Abort exit, 169–170
Accenture, 239
Accurate trader type, 26
Administrative trader type, 25
Adventurous trader type, 26
Alexander, Michael, 127n
Anatomy of an Illness (Cousins), 85, 85n
Arbitrage, 158
Artistic trader type, 26
Artist’s Way, The (Cameron), 34, 34n
Asset allocation:
defining, 205–206
as position sizing method, 205–206, 220–221
Association, dissociation versus, 65
Attitudes, self-empowering, 42–43
Attraction, law of, 89
Average true range (ATR), 6
Back office management systems, 145
Balance in trading/investing, 69–70
importance of, 69
trading process and, 69–70
win-versus-lose polarity, 69
Band trading, 157–158
Banks:
leverage of, 128
losing economic game of, 128
Barber, Brad, 21n
Barton, D. R., 4n
Basso, Tom, 12, 66–67, 148, 162, 218, 221, 240
Basso-Schwager asset allocation position sizing model, 221
Beebower, Gilbert, 205n
Behavioral finance, 233
Beingness:
focus on the moment, 84–85
stuckness versus, 73
Belief Examination Paradigm, 46–48, 58, 76, 101–104, 125
Beliefs, 44–48
Belief Examination Paradigm, 46–48, 58, 76, 101–104, 125
about the big picture, 154–155
failure as motivator, 74–76
market beliefs in business plan, 121–125, 155
of mechanical traders, 236–238
mindfulness trading and, 59–60
in psychology of trading, 2, 13, 44–48, 101–104
removing stored charges from, 101–104
about trading systems, 156
writing down, 44–45
Benchmark indexes, 165–166, 167
Berkshire Hathaway, 163
Big picture:
beliefs about, 154–155
factors influencing, 126–128
goals and, 99–100
nature of, 4
understanding, 126–130
Blessings, giving thanks for, 89–90
Bliss, following your, 33–35, 90–92
Brainstorming:
for mission statement, 113
for worst-case contingency plan, 139–140
Breathing deeply, 93–94, 96–97
Broker problems, planning for, 140
Buffett, Warren, 152, 161, 205
Business fundamentals setups, 161
Business-owner traders, 151–152
Business plan, 110–152
business systems in, 4–5
categories of traders, 148–152
components of, 111–112
daily procedures, 98–99, 136–137
dealing with challenges, 134–135
education plan, 138
goals and objectives, 118–120
importance of, 1, 4–5, 13–14, 110–112, 190
market beliefs in, 121–125, 155
market type and, 131–132
mission statement in, 113–117
position sizing strategies (see Position sizing strategies)
systems other than trading systems, 144–147
tactical trading strategies, 131–132
for trading/investing, 5, 13–14, 110–112
worst-case contingency planning, 5, 139–143, 250–251
Business systems, nature of, 4–5
Buy and hold strategy, 202, 205
Byrne, Rhonda, 90n
Caeron, Gladys, 96n
Cancer rates, deep breathing and, 96
CANSLIM system, 160
Cash flow systems, 144
Cashflow Quadrant, The (Kiyosaki and Lechter), 148n, 148–152
Choquette, Sonia, 84n
Clayton, Clydette, 96n
Clearing, personal, 89–90, 95–96
Climax reversal setups, 160
Commitment, 27–32
declaring who you are, 93
distractions versus, 28–29
to feeling, 104
goals and, 28, 30–32, 98–100, 118–120
importance of, 27
lack of, 32
to love, 92–93
steps in process, 91
Commodity futures, 213–214
Company traders, 128, 133, 148–150
Component data setups, 161
Confidence, 196–198
Contingency plan (see Worst-case contingency plan)
Core equity method, 217–218
Cost of trading, 187
Course in Miracles, A, 87n, 87–88, 90
Cramer, Jim, 205
Creativity:
brainstorming and, 113
meditation and, 94
Currency trading, 178–179, 179n, 214
Customer relationships systems, 144–145
Daily procedures:
in business plan, 98–99, 136–137
debriefing, 252
importance of, 136–137
journal writing, 89–90
mental rehearsal, 98–99, 141, 142–143
types of, 136–137
Data errors, in mechanical trading, 238–239
Data management systems, 139–140, 145–146
Debriefing, daily, 252
Definitive Guide to Position Sizing, The (Tharp), 133, 133n, 201, 210n, 220, 222, 230
Detailed trader type, 25
Diary/journal writing, 57, 89–90, 99–100
Discretionary traders, 151, 189
mission statement for, 115
Dissociation, 65–68
association versus, 65
examples of, 66–67
exercise, 67–68
nature of, 65
as taking other perspectives, 65–68
Distraction, commitment versus, 28–29
Doing what you love, 33–35, 90–92
Dow Jones Industrials, 163–164
Dream life, 254
eBay, 238
Edison, Thomas, 192
Education plan, 138
Emotions:
commitment to feeling, 104
failure as motivator, 74–76
gaining control over feelings, 63–64
letting go of, 101–104
releasing feelings, 103–104
stuckness and, 72–73
suppressing negative, 101–104
welcoming feelings, 103
Employee traders, 127, 133, 148–150
Empowerment, 42–43
Entering the market, 162–168
entry price for trading, 27
random entry system, 162–164, 167–168, 169
stockpicking, 162–164, 165–166
Equal units/equal leverage position sizing model, 220
Equipment problems, planning for, 139–140
Equity crossover position sizing model, 221
Errors of omission, 239–240
evaluating, 40–41
listing, 39–40
recognizing, 194–195
Exit strategies, 169–180
abort exit, 169–170
beyond initial stop, 172–174
narrow exits, 170
profit-taking exit, 169, 191–192
purposes for exit, 172
reward and risk in, 175–180
tight exits, 170
trailing stop, 169
types of stops, 173
Facilitative trader type, 25
Failed test setups, 160
Failure as motivator, 74–76
exercise, 74–75
stretching beliefs, 75–76
Faith, in self-empowerment, 43
Fear:
acting out of, 105–106
commitment to love versus, 92–93
focus on blessings versus, 89–90
God Box and, 87–88
Financial Analysis Journal, 205
Fixed-ratio position sizing model, 221
Focus on blessings, 89–90
Focus on the moment, 84–85
Following your bliss, 33–35, 90–92
Foreign exchange, 178–179, 214
Fun-loving trader type, 24, 26
Fundamental data setups, 161
Fundamental market analysis, 157
Futures trading, 178–179, 213–214, 235
General Electric, 163–164
Global categories for opinions, 53
Globalization process, 127
Goals:
big picture and, 99–100
business plan and, 118–120
commitment and, 28, 30–32, 98–100, 118–120
diaries and, 99–100
dividing general goal into specific steps, 98
in mission statement, 113
positive side of, 99
promises and reasons for promises, 98–99
rewards and, 100
setbacks and, 100
triggers, determining personal, 99
God Box, 87–90
“Gratitude” iPhone app, 90
Greenspan, Alan, 128, 207, 207n
Group risk position sizing model, 220
Happiness:
from “beingness,” 73, 80
humor and, 85–87
joy in simple things, 77–82, 95–96
Hedge fund managers, 166
Heuristics, 232
Holy Grail system, 200–204
Hot tips, responding to, 110–111
Humor, 85–87
“I” position, 54
Independent trader type, 25–26
Infinite wealth, concept of, 77, 78–79, 114, 115
Infinium Capital Management, 246
Inner interpreter, 61–64
exercise, 62–63
imaginative approach to problems, 62–64
playing with, 62–63
problem identification and analysis, 61
Innovative trader type, 25
Insecurity, 105–106
Intel, 238
Intermarket analysis, 158–159
Internal guidance, 59–60, 81, 95–96
Investor/traders, 152
Investment Psychology Inventory Profile, 254
Jokes, 85–87
Jordan, Michael, 66
Journal/diary writing, 57, 89–90, 99–100
Journal of Finance, 21–22
Joy in simple things, 77–82
children and, 78
concept of infinite wealth, 77, 78–79, 114, 115
priorities and, 78
pure trading and, 59–60, 81, 95–96
suffering and hard work versus, 79–80
tips for, 81–82
Kelly criterion position sizing model, 221
Kiyosaki, Robert, 148n, 148–152
Laughing with God (Stocking), 74, 74n, 77–80
Laughter, 85–87
Law of attraction, 89
LeBeau, Chuck, 240
Lechter, Sharon, 148n, 148–152
Leslie, Brad, 89n
Listening, 93–96
Long, Ken, 239
Long-term investors, mistake evaluation by, 10
Long versus short positions position sizing model, 220
Love:
commitment to, 92–93
declaring who you are, 93
doing what you love, 33–35, 90–92
Major life changes, planning for, 140
Managing money for others, mission statement for, 115–117
Marble game:
personal responsibility, 36–37
position sizing methods, 8–9, 207–209, 215–224
simulation of, 8–9, 36–37, 225–230
Margin calls, 11
Marine Corps, 148
evaluating, 125
sample list of, 124
trend following and, 122, 157, 160
Market moves, 5–6
Market predictions, 258–259
Market types, 5–7, 131–132 (See also Trading systems)
Market Wizards (Schwager), 74, 74n
Market’s money techniques position sizing model, 221
Marriage of Spirit, The (Temple-Thurston and Leslie), 89, 89n
Maximum adverse excursion (MAE), 193
Maximum drawdown position sizing model, 221
McDonald’s, 148–149
Mechanical traders, 189, 236–240
beliefs of, 236–238
common mistakes, 248–249
data errors and, 238–239
effectiveness of, 240
errors of omission and, 239–240
list of, 240
nature of, 236–238
Meditation, 93–96
benefits of, 94–95
creativity and, 94
deep breathing and, 93–94, 96–97
method of, 93–94
mind chatter and, 94
mindfulness, 57
mindfulness trading as, 52
Mental rehearsal, 98–99, 141, 142
of disaster plan, 141, 142–143
in dissociation, 65–68
Metro Joy (video), 86–87
Mind chatter, 94
Mindfulness meditation, 57
Mindfulness trading, 52–60
beliefs and, 59–60
creating new trading categories, 53
example of, 59–60
exercises, 57
as form of meditation, 52
global categories in, 53
mindfulness, defined, 52
multiple perspectives in, 54–55, 57
process versus outcome and, 56–58
as state of being, 52
Mission statement, 113–117
discretionary trader, 115
importance of, 113
infinite wealth concept, 114, 115
mission-critical tasks, 116–117
nature of, 113
project evaluation based on, 114–117
sample objectives, 113–114, 114–117
Mistakes, 232–254
common mistakes, 247–249
costs of, 235
errors outside definition of mistake, 249
importance of evaluating, 2, 10, 14
mechanical traders and, 236–240, 248–249
mistake-free trading, 232–234
no-rules discretionary traders and, 241–243, 247–248
not repeating, 252
rule-based discretionary traders and, 244–246, 248
self-sabotage and, 235
simple approaches and, 253–254
Moment, focus on, 84–85
Morgan Stanley Global Wealth Management Group, 205
Motivation, failure and, 74–76
Multiple-tier position sizing model, 221
Mutual funds:
benchmark indexes, 165–166, 167
buy and hold strategy, 205
dealing with challenges, 134–135
impact of, 127–128
performance of, 165–166
Narrow exits, 170
Neurolinguistic programming (NLP) modeling, 12–13, 23, 40–41, 50, 67, 142–143
Neutral observer, 55
New information, attitude toward, 54, 57
New Market Wizards, The (Schwager), 66n, 66–67, 148
New systems, evaluating, mission statement for, 115
New York Stock Exchange, closings of, 251
NLP [see Neurolinguistic programming (NLP) modeling]
No-rules discretionary traders, 241–243
characteristics of, 241–243
common mistakes, 247–248
effectiveness of, 242–243
Objectives:
business plan and, 118–120
in mission statement, 113–117
number of potential, 118–119
of position sizing strategies, 223–224
trader, 210
Obstacles, 49–51
embracing, 50–51
nature of, 50
taking losses, 50–51
wall of losses, 50
Odean, Terrance, 21n
Operations systems, 146
Opinions, global categories for, 53
Optimal f position sizing model, 221
Order to the universe, 159, 160–161
Organization and management systems, 146–147
Overbought setups, 161
Oversold setups, 161
Overweighting benchmark in position sizing model, 221
Park bench technique, 104
Passive income, 115
Peak Performance Workshops, 44n
Percent margin position sizing model, 220
Percent risk position sizing model, 212–214, 218, 220
Percent volatility position sizing model, 220
Perfectionism, 151
Perfectionism-complexity complex, 17
Personal emergencies, 139
Perspectives:
dissociation and, 65–68
in mindfulness trading, 54–55, 57
Pessimism, 42
Pips, 179n
Planning trader type, 24–25
Policies, changes in, 128
Portfolio heat position sizing model, 220
Position sizing strategies, 200–230
basics of, 215–216
business plan and, 133
components of, 210–211
core equity method, 217–218
equity models, 217–219
Holy Grail system, 200–204
importance of, 2, 8–9, 190, 192, 205–209
marble game and, 8–9, 207–209, 215–224
objectives of, 223–224
percent margin model, 220
percent risk model, 212–214, 218, 220
percent volatility model, 220
potential of, 202–204
power of, 209
psychology of trading and, 134–135, 210–211
R-multiple simulator, 225–230
reduced total equity method, 219
reward and risk in, 177–179, 188
simulation approach, 225–230
specific methods, 211
System Quality Numbers (SQN), 201–204, 230
trader objectives and, 210
types of models, 217–222
Positive expectancy, 189
Power of Mindful Learning, The (Langer), 52, 52n
Power of Myth, The (Campbell), 90, 90n
Pranakriya exercises, 97
Pranayama exercises, 97
Predictions, market, 258–259
Price-data-in-sequence setups, 161
Process:
in mindfulness trading, 56–58
outcome versus, 56–58
Procrastination (see Stuckness)
Procter & Gamble, 239
Profit-making:
business plan, 1, 4–5, 110–152
elements of successful trading, 1–10, 12–15, 27–28, 30–32
knowing why strategy does not work, 191–192
mistake avoidance, 2, 10, 14, 232–254
position sizing methods, 2, 8–9
psychology of trading, 1, 2–4, 12–107
size of profits versus losses, 187
Profit-taking exit, 169, 191–192
Psychology of trading, 12–107
balance in trading/investing, 69–70
beliefs, 2, 13, 44–48, 101–104
commitment to trading, 27–32
completion of self-work, 105–107
dealing with challenges, 134–135
discipline in meeting goals, 98–100
dissociation, 65–68
doing what you love, 33–35, 90–92
enjoying obstacles, 49–51
excuses, 39–41
failure as motivator, 74–76
following your bliss, 33–35, 90–92
honest self-appraisal, 16–22
inner interpreter, 61–64
joy in simple things, 77–82, 95–96, 114, 115
mindfulness trading, 52–60
overcoming stuck state of mind, 71–73
personal responsibility, 36–41, 83–84, 190
position sizing strategies and, 134–135, 210–211
self-empowerment, 42–43
spiritual work, 83–97
stored charges, removing, 101–104
trading type/personality, 23–26
worst-case contingency plan and, 140
Pure trading, 59–60, 81, 95–96
Pyramids, 229
Questionnaires, self-assessment, 19–21, 260–266
R multiples, 175–186
defining in each trade, 181–182
distribution for trading system, 176–177, 233
examples of use, 182–186
expectancy and median expectancy, 208–209
keeping up with trades, 181–186
in position sizing strategy simulation, 225–230
reward-to-risk ratio, 31, 167, 175–180, 189, 245
in risk assessment, 70
scalping trades, 182–186
sorting, 184–186
Random entry system:
application of, 162–164
exits, 169
improving, 167–168
Reality:
as illusion, 87–88
trading system reality check, 194–195
Reduced total equity method, 219
Regulations, changes in, 128
Relativity, 54–55
Reliability, of trading systems, 187
Renaissance Capital Management, 240
Research systems, 146
Responsibility, personal, 36–38
marble game simulation, 8–9, 36–37, 225–230
spiritual work and, 83–84
Retracement setups, 160
Reward-to-risk ratio, 31, 167, 175–180, 189, 245
Rewards:
exit strategy and, 175–180
importance of, 100
listing accomplishments, 100
Risk:
factors in big picture, 126–128
in marble game simulation, 8–9, 36–37, 207–209, 215–230
Rogue traders, 128
Rule-based discretionary traders, 239
common mistakes, 248
effectiveness of, 246
list of, 246
sample rules, 244–246
Rules, changes in, 128
Ryan, David, 246
Scalping trades, 182–186
Schwager, Jack, 66n, 66–67, 74n, 148, 154, 221
Schwartz, Marty, 246
Seasonal tendencies, 158
Second-guessing (see Inner interpreter)
Secret Gratitude Journal, The (Byrne), 90, 90n
Secular bear market, 127
Secular bull market, 127
Sedona Method, The (Dwoskins), 103, 103n
Self-appraisal, 16–22
confidence and, 196–198
initial evaluation, 16–17
levels of, 19
low self-esteem, 17–18
perfectionism-complexity complex versus simplicity, 17
questionnaires for, 19–21, 260–266
self-sabotage, 35, 105, 194–195, 235, 236
in trading well, 14–15
Self-awareness (see Psychology of trading)
Self-employed traders, 150–151
Self-empowerment, 42–43
Self-improvement, 33–35
Self-sabotage, 35, 105, 194–195, 235, 236
Sensory perception, 84
Setbacks, allowing, 100
Setups, types of, 160–161
Shields, Jack, 96
Sideways markets, 5–6
Signals, 192
Simplicity:
consistent profits and, 253–254
dream life and, 254
joy in simple things, 77–82
perfectionism-complexity complex versus, 17
Simulated trading systems:
marble game simulation, 8–9, 36–37, 225–230
position sizing simulation, 225–230
Singer, Brian, 205n
Sjuggerud, S., 4n
Socially responsible trader type, 26
S&P 500 Index, 255
Spiritual work, 83–97
blessings and, 89–90
breathing deeply, 93–94, 96–97
commitment to love, 92–93
focus on the moment, 84–85
following your bliss, 33–35, 90–92
God Box and, 87–90
laughter and, 85–87
listening, 93–96
meditation, 93–96
order to the universe and, 159, 160–161
personal clearing, 89–90, 95–96
responsibility and, 83–84
spiritual references, 43
Spontaneous trader type, 26
Spreading, 158
Starbucks, 24
Steidlymayer, Peter, 246
Stock Cycles (Alexander), 127n
Stocking, Jerry, 74, 74n, 77–80
Stockpicking:
impact of, 162–164
source of myth concerning, 165–166
Strategic trader type, 24
Stress:
measuring, 254
mental rehearsal and, 142
Stuckness, 71–73
examples of, 72
nature of, 71–72
solutions to, 72–73
stepping into “beingness,” 73
symptoms of, 72
Subprime mortgage loans, 128
Suffering:
failure as motivator versus, 74–76
laughter versus, 85–87
mindset of, 79–80
Super Trader Summits, 60
Supporting trader type, 26
Swing traders:
exit strategy, 179–180
System Quality Numbers (SQN):
position sizing strategies and, 201–204, 230
purpose of, 201–204
Tactical trading strategies, 131–132
Temple-Thurston, Leslie, 89n
Tharp’s Thoughts (newsletter), 1, 128–130
Tight exits, 170
Time setups, 160–161
Total equity position sizing model, 218
reduced, 219
Total systems traders, 151–152
Trade Your Way to Financial Freedom (Tharp), 12, 126–128, 152, 164, 246
Trader efficiency, 236
Trader Reinvention Paradigm, 44
Traders:
business-owner, 151–152
discretionary, 151, 189, 239, 241–246
investor/traders, 152
no-rules discretionary traders, 241–243, 247–248
objectives of, 210
rogue, 128
rule-based discretionary traders, 239, 244–246
self-employed, 150–151
total systems, 151–152
Trading capital, size of, 187–188
Trading opportunity, 187
Trading systems, 154–198
avoiding “It didn’t work” mentality, 191–193
beliefs about, 156
common elements of success, 189–190
confidence in, 196–198
customizing, 154–156
data according to market type, 7
developing improved, 256
entering the market, 162–168
evaluating effectiveness of, 200–204
exiting positions, 169–180
finding new markets for, 256
keys to effective, 187–188
marble game simulation, 8–9, 36–37, 207–209, 225–230
personalizing, 154–156
reality check for, 194–195
reward-to-risk ratio in, 31, 167, 175–180, 189, 245
setups, 160–161
stock selection myth, 165–166
tactical, 131–132
trading concepts for, 157–159
types of market moves, 5–6
(See also Business plan)
Trading type/personality, 23–26, 148–152
Trading well, 12–15
adding traders, 255
business plan and, 13–14
developing new trading systems, 255
elements of successful trading, 1–10, 12–15, 27–28, 30–32, 189–190
finding more markets, 255
making traders more effective, 255–256
mistakes and, 14
optimizing positions, 256–257
position sizing methods in, 14
psychology of trading in, 13
self-appraisal process, 14–15
self-assessment questionnaires, 19–21, 260–266
trading system in, 14
wealth process and, 13
Trailing stop exit, 169
Transformational Meditation, 34–35
Trend following, 122, 157, 160
Triggers, in meeting goals, 99
Turtles experiment, 23, 160, 246
Twain, Mark, 84
Two-tier position sizing model, 221
Uncertainty, abundance of, 78, 80
Unconditional love, 92–93
Underweighting benchmark in position sizing model, 221
Unexpected market disasters, 139
Units per fixed amount of money position sizing method, 220
U.S. debt, 126–127
Values-driven trader type, 25
Van Tharp Institute, 34–35
Vitamins for the Soul (Choquette), 84, 84n
Volatility breakouts, 161
Volatility setups, 161
Volume data setups, 161
War games, 139
Wealth process, 13
infinite wealth as concept, 77, 78–79, 114, 115
Whitman, Chuck, 246
Win-versus-lose polarity, 69
World Trade Center attacks, 139, 250–251
Worry:
commitment to love versus, 92–93
focus on blessings versus, 89–90
Worst-case contingency plan, 139–143, 250–251
brainstorming events, 139–140
categories of events, 139–140
developing, 141
nature of, 5
types of emergencies, 139–140
Zero-expectancy game, 119–120
204.236.220.47