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Article Archive For Van K. Tharp, Ph.D.

  • Developing Discipline With Daily Debriefing by Van K. Tharp, Ph.D.

    ARTICLE SYNOPSIS ...Stocks & Commodities V. 25:1 (50-53): Developing Discipline With Daily Debriefing by Van K. Tharp, Ph.D. It is easy to design a system that will produce annual returns of 100% or more. Trading the system so you will get those returns is not so easy. Here's why it's easy to develop such a system, why it's so difficult to get those returns, and how to fix the problem. IN TERMS OF R-MULTIPLES First, let's start thinking about your trading results in terms of multiples of your initial risk (Rmultiples for short). A key of trading success is that you must have a predetermined exit before you ent...

  • Protecting Yourself in Tough Markets by Van K. Tharp, Ph.D.

    ARTICLE SYNOPSIS ...Protecting Yourself in Tough Markets by Van K. Tharp, Ph.D. Things may be going great for you now, but what happens when the tide turns and you face hard times in the market? Here's how to protect yourself. Recently, I encountered a man who was close to suicidal. Three weeks prior, his Keogh account had been worth about $1.3 million. Unfortunately, as a result of the mini-technology crash in NASDAQ, the value of his account had plummetted, ending up only worth about $400,000 by the time we met. Then, he had watched one stock drop from $200 per share to about $50 per share before he got out ...

  • Scheduling Time For Market Study by Van K. Tharp, Ph.D.

    ARTICLE SYNOPSIS ...Scheduling Time For Market Study by Van K. Tharp, Ph.D. Bill, a trader, called my office complaining that he never has enough time to really study the markets. He said his lack of time often resulted in serious problems, and he expressed an interest in consulting with me if I could help him solve his problem. I told Bill that I had helped others with similar problems, but that we would have to schedule two intensive days together in order to work on it. Bill exclaimed that he couldn't possibly give up two days out of his busy schedule. ""Couldn't we do it through hourly phone consultations ov...

  • Avoiding Overconfidence by Van K. Tharp, Ph.D.

    ARTICLE SYNOPSIS ...Avoiding Overconfidence by Van K. Tharp, Ph.D. If I could give just one piece of advice to a trader, it would be: Avoid overconfidence--it could be your worst enemy. Thousands of traders make the mistake of becoming overconfident each month and lose substantial amounts of money. For example, the following incidents were brought to my attention just recently: r A trader -- whom we will call Henry -- needed to make $7,000 each month to meet his living expenses. This particular month was exceptional; he made $20,000 in two weeks making low-risk trades and following his own trading rules. He was f...

  • Flowing With The Markets by Van K. Tharp, Ph.D.

    ARTICLE SYNOPSIS ...Flowing With The Markets by Van K. Tharp, Ph.D. Imagine yourself flowing down a river, only you don't know that you are. You do, however, notice that when you move in one direction, with the flow of the river, you move rapidly. When you move in another direction, against the river, you move slowly or not at all. In fact, when you go in that direction, you seem to put out a lot more effort just to stay in place. Your life becomes a struggle. It just seems to push you in another direction. Feeling miserable, you fight against it. But it doesn't help. You still seem to move only in one direction...

  • Predicting The Market With Unreliable Sources by Van K. Tharp, Ph.D.

    ARTICLE SYNOPSIS ...Predicting The Market With Unreliable Sources by Van K. Tharp, Ph.D. Joe trades Standard & Poor's 500 contracts, and at the moment he is in a quandary. He looks at a chart of the market and wonders what he should do. The market looks as though it's in an uptrend. But perhaps it's gone as high as it's going to go, and it might be topping out. On the other hand, the pattern looks bullish. What will the market do? If it moves, will it be a strong enough move for Joe to make a major profit? The difference between luck and skill can be difficult to distinguish when it comes to market predictions,...

  • On-Line Data Addiction by Van K. Tharp, Ph.D.

    ARTICLE SYNOPSIS ...On-Line Data Addiction by Van K. Tharp, Ph.D. One of the most useful tools for the modern trader is the on-line quote monitor, which gives the trader a minute-by-minute picture of what is going on in the market. It allows the trader to position a trade much more advantageously than someone who does not have such access. Thus, it can theoretically save or make a trader thousands of dollars. In many cases, however, the on-line computer can also be a trader's worst enemy. Find out if having a quote screen in front of you is beneficial or harmful to you by answering ""true"" or ""false"" to these...

  • The Psychology Of David Ryan by Van K. Tharp, Ph.D.

    ARTICLE SYNOPSIS ...The Psychology Of David Ryan by Van K. Tharp, Ph.D. David Ryan won the U.S. Investing Championships three years in a row. I first interviewed David in May 1988 and again in August 1989. Q: What makes you successful as opposed to the average trader? A: I'm interested in what I'm doing. I love what I'm doing! I'm fascinated! I study the market because I want to do it and because I 'm fascinated to find out what makes the stock go up and what is going to be the next big winning stock. My goal is just to become a better and better trader, more and more disciplined, so I can be more and more suc...

  • The secret of trading success: COMMITMENT by Van K. Tharp, Ph.D.

    ARTICLE SYNOPSIS ...The secret of trading success: COMMITMENT by Van K. Tharp, Ph.D. Jack had a successful business, but he wanted to be a trader. Still, he wasn't willing to give up his annual $75,000 salary until he was certain he could be successful as a trader. So, he just dabbled in the markets, waiting to find the magic secret. He tried different brokers, advisors, software programs and systems. But it was always the same result--he never made enough money. One day, Jack discovered the name of a trader who had made consistent and large profits in the markets for over 30 years. He learned this trader would ...

  • Wizards: minds over markets by Van K. Tharp

    ARTICLE SYNOPSIS ...Wizards: minds over markets by Van K. Tharp Jack Schwager, commodity trader and confessed system skeptic, has been a familiar name in commodity trading for a number of years. His 1984 book, A Complete Guide to the Futures Market, laid out most tested techniques along with other methodologies. His latest book, The Market Wizards: Interviews with Top Traders (Simon & Schuster, New York) might be considered a companion to his technical tools book. Wizards brings home some of the more important, and often, overlooked elements of successful trading--not magical systems, but the beliefs that have m...

  • Dealing with conflict by Van K. Tharp, Ph.D.

    ARTICLE SYNOPSIS ...Dealing with conflict by Van K. Tharp, Ph.D. Emotional conflict is one of the most significant problems that most traders (or people) have to deal with in their lives. Yet explaining what it is or how it occurs is not easy. What follows is an interview with a trader who went through a major improvement in his trading and life as a result of conflict resolution. Although the exercise had taken place almost five months prior to this interview, when he actually described the conflict he relived it again. As a result, I've made few notes about his language patterns and this behavior to illustrat...

  • Dealing with conflict Part 2 by Van K. Tharp, Ph.D.

    ARTICLE SYNOPSIS ...Dealing with conflict Part 2 by Van K. Tharp, Ph.D. ""I have an elaborate computer system, on-line market quotes direct from the major exchanges, and a program that gives me distinct buy-sell signals. I know that if I followed those signals, I'd make money. But I don't. I just sit there and do nothing. What's the matter?"" This is an all-too-common complaint from traders. They've spent thousands of dollars studying the market and developing a system that works, but they can't pull the trigger. Yet it is only one of many symptoms of conflict that traders experience. Other symptoms include: ?...

  • Peter Hackstedde: profile of a winning trader by Van K. Tharp, Ph.D.

    ARTICLE SYNOPSIS ...Peter Hackstedde: profile of a winning trader by Van K. Tharp, Ph.D. It was two o'clock on a Friday afternoon. I found myself having lunch with Peter Hackstedde in the Turf Club at Santa Anita race track. I had just finished two articles on compulsive trading (see Stocks & Commodities, January and March 1988) and here I was at the race track with Peter Hackstedde, whom I consider to be a model trader. He is as different from a compulsive trader as day is from night. Peter loves the markets and the track, but he controls the action--the action does not control him. ""I learned how to manage my...

  • The Compulsive Trader Part 1 by Van K Tharp, Ph.D.

    ARTICLE SYNOPSIS ...The Compulsive Trader Part 1 by Van K Tharp, Ph.D. Compulsiveness is perhaps the most serious of all trading problems. I have evaluated psychological profiles on thousands of commodity and option traders. Despite the fact that about 50% of the traders I have evaluated make money in the futures markets, I would still describe about 5%-10% of my sample as being compulsive gamblers. At least once a month I get a phone call from someone who has lost $250,000 or more in the markets and who is wondering how I can help. They typically say, ""My wife would kill me if I spent any more money on invest...

  • The compulsive trader Part 2 by Van K. Tharp, Ph.D.

    ARTICLE SYNOPSIS ...The compulsive trader Part 2 by Van K. Tharp, Ph.D. ""When water passes over your head, it makes no difference if it does so by an inch or afoot. You're drowning. You don't want to admit that it is easier to get out of a $100,000 debt than a million dollar debt. You just go for it. When you get to that point, it really starts accelerating. Nothing matters anymore. Nothing matters."" --A compulsive trader, Stocks & Commodities, January 1988. Compulsiveness, as illustrated by this quote, is deadly to investment success. Yet many traders have to deal with it. In this second article on compulsiv...

  • The loss trap by Van K. Tharp, Ph.D.

    ARTICLE SYNOPSIS ...The loss trap by Van K. Tharp, Ph.D. Do you remember playing with a toy called the Chinese Finger Trap when you were a child? This toy is a woven straw cylinder with an opening at each end just large enough for a finger. Once you insert a finger in each end, you are in the trap. You pull to get out and the trap closes around your fingers. The harder you pull to get out, the tighter the cylinder compresses around your fingers. The more you struggle with the trap, the more ensnared you become. Only when you let go and relax does the trap let go of you. Investment losses form a similar trap for...

  • Winning under stress: the fight-flight reaction by Van K. Tharp, PhD.

    ARTICLE SYNOPSIS ...Winning under stress: the fight-flight reaction by Van K. Tharp, PhD. In primitive times, basic survival was man's most potent source of stress. Life or death, quite literally, hung in the balance of everyday decisions and one way early man learned to cope was by developing the ''fight-flight"" reaction. It was a primitive, biological response to decision making under stress--either battle the apparent threat or run away from it. This behavioral legacy is one that traders still must deal with today--even though we live in an entirely different world with entirely different stresses. But unlike...

  • The danger in profits by Van K. Tharp, Ph.D.

    ARTICLE SYNOPSIS ...The danger in profits by Van K. Tharp, Ph.D. Have you ever wondered why you can paper trade successfully, but fail miserably when real money is at stake? The reason is simple. The trader who concentrates on profits will have difficulty winning, as will the investor who concentrates on losses. Frank, for example, wants to make a killing in a speculative stock. He pays $5,000 for the stock. It immediately goes to $5,900, so he sells it. His profit of about $800 after commissions is a nice return for a few days work. A week later the stock is worth $6,500 and within six weeks it doubles. Frank ...






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