1. No category

Trading
Without
Meaning
Just Add Money
And Watch The
Sparks Fly!
How to Face the
Current Market
Climate
Market Update
Matthew Sharratt
Busting the Myth
of the 2% Rule
Trading in the Trend
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MARKET UPDATE
Van K. Tharp, Ph.D.
Matthew Sharratt
How to Face the Current
Market Climate
Page 5
Page 19
TRADING ARTICLES
Graeme Pearson
Trading Without Meaning
REGULARS
News and Events Page 8
Page 9
Quotes to Inspire Page 23
Louise Bedford
Just Add Money And Watch The
Sparks Fly!
Page 12
Did You Know? Page 24
Trader’s Library – Book Review
Page 25
Gary Stone
Busting the Myth of the 2%
Rule
Page 13
YOUR TRADING SOLUTIONS
T +61 3 8682 8774 | F +61 3 8678 3034 |[email protected] |
www.yourtradingsolutions.com
Welcome to Issue 37 of the Your Trading Solutions eMagazine.
In this issue I have written an article titled “Trading Without
Meaning” I look at removing the root cause of emotional trading.
Gary Stone investigates the 2% risk management rule in “Busting
the Myth of the 2% Rule”. Louise Bedford’s article “Just Add Money
And Watch The Sparks Fly!” explores the relationship trader have
with money. In Van K. Tharp's article "How to Face the Current
Market Climate" he answers some interview questions leading up to
a conference in Poland.
We have our regular Market Update with Matthew Sharratt from
SCM Equities. Matt is offering all YTS eMagazine readers a full
review of your portfolio and he will put a comprehensive
investment plan together for you free of charge.
We hope you enjoy the current issue of the Your Trading Solutions
eMagazine. If you have any comments or feedback, please direct
them to: [email protected]
Your Trading Solutions is committed to assisting Traders to gain the
right knowledge and to educate themselves to make informed
decisions about financial matters.
All or love and best wishes to you for a continued happy and
profitable 2013!
Graeme and Natalie Pearson
eMagazine Producers
Natalie & Graeme Pearson
Editors
Natalie & Graeme Pearson
[email protected]
[email protected]
Design
Natalie Pearson
Contributors
Louise Bedford, Graeme Pearson, Matthew
Sharratt, Gary Stone, Van K. Tharp.
Contribution & Advertising Enquiries
Natalie Pearson
[email protected]
Important Message
All of the information contained in the Your
Trading Solutions eMagazine should not be
taken as financial, legal or accounting advice.
The producers, editors, contributors and any
other associated parties expressly disclaim
any and all liability and responsibility to
every person or party, whether a reader or
consumer of this eMagazine.
We do not endorse the views, statements,
claims, strategies or ideas that are put forth
in this eMagazine. We are merely relaying
the information.
Note: Articles have been reprinted in the English language supplied
Any business or financial strategy or
investment should only be applied after
taking into consideration your own financial
situation and you should seek professional
advice before making any decisions.
We are not liable for any losses you may
incur directly or indirectly as a result of
reading the Your Trading Solutions
eMagazine.
31st August 2013
Markets Report for August 2013
August Market Returns
SCM Equities International
S&P 500
XJO
AUDUSD
CBOE VIX
GOLD
Contact:
Dealing Desk
[email protected]
-3.13%
1.64%
-0.49%
26.10%
5.04%
Matthew Sharratt
August closed as a mixed bag for equities, the Australian XJO
Portfolio Manager
index, finished up 1.64% whist the US index, as measured by
[email protected]
the S&P500, finished down 3.13%.
+61 2 8226 8280
Australian and US equity markets were banging their own
respective drums in August; here the focus was on the full year
www.scmequities.com.au
reporting season and the upcoming election, whilst the US was
AFSL 313 495
driven by Q2 earning season, the US economy and in the later
part of the month Syria dominated the news.
Uncertainty over Syria caused the VIX index, which measures
volatility, to hit a new monthly high, up 26.1% to 17.01 and Gold staged a recovery up 5.04% in
August, Gold is now up 19% from its June low.
The Aussie dollar had a volatile month, despite showing early signs of wanting to rally back to the
93-95c level it ended the month down 0.49% @ 0.88992 versus the Greenback.
The Australian reporting season has been a mixed, returning cash to shareholders has been a
dominant theme with the payout ratio for the XJO now over 70, the highest since the 1992 recession.
This, coupled with the high number of CEO’s not prepared to give future guidance, highlights a lack
of business confidence and a sign of a lack of growth for many companies in the near term.
The Australian Federal Election is on September 7th with a Liberal Coalition majority looking very
likely winners with some betting agencies already paying out on “Liberal party to win” bets.
The fact the Aussie market shrugged off a lot of the uncertainty that Syria was impacting on global
markets was sign of the appetite investors have for the yield available holding Australian stocks over
August September period and possible buying in anticipation of a change of government come
September 7th, however it will be interesting to see if this appetite remains if the situation in Syria
was to escalate.
The US Q2 reporting season is almost over with total earnings for the 494 S&P 500 companies that
have reported up +2.5% from the same period last year, with 65.6% beating earnings expectations
with a median surprise of +2.9%. Most of that earnings growth has come from top-line gains (up
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+1.9%), with margins essentially flat from the same period last year. Revenue surprises have been
better relative to the extremely weak levels in Q1, but largely in-line with historical levels.
On the surface this seems positive however the Finance sector was solely responsible for the growth
with all other sectors showing weakening earnings growth.
Poor Q3 guidance has also been common and Zacks Investment Research House has lowered their
Q3 growth forecast for the S&P 500 companies to 1.9%. This was as high as 5% in early July.
Picture Unclear From Here
We have always been forward looking in our reports endeavouring to pick possible future direction
and sectors for outperformance and as I am writing this month’s article it is apparent to me that the
next move is not clear. Does that mean a move down is imminent? Not necessarily however looking
for the next catalyst to move the markets up is not glaring obvious right now.
All the factors we are aware of seem negative, Syria, Fed Tapering, US fiscal budget problems, weak
Australian economy, the question is has the market factored in these negative points into today’s
stock prices? One would have to think a full blown military crisis in Syria is not priced in, the rest are
harder to gauge.
Our view remains that the market is currently under-pricing risk and investors should remain long
equities however portfolio protection is still very cheap and should be employed to protect against
market risk.
Have a great month
About SCM Equities
SCM Equities are specialist in Australian and International equity markets; they are specialists
in Integrated Portfolio Management advice and services. To obtain their latest research or to
find out how they can help you with your portfolio or self-managed super fund, contact Matthew
Sharratt or one of his experienced team.
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Regards
Matthew Sharratt
Head of International Equities / Portfolio Manager
SCM Equities Pty Limited
AFSL 313 495
Level 11, 1 Chifley Square, Sydney NSW 2000
PO Box R995, Royal Exchange NSW 1225
T 02 8226 8280 F 02 8226 8255
E [email protected] W www.scmequities.com.au
Warning: This report provides general advice only and document has been prepared without taking into account your
objectives, financial situation or needs. Before acting on any advice in this report, you should consider whether the advice
is appropriate for your individual financial circumstances and needs.
The report and any advice is subject to change without notice, but SCM Equities shall not be under any duty to update or
correct it. All statements as to future matters are not guaranteed to be accurate and any statements as to past
performance do not represent future performance.
General Disclosure
This research has been issued by SCM Equities Pty Limited (ABN 46 124 553 224, AFSL 313 495) (“SCM Equities”). It is
intended for clients of SCM Equities only and may not be reproduced or distributed without the consent of SCM Equities.
So far as laws and regulatory requirements permit, SCM Equities, does not warrant or represent that the information in the
report including any advice is accurate, reliable, complete or current (Information). The Information is indicative and
prepared for information purposes only and does not purport to contain all matters relevant to any particular company or
issuer. SCM Equities believes the information or advice in the report has been obtained from sources that are accurate at
the time of issue, but it has not independently checked or verified that information and does not warrant its accuracy or
reliability.
Important disclosure information regarding the subject companies covered in this report is available at
www.scmlequities.com.au/disclosures.
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Perth Trading and Investment
Seminar & Expo
22nd-23rd March 2014
Venue: Perth Convention & Exhibition Centre
21 Mounts Bay Road, Perth WA 3006
Times: 10am – 5pm Daily
Discounted Tickets available online at
http://perth.tradingandinvestingexpo.com.au/visitor
Adelaide - Wednesday 18th September at 7:00pm
Brisbane - Wednesday 21st August at 6.30pm
Canberra - Tuesday August 20th at 5:15pm for 5:30pm
Melbourne - Thursday 12th September at 5:15pm for 6:00pm
Newcastle - Saturday 14th September at 10:00am
Perth - Thursday 19th September at 5:45pm for 6:00pm
Sydney - Monday September 16th at 5:15pm for 6:00pm
Toowoomba - September 11th at 6:30pm for 7:00pm
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Trading Without Meaning
By Graeme Pearson
Emotion free trading is often promoted as being the ultimate goal in trading. Emotions can
be useful as a guide and can act like a compass to direct your path. Perhaps a better goal to
aim for is meaning free trading. Another way to describe this ultimate goal might be trading
without suffering.
What do I mean by all of this? The point I am trying to
make is that it is not the events or circumstances that
causes the suffering but the meaning that is associated
with the event.
For example if you consider a losing trade. One trader
could see it as just part of the business of trading.
Another trader could see it as a reflection of them as a
person and place the meaning of "This is a disaster" or
"I'll never be a successful trader". As you can see it is not
the actual event that is the problem but the meaning that
is associated with the event that is the problem.
The problem is most likely to occur when you are not being present and are just operating on
your subconscious programming. In this state of not being present you fall into patterns of
stimulus and response which can have their origins in your early childhood. So in effect you
are trading like a child. Sorry to have to tell you that.
What needs to be done is to separate what is true reality from what is our reality. As much
as we don't like to admit it we don't see the world as it is but see it as we are. Very rarely do
we truly experience an event as it actually is but see it through our individual filters which
bias our perspective in some way.
One of the main drivers behind of these filters through which you experience the world are
your beliefs. So one way to look at the process or sequence I have just described is your
beliefs create the meaning you associate to an event which in turn causes the emotion you
feel.
Therefore to remove the emotion from your trading you need to identify the meaning behind
that emotion and then find the belief which is the root cause of that meaning. So if we
expand on the losing trade example used earlier this
might all become a bit clearer.
As a result of a losing trade you might feel depressed or
maybe angry. This emotion could be caused by the
meaning mentioned before of "This is a disaster" or "I'll
never be a successful trader". The underlying belief
behind these meanings might be "mistakes and failure
are bad" or "I am not good enough".
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To effectively make changes and break this chain of events you need to address the root
cause which is the belief. I will take you through a process you can use to work your way
back from the emotion to finding the belief and then removing that belief.
Think of a recent trading event and run through the following steps.
1. Notice any negative feelings you had.
Identify any negative feelings you had as a result of a trade. This is just to bring awareness
to them and acknowledge them and not be judgemental.
2. Notice the meaning that produced that feeling.
From the negative emotion work back to determine the meaning you would need to place on
the event for it to produce that negative emotion.
3. Identify any underlying beliefs that would create
that meaning.
Once the meaning causing the negative emotions has been
discovered it is then time to find what belief is underlying the
meaning. What would you need to believe in order for the
event to mean what it did?
4. Find the origins of that belief (find the first or
strongest event).
With the belief now firmly in your mind you now want to find
your earliest memory of forming that belief. In the majority of
situations this will involve you and some authority figure.
More often than not this will be one of your parents.
5. Identify the positive intent of the authority figure.
Recall the event and try to determine the positive intent. Even though it may not seem to be
the case there was some lesson they were trying to impart and the majority of behaviour is
carried out with the best intentions with no aim to harm or hurt.
6. Explore other belief options and distinguish between the meaning and the
event
Look for other possible meanings which could be drawn from the event. To be able to do this
successfully you want to disassociate yourself from the event. One way to do this is to
imagine watching the event play out on a movie screen with you sitting in the theatre
watching the event play out with you in it. If you need even more separation you can imagine
you are in the projector room seeing yourself in the theatre watching the event on the
screen. To get other points of view you could also image a few of your friends watching with
you and then ask them what it meant to them. You want to get to the point where you realise
that the event and the meaning that you placed on it are separate things. The event is the
only thing that happened in reality and the meaning was only in your mind. From this you
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now have the choice of what belief you want to derive from this event. Choose one that will
empower you and help you rather than limit you.
7. Play out the event and future events with new belief
Now that you have chosen a more empowering belief play out the event with you back in the
picture and see what new meaning you get from the event. Work through any other events
which come to mind which you held the old
belief and labelled with the same meaning.
Play out each of these past events with the
new belief and see what new meaning you
draw from the various events. Project into
the future and imagine similar events
playing out and the meaning you would
draw from these events with the new belief
in place. See how different your life looks
with this new belief in place.
Once you have gone through this process once you will have less attachment to your beliefs
and that applying any meaning to any event is unnecessary and just creates limitations. You
can begin to see the world as being endless possibilities rather than being pigeon holed.
This process is a lot more effective when guided through the process rather than just reading
and working through it. One thing you could try is record yourself talking through the process
that you can listen to later and fully immerse yourself in to get more benefit.
If you would like more information on the removing meaning from your trading and creating
more empowering beliefs then contact me at [email protected] to help you
become the best trader you can be.
About the Author: Graeme Pearson is a Professional Trader and Trading Coach for Your Trading
Solutions. Since resigning from his Full-time job as a Mechanical Engineer
back in 2006, Graeme realised that although he had reached his goal of
financial independence something was still missing. Graeme found that he
gained great pleasure in helping others and particularly when that help
involved trading. Graeme now utilises his trading experience, Neuro
Linguistic Programming and coaching training to combine mindset and
methodology to help other traders become the best they can be. For more
information about coaching contact Graeme at: [email protected]
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Just Add Money And Watch
The Sparks Fly!
By Louise Bedford
PEOPLE'S LOVE AFFAIR with money has always fascinated me.
Want to see normal people do completely bizarre things? Add some money and watch the
games begin.
How about the friend that disappears after you loan them some money. What's going on
there? Or the siblings that create merry hell at the reading of their father's will. Or the bloke
with the secret bank account that he isn't telling his wife about. And then there's the girl who
spends too much to impress people she doesn't like, with money she doesn't have.
See... it makes ordinary people just crack up!
So is money bad? Of course not. Then what the heck is happening?
Money, in and of itself, is meaningless... until we empower it. We
give it meaning and it's our own thoughts and emotions around
money that determine whether it's a positive or negative force in our
lives.
I guarantee you this - change your views towards money and what it
means to you, and you'll change your results as a trader.
When we realise that money is just a way of keeping score, and it's nothing more than a tool
- we detach from it's power over us. We stop it's control over our thoughts and our actions.
Plus, ironically, this attitude paves the way for more of it to enter our lives. Some of the most
greedy, money-hungry people I have ever met have barely any of the stuff.
Yet some of the most generous, philanthropic people (who don't continually talk about their
lack of money) - are some of the most financially wealthy people on the planet.
So which comes first? The attitude about money, or the money itself?
Having trained hundreds of successful traders, and seen them at every stage of their wealth
development, I can definitely answer this one. The attitude towards money comes first. The
way a trader thinks, always precedes their actual share trading results.
In reality, some rich people are poor and some poor people are rich. It's just a matter of time
until reality catches up with their mindset.
If you feel that there are some areas you need to improve with
your trading and your mindset, grab my free newsletter and free
5-part e-course from www.tradinggame.com.au. I’d love to be by
your side as you progress on your trading journey.
Louise Bedford (www.tradingsecrets.com.au) is a full-time
private trader and author of The Secret of Writing Options, The
Secret of Candlestick Charting and Trading Secrets.
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Busting the Myth
of the 2% Rule
by Gary Stone
The
art of trading is not about winning as much as it is about not losing. Like a business
needs to control its costs, a trader needs to be able to minimise and withstand losses so that
they are ready and able to take advantage of profitable opportunities. This comes down to
managing risk at a trade and portfolio level.
Today I’m going to discuss a trading rule that has been regurgitated in book after book for
many years. Pick up a book on trading the markets and you’re likely to read this rule as
gospel. I’m talking about the ’2% rule.’
If you’re someone that has never heard of the 2% rule, here’s a definition that I found online:
“The 2% Rule represents the actual percentage of a trader’s capital that he or she is willing
to risk on a single trade should it go against them. So a trader with $100,000 capital will risk
$2,000 per trade”.
Well today I’m going to dispel the perceived truth of the 2% trading rule.
Don’t get me wrong, using the 2% rule is better than using nothing at all but in my opinion,
2% is taking too much risk on individual trades.
How did I come to this conclusion?
Over the past 2 years, my team and I have spent thousands of hours testing and simulating
risk management concepts to discover methods of preserving trading capital. We were
looking to discover how the risk per trade equated to growth and drawdown in a portfolio.
You might call it the position sizing ‘sweet spot’, where the risk per trade delivered the best
reward, with the least amount of pain (drawdown) for effort.
We knew that if we could get this right that our customers would be able to understand how
portfolio performance related to the risk they took on each trade. Customers would be able
to consider their own personal and financial objectives upfront and then based on the
simulation research, they’d be able to select the appropriate position sizing that best suited
their financial goals.
The research process involved running over 1,000,000 individual portfolios with the help of
our mechanical system, SPA3. To test such concepts, mechanical entry and exit signals for
every trade were needed so we could objectively measure the risk per trade versus portfolio
growth versus drawdown.
We ran multiple simulations using position sizes based on % risks per trade of 0.2%, 0.3%,
0.4%, 0.5%, 0.6%, 0.8%, 1%, 1.5%, 2% and 3%. We also researched different portfolio
sizes, different brokerage rates and different system parameters
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Here’s what we found…
What I am going to discuss here is some hard-nosed research using different % risks per
trade. I should also explain that in each research simulation run we simulated 1000
portfolios, with each portfolio being defined as a unique and separate portfolio equity curve.
Each portfolio equity curve was unique because the individual trades that comprised each
portfolio were selected randomly through the life of the portfolio from a list of mechanically
signalled trades on any given trading day when there was available capital in any portfolio to
be filled with a trade(s).
Please stick with me here because I need to get technical to help you understand the
research findings.
Box-plots
The box in the image below is called a ‘box-plot’. Each box-plot shows 900 of 1000
simulated portfolios for each % risk per trade. The box-plot represents the 5, 25, 50, 75 and
95 percentile portfolios so you can understand the range of performance from the best
performing to the worst performing portfolios.
*When considering a statistical sample it’s common practice to omit the top 5% and bottom
5% from the results.
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The Daily Geometric Mean
The graph below is called the ‘Daily Geometric Mean’. The Daily Geometric Mean indicates
the growth of the simulated portfolios for each % risk per trade versus the average portfolio
growth per day. E.g., a $100,000 portfolio with 0.5% risk ranged between 1.0008% and
1.0006% compounded growth per day.
So what are you looking for?
You’re looking for the narrowest possible box-plot from the top to the bottom of the whisker
as it demonstrates that low variation between the best and worst performing portfolios were
achieved.
You’re also looking for the highest growth or best performing portfolios which are indicated
by the top of the whisker.
The ASX
Using portfolio growth as the key decision criterion for trading on the ASX, the ideal position
sizes for this trading plan scenario range from 0.4% risk per trade to a maximum of 1% risk
per trade.
Note that 2% risk per trade and definitely 3% risk per trade (two box-plots on the far right)
are far too big a position size with which to trade as growth has fallen away substantially.
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The same can be said for the NASDAQ
Let’s see if we found a similar pattern regarding position sizing on the NASDAQ. Again, from
a growth perspective it would be unwise to use a % risk per trade money management
regime greater than 1%!! In fact, 0.8% would probably be the limit if the NASDAQ does in
the next 12 years what it did over the 12+ years in our research period. (PS, it could do
better!)
Maximum Drawdown
The second graph is the ‘Maximum Drawdown (%)’. The Maximum Drawdown shows the
maximum drawdown that occurred for each % risk per trade. We used the same portfolios as
above in the Daily Geometric Mean so you can understand how the risk per trade affects the
potential for portfolio growth and drawdown.
Drawdown, as shown in the next graph below, gets far deeper when using the 2% and 3%
rule. You can clearly see this by the two box-plots on the far right in the graph above. 1%
risk per trade would probably be the largest position size to use from a maximum drawdown
perspective on the ASX.
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And from a maximum drawdown perspective on the NASDAQ, the limit might also be 0.8%
risk per trade. 2% risk per trade would be far too big a position size to use.
Now remember that the NASDAQ had some huge drawdowns during the 12 year period
from 2000 with the biggest being -76% from 2000 – 2002 so maximum drawdowns in
NASDAQ portfolios should be expected to be a bit deeper than with ASX portfolios over this
period.
The idea of this research is not to determine whether the mechanical system is profitable or
not, as we already know that, it is to determine what the upper and lower position size and
risk boundaries are for different customer trading scenarios, mainly to do with portfolio
starting capital.
I trust that you now have the evidence to seriously question anybody that casually writes in a
book or blog that you should use the 2% rule for your active investing.
In my view the 2% rule was never really researched and as it seemed to make sense, most
other authors just regurgitated it in their books. I am suitably convinced that managing an
active portfolio using the 2% rule is taking too much risk on individual trades.
There are other limiting factors when trading with too large a position size like potentially
being forced to have too little diversification in a portfolio due to having too few
simultaneously open positions and not letting enough trades sift through your portfolio to
capture the juicy ones.
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As important as it is to have a system with an edge, position sizing has the largest influence
on a portfolio’s performance. And funnily enough it’s probably the most undervalued and
under-prepared component of any investment strategy.
In conclusion, my view is the 2% rule is a myth and that far
smaller position sizes should be used, at least half the size, on
average, compared to the 2% rule!
If you would like to understand more and see how SPA3
controls the risk per trade, you can register for a demonstration
here.
Gary Stone is the founding Director of Share Wealth Systems and
leads the Research and Development Team. Trading and
researching the markets since 1990, Gary is motivated by a
conviction to help people do better. He has a strong belief that
gaining knowledge in the market is not enough. “Investors need to
be able to step into a set of repeatable and measurable processes
that emanate from the market. Without a set of rigorous processes
the probability of success is low”. A contributor to media outlets
such as Sky Business News, ABC Radio, Your Trading Edge
Magazine and the Australian Technical Analysis Association, Gary is regarded as a wellresearched and credible market commentator.
18 | P a g e
How to Face the Current Market
Climate
by Van Tharp, Ph.D.
This is an excerpt from an interview to promote a conference in Poland. We wanted to share
it with our readers as it gives additional insight into Van’s thoughts and opinions about what
a trader needs to face the current market climate.
What are your thoughts on the current recession? How are your traders doing
in this climate?
If you believe the US federal government statistics, the recession has been over for some
time. I don’t believe the government figures, however, so I think we are still in a recession.
The recession is merely a symptom of several fundamental economic truths and those
fundamentals are fueling risk in the markets right now.
Banks do not understand risk and their traders don’t even know how much money they are
trading. This is why rogue traders keep appearing. Banks generate revenue by making
markets and they lose money trading so they mostly concentrate on developing new
products.
Banks seem to think that risk is related to
volatility, so they create products focused on
keeping volatility low. One such set of products
they created packaged many subprime mortgages
together. No one knew how to price these
because they didn’t understand them or the
potential risk involved. Once it was clear that
these mortgages were defaulting, no one would
buy them at any price. The owners of these
subprime mortgages were holding these positions
with a lot of leverage (30-40 to 1). The losses in
those highly leveraged positions meant the
holders were suddenly bankrupt. Holders who
were not bankrupt had to sell whatever was liquid
because of the selling pressure going on at the
time. As a result in 2008, the world lost about 40%
of its equity.
The traders in my Super Trader program, however, have been and are doing very well. They
have methods that can make money every day, regardless of what the market does, and
they know they’ll make money by the end of the month. Most of the Super Traders share
their trading results with me and, of those, not one of them was hurt much—if at all—during
2008. It doesn’t take a Super Trader to do that though. In fact, we have a lot other clients
who say that the principles that I teach saved them during 2008.
Tell us a little bit about what you do as a trading coach.
If trading were easy, big money would make it almost impossible for people to enter the
markets. But trading well is very difficult, so the entry requirements are easy. Big money
19 | P a g e
makes money regardless of what new traders or the average trader does because they
wrote the rules and structured the markets for their benefit.
Most people spend years training for their profession. Then,
after they accumulate a little money, they just open an
account and expect miracles. Trading success doesn’t
happen like that; it only happens when you get training that
would be equivalent to preparations for any profession. I’ll
share with you a few training essentials, which are further
covered in my book, Super Trader:
1.
Understand basic Tharp Think terms such as Rmultiples, position sizing™ strategies, and risk control.
2.
Work on yourself until you have accomplished at least
five major transformations. (This could take one to two years;
however, this step will not only improve your trading but your
life.)
3.
Create a personal working document that guides your
trading business (this is usually 100 pages or more).
4.
Develop three, non-correlated, high-quality systems.
5.
Be 95% efficient at trading those systems (i.e., not more than one mistake in 20
trades).
What are the primary traits of your Super Traders?
First, I believe that certain personality types
make it easier for some people to become
successful as a trader. To find out what type of
trader you are, visit www.Tharptradertest.com
and take our free test for information on your
trader type. The ideal personality for trading is
what I call the strategic trader type. A strategic
trader is focused on the big picture rather than
lots of facts and details; he is also more logical
than emotional; and he is organized but not
compulsive. Trying to trade with two out of
three of these traits is probably okay, but the
fewer you have, the more personal work you’ll
need to do to be successful as a trader.
Second, you must be open to working on
yourself and to taking personal responsibility for
anything that happens.
Third, you must be committed to do what it takes to be a successful trader. It’s a lot of work.
Fourth, you should be good at math and understand basic probabilities and statistics.
Fifth, you should be good at strategizing and playing games that require such skills.
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Sixth, while it’s not necessary, good computer skills are very useful.
Can those traits be learned?
It depends. I have a basic belief that if
one person can do something, then
anyone can. But commitment is not
learned. Personality traits are not
learned. It’s more difficult to be a
successful trader without a strong
commitment
and
complementary
personality traits.
Can financial market speculation
be unethical? Are there reasons
to be ashamed of it?
Not the way I teach trading. In fact, many of my traders now use their trading success as a
measure of their spiritual development. However, one might argue that the way big money
uses the markets is unethical.
Is it possible to make money in the market on a consistent basis without
having a trading system? What are the
benefits of creating and maintaining a set of
trading rules?
Anything is possible, but consistently making
money without a system is not probable. Traders
need a set of rules to guide their actions.
While many traders equate being right to making
money, I believe that you are right if you follow your
rules, regardless of your results. If you don’t have
any rules, I would consider everything you do to be
a mistake. I define a mistake as not following your
rules. So when I mentioned earlier that you must
trade at 95% efficiency, I meant that you follow your
rules 95 out of 100 times.
Does an individual investor (speculator) stand a chance when facing
institutional investors with access to tools, information, analytical capacity
and low transaction costs that an individual can only dream of?
Most institutional investors have no idea what they are really doing. They make markets and
sell products, but few of them really know how to trade. Some funds may know what they are
doing, but I wouldn’t give them any more credit than that.
As I said, trading isn’t easy; however, if you are willing to go through the five steps I’ve
outlined, you probably will have a big advantage over any institutional trader.
What is the future of capital markets, especially the stock market, in terms of
national regulators, laws and regulations, growth and participation of
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individual investors? Will it become more and more difficult to make money in
the market?
I think there is a good chance that much of the capital market structure could collapse. We
still have money in the hands of very uneducated people whose only advantage is that they
make the rules. That’s a huge disadvantage to the rest of us.
The value of derivatives surpasses the entire wealth of the world and those derivatives could
collapse. I think there’s a good chance of that happening. In the long run, I’d also expect the
dollar and the euro to collapse. Such crises, however, imply opportunity—with the proper
education, you can thrive in this sort of atmosphere.
About the Author: Trading coach, and author, Dr. Van K. Tharp is widely
recognized for his best-selling books and his outstanding Peak Performance Home
Study program—a highly regarded classic that is suitable for all levels of traders
and investors. You can learn more about Van Tharp at www.vantharp.com.
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“What you get by achieving your goals is not as important as what you become by
achieving your goals."
~ Henry David Thoreau
“Your biggest enemy in trading is going to be a directional bias.”.
~ Linda Bradford Raschke and Larry Connors
"Success is going from failure to failure without losing enthusiasm”
~Winston Chirchill
"Never regret. If it’s good, it’s wonderful. If it’s bad, it’s
experience."
~ Victoria Holt
" When one door closes, another opens; but we often
look so long and so regretfully upon the closed door
that we do not see the one which has opened for us.”
~ Alexander Graham Bell
“Don't take action with a trade until the market, itself, confirms your opinion. Being a
little late in a trade is insurance that your opinion is correct. In other words, don't be an
impatient trader.”
~ Jesse Livermore
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National Australia Bank
National
Australia
Bank
(abbreviated NAB, branded
nab) is one of the four largest
financial
institutions
in
Australia in terms of market
capitalisation and customers.
NAB is ranked 17th largest
bank in the world measured by
market
capitalisation.
It
operates across 10 countries
serving 8.3 million consumer
and
business
banking
customers and over 2.3 million
wealth
management
customers.
NAB operates 1,808 branches
and service centres and 4656
ATMs globally
Commercial Banking Company of Sydney began
operations on 1 November 1834 and in 1848 was
incorporated by an Act of the New South Wales
Parliament.
In 1982, National Bank of Australasia Limited merged
with The Commercial Banking Company of Sydney
Limited to form National Commercial Banking
Corporation of Australia Limited and subsequently
changed its name to National Australia Bank Limited
(NAB).
The expanded financial base of the merged entity
triggered significant offshore expansion over ensuing
years.
While NAB operates in several jurisdictions globally, it
earns the bulk of its revenue from its Australian
operations. The bank owns two retail/commercial banks
in the UK, Yorkshire and Clydesdale. In NZ it operates
BNZ and in the US it owns a small agribusiness focussed
bank called Great Western. The Business Banking and
Wholesale divisions of NAB have offices in London, New
York, Hong Kong, Singapore, Tokyo and Shanghai.
NAB became a public limited company, incorporated on 23 June 1893. In trading since 1984
NAB traded at an all time low of $2.31 on 18th June 1984 and reached an all time high of
$44.84 on 14th November 2007.
http://en.wikipedia.org/wiki/National_Australia_Bank
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Each issue we will feature a Review from Amazon.com about a book that we would
recommend for your Trading Library. If you would like to purchase the book each month
simply click on the image and you will be taken directly to our Amazon A-Store to securely
take your order.
Short Term Trading Strategies That Work
By Larry Connors, Cesar Alvarez
Click directly on the image to
purchase this book
Product Description
Market volatility has been at record levels in recent months, leaving every trader and
investor to ask the same question: "Am I prepared to handle the market conditions?"
In Larry Connors', CEO and Founder of TradingMarkets, Short Term Trading Strategies That
Work, he discusses 16 simple strategies crucial to the success of any trader or investor.
These strategies have been both back-tested up to 2008, but also have been traded by
Larry and his team under multiple market conditions.
This is the must have book for anyone seeking to improve their trading in any market
condition.
25 | P a g e
You'll see strategies and methods which you've likely never seen before, all of which are
statistically backed by more than a decade's worth of research.
The Single Best Oscillator for Traders Do you know what's the best oscillator to use for your
trading? In Chapter 9 you'll learn the one oscillator Larry believes is the closest to being the
holy grail of oscillators. And you'll see the test results when applied to over 77,000 trades
since 1995!
How to Make Your Trading Edges Even Bigger On pages 39-48, Larry will teach you the one
simple technique to help make your daily trading edges even greater.
Learn to Properly Trade ETFs Larry teaches you some of his best strategies to trade popular
ETFs like the SPYs, QQQQ's and many of the more actively traded ETFs. Professionals are
flocking to ETFs and now you'll have in your possession statistically backed ETF strategies
you'll be able to apply for years to come.
How to Trade Using the VIX Do you use the VIX to time your trades? You'll learn numerous
ways to use the VIX, many which have been over 70% correct going back more than a
decade.
"Larry has done it again. He delivers an insightful handbook of practical, useful and timeless
methods to profit in the market." Tony Saliba, CEO of BNY ConvergEx LiquidPoint; Profiled
in Market Wizards
The Mind Trading is as mentally tough as any profession in the world. Now learn from a
world class expert, who Larry interviewed on extreme psychological training and what it
takes to succeed not only in trading but in all walks of life.
Learn how to improve your trading results by purchasing Short Term Trading Strategies That
Work today!.
Customer Review By Mr. Hit The Bid
About a year ago, I decided (either boldly or foolishly) to set a goal for myself to become a
full-time trader. The stress of my job was getting to me. To reach my goal, I absorbed every
trading book I could get my hands on and took a number of high priced courses ranging
$3,500 to $10000. After about eight months into my journey, I was experiencing only spotty
success in my endeavor and I was getting frustrated.
No...I'm not going to say that "Short Term Trading Strategies That Work" was the magical
turning point. But I will say that reading it and applying it enabled me see the following:
1) My success in trading cannot be based on me trying to subjectively interpret patterns on
chart. Through this book I found that it was possible to trade using crystal clear,
unambiguous rules.
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2) Being profitable on a daily or weekly basis does not require a complicated methodology.
Mr. Connors strategies are surprisingly simply and they are brilliant in their simplicity. I could
teach them to my 12-year daughter.
3) I don't have shoot myself in the foot because of errors cause by my emotions. With this
book there is no interpretation and there is no wiggle room for me second-guessing the
clearly presented rules.
To sum it up, while this book played a big part in helping me to trades stocks and ETFs
successfully, from a bigger picture standpoint, it also helped me to understand that process
of trading successfully no different from excelling at a sport. You learn the technique and
practice it over and over again. It's not complicated at all.
27 | P a g e
Trading skills can be one of the most difficult skills to acquire, yet how many traders take on a coach to
help them with their trading? If we were to talk about any sporting endeavour which you wanted to
achieve your best in then you would hardly think twice about taking on someone to help make it work for
us, but trading, no, that seems to be different. Of course trading coaches may not be cheap, but in most
cases they are a lot cheaper than the losses which many make in the markets.
A quote by Derek Bok sums it up nicely “If you think education is expensive, try ignorance”.
It is not difficult to make money in the markets, but there are many things you need to learn and you also
may need to “unlearn”. It is learning to do what you learn intellectually, that ultimately proves so difficult.
Knowing what you should do is not enough. That is where the coach comes in to help you not only to know
what you should do, but actually do it.
A large number of losses exist through not following a profitable trading system and this is where the
coach comes in to find out what is stopping you working in your own best interest.
Your coach will give you methods to follow to help strengthen your internal discipline and continues to
work with you until it works for you. That is when the fees charged will be dwarfed in comparison with the
money you can make from the markets.
Winners go for what they need. If you think there is scope for improvement in your trading then you
should do something about it. The first step is to decide that you are going to be a winner, and then just
do it.
Become the Best Trader You Can Be!
When would now be a good time become a successful trader and make massive profits from the market?
Pick up the phone and CALL NOW on +61 400 482 653 or email me on [email protected]
for more information on our transformational coaching. Graeme Pearson.
As Anthony Robbins says “Never leave the scene of a decision without taking the first step”