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Thursday, January 26, 2017

Tharp Think Helps Create Great Trading Systems

Feature Article
http://newsletter.vantharp.com/public/viewmessage/html/10920/55uouqeti961fpl6a7o67kjkwy1ji
Tharp Think Helps Create Great Trading Systems
by Gabriel Grammatidis



In his various publications and workshops, Van stresses a set of important trading fundamentals that he calls “Tharp Think.” Tharp Think is a set of ideas and principles that he has found successful traders apply consistently. Some of them you have heard or read in other places but others I have only heard from Van. Having been in close contact with Van for many years now, I have experienced the usefulness of his principles first hand in many areas including when it came time to build my own trading systems for the Forex market. Van defined two areas of Tharp Think principles as (1) The Psychology of Trading and (2) System Development. Psychology and Trading Systems, however, are actually two sides of the same coin. How is that?

Having many useful beliefs about the markets and trading is not enough to make you a good trader — you also need a trading system with an edge. The corollary is also true; simply having a good trading system will not allow you to trade well — you also need useful beliefs about the markets, trading, and yourself (your psychology). You will be able to trade a system well if your beliefs align with the beliefs of the trading system. For example, if you are a band trader, you have many ideas about how prices move in relation to band but you may have great difficulties trying to trade a trend-following system. Your beliefs about the reasons and the ways price move are very different between these two kinds of traders and trading systems. The right system for the right trader, however, will work fine. Both band systems and trending systems work in the markets. Aligning underlying beliefs both about yourself and about your trading system is crucial if you want to be able to trade well.

Build A Great Low-Risk Idea — With A Useful Set of Beliefs

Every trading system rests on a set of beliefs — whether the trader and/or system developer realizes this or not. You gain your first edge by simply being aware of the underlying beliefs of a trading system. A great system has many useful beliefs about the market and price behavior that create an edge — it also creates positive expectancy. As an example, trading against the crowd in certain circumstances can be an edge. Applying those beliefs about why that works by developing a trading system that generates a positive expectancy is an edge — the advantages your system has in the market. You want to find and develop an edge (or several) for each of your trading systems.

Based on your beliefs about the market and price behavior (edges), you can then define a set of clear rules for the trade setup. Here, the necessary setup conditions as well as the entry rules and initial stop strategy are solidified to define a low-risk trade so your system can reap the benefits of the core beliefs that form your edge. From there, you would add other important trading components such as the exit rules, filters and the position sizing strategy.

Tharp Think In Practice

I have developed all of my Forex trading systems aligned with Van’s Tharp Think principles. Why? I have simply found that what Van teaches works very well in the markets. Van will teach his Tharp Think principles in the February Peak 101 workshop and I will teach how those principles apply in the Forex market with working trading systems — all using Tharp Think principles. For each of the three systems I teach, I provide the full set of beliefs behind the system, the specific market edges, the full detailed ruleset, and all other important system components (e.g. exit algorithms). You will need to know all this before you can fully “own” a system. Typically, however, you won’t get these elements reading blogs or buying a black box “system” off of the internet that tells you to buy on the green arrows and sell on the red arrows. Only when you know what the system is about and understand why it works will you start to be able to fully identify yourself with it — to truly own it. Once you do, then it becomes possible to flawlessly execute the system in an unconscious competent manner.

In addition to learning the Tharp Think principles, beliefs, rules, etc. for each Forex system, attendees will have a practical “hands on” training session. During a group simulation, we look for the patterns to trade the rules with charts as if live — using recent historical Forex data. This training includes spotting the setups as they develop in the charts, stalking for a proper entry, setting the initial stop, calculating the appropriate position sizing strategy, and applying the exit rules. All those elements correctly and consistently are important tasks for executing any trading a system if you have any hope of success. Finally, we will step together through my personal trading preparation process that I perform on a daily basis to mentally prepare for a successful trading day — which is — another Tharp Think principle.

During the Live Trading Workshop, you will deepen your understanding in all those areas in a live market environment.

Trading well is one of the most difficult tasks you are probably ever going to try to learn. If you have figured that out, help decrease the amount of time and increase the probability of reaching a consistent level of trading success with some of the best trading education in the world — for trading fundamentals and Forex trading.

Start evolving in your trading expertise and prepare accordingly for your success!

Good trading,
Gabriel Grammatidis

Note:
Current markets are getting more and more volatile (for recommendations to reduce your risk see Walk Away from The Shell Game to Play more Profitable Games, #746

For a detailed description on System development, see Gabriel’s article in the Traders’ Magazine below “How to Develop Your Trading System.” This article refers to the development of System1: Busted Breakout.

As well see Gabriel’s 2nd article in Traders’ Magazine “Become a Hunter” that describes the Psychology of Trading of System1 as well as its’ rule-set (not the full ruleset taught in the coming workshop).

3 comments:

  1. Let me explain the basic principle how most Forex systems work. They are tuned up to work in a specific market condition. They often make money in a trending market, but loose money in a choppy market. It is not a problem as long as the market is trending and the system is making more money than it loses. Such a system can be profitable for several months and you would be happy with it. BUT...

    PREPARE FOR THE WORST...

    Market change over time. A well designed system starts with trend analysis to stay away from potentially losing trades. There are two problems of how a Forex system recognizes the trend.

    PROBLEM: FALSE "STRONG TREND" INDICATION.

    The system responds only to immediate price action. An explosive price movement that is usually the result of news release is tempting people to jump in and make a profit. It looks like a "strong trend", but what usually happens next is a hard fall.

    To avoid falling into this trap, check for the SOLUTION to find a REAL trend:

    ==> http://www.forextrendy.com?vgcvasdiugf9g87346

    SECOND PROBLEM: TREND RELIABILITY

    Most systems use various indicators to determine the trend. Actually, there is nothing bad about using indicators. One Simply Moving Average can do the job. The problem comes with the question: "Is the market trending NOW?" Whether the market is trending or not trending is not like black and white. The correct question is: "How well the market is trending?"

    And here we have something called TREND RELIABILITY.

    Trends exist and they can be traded up and down for a profit. You have to focus only on the most reliable market trends. "Forex Trendy" is a software solution to find the BEST trending currency pairs, time frames and compute the trend reliability for each Forex chart:

    ==> http://www.forextrendy.com?vgcvasdiugf9g87346

    ReplyDelete
  2. Do you think that to dramatically improve your success rate you have to read tons of thick books, buy expensive software and spend countless hours of learning more about Forex?

    What I'm going to share with you is something very EASY to use and very POWERFUL at the same time.

    Let me give you an EXAMPLE:

    Imagine you trade a system that makes 50% winning trades, but another 50% are losing trades. If you increase your odds of winning by only 20%, that would make 70% winning trades and 30% losing trades.

    Well, HOW TO accomplish that?

    Just pick the best trending pair at the current time and simply follow the trend! I have found ONE INCREDIBLE TOOL that continuously scans the Forex market and picks the most reliable trending pairs for you.

    http://www.forextrendy.com?ljsjhd8374h

    By taking signals in the direction of a strong trend you would REDUCE UNNECESSARY LOSSES and increase the odds of winning. You need to know "how well" the market is trending to avoid very short-term trends.

    STOP hunting the market for every potential trade. Pick only the best trending pairs and time frames and DO NOT take any trading signals in the choppy market (unless you know exactly what you are doing).

    Successful traders keep it simple and this is the way how the pros made fortunes in the markets - by trading less and making more.

    To increase the profitability of any system or robot you are currently using, check out this easy and powerful ultimate solution:

    http://www.forextrendy.com?ljsjhd8374h

    ReplyDelete
  3. Can I just say what a relief to find somebody who truly knows what they’re speaking about on the internet? You, without a doubt, know the best way to deliver a problem to light and make it important. More people must read this and perceive this side of the story. I’ve just got a new way to see things differently from your insights. Thank you for sharing! I would love to see more updates from you.

    Best Trading Books

    ReplyDelete