 and Peak 203 in April
  • Mailbag Peak Performance Explained: Active Tensing and Threshold Tensing


Project Marathon Update: Simplicity and Consistency As an Individual Trader

Just after New Year’s, a friend sent me an article that proposed crafting a desired theme for the year rather than setting annual goals. The author used an example of abundance and showed how a daily focus on the various aspects of that theme would help make abundance evident throughout the year in all of its facets. That sounded like a nice idea and, although I didn’t set a particular theme, it stayed at the back of my mind.

In January, I concurrently gave my business a review and thought about my annual goals; during this time a few points became clear to me.

First, I had written much of my business plan before I had started actively trading again. While much of the plan contained generally good business principles and trading practices, this time around, I found that a lot of it was also fairly complex and irrelevant.

Second, reviewing my trading log and journal helped me arrive at a conclusion with its roots in the business plan as well. The trading system column in my trading log showed a lot of variety in terms of which systems I was trading during the year. In my trading log, I could see how much discretion I had used to apply the trading rules from my systems.

It was obvious that the trading plan part of my business plan needed a lot of work. I spent most of January and February rewriting a good chunk of it. And as I did that, a few themes appeared.

My Identity: I am an Individual Trader

I looked at my business plan with new eyes in January. I had read through it in the previous two years and even updated parts, but now I really wanted it to help me trade better. As I initially reviewed it, I thought, “Wow, I could do all this in here but how much of it is required? In fact, how much of it even makes sense?”

At certain workshops, Van draws a pyramid to represent the levels of belief that determine how we live. The most powerful beliefs we hold are spiritual, and they form the foundation for all of our other beliefs. The second most powerful beliefs are about our identities. We consciously or non-consciously say or know who we are, and then we assign a lot of additional beliefs, meanings, and behaviors to this identity. As you might imagine, Van asks traders to consciously state who they are before they come up with their objectives and plans. In my business plan, my answer to the question “Who am I as a trader?” was “I am a successful fund manager with several hundred million under management.” Were either of those statements true of me? No, but I had an intent—actually two intents—for adopting that identity.

  1. I thought I was heading in that direction at the time and wanted to start thinking about running such a management business.
  2. I believed that identity would help me be more professional in my approach trading.

The professional approach part worked; however, the fund manager identity introduced ideas and practices that proved too burdensome to worry about or execute—and frankly I never did.

To help me trade better now, I answer the question in a new way: “I am an individual trader that manages a small amount of money and earns very high rates of return.” That short sleeve golf shirt fits me so much better than the long sleeve starched button down dress shirt with a tie around my neck. As an individual trader, I believe my business can focus on simplicity and profitable actions rather than the complexity introduced by large scale risk controls, client management, and trading larger sums of money. My change of identity to “individual trader” opened up a new way of looking at my trading business. Regardless of the changes I needed to make to my business plan based on this new identity, it fits me so much better right now.

My Business Plan: Trading Simply and Consistently

When I looked over my year of trading in my log in December, I noticed a pattern with my trades. More precisely, I noticed a lack of pattern: the systems I traded varied significantly. I did not (nor would not) notice this on a daily or even weekly basis; however, it was evident in a year’s view. I also remember frequently not updating my trading log daily—or even weekly. Also, I never spelled out my money management rules specifically enough to effectively help me meet my money goals, so I varied my position sizes on trades, which produced varying dollar results in equity.

There were certain big aspects of my trading that varied a lot last year, and I believe that cost me.

Moving Forward with These Themes in Mind

So simplicity and consistency are the themes for me this year. As I rewrote my trading plan, my individual trader identity helped me keep simplicity and consistency front of mind as I changed my combination of trading systems, wrote rules on when to start and when to stop trading systems, fleshed out my position sizing strategies and set my annual goals. If my plans are simple and my execution is consistent, I believe I will see better results this coming year.

Not surprisingly, my goals this year are very simple and require consistency. They are simple in that each of them is done on a daily basis and none of them need much time, strategizing, or complex planning. They require consistency in that I do them every day. The approach reminded of my son’s karate kata.

Kata is a choreographed series of moves that martial arts students practice and perfect. They are not necessarily complex movements (although the complexity or length increases by level) and the focus is on perfect execution. I never gave kata much credit until I saw my son’s sensei perform one. He is an advanced degree black belt and never before had I seen a human move so fast or with such precision. I watched with amazement, and a bit of fear, as I gained a newfound respect for my son’s sensei that day. I also learned to appreciate the impressive results that can come from practicing a humble kata.

This year for my annual goals, I’ll be practicing a set of katas of sorts every day with a focus on simplicity and consistency.

Take care and trade well.

About the Author: R.J. Hixson is a devoted husband and active father. At the Van Tharp Institute, he researches and develops new products and services that will help traders trade better. He’s ready to visit the beach again soon after a long winter. He can be contacted at “rj” at “”.

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Crude Oil: The End of the Rally Is Near

A couple of weeks ago, we talked about the troubles with civil uprisings in the Arab League that are toppling dictatorships.

Fear of a major disruption in oil production, along with an actual loss of about one percent of the world’s oil supply, has caused crude oil prices to skyrocket. This significant rise in the cost of crude has impacted the price we pay for many things including a gallon of gas and the valuation of the stock market in general.

However, there are technical, fundamental and geopolitical reasons to believe that at least a short term top in crude is near. Let’s look at crude from both perspectives.

Fundamentals of Crude: Supply and Demand plus Geopolitics

The geopolitical angle of this game is fairly easy to see, for a change. The worries about disruption in oil supply due to the Arab League turmoil have largely been baked into prices already. Remember the old trader’s adage, “Buy the rumor, sell the news.” The Libyan civil war is largely at a standoff. So the news event that could reverse the meteoric rise in crude could come Friday in Saudi Arabia’s “Day of Rage.”

Many informed pundits predict that the pre-planned protests in Saudi Arabia will be a non-event. The Saudi government is much more mature and stable than those of Tunisia, Egypt or Libya. And the National Guard there is very loyal to the royal family. Lastly, Saudi’s great wealth has been spread around fairly well, giving less cause for true economic outrage.

On the supply and demand front, there has been no news that could contribute to the 22%+ rise in crude oil prices. In fact, a glut from Canada has caused the U.S. reserves to be filled to the brim. And even though the Arab League problems have caused a 1% disruption in daily oil flow, the Saudis have stated publicly that they stand ready to increase supplies to cover this shortfall if needed. The US has also hinted that it could dip into the strategic reserve.

The Technicals in Crude Are Ready for a Retrace

A quick look at a crude oil price chart will show that this big run-up in crude oil has overstretched price to the upside.


As we can see in this chart, the RSI reading has only topped 70 (the traditional level for an oversold reading on this indicator) for crude oil twice in the last 15 months (before the current run). Both instances were met with pullbacks. Obviously, this run-up was more severe than the other two, which only had one day each above the 70 level; the current run has spent 6 days above that level.

The RSI reading alone doesn’t mean that a crude pullback is eminent, but if the Saudi rallies on Friday are uneventful, that could relieve some of the political tension that is holding crude prices high in the face of plentiful supply. A pullback to the 50% retracement of this run-up would then be very likely.

I’d love to hear your thoughts and feedback on this article or about trading and investing in general at drbarton “at” Until next week…

Great Trading,
D. R.

About the Author: 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 and Financial Advisor magazine. You may contact D.R. at "drbarton" at "".


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Active Tensing and Threshold Tensing Exercise

Q:I need help understanding the Active Tensing and Threshold tensing exercise in Book 2 of the Peak Performance Home Study Course. I don't understand the description or how to perform it. 

A:The tensing exercise helps you focus your mind in part by using some muscles in your body. Active tensing requires that you actually move. Threshold tensing requires that you think about the muscle and slightly contract it; no movement is required. Tensing simply means to contract the muscle enough either to move it in the case of active or contract it enough to be aware of the sensation of contraction for the threshold. Concentrating on the contraction helps focus your mind in a way similar to how some meditation practices have you focus on your breathing. It's really rather simple but probably not intuitive.

I would suggest rereading the exercise again and just trying it. There's no "right" way or proper form to worry about; just focus.

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March 09, 2011 - Issue 516

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