Trading Psychology Masterclass
Transform your mindset, transform your trading
Learn the psychological principles that separate elite traders from the rest
Who is Van Tharp?
Dr. Van K. Tharp is a legendary trading coach and psychologist who has trained thousands of traders worldwide. Featured in Jack Schwager's Market Wizards, he discovered that successful trading is 60% psychology, 30% money management (position sizing), and only 10% system.
"You don't trade the markets; you trade your beliefs about the markets."
- Van Tharp
The Trading Success Formula
Psychology
Your mindset, emotions, and discipline
Position Sizing
How much you risk on each trade
System
Your entry and exit rules
Key Insight
Most traders spend 90% of their time on the system (the least important part) and ignore psychology and position sizing. This is why 90% of traders fail!
🎯 The Power of Responsibility
What Van Tharp Teaches:
The #1 trait of successful traders is taking 100% responsibility for their results. Van calls this "Response-ability" - your ability to respond to any situation.
❌ Victim Mindset
- • "The market makers got me"
- • "My broker gave bad advice"
- • "The system doesn't work"
- • "I was just unlucky"
- • "The market is rigged"
Result: Repeat the same mistakes
✅ Responsibility Mindset
- • "How did I create this loss?"
- • "What can I learn from this?"
- • "How can I improve my process?"
- • "What rule did I break?"
- • "How can I prevent this?"
Result: Continuous improvement
🌟 Real Example from Van's Workshop
A quadriplegic trader (paralyzed from a football accident) initially rejected the idea of responsibility. "How could I be responsible for my accident?" he asked.
But when he accepted even 1% responsibility - maybe his mental state made him take unnecessary risks - everything changed. He realized: "If I'm responsible, I can change my future."
He went from victim to victor, becoming independent and successful.
🎲 The Famous Marble Game
Van Tharp's marble game demonstrates how the same trading system produces different results for different people.
The Setup:
- • System: 60% winning trades, 40% losing trades
- • Win/Loss Ratio: Winners pay 10:1, Losers cost 1:1
- • Expectancy: Highly positive (great system!)
- • Participants: 30 traders with identical starting capital
🔍 The Shocking Results:
After 100 trades with the EXACT same system:
- • 1/3 went bankrupt
- • 1/3 lost money
- • 1/3 made money (some made fortunes)
- • All 30 traders had different final equities!
Why People Failed:
- • Bet too much (poor position sizing)
- • Increased bets after losses
- • Got emotional after streaks
- • Didn't follow the rules
Why People Succeeded:
- • Consistent position sizing
- • Followed rules exactly
- • Stayed disciplined
- • Managed emotions
The Lesson:
Your system doesn't determine your success - YOUR BEHAVIOR does!
🧠 The Wizard Technique
Van Tharp's famous technique for instantly changing your emotional state during trading.
When You're in a Bad State (Angry, Fearful, Frustrated):
Stand Up & Move
Immediately change your physical position. Movement breaks the emotional pattern.
Dissociate - Watch Yourself
Step back mentally and observe yourself as if watching a movie. See yourself sitting there in that emotional state.
Model a Super Trader
Imagine how Warren Buffett or your trading hero would handle this exact situation. How would they sit? Breathe? React?
Assume Their State
Physically adopt their posture, breathing, and mindset. Become that calm, confident trader.
💪 Why This Works:
- • Physiology: Changing posture instantly changes brain chemistry
- • Psychology: Dissociation reduces emotional intensity by 80%
- • Modeling: Your brain can't tell the difference between real and imagined
- • Practice: Do this 20 times and it becomes automatic
🎯 Mental Rehearsal Like Champions
Every top athlete uses mental rehearsal. Van Tharp teaches traders to do the same.
Jack Nicklaus's Golf Method (Applied to Trading):
See the result: Visualize your profitable trade closing
See the path: Watch the price movement that leads there
See yourself: Watch yourself executing perfectly
Feel it: Experience making the trade from inside
Do it: Execute in reality what you rehearsed
Morning Rehearsal (5 mins):
- • Visualize following your rules perfectly
- • See yourself staying calm in volatility
- • Imagine handling losses professionally
- • Picture taking profits at targets
Evening Review (5 mins):
- • Review what went well
- • Identify one improvement
- • Rehearse doing it better
- • Celebrate following your rules
📊 Van Tharp's Self-Assessment
Rate yourself 0-4 on each item (0 = never, 4 = always):
Your Score Means:
- • 0-5: Excellent mindset for trading
- • 6-10: Good foundation, minor work needed
- • 11-15: Some psychological barriers to address
- • 16-20: Significant mindset work required
🎓 Van Tharp's 10 Key Lessons
The Fundamentals:
- 1. You are responsible for all your trading results
- 2. Losses are just feedback, not failures
- 3. Your beliefs about yourself affect every trade
- 4. Emotions are signals to pay attention to
- 5. Good trading is boring (excitement = danger)
The Advanced:
- 6. Position sizing determines your returns
- 7. Expect long losing streaks (even with 60% winners)
- 8. Your system must fit your personality
- 9. Mental rehearsal programs success
- 10. Trading is a business - have a written plan
🏋️ Daily Practice Exercises
Morning (5 mins)
- 1. Review your trading rules
- 2. Mentally rehearse following them
- 3. Set your daily risk limit
- 4. Practice the Wizard Technique
During Trading
- 1. Notice emotional states
- 2. Ask "How did I create this?"
- 3. Use Wizard Technique if stressed
- 4. Follow position sizing rules
Evening (5 mins)
- 1. Journal your trades & emotions
- 2. Identify one improvement
- 3. Rehearse better execution
- 4. Celebrate rule-following
Your 30-Day Transformation Plan
Week 1-2: Foundation
- ✓ Take responsibility for everything
- ✓ Start a trading journal
- ✓ Practice the Wizard Technique daily
- ✓ Identify your emotional triggers
Week 3-4: Implementation
- ✓ Mental rehearsal before trading
- ✓ Apply strict position sizing
- ✓ Review and improve daily
- ✓ Simulate your system 100 times
Remember Van Tharp's Ultimate Truth:
"You don't trade the markets. You can only trade your beliefs about the markets."
📚 Learn More from Van Tharp
Essential Reading
- • Trade Your Way to Financial Freedom
- • Super Trader
- • The Definitive Guide to Position Sizing
Key Concepts
- • R-Multiples
- • System Quality Number (SQN)
- • Tharp Think principles
Remember
"Through repetition and practice, excellence becomes a habit."