Trading Beyond the Matrix: The Red Pill for Traders and Investors by Van Tharp

Q & A with author Van K. Tharp

When I saw the movie The Matrix, I said, "I don't know if the writers really understand how true their metaphor is!" That's because there really is a Matrix that masks reality. That Matrix is our beliefs. Sometimes I'm totally amazed at the beliefs society and other people try to impose on us. And a long time ago I realized that we need to look at our beliefs in terms of utility. How useful are they? When I adopted that belief, my life changed forever.

Anyway, this book is my attempt to convey just that. When you realize that everything is programmed, then you can be like Neo in the movie and reprogram yourself. When you do enough transformation, you might even be able to step outside of the Matrix . . . which is what I call "Trading in the Now." So this book really is the "red pill" for traders and investors.

Exactly. I've always known that my mission was transformation through a financial metaphor. My whole staff thrives on frequent comments like: "You have changed my whole life for the better, thank you." We had a staff meeting several years ago and decided that we should really promote the mission. For example, I occasionally hear people say that if Van Tharp knows so much about trading, then why doesn't he just trade? Well, the presupposition behind that statement is that "the be all and end all" of life is the money you make from trading. It's not for me. It's what I just explained.

One of my staff members suggested that perhaps I should write a book about transformation and I found that very exciting. I've already written a five-volume course on peak performance trading and I really didn't want to duplicate that in discussing psychology. So at this point none of my books have been what I'd call an in-depth psychology book--that is until this one. But transformation gave me a new angle to really talk about the "you" factor in trading, as one will read in this book. We believe that we take our clients through three levels of transformation--this is what's covered in the book. The first level is the core beliefs that come out of my modeling work with top traders. You have to share a top trader's beliefs to become one. I've never seen anyone else provide all of this material together, so we call it Tharp Think. So, the first section of the book is about how people transformed themselves using Tharp Think principles.

Second, most people can't just adopt those principles. Instead they have to transform themselves. The second part of the book goes through various transformation techniques that will help you adopt Tharp Think. However, my approach in the book is rather unique. I have one chapter devoted to each of a number transformational techniques, the first one being how to look at and change your beliefs. Each chapter also focuses on one person's transformation using one of the techniques. It is a lot like a story about transformation.

Lastly, if you do a lot of personal transformation, then your level of consciousness will tend to change. For example, everyone knows what happens when you trade out of "fear" or "greed," which are rather low levels of consciousness. Now imagine what would happen if you traded from "acceptance," which is a much higher level. The results would vastly improve. And how about if you could trade from "an enlightened state" in which there was no internal chatter and you just see the market for what it is. The trader who wrote Chapter 16 trades from such a state and her results are phenomenal.

One of the principles of Tharp Think is that you should predefine your risk (which I call R) before you enter a trade. Another key principle is that you should always think in terms of reward-to-risk throughout the course of a trade. I encourage people to do this by thinking about their profit and losses from a trading system as a function of the initial risk. For example, if your initial risk is $1000 and you make $5000, then you made five times your initial risk or a 5R profit. If you lose $500, because you raised your stop, then you lost half of your initial risk or minus 0.5R.

When you start doing this regularly, it becomes ingrained to think about reward to risk (and how often do you hear the media talk about that). The average R value of the results is the expectancy of your system. You also realize that a trading system can be characterized by its R-multiple distribution. And you can ever measure the quality of a trading system. So there are huge advantages of using R-multiples.

Absolutely. For whatever reason, women are not attracted to trading as much as men. About 10-15 percent of the people who come to our workshops are women and about 10-15 percent of the people in our database our women. I think women are every bit as qualified as men, but they need to make the decision.

There is some good news. I had four women join my Super Trader program in 2013--and that quadruples the number of women enrolled. The women in the program are doing well, so I would definitely encourage more to start.

We have several home study courses, an expanding selection of online courses, at least 12 different workshops, numerous books, and a super trader program that combines all of that. So if you think you are weak in some area, like understanding the basics, needing a trading system, developing a trading plan, or working on yourself, we have workshops for all of it.

I'd be disappointed if that's all it did. I'm expecting a lot of people to tell me or my staff that this book changed their life--that's a lot more rewarding to me. Imagine, there really is a matrix and there really is a red pill you can take to get out of it--the red pill is this book.