How Dr. Van Tharp Modeled the World’s Top Traders
Discover how the original Market Wizard used psychology to decode the patterns behind trading success.
Dr. Van Tharp was one of the original "Market Wizards," known for his unique role as a psychologist in the trading world. He modeled some of the most successful traders globally, analyzing their behaviors and strategies to uncover patterns that could be applied to enhance trading performance. His work helped shape a deeper understanding of the psychological factors critical to trading success.
Van Tharp interview with Ney Torres
from https://financiallyfreepodcast.libsyn.com/the-best-trading-coach-in-the-world-van-tharp
Ney Torres: [00:00:00] Welcome, everyone, to the podcast. Today, I want to introduce what I believe is simply the best coach in the world for anyone interested in trading. I attended his seminars nearly a decade ago, and before meeting Van Tharp, I was searching for the "perfect trading system." I thought if I could find the right system, I’d be set. But then I met you, Mr. Van Tharp, and you completely shifted my perspective—not just in trading, but in life as well. Thank you for joining me and for all the insights you’ve shared over the years. Welcome to the show, sir.
Van Tharp: [00:00:46] Thank you very much, Ney. I’m glad to be here. My business mission is all about transformation through the metaphor of trading, which is one reason I may never retire. When we help change lives, people naturally improve in trading—and we often receive letters from people telling us how much their lives have improved. That’s what keeps us going.
Ney Torres: [00:01:16] Trading is indeed a deep psychological journey. I’ve dabbled in digital marketing, started a few businesses, and even retired through real estate at a young age. But trading? Nothing drives you as crazy as watching that screen, seeing the little dot go up and down. To succeed in trading, psychology has to come first. You actually pioneered using NLP to model top traders, which is fascinating. Could you explain how that works?
Van Tharp: [00:01:57] Certainly. NLP modeling has several approaches, and I found one that worked well for me. The process involves identifying common practices among top traders. For example, we look at how they develop systems, what tasks they focus on, and how they achieve their objectives. Each task has three main components: beliefs, mental states, and sequencing of thoughts, or mental strategies. These models aren’t always absolute, but they’re incredibly useful for guiding people to success.
Ney Torres: [00:02:54] That was a big takeaway for me. You taught me to examine my beliefs objectively—to see what works for me without judgment.
Van Tharp: [00:03:09] Exactly. When someone identifies as a trader, it’s an identity shift. And many things have to change for that transformation. Years ago, when people spoke of "money management," it was ambiguous. Was it managing your own finances? Managing others' money? For me, it was about position sizing, which I coined. It’s a key factor in trading success.
Ney Torres: [00:03:58] And everyone uses that term now! Position sizing is crucial, right?
Van Tharp: [00:04:07] Absolutely. Through modeling, we’ve also developed concepts like the impact of mistakes, focusing on reward-to-risk ratios, and thinking in terms of R-multiples. For instance, if you have a 10R, it means you made ten times your initial risk, which is easier to achieve than having an asset go up ten times in value.
Ney Torres: [00:04:52] For listeners unfamiliar with trading, would you say it's more about viewing trades as a mathematical risk-reward process?
Van Tharp: [00:05:13] Yes, but it goes against the grain. We’re conditioned to be "right," but in trading, you could be right less than half the time and still profit if your gains are larger than your losses.
Ney Torres: [00:05:38] So even with more losses than wins, if your wins are big enough, you can be profitable.
Van Tharp: [00:05:45] Exactly. Some traders think they have a "Holy Grail" edge. The reality is, even with a significant advantage, market conditions play a huge role.
Ney Torres: [00:06:13] It’s fascinating. I think that’s why psychology is so integral. Trading has evolved into a personal transformation journey for you, hasn’t it?
Van Tharp: [00:06:52] Absolutely. Trading can transform consciousness. David Hawkins has a scale from zero to a thousand, where 200 is the line between negative and positive. Fear and greed are lower on the scale, but to trade effectively, you need to reach a level of acceptance or higher. It’s about moving from “things happen to me” to “things happen through me.”
Ney Torres: [00:07:56] You have a unique process for defining consciousness levels, right?
Van Tharp: [00:08:01] Yes. By clearing out negative beliefs, our consciousness naturally rises. Recently, I released a video called "Trading Genius II," which delves into how our subjective experience shapes our perception. It’s all a matter of translating external signals into internal interpretations.
Ney Torres: [00:11:19] So, being fully present is the closest thing to a "Holy Grail," right?
Van Tharp: [00:11:21] Yes. When you’re present and understand your beliefs’ limitations, you’re closer to what some might call the Holy Grail of trading.
Ney Torres: [00:14:33] I remember a video of you from years ago where you emphasized that trading is almost entirely psychological. How has that view changed for you?
Van Tharp: [00:14:54] It’s only deepened. Trading involves beliefs, mental states, and strategies—all psychological elements. We don’t experience the world directly; we experience it through our interpretation, which is why trading is, at its core, a mental game.
Ney Torres: [00:15:38] So, in essence, if someone doesn’t have clear, written rules, they’re just guessing, right?
Van Tharp: [00:15:43] Exactly. You need clear rules that you’ve tested and believe in. Those rules should fit your personality and the current market context.
Ney Torres: [00:16:06] You once told me that a trader needs multiple systems. Could you elaborate?
Van Tharp: [00:16:14] Yes. There are at least six market types: up, down, and sideways under both quiet and volatile conditions. It’s unrealistic to think one system will work in all scenarios, which is why it’s essential to have different systems for each market type.
Ney Torres: [00:16:44] For those interested, they should visit VanTharp.com and sign up for your newsletter. I believe it’s weekly, right?
Van Tharp: [00:16:59] Yes, every week. The latest one just went out today.
Ney Torres: [00:17:04] Great! And you also share updates on market conditions there.
Van Tharp: [00:17:12] Correct. In fact, this week’s newsletter includes a link to my upcoming podcast on Friday at noon.
Ney Torres: [00:17:22] Fantastic. I’ll be sure to include that link. How does one develop trust in the systems they use?
Van Tharp: [00:17:34] Trust is subjective. It depends on your own convincer strategies—whether you need to see results, hear from an expert, or experience it yourself. My approach is to understand the beliefs underlying your system and their limitations.
Ney Torres: [00:18:48] Easier said than done!
Van Tharp: [00:18:50] Indeed.
Ney Torres: [00:19:02] You offer a Super Trader program that spans several years. Could you briefly explain it?
Van Tharp: [00:19:02] Sure. Super Trader I focuses on clearing psychological blocks. Super Trader II is about creating a comprehensive business plan for trading, and Super Trader III involves developing and validating systems with at least 95% efficiency.
Ney Torres: [00:22:00] For someone interested in trading, when do you think they should begin?
Van Tharp: [00:22:00] If someone has $20,000 or $30,000, I’d advise spending it on education first. Without a strong foundation, most people lose money quickly. If you want to treat it as a profession, education is non-negotiable.
Ney Torres: [00:24:34] Great advice. Thank you, sir. Everyone, I highly recommend exploring Van Tharp's books and preparing for the long journey that trading entails. It’s not about quick fixes or indicators; it’s a path of constant growth.
Van Tharp: [00:24:58] Thank you, Ney. It was a pleasure.
Ney Torres: [00:25:05] Till next time!
Van Tharp: [00:25:07] Bye-bye.
Ney Torres: [00:25:09] Bye.
Please read the article "Blog's "read me first"" Terms And Conditions Of Use All content provided on this blog is for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The owner of this blog will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information. This terms and conditions is subject to change at anytime with or without notice.