How Competent Are You as a Trader? By, Van K. Tharp, PhD

van tharp bkHow good are you as a trader?

Do you make money every year? Do you make any money at all? Can you live off your trading? Maybe you make money, but not enough to cover all your trading expenses? Or, perhaps you made a lot of money once, lost it all (and then some), and now you are just trying to get it all back. Is that you?

Considering all the questions I just asked, rate your competence as a trader on a one through ten scale.

Let’s say that “one” is terrible – you lose on a regular basis. “Five” is neutral – you don’t make or lose money. And “ten” is very good – you make a living trading, and your earnings are probably in the top 1% of all Americans. What kind of rating would you give yourself?

Scale of 1 10 1

Rate Yourself Now _____________

Now, rate your feelings about your competence on the same scale. This feeling refers to how successful you think you’ll be in the next year or the next five years.

Scale of 1 10 1

Rate Yourself Now _____________

Guess what. You’ve just given yourself a predictor of your success. Competence at trading starts with not only being competent but feeling competent. So, if your average rating on the two scores above was less than 6, you’ve got some serious work to do.

This all gets into some of the key behavioral issues that surround trading. Most people think that trading success comes from finding some magic secret and, once you have that, you simply apply it, and then you BECOME a successful trader.

But that’s not the way it works at all. Success comes from the inside first. You must BE a successful trader. That means you must adopt the persona that successful traders have. What is their nature? What is their beingness?

When you first step into the BEINGNESS of a trader, you will start to do what successful traders do, and then you will start to have what successful traders have. You’ll start seeing success and profits.

In the Peak Performance Home Study Course for Traders and Investors, I wrote about a floor trader who was very successful. He made millions in the market. However, one day, because of poor position sizing and perhaps a little too much cockiness, he lost it all. Well, not quite everything. He’d put $30,000 away just in case something like this might happen. He still had a $30,000 cash reserve to sustain him as a trader. (And this was many years ago when $30,000 meant a lot more than it does today.)

But only having $30,000 really got to him. He felt like he couldn’t spend any money.

He felt like he had to be particularly careful with everything he did. In fact, he said he used to go into bars at happy hour, buy one drink, eat all the free food, and that was his dinner.

So how did this trader do in making a comeback? What would you predict? He didn’t have the beingness of a successful trader, was very concerned about losing, and he was living a lifestyle that was way below the lifestyle he had when he was successful.

If you guessed that he wasn’t trading well, then you’ve guessed correctly. Within a few months, his $30,000 was down to about $10,000. How do you think he felt then?

At this point, he had a sudden realization. He understood that he was totally different from the person who had made millions in the market. He said to himself, “What the heck? I only have $10,000 left, so I’m just going to go back to the type of person I used to be.” And as he did that, he resumed his old lifestyle, which meant that he probably had enough money to last one to two weeks.

At the same time, everything else shifted inside of him. Suddenly, he could also trade well. Suddenly, he was making a lot more money than he was spending. He was now BEING a good trader. And the net result was that, within a few years, he was a millionaire trader again.

What’s the Moral for YOU?

Does this mean that you should simply assume that you are a competent trader, spend money like you are going to make millions in the market this year, and just charge forward? No, it doesn’t mean that at all!

Here’s what it means. You need to study what good traders are like and get into their psychology. You could go out and surround yourself with successful traders and try to get inside their heads, but I’ve already done that for you in the Peak Performance Home Study Course. Why not save yourself a lot of time and money and do that instead? Study what good traders are like and then become more like them.

You also need to develop a business plan and some systems that work. Almost every good trader I know of works hard at these things. At VTI, we have the products to help you complete these tasks as well. And the main reason to do all of this is so that you’ll have the confidence to trade well. When you have a great business plan and systems in place, that you’ve proven will work through your testing and simulation, then it is easy to assume the BEINGNESS of a good trader.

The Market Wizard Exercise

Lastly, I’d like to talk about one of the exercises we’ve done in the Peak Performance 101 Workshop. (A new session starts next month!) I call it The Market Wizard Exercise. The term Market Wizard is derived from Jack Schwager’s famous book in which he interviews the world’s top traders and it is still an essential book for all traders*.

To do The Market Wizard Exercise, imagine yourself in a situation where you are not doing well at all in trading. Now, get up and walk away. Look at what you looked like trading poorly. Notice what you were doing with your body. That’s part one of the exercise and you’ll probably notice that you were slumped over, tense, and not breathing very well.

The second part of the exercise is to imagine a Market Wizard sitting in that same situation – where you were having so much trouble. What is that person doing? How are they handling that situation? The amazing thing about this exercise is that everyone can do it – even beginning traders who have never seen a great trader in action. Nevertheless, they know exactly how that trader is BEING. And typically, they are relaxed, very upright, breathing well, and behaving totally differently from the way you were.

The third part of the exercise is to return to your chair and become that Market Wizard. This exercise is a perfect illustration of how you must BE a great trader to DO what they do and HAVE their results.

So, what do you need to do? Study, work hard, and develop a plan that you have confidence in. Understand the psychology of top traders and investors and then adopt it. Develop confidence in your future success and then when you are ready, just BE a great trader. The results will follow.

Until next week’s Crypto Update, this is your trading coach, Van Tharp.

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