Van K. Tharp Quotes

“A good trader once told me that his personal psychology did not enter into his trading at all because everything he did was automated. I responded: That’s interesting, but what if you decide not to take one of your signals? He responded: That would never happen!

About six years later this trader went out of business as a professional trader because his partner did not take a trade. That trade would have made them very profitable for the year because it was a huge winner, but they’d had so many losses in that particular area that his partner decided not to take it.”

“A peak performance trader is totally committed to being the best and doing whatever it takes to be the best. He feels totally responsible for whatever happens and thus can learn from his mistakes. These people typically have a working business plan for trading because they treat trading as a business.”

“Almost every successful investor that I have encountered has realized that success in the markets comes from internal control. Internal control is not that difficult to achieve, but it is difficult for most people to realize how important it is.”

“An increasing number of investors are entering the high-risk world of electronic day trading — often before they’ve learned the basic principles and safeguards.”

“Financial freedom occurs when your passive income (income that comes in when your money works for you) is greater than your monthly expenses. Thus, if you need $5,000 per month to live on, you become financially free when your passive income is greater than $5,000 per month. It’s that easy, and anyone with enough desire and commitment can do it.”

“I’ve argued for a long time that trading is 100 percent psychology and that psychology includes position sizing and system development. The reason is simple: We are human beings, not robots. To perform any behavior, we must process information through the brain. Behavior is required to both design and to execute a trading system. And to duplicate any behavior, one must learn the ingredients of that behavior.”

“If you are really committed, then not only are you certain that you are doing the right thing, but somehow events just seem to occur to help you.”

“If you can generate enough income through trading or investing to meet your monthly expenses, and if the process requires only a few hours of your time each day, then I’m willing to call that income 'passive income'. And through this process you can be financially free. Although you may have to spend several years learning the business of trading and developing a business plan and systems that fit your plan, once that is complete, you could be financially free by my definition.”

“If you cannot accept the negative consequences, you’ll never succeed as a trader. Good traders usually make money on less than half their trades. If you can’t accept losses, then you are not likely to want to get out of a position when you know you are wrong. Small losses are more likely to turn into giant ones. More importantly, if you cannot accept that losses will occur, then you cannot accept a good trading system that will make a lot of money in the long run but might lose money 60 percent of the time.”

“Learn how to transform your trading results by transforming yourself.”

“Many people actually want to lose on a subconscious level.”

“Most investors believe that there is some magic order to the markets. They believe that a few people know about it and that those few are making vast fortunes from the market. These believers are constantly trying to discover the secrets so that they too can become wealthy. Such secrets exist. But few people know where to find them because they are where one would least expect the secrets to be.”

“Most people approach trading to make a lot of money, and that is one of the primary reasons they lose.”

“Most people lose the money game because they follow someone else’s rules for how to win the game. They believe that the person with the most money or the most toys wins the game.”

“Most successful market professionals achieve success by controlling risk. Controlling risk goes against our natural tendencies. Risk control requires tremendous internal control.”

“Most successful speculators have success rates of 35 to 50 percent. They are not successful because they predict prices well. They are successful because the size of their profitable trades far exceeds the size of their losses. This requires tremendous internal control.”

“My belief is that the largest profit percentages are made by active short-term traders who really have their psychology together. I’ve seen short-term traders who could make as much as 50 percent or more per month (on small amounts of money such as a $50,000 account) when they were very in tune with the market and themselves.”

“People want to be led astray. They constantly ask the wrong questions. For example, what’s the market going to do now? What should I buy now? I own XYZ stock. Do you think it’s going to go up? (If you say no, then they’ll ask someone else until they find a person who agrees with their opinion.) Tell me how I can get into the market and be 'right' most of the time. And those selling information get rewarded by giving them the answers they want. There is a large industry available to give you the answer to such questions.”

“The best traders are always those who practice simplicity.”

“The composite profile of a losing trader would be someone who is highly stressed and has little protection from stress, has a negative outlook on life and expects the worst, has a lot of conflict in his/her personality, and blames others when things go wrong. Such a person would not have a set of rules to guide their behavior and would be more likely a crowd follower. In addition, losing traders tend to be disorganized and impatient.”

“The Holy Grail system is an internal search.”

“The psychological factor for investing has 5 areas. These include a well-rounded personal life, a positive attitude, the motivation to make money, lack of conflict [such as psychological hang-ups about success], and responsibility for results.”

“The realization that you are responsible for the results you get is the key to successful investing. Winners know they are responsible for their results; losers think they are not.”

“The simple truth is that most people are risk-aversive in the realm of profits – they prefer a sure, smaller gain to a wise gamble for a larger gain – and risk-seeking in the realm of losses – they prefer an unwise gamble to a sure loss. As a result, most people tend to do the opposite of what is required for success. They cut their profits shots and let their losses run.”

“The top traders that I’ve worked with began their careers with an extensive study of the markets. They developed and refined models of how to trade. They mentally rehearsed what they wanted to do extensively until they had the belief that they would win. At this point, they had both the confidence and the commitment necessary to produce success.”

“There are probably hundreds of thousands of trading systems that work. But most people, when given such a system, will not follow it. Why not? Because the system doesn’t fit them. One of the secrets of successful trading is finding a trading system that fits you.”

“When I’ve had discussions about what’s important to trading, three areas typically come up: psychology, money management (that is, position sizing), and system development. Most people emphasize system development and deemphasize the other two topics. More sophisticated people suggest that all three aspects are important but that psychology is the most important (about 60 percent), position sizing is the next most important (about 30 percent), and system development is the least important (about 10 percent).”

“You cannot develop an adequate system for making money in the market unless you totally understand what you are trying to accomplish in the markets. Thinking about your objectives and getting them clearly in mind should be a major priority in your system development.”

“You do not trade the markets. You can only trade your beliefs about the markets.”

“You must discover your beliefs about the market so that your system will fit those beliefs. You must know yourself well enough to develop your personal objectives and a system that fits those objectives. And you must work on your system until you are comfortable trading it. You must know your criteria for comfort. Most people have many biases against doing it well. To overcome those biases, most people need to take some steps in their personal development.”