Do you make these mistakes in your trading? If you answer yes to any of these questions, READ ON!

• Have you ever talked to someone who was trading profitably and felt jealous?
• Have you ever wondered if there is some kind of conspiracy causing the market to almost instantly reverse against you as soon as you place your trade?
• Have you ever planned your trade only to find that you’re unable to execute your plan?
• Have you ever taken so many trades that you couldn’t maintain focus?
• Have you ever had the feeling that you’re not trading to your full potential?

Van Tharp believes that you have to put together the ingredients of common tasks of highly accomplished traders in order to become a successful trader. There is no right or wrong in terms of your beliefs about the market. A belief is a judgment, categorization, or comparison used to determine how to perceive reality. Your beliefs will direct your thinking and your following actions. The most important belief needed for good trading is that you are completely responsible for your own results. If you tend to blame others and not accept responsibility for your own mistakes, you will just continue to make the same mistakes rather than accepting the blame and learning. The key to establishing an excellent idea of how and what you want to trade is writing down all your beliefs about all aspects of trading. It is imperative to know what supports you as a trader and what hinders your progress. Mental states can be described as having discipline and emotional control. A mental strategy is the step-by-step process traders use; it is the specific sequence of your thinking.

The key psychological traits of top traders are

1. Personal Responsibility
2. Commitment
3. Their psychological “profile”
4. Working on personal issues (e.g., self sabotage)

Trading fundamentals include the Ten Tasks of Trading.

1. Self Analysis
2. Mental Rehearsal
3. Low-Risk Idea Development
4. Stalking
5. Action
6. Monitoring
7. Abort
8. Take Profits
9. Daily Debriefing
10. Periodic Review

Trading is 100% psychological and revolves around your beliefs, mental states, and mental strategies. Get rid of the fear, get rid of the biases. Trading is about you and yourself, not you and the market. You are your own worst enemy! The goal of trading psychology is to build consciousness, not reduce emotion. The goal is to create regular access to the flow state of heightened learning and focus. The ultimate plan is to build minds not eliminate emotions. For example, if you were to exercise 30 minutes a day to build cardio, the same can be applied to training our minds to strengthen our abilities to operate in terms of trading psychology.

Defining a Great Trader

• Empathy and the ability to listen.
• Faith in their own ability to get things done, in life and in work.
• Humility and a willingness to accept defeat as graciously as accepting success.
• Desire to work towards, and not to just expect, having more success than defeat.

Great traders understand that we have two ears and one mouth for a reason and use them in proportion to listen more than they speak. They have faith and belief in themselves and understand that whatever goes wrong is out of their control because they plan their work out completely. Great traders are humble and have faith that they can get things done and have gained humility to accept defeat sometimes and understand that they cannot be right all the time and realize that being right more than being wrong is all that matters. The most important thing is no matter how good the plan is today, there is always something to learn tomorrow.

Five Principles of Trading

1. Trading is a performance activity- Much like playing a sport, trading deals with the application of knowledge and skill to real- time performances. Success at trading depends upon a developmental process in which intensive, structured practice and experience over an extended time yield competence and expertise.
2. Success in trading is a function of talent and skill- Inborn abilities and developed competencies enable successful trading and determines the level of success. The key to success is finding a balance between one’s talent and the opportunities available in trading.
3. The core skill of trading is pattern recognition- Pattern recognition lies at the heart of trading. Trading is all about trying to identify shifts in supply and demand and responding to patterns. A person adept at visual processing, with superior visual memory, might benefit from the use of charts in framing patterns. Someone who is highly analytical might benefit from statistical studies and mechanical signals.
4. Much pattern recognition is based on implicit learning- This occurs when people are repeatedly exposed to complex patterns and eventually internalize those patterns. A person adept at visual processing, with superior visual memory, might benefit from the use of charts in framing patterns. Someone who is highly analytical might benefit from statistical studies and mechanical signals.
5. Emotional, cognitive, and physical factors disrupt access to patterns we have acquired implicitly- Once a performer has developed skills and moved along the path toward competence and expertise, psychology becomes important in sustaining consistency of performance. Many performance disruptions are caused when shifts in our cognitive, emotional, and/or physical states obscure the felt tendencies and intuitions that lie at the heart of implicit learning.

Five Fatal Flaws of Trading

1. Lack of Methodology- The only way to become a successful trader in the long run is to have a plan, a method. In the long run, going solely on your gut feeling is not enough. Without a defined trading methodology, you cannot correctly define a trend efficiently. It doesn’t matter what your analytical tool is, as long as it is defined and is not complicated.
2. Lack of Discipline- You must have the ability to FOLLOW YOUR SYSTEM. The way to be successful is to apply a proven methodology consistently and follow it religiously.
3. Unrealistic Expectations- Yes, it is possible to obtain above-average returns on your trading account, but the key is to not be realistic and not expect to return a high percentage. The first year, you should just try to break even and then move up slowly by trying to beat the DOW or the S&P 500. These goals are not flashy, but slow and persistent is the way to go, learn to live with simple goals and achieve them.
4. Lack Of Patience- It is easier than you realize to start taking trades of lesser and lesser value and quality and then you begin to overtrade. Basically, don’t worry about missing the trade today because there will be another one tomorrow and the next day and the next day. Aim small, miss small.
5. Lack of Money Management- Apply the rule of only risking 1% to 3% of your portfolio. Many traders tend to trade underfunded or without sufficient capital in their trading accounts to trade the markets they chose to trade. To overcome risking too much, simply go by the aim small, miss small theory. In other words, if you have a small trading account, then trade small.

Why Van Tharp Thinks that Trading Psychology Matters So Much

Managing your emotions is 60% of the trading game, and is difficult to achieve as it often goes against human nature! Dr. Van Tharp believes that human nature otherwise known as common sense, is the most common obstacle that gets in the way of trading.

Shown below is an example of  how a trader with a good mindset can pick up the worst systems and still make money.

• Correct trading psychology cuts losses early, doesn’t allow for wishful thinking to influence their decision.
• Correct trading psychology does objective technical analysis, on the contrary people who have for example a long position on, cannot do objective analysis, their emotions lead them to spot all sorts of bullish signals on the charts.
• Correct trading psychology shows you how to keep cool no matter what happens, it leaves no room for luck, superstition, feelings and the potential to deal with reality from a distorted point of view.

The Van Tharp trading system and methodology is not some kind of short-lived successful recipe for big profits, rather is a realistic approach to trading the markets month after month. Profitability is realistic and grounded in reality, but is very sustainable and thanks to Dr Van K Tharp is also as stress free as possible, in fact its principles will spill over to your everyday life and help you remove misleading emotions on a number of things that also require high focus.

Needless to say, the Trader Guy thinks very highly of Dr. Tharp’s work is please to summarize and share.

About the Trader guy Next Door

Much like the millionaire next door, the Trader Guy is unassuming, conservative, quietly successful, grounded, humble and he could probably be your neighbor. Traderguynextdoor.com was launched to showcase and share the conservative momentum-based day trading activities of the Trader Guy that may be living next door to you. With over 10 years of experience, including successes and failures, the Trader Guy has refined and mastered a system that triggers for short-term profit more often than not.

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