The First Level of Transformation: Stop Thinking Like an Average Trader

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The first level we offer is a transformation of the trading game that helps you stop thinking like an average trader.

The old rules, Big Money ’s rules, are apparent by watching or reading the financial media for a week or so. They’ll imply that:

  • Selecting the right investment (i.e., picking the right stock) is everything.
  • When you find the right investment, buy it and hold it for the long term.
  • You must spend a lot of time analyzing the market to find the right investment.
  • You should closely follow expert advice and trust someone else’s judgment over yours.

[/vc_column_text][vc_separator el_width=”50″ css=”.vc_custom_1547974110828{margin-top: 7px !important;}”][vc_custom_heading text=”Recognizing the Effect of the Old Rules in Your Investing” use_theme_fonts=”yes”][vc_column_text]These and many other common beliefs are offered as worthwhile rules by those who insist they know what is correct. If these rules are so helpful, then why don’t most people benefit from them? Why is that while the Su0026amp;P 500 returns over 10% in bull-market years, most mutual fund investors (the ones who buy, hold and trust the advice and expertise of others) experience returns of a little more than half of that? Is it any wonder that the same experts that help investors achieve this return are the first to say investors can’t expect to do better on their own?

My experience indicates that these rules cause most people to be net losers in the markets. Through my modeling work with top traders and investors, looking at what they do and how they think, I’ve come up with a new set of rules. We call these rules Tharp Think. These are concepts I require everyone in my Super Trader program to know and understand as the cornerstone of their training.[/vc_column_text][vc_separator el_width=”50″][vc_custom_heading text=”The Primary TharpThink Rules” use_theme_fonts=”yes”][vc_column_text]A complete list of the rules is found in the summary of Section I of my book, so I hope you’ll read it, but here are the four primary rules:

  1. Trading is as much a profession as any other.
  2. Trading is as much a human performance activity as is any athletic endeavor.
  3. Objectives are important and you achieve them through position sizing strategies.
  4. Trading is driven by probabilities and risk-to-reward ratios under specific market conditions.

Level 1 transformation is probably the most basic transformation you must make as a trader/investor. But simply reading these four primary rules is not a transformation. The transformation comes as you more fully understand what they mean to you in your trading and that your trading activity reflects this.[/vc_column_text][vc_separator el_width=”50″][vc_custom_heading text=”Self-check:” use_theme_fonts=”yes”][vc_column_text]Which two of the following rules would you consider to be the more useful to an investor or trader?

  1. The best gains are made from holding on to a good stock as long as possible.
  2. I am responsible for the gains I achieve in trading and investing.
  3. My goal for trading and investing is to achieve better than 20 percent annually with no more than 10 percent drawdown annually.
  4. If I didn’t take a position in a stock that tripled in value after I heard about it, I consider that a costly mistake.
    Companies with sound fundamentals are better investments and therefore better trading instruments.

Self-check evaluation:

If you selected statement #2 and #3 then you have the potential to make a level 1 transformation if you haven’t already. The next lesson will give you a look into what a level 2 transformation includes.[/vc_column_text][/vc_column][vc_column width=”1/4″][vc_widget_sidebar sidebar_id=”flash_right_sidebar”][/vc_column][/vc_row]

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