Podcast: Dr Van Tharp

Audio Link, Click Me!

In the actual audio interview, you’ll hear answers to these thought-provoking questions (and more):

Question 1: Let’s start off with the mental before moving on to technicals. You talk a lot about traders’ personal beliefs, and how they can either empower or limit traders’ success; I agree with this. When traders fail to match their internal beliefs up with their personal skills, goals and strategies that fit them individually – they don’t succeed. What advice would you give traders when it comes to leveraging their belief systems in a way that can help them potentially become better traders?

Question 2: Van, I really enjoyed your new “Super Trader” book, especially the part on position sizing, which I know you had developed many years ago. I think it’s an absolutely critical skill, that traders overlook. They get wrapped up in chart patterns, without focusing on risk management and scaling into winning positions, which is important to understand. What advice would you give traders when it comes to position sizing, and what to keep in mind?

Question 3: This is a totally different topic so I made it a different question. How do R-multiples work in a practical trading situation, say if I was looking to buy a new breakout stock in the markets this week?

Question 4: Trading in a more businesslike way is absolutely critical to success, instead of the gambling and hoping approaches that many traders use. What advice would you give our traders listening today when it comes to those two issues, trading like a business, and achieving the discipline it takes to reach that goal?

Questions 5: Finally, I’d like to ask you about your take on how traders can best transform themselves, on several levels, to become more successful. The changes they need to make. The before-after steps they can take, as they work on developing a structured trading plan, that assists them in reaching their trading goals. How would you suggest they move forward, to accomplish this?

Question 6: How can traders learn more from you? What types of training and resources do you offer?

<Sourced from Ken Calhoun of daytradinguniversity.com>

Trader Stages

This blog post is interesting. It discusses the different trader stages. What is your current trading stage?

Stage One: The Mystification
Stage Two: The Hot Pot
Stage Three: The Cynical Skepticism
Stage Four: The Squiggle Trader
Stage Five: The Inwardly-Bound
Stage Six: Mastery

Trading Emotions – Denial, Anger, Bargaining, Depression, Acceptance

Happy New Year!

Approx P40,000

This is the amount I paid for my PSE market tuition (inflation cost not included). The course started mid of 2007 until November this year. I finally graduated this December.

Finally, after a gruesome journey, I now have the following: winning attitude, personal trading system, improving market feel, money management, and risk management.

I’d like to thank everyone who influenced and inspired me to do better. Most of all, thanks to Jesus Christ, our Lord and Savior, for blessing and guiding me in my private trading career.

December 2010

Fund Objective: To attain long term capital growth by trading selected stocks (listed in the Philippine stock exchange) using a customized turtle trading system. The fund aims to outperform the PSEi.

Fund Performance: The PSEi returned a measly 0.34% this month while Turtle Capital gained 19.03% because of the strong uptrend of SMC and MER. TEL which was a laggard in the portfolio turned a profit too.

Inception Amount: 292,278.65
Cash: 73,748.20
Dec Return: 19.03%
YTD Return: 12.50%
Return since Inception: 12.50%

Fund Strategy: TEL was sold down and distributed to SMC and Cash positions. Protective stops were adjusted accordingly to ensure profits going into 2011.

Stock Market Basics

How do you ride a bear?

The answer would be the same way you ride a bull… in the direction it’s going. If the trend is downwards, it’s NOT a signal to buy. It’s a signal to sell.

I remember averaging down GLO from ~1500 to ~800. It has been a disaster move in-spite of dividend payouts. How about Alfred Harrison of Alliance Capital Management, he averaged down Enron from 90 all the way down to 10 dollars thinking it gets cheaper and cheaper. Ouch!!!

Always remember that the trend is your friend: Buy winners, sell losers.

Market Wizards

Jack Schwager created this bestseller classic that delves into the hearts and minds of successful traders. In this book, you will learn that winning the market has nothing to do with finding a secret formula. The common denominator of these super traders is their attitude in winning, losing and following their rules. It is their attitude/discipline rather than approach that catapulted them to being the best of the best.

This book also brings inspiration/hope to traders who encountered extended losses in the market. In fact, one’s failure to conquer the market is a blessing if the lessons learned translates to continuous improvement which will eventually lead to success in the market.

The lesson which impacts me most is risk management. It was often cited that the lack of risk management is a sure express way to the poorhouse. I’ve dodge many during my first 3 years of trading. I’m fortunate to last this long without the knowledge I know now.

Money Management and Trading Guidelines

1. Let profits run, cut losses short.
2. Use protective stops to limit losses.
3. Don’t trade impulsively; have a plan.
4. Plan your work and work your plan.
5. Use money management principles.
6. Diversify, but don’t overdo it.
7. When pyramiding (adding positions), follow these pointers
— Each successive layer should be smaller than before.
— Add only to winning positions.
— Never add to losing positions.
8. Never meet a margin call; don’t throw good money after bad.