Modeling Trading Success by Van K. Tharp, Ph.D.

van tharp bkA note to readers: While Dr. Tharp’s content is timeless, this article is from our newsletter archive and may contain outdated information, missing links or images.

I’d like to give you a little history of Neuro-Linguistic Programming (NLP) Modeling.

Early NLP History

Richard Bandler was a student at Kresge College (UC Santa Cruz) and given the assignment, under the supervision of Dr. Robert Spitzer, of transcribing tapes of Fritz Perls doing therapy. After working with the tapes for a while, Bandler could duplicate almost anything he heard Perls say and pretty soon Dr. Spitzer was calling him Fritz because he sounded so much like Perls (voice, tone and tempo).

Bandler had read a book about Gestalt Therapy and the idea of hallucinating Mom and Dad in a chair and yelling at them seemed like great comedy to him, so he did it. Interestingly, he noticed that this “comedy routine” seemed to have an impact on people who did it.

Later, Bandler taught a student-directed workshop on Gestalt Therapy under the supervision of Dr. John Grinder. In these workshops, Bandler would impersonate Perls and students began to experience changes in their lives. That got John Grinder involved in analyzing the linguistic patterns involved.

Dr. Spitzer sent Bandler to Canada to record Virginia Satir which led to Bandler being able to copy Satir and adding her patterns. With Grinder helping Bandler with what they were doing with language (linguist forms), these two examples resulted in two men being able to copy a free form of therapy. So Richard Bandler became the first modeler by being able to copy the micro-strategies of two famous therapists. Much of what they did was called the meta-model. Later they also interviewed Milton Erickson and they called this the Milton Model. Both are the famous NLP models that people who take NLP practitioner courses learn.

This early NLP modeling was extremely simple. Bandler and Grinder believed that you should find one exceptional prototype, model that person’s micro-strategies and then see if you could do them yourself. And the result was they could copy certain types of therapy and micro-behaviors such as spelling strategies. I was attracted to NLP because of the modeling, but I didn’t realize it only pertained to these sorts of micro-strategies.

Missing from their initial efforts, however, was any attempt to model something “big” such as trading success or wealth creation. Bandler had an interest in the stock market and when I told him I was doing that sort of modeling, he said, “Have you applied it to yourself?” At that time (mid 1980s), I didn’t even have the models worked out so I said “No” to which he replied, “then I’m not interesting in talking with you.” His modeling was limited to micro-behaviors which could not handle something “big” and to the best of my knowledge, Bandler never got anywhere with modeling trading success or wealth creation.

Some years back, another NLP expert tried developing a trading model. I once heard Charles Faulkner (see the New Market Wizards) explain how he modeled Richard Dennis. First, he subscribed to a magazine in which Dennis wrote a monthly column. He read every column for a year looking for Dennis’ metaprograms (basic unconscious patterns of how someone works, such as, do they move toward things or away from things for their motivation). He then attended a talk Richard Dennis gave and said that within ten minutes he had his metaprograms down. Later, Faulkner talked about how he was going to start trading futures and that his primary task was to manipulate his convincer strategy (a basic micro-strategy for determining how to convince yourself of something) so that he would be convinced that he could do it. When I heard his intention to trade money based on this modeling approach, I was horrified. I’m not sure how someone could possibly think that such an overly simplified model captured all that was involved in trading success. Good luck to anyone else who might want to try that approach.

I once attended a workshop in which John Grinder and Robert Dilts presented on what each thought was the most important aspect of modeling. Dilts said the strategy was the most important (i.e., for duplicating some skill) while Grinder said it was the mental state. In those days, however, both still had a very limited view of what was important.

In a 2006 tape series I heard David Gordon talk about modeling an ability. Among all of the details, Gordon said that you first need to determine the criterion or the primary standard for evaluating that ability. You also needed to get the conditions necessary to satisfy the criterion and what the criterion means to that person, including examples of evidence of having met the criterion. This was basically all Gordon did with beliefs (which was a lot better than what prior NLP researchers had been doing). The rest of his modeling process focuses on determining the primary strategy which manifests the ability plus the secondary strategy which is what they do when the primary criterion doesn’t work.

Now with just that information, do you think you could duplicate trading success? Well, they do also ask for the mental state necessary to manifest the ability and the signals that the person uses to determine whether or not the criterion is being satisfied.

I thought to myself, well the top tasks of trading (given in the Peak Performance Home Study Course and in Peak 101) could be used as an example of what someone does to trade well. So what would happen if I modeled the tasks of trading using David Gordon’s method? The net result was that I determined that if someone asked me the primary criterion for the tasks of trading, I would say “Not to make any mistakes.” And if I said that, then the best I’d get out of the modeling is a global overview of about only 3—4 of the primary tasks of trading out of the dozen or so the top tasks model has. So in my opinion, Gordon’s model was woefully incomplete. At minimum, you needed to determine if there were multiple criteria involved in the ability that you were trying to model.

Modern Modeling Models

I was fortunate enough to have taken a modeling course from Wyatt Woodsmall. I’m not sure how many times that course was given — probably only a few times. But I got to take it and it changed everything for me. Woodsmall said that you cannot develop an effective model by looking at just one person. If you did, then you would just model what was unique to that person. Every modeler that I’ve mentioned so far, however, focused on modeling just one person.

Second, Woodsmall said you must determine what these people did in common. So what if I asked ten good traders what they did and each one told me something about their trading system — all of which were completely different systems? Then I would know that the trading system per se is not the key to success (and I’ve been saying exactly that for a long time).

Finally Woodsmall said that for each task involved, he needed to know three things — the mental states, the mental strategies (on which the early NLP modelers were already focusing) plus the BELIEFS for each task. When I learned about each task incorporating certain beliefs, I knew I now had everything necessary to begin fully modeling the top tasks of trading. The top tasks model teaches you the common important elements of executing most trading systems plus it helps you get through the day without making mistakes. That’s what’s important for trading success.

And that has been much of my life’s work over the last 30 years. However, for a complex skill like successful trading there are a lot of things that need to be modeled. Through the years, I’ve modeled:

• The tasks of trading.
• How to develop a trading system that fits you.
• How to achieve your objectives through position sizing.
• Infinite wealth.

And all of these processes are important to trading success. In addition, to adopt any of these models you need to be fairly clear of non-useful beliefs and negative states that might interfere with the success of adopting the model. For example, if you are not organized or tend to procrastinate or run away and hide each time you encounter some major psychological issue that impacts your life, then you don’t have a chance at becoming a successful trader. This is why I have divided the Super Trader program in two stages. In Super Trader I you learn the models, basic Tharp Think beliefs, and you clear out everything that might prevent success. Then in Super Trader II, you apply all of that and prove that you can overcome any obstacles that might get in your way at the end of the program by live trading at a high efficiency level.

L. Michael Hall’s Neurosemantics

In the late 1990s Richard Bandler filed a lawsuit that basically killed NLP in the United States. My understanding is that the lawsuit bankrupted Bandler as well as drove most of the NLP practitioners out of business in the U.S. There are still about four organizations that give NLP training in the U.S. now but they only provide courses one or two times a year. NLP is almost dead in the U.S. There are a number of organizations, however, that provide frequent NLP-oriented training in many other countries across the globe. Dr. L. Michael Hall heads one of those organizations and all of his workshops in 2015 are outside of the US. Dr. Hall’s workshops are mostly advanced-level courses that require NLP certification.

Hall started out in NLP but focused his research and practice on a new area he called Neurosemantics, partially as a result of Bandler’s lawsuit. In addition, he has developed some very advanced models for modeling. He basically says there is a hierarchy to how we operate and you have to understand the entire hierarchy. Interestingly enough, Dr. Hall calls his advanced model The Matrix Model while I called my latest book Trading Beyond the Matrix.

Dr. Hall says you have to understand the impact of a number of matrices upon how a person does things. His matrix model includes three process matrices and five content matrices. Furthermore, there can be hierarchies to those matrices. You can read about these areas in his book The Matrix Model: The 7 Matrices of Neuro-Semantics. Or you can learn how they apply to trading by attending Modeling Great Trading Through Mental Strategies (Peak 204).

Overall, we believe that Dr. Hall’s models add a great deal of utility to modeling and in the long run they might shorten the process of duplicating success. For example, we’re currently looking at such issues as 1) do certain metaprograms prevent someone from trading well or from even doing the self-work necessary to trade well and 2) if so, how can we mitigate the impact of those metaprograms.

Dr. Hall believes that intention is a key process matrix behind success. And this is similar to one part of Super Trader 1 in which we make sure everyone understands their purpose in life — which then becomes the motivating factor behind trading well.

Dr. Hall believes in multiple levels of meaning and in determining the overall meaning that you give to a task. We’re currently looking at the impact this might have on our various tasks of trading success — perhaps it’s just an added dimension. What meaning do you give to trading? Perhaps that meaning applies to many areas of your life. You should already know that if trading is only about money, you have very little chance of success.

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