Becoming a top trader is a journey. There are years of struggle and hard work ahead for most aspiring traders.
But the good news is, it’s a battle you can win, and when you do, the carrot is a big one.
In this lesson, I’m going to outline a daily trading routine defined by legendary Market Wizard Dr Van K. Tharp.
These 12 daily tasks of successful traders will go a long way towards turning you into a trader who can profitably trade like the pros.
This lesson draws extensively (with permission) from the teachings of the late Dr. Van Tharp, who regrettably passed away in 2022.
Dr. Tharp profoundly influenced my approach to trading in topics ranging from market analysis and position sizing to psychology.
I had the fortunate opportunity to meet Dr Tharp in person, and I was deeply honoured when he featured my work (built upon his teachings) in his newsletter.
Dr. Tharp’s teachings impacted traders worldwide.
I am forever indebted to Dr. Tharp, and aspire for this course to contribute, in some modest manner, to continuing his remarkable legacy.
Putting it all together
In your journey to becoming a successful trader, you’ll get your butt kicked time and time again.
(Most likely just after you thought you had finally ‘got it.’)
You’ll eventually reach your goal only through dogged determination and sheer willpower.
Legendary trader and Market Wizard Bill Lipschutz said:
“The really best traders don’t think twice about how many hours they’re working, or whether they come in on a weekend. There is no substitute for that level of commitment.”
However, hard work and commitment will only take you so far.
You need to work hard at the right things.
In this lesson, we review a daily trading routine defined by Dr. Van K. Tharp, that will get you doing what will make you a successful trader day-in and day-out.
By following this routine, you’ll learn how to apply what you’ve learnt throughout this course to daily action steps.
The Top 12 Daily Tasks of Trading
Here are the top 12 daily tasks of master traders.
- Daily self-analysis
- Daily mental rehearsal
- Centring yourself
- Developing a low-risk idea
- Stalking your trade
- Action stations
- Monitoring your trade
- Aborting your trade
- Taking profits
- Daily debriefing
- Being grateful
- Reviewing
Daily self-analysis
Your performance as a trader is a direct reflection of your level of self-mastery.
The more aware you are, the greater your ability to perform in a challenging market environment.
Overly emotional or arrogant traders struggle with their consistency in the markets.
They tend to make mistakes and miss opportunities that may come their way.
In contrast, a self-aware trader:
- exists in the present moment
- is free from emotions like fear and greed
- is calm and quietly aware
- can make decisions with an open mind
Your trading day should start with assessing your trading state of mind.
This could be a period of introspection or meditation, during which you focus inwardly, and notice what is going on internally.
It could also be a self-rating process, in which you rank yourself out of 7 (the number Dr Van Tharp recommended.)
If you are either too low or too high, you will want to meditate – or centre yourself – until you are in a more level state.
Ideally, you want to be around a 5.
Are any ‘parts’ interfering?
You may also find that certain ‘parts’ within you will be active on a certain day interfering with your trading.
(If you aren’t sure what I mean by ‘parts,’ go back and read this lesson.)
If you can learn to notice the ‘thoughts and feelings’ of these ‘parts,’ you can provide the ‘parts’ with what they need, outside of trading.
So your first daily task is to spend time meditating, or in introspection reflecting on your trading.
Daily mental rehearsal
As the market throws different circumstances at you, it can be helpful to mentally rehearse yourself trading well.
This rehearsal can either be conducted immediately prior to trading, or the night before.
The concept of mental rehearsal is borrowed from high-performance sports.
It’s been discovered that elite athletes visualise their events in full before performing.
They conduct perfect practice in their mind’s eye, resulting in increased performance during the actual event.
This rehearsal allows them to pre-plan their response to any scenarios that may arise.
By mentally rehearsing, a trader can anticipate problems and develop solutions, so the correct reaction becomes automatic.
This is your second task. Every day, you should:
- Visualise yourself following your trading system rules, coolly and calmly
- Think about and take into consideration any upcoming news events for that day
If you get into the daily habit of visualisation, you’ll be miles ahead of the crowd if anything unexpected does happen.
Centre yourself
When traders lose sight of their objectives, they make mistakes like cutting their winners short or letting their losses run.
For peak performance, traders must take a moment to re-orientate themselves towards their goals. This is ‘centring yourself.’
Top traders have a razor-sharp focus on activities that lead to achieving their goals.
Think of this action as ‘centring yourself’ towards your goals.
In addition, this may help to clear out negativity and align your subconscious mind with what you plan to achieve.
You could review your trading philosophy, to keep your trading principles fresh in your mind.
Once you have reviewed the goal, you should not focus on it.
Instead, you should detach from the goal, and focus on the activities that lead to achieving your goal.
This is your third mental task for the day. Take time before you trade to re-align yourself with your goals, centre yourself, and get ‘in the zone.’
Developing a low-risk idea
Many traders confuse market analysis with developing a low-risk idea.
They spend lots of time and energy analysing the market and then try to ‘fit’ the idea into their preconceived notions.
Dr. Tharp calls it ‘building a straw house’ – it gives the trader comfort, but avoids the important issues.
Remember your fairy tales – how sturdy is a straw house really?
The concept of developing a low-risk idea provides a framework that is more useful to the trader.
Your time analysing the market has one sole purpose: to find low-risk opportunities to make money.
It’s not about being right, nor is it about analysing the markets.
It’s more about developing a low-risk idea for you to trade.
How to develop a low-risk idea
When you develop a low-risk idea, you are looking for opportunities to place a trade in line with your target risk/reward ratio.
Preferably, it will be 1:3 or greater, though this will depend on your objectives in your rules-based plan.
Good ideas will usually be relatively simple (but this doesn’t mean they’re easy to generate)
Dr. Tharp divides this task into three main sub-tasks:
- Gathering data
- Creative brainstorming
- Determining risk/reward
Gathering data involves getting information from charts, fundamentals, or other sources (such as your news calendar.)
Creative brainstorming is about looking for a different way to look at the data – practising contrarian thinking.
Determining risk/reward is firstly about understanding the opportunity, and then working out if a plan can be implemented to capitalise upon it.
Note that for a rules-based plan, this can be conducting research or tests about your rules.
Identify what a high-conviction trade ‘feels like.’
In this phase, you’re looking for high-conviction trades.
Use your trading journal to note your feelings as you trade, until you learn to automatically recognise what you are feeling when you place successful trades.
If you have identified a high-conviction idea then you can trade a larger size.
Your fourth daily task is to find a good low-risk idea and determine your conviction.
Stalking your trade
Once you develop your low-risk idea, you want to act like a hunter stalking your prey.
Good traders don’t jump right in.
Instead, they wait for the optimal time to enter: when the odds are most in their favour.
One Market Wizard describes himself as a cheetah.
Even though cheetahs are one of the fastest animals on earth, they wait patiently for an easy kill before expending their energy.
A good trade should feel as if you are ‘shooting fish in a barrel,’ not as if you are taking a punt or hoping it will go your way.
In this stage, your analysis is all done and you are simply waiting for your final entry conditions to be triggered.
You can set alerts in your trading platform to ensure you don’t miss your trade, and key your entry order into your trading platform so its all ready to go.
Stalking your trade is your fifth daily task.
Action stations!
Once your conditions for entry have been met, it is time to enter your trade, or your trade may have already have been entered on a limit or stop order.
Check for silly mistakes as you enter your trade.
Check that you have not made any mistakes on your trading platform to avoid any losses due to ‘fat fingers.’
For example, double-check that you have not mistaken the number 6 for the number 9, or have accidentally typed the buy or sell quantity incorrectly.
Such typing errors are common, so you need to be vigilant, and constantly double-check your keyboard entries are correct.
In this phase, you will set alerts that help you to manage your trade.
This is your sixth daily task. Enter your trade, and double-check that your position size is accurate. Quickly fix any mistakes if you have made an error.
Monitoring your trade
The master trader carefully monitors their position as it moves toward their objective.
In this step, you monitor the trade against your exit strategy.
Dr Van Tharp suggests that monitoring is broken down into two types:
- overview monitoring
- detailed monitoring
Overview monitoring
During overview monitoring, the trader steps back and takes a big-picture view of his position.
As Dr Tharp put it, look at the forest instead of the details of the trees.
This involves:
- sitting back and comparing market events with your trading plan and profit objectives
- look for insights that may indicate a change in the reason for staying in the trade
For example, this could include:
- the market not responding to news how it ‘should’
- a change in the price action
- a sudden breach of support or resistance levels
Overview monitoring is a method of risk control.
If a trade is going for you, it should be easy to hold on to as it moves in your favour.
If the market is not behaving how it ‘should,’ it could be a sign you might want to reduce your position size, or get out of the trade.
Market Wizard Paul Tudor Jones said:
“If you have a losing position that is making you uncomfortable, the solution is very simple: get out, because you can always get back in.”
Detailed monitoring
Zero in your focus on the position. When you first get in, you make sure the trade does what you expect.
During your detailed monitoring, you may decide to:
- add on to the position
- hold on to the position and monitor it
- tighten the stop-loss
- exit part or all of the position
(or a combination of any of the above.)
Check if there are any news events coming up.
If there is a major news event, you can plan what to do if it goes for or against you.
For example, you might want to tighten the stop on part of your position, in case you get news that moves the market rapidly against your trade.
Your seventh daily task is monitoring.
Aborting your trade
You may quickly choose to get out of the trade if the market reverses after your entry.
This is an ‘action’ phase, where decisiveness may be required.
Your decision about where to exit will be either pre-planned with a stop-loss or arise from your observations during the monitoring phase.
It’s where you execute your risk control by cutting losses if necessary.
According to Dr Tharp, top traders have three main beliefs about when to abort a trade:
- if the market is going against them beyond a threshold determined by their risk-management plan
- when the reason for the trade no longer exists
- if they feel uncertain about the position
These are all good valid reasons to abort the trade and get out.
Once you determine the appropriate time to abort, change your mental state to one of focus and action, and commit to your decision to close the trade.
Of course, you will want to use stop-loss orders and trailing stops as much as possible to automate this process.
Your eighth task of the day is to get out quickly if the trade is going against you, or if the reasons for the trade change.
Taking profits
Many traders focus on their entry, and not when to exit.
This means they end up with less profit than they should get from their winning position.
In addition, many traders over-emphasise being right and make taking profits an ‘all-or-nothing’ decision, rather than scaling out of positions.
Before you enter a trade, you should know your profit potential in terms of risk.
With this in mind, you should have a number of rules in place that give you the best opportunity to achieve or exceed that profit potential (while managing risk and adapting to changes in market conditions.)
Dr Van Tharp believes top traders have four primary beliefs about taking profits:
- top traders avoid being greedy and simply react to the signals provided by the market
- top traders are patient, and allow the market to move toward the objective
- if market volatility or risk conditions change dramatically, they will get out.
- in a volatile market phase profits are taken quickly
Top traders don’t get overly worried if a positive move goes much further than their profit objective.
Don’t feel you have to close 100% of your trade just because your profit objective has been reached.
Once top traders are out of a position, they don’t chase the market if it continues to trend.
A focused state of mind is needed
Similar to the action and abort tasks, profit-taking requires a focused, action-orientated state of mind.
This will mean a mental shift from the state of mind you use for monitoring your position, once you are ready to take profits.
Your ninth task of the trading day is to take your profit per your rules.
Daily debriefing
Daily debriefings facilitate two things:
- they allow the trader to note any mistakes they may have made, and avoid making them again
- they allow the trader to create a record of what works for them in the market, which they can review to develop their trading systems and processes
A daily debriefing does not need to be a time-consuming process.
It might be as simple as writing in your trading journal.
I’d suggest you record your results, noting what worked and what didn’t work.
Dr Van Tharp suggested that it is important to avoid self-recrimination about mistakes.
That is not helpful behaviour.
Instead, review the situation objectively, as if you were ‘looking in on yourself’.
Then you can visualise and rehearse more productive options available to improve your trading the following day.
Your tenth daily task is to conduct a daily debriefing.
Be grateful
The practice of giving thanks is a later addition to Dr Van Tharp’s top tasks of trading.
He realised he was spending much of his energy finding problems, so they could be fixed or cleared.
Instead, he started to look for the blessings in his life.
What gradually happened was a lightening of his spirit.
He started to ask traders to apply this practice each day when they traded – to dramatic effect.
Whether it is the ‘law of attraction’ in action, or simply an excellent method of staying humble, it is a good way to shift the trader’s state of mind to the positive.
Whichever way it works, being grateful is an important part of the top traders’ routine.
Your penultimate task for the day is to be grateful for the day, no matter the outcome.
Reviewing
Although a periodic review is not conducted daily, it is listed by Dr Van Tharp as one of the core tasks of top traders.
You should establish a routine where you sit back and review your trading.
By objectively reviewing your trading rules and behaviour, you can adapt to an ever-changing market environment.
The more you trade, the more often you need to complete the review process.
The review process should include:
- going through your journal from your debriefings
- reviewing your trading plan and business plan
- reviewing your performance, and what you have learned.
Dr Tharp suggests spending at least a day on your periodic review.
This is the final regular task that all top traders carry out.
For more information about how to review your system’s performance, see this lesson all about testing your system.
Apply the practices of master traders
By following these twelve top tasks, you are applying the daily practices of master traders.
Master traders don’t just know the markets, they know:
- precisely how each part of their personality comes together to produce results
- when they’re in the zone
- how to get themselves there when they’re not
- how to hold themselves under a microscope
- how to take profits, cut losses, and preserve capital
- how to survive until their best ideas come to fruition
By rigorously applying the daily tasks of top traders, you are taking proven steps that will get you from where you are now, to where you want to be.
These are exciting times.
Cheers,
Sources
Marketmates uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial guidelines to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
- Dr. Van K. Tharp – Super Trader https://www.amazon.com.au/Super-Trader-Expanded-Van-Tharp/
- Dr. Van K. Tharp – Trade your Way to Financial Freedom https://www.amazon.com.au/Super-Trader-Expanded-Van-Tharp/
- Ari Kiev – The Mental Strategies of Top Traders https://www.amazon.com/Mental-Strategies-Top-Traders-Psychological/
