Self Sabotage Reexamined:
Part One
By
Van K. Tharp, Ph.D.
TRADING
C OACH
Van K. Tharp, Ph.D.
In the unique arena of professional
trading coaches and consultants,
Van K. Tharp stands out as an
international leader in the industry.
Helping others become the best
trader or investor that they can be
has been Tharp’s mission since
1982. Dr. Tharp offers very unique
learning strategies, and his techniques for producing great traders
are some of the most effective in
the field.
“Most people are
psychologically wired
to lose, or perform very
poorly, at whatever
they set out to do.”
-V. Tharp
One of my passions in life is to
model things. When I’ve modeled different aspects of human
excellence, I’m always amazed
at how people seem to be almost
hard-wired to do things the
wrong way. Let’s look at a few
examples:
I first modeled the trading process and the Peak Performance
Home Study Program was born
as a result of this. And what I
discovered was that most people
do all of the wrong things almost
naturally. For example, they
tend to cut their profits short
and let their losses run. They
focus on picking the right stocks
(and being right about them) as
opposed to position sizing and
exits. They get emotional about
their trading. The list could go on
and on and all of it appears to be
some form of self-sabotage.
Trade Your Way to Financial
Freedom came about as a result
of modeling the area of trading that seemed to be the least
psychological—system development. I wanted to know “how
traders develop good systems.”
And, once again, I discovered
that most people do all the
wrong things. It’s almost second
nature to them. For example,
they concentrate on the entry
portion of system development,
often to the exclusion of critical
items such as exits and position
sizing. In fact, this bias is built
right into most of the com-
mercially available software
for system development. That
software is designed to optimize
historical entries and will not
even permit decisions that have
to be made simultaneously at any
given moment in time such as
position sizing decisions. Trade
Your Way to Financial Freedom
listed 25 different psychological
biases that affect trading system
development and all of them are
basically some sort of self-sabotage.
Most recently, I’ve been interested in modeling the wealth
process. The wealth process is
so simple that almost everyone,
including those with a minimal
education, can become infinitely
wealthy. However, most people
do everything they can to prevent
that from happening. They go
deeply into debt to obtain “consumer items” on credit. And that
process starts as soon as they earn
money, perhaps even earlier if
they are in college. Furthermore,
when they become successful,
most people simply go further
into debt because they can afford
more debt. As a result, you often
PEA K PER FOR M A NCE T R A DI NG T I PS
hear wealthy people say, “I have
the same problems I had when I
was poorer, only the problems
now have more zeros behind
them.”1 And, in most cases, this
happens even when you educate
people about the pitfalls. They
still go out and make the same
mistakes. Again, this seems like
self-sabotage to me.
Most people recognize their
own self-sabotage when they are
trying to accomplish something
and they continually fail at it.
For example, if you are trying
to earn a living trading and you
continually lose in the market,
you might eventually recognize
this as self-sabotage. Similarly,
if you have set up a plan to trade
a particular way, which you do
most of the time, but let’s say
once a month, something goes
wrong and you give up all of your
profits, then you’d probably call
that self-sabotage.
However, most people are not
aware of their own self-sabotage as it occurs. For example,
I just finished taking a group of
six people through a mock trading game. They all made huge
mistakes and I was debriefing
them by asking, “Give me three
lessons that you learned from the
game.” One woman had elected
to go against the expectancy of
the game and ended up bankrupt.
Yet, with a lot of struggle, the
only lessons she could come up
with were: “I risked too much
and I didn’t think about percentages.” When I explained to her
that she went against the odds so
that she had no chance of winning
if we played long enough, she
said, “Oh, yes, I see that.” Yet
later when I asked her to repeat
her major lesson from the game,
she’d totally forgotten that one.
Our game consisted of 100 trades,
and one person drew out over 40
losing trades in a row. Even in a
system that is only correct 20%
of the time, the odds of 40 plus
straight losses are quite slim .2
She seemed a little shocked after
the experience. And later in the
game when we had four 10R
winners in ten trades, she only
managed to increase her equity
about 2%. Yet when I asked her
what mistake she was making,
she didn’t have a clue.3 Again, it
took a lengthy explanation to get
her to understand the mistake.
Yet I would call the mistake a
major example of self-sabotage.
The last three articles in Market
Mastery have been on the topic of
peak performance health. Most
of the foods we eat are killing
us. Yet I would guess that about
99% of the American people are
totally unaware that 90% of what
they eat is dangerous. In fact,
I’ve been on a strict cleansing diet
since last September. I’ve made
incredible strides in improving
my health. Yet I find that when
I record what I eat in a diary, I
only eat one or two things that
are on the “dangerous” list simply
because I like them. But when I
forget to write down what I eat in
a diary, I’ll suddenly realize after
a week or ten days, that about
60% of what I’m eating is now
dangerous. And I suspect that
if I totally ignored the journal,
I’d find myself getting back to
normal American habits of 90%
dangerous food quite quickly.
So what have we discovered
about self-sabotage? Well, the
following points seem quite obvious to me.
• Most people are psychologically wired to lose, or perform
very poorly, at whatever they set
out to do.
2
• People are only aware of their
self-sabotage when they have a
distinct goal and they repeatedly
thwart themselves from achieving it.
• Most of the time we are totally
unaware that we are doing things
that keep us at very sub-optimal
levels of performance.
The Matrix Theory of
Self-Sabotage
One of my favorite movies of all
time is The Matrix. In this movie,
human beings have been taken
over by robots. We, as a race,
are all unconscious and having a
dream about life. And that dream
is very much like our life today.
However, the hero of the movie,
Neo, gets the opportunity to find
out what’s really going on. He
takes a “red pill” and after going
through a very “wild” experience,
wakes up to what seems to be going on in his world.
In the Matrix world, Neo and
others like him who are awake to
their programming, can do something that the average unaware
person cannot–they can reprogram themselves. And when you
reprogram yourself to function in
a world where everyone else is
unaware, you basically seem to
function at a superhuman level.
Neo and his colleagues can now
compete, although just barely,
evenly with those who are doing
the programming.
The Matrix model of self-sabotage would basically say that
we are programmed to perform
at a very poor level. The world
gives us stimulation (i.e., experiences) and because of our faulty
programming, we perform at a
sub-optimal level. And we are
totally unaware of the fact that
we are doing so.
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The fix for self-sabotage, in this
model, is to reprogram yourself
to perform at a “super-human”
level. And interestingly enough,
this particular model is probably
the dominant model for how selfsabotage works and how people
fix it. And, of course, there is
no fix for the problem that most
people are unaware of their self
sabotage. The model is illustrated
in Figure 1. It reminds me a lot
of my early training in psychology which focused, at that time,
on behaviorism. Behaviorism
assumes that we as human beings
are “black boxes.” However, if
you play around with the stimulus-response programming of the
black box, you really don’t need
to know anything else.
Anthony Robbins has really
popularized this model with his
Neuro-Associative Conditioning™ Model. Robbins assumes
that we are programmed to avoid
pain and pursue pleasure and that
if you change the pain/pleasure
dynamics for an individual, you
can reprogram them for success.
Much of what Robbins does is
from Neuro-Linguistic Programming which is also based on the
same model. Its basic tenant is
that you can model how people do
things by determining their neural
and linguistic patterns. And once
you know the “programming of
those who do it well” you can
program others to do the same
thing.
Given these examples, the Matrix
model for self-sabotage seems
to be very popular and the one
most people use in determining
how to fix problems. You simply
determine what the programming
is and then fix it.
Jeffrey: An Example
Jeffrey had been a real estate
tycoon during the boom period
Figure 1
in the 1980s. He made millions
and was constantly doing deals.
Everything he touched turned
to “gold” so to speak. Jeffrey
thought he was on top of the
world and he lived that way.
Jeffrey was quite lonely and
spent most of his free time with
his best friend, Rick. Jeffrey and
Rick had grown up together, attended school together, and even
dated girls as a foursome. They
were almost inseparable. Jeffrey probably spent more time
with Rick than he did with his
wife. And then it happened, the
boating accident. Rick was fishing one weekend, surprisingly
without Jeffrey. He’d gotten
drunk, fallen out of his boat, and
drowned.
Jeffrey was mortified. He blamed
himself because he was not there
with Rick. Perhaps he could have
saved him. Perhaps he could
have stopped him from drinking
so much. Perhaps he could have
died with him (or instead of him)
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and then he wouldn’t feel so lonely. There were so many things he
could have done, but he didn’t do
them. And now Rick was dead.
Jeffrey was really down and he
felt like it was all his fault.
Within the next year, real estate
started to become a bad investment. Loan rates skyrocketed
and Jeffrey found himself in a
position in which the bank started
to call some of his loans. He
said he could have easily sold
the buildings for a profit, but the
bank wanted to call the loans. He
even had a positive cash flow on
the buildings, but for some reason
the bank wanted to call the loans.
And when they did, they sold the
buildings at a wholesale price just
to pay off the loans. Jeffrey was
certain that someone in the bank
was out to get him.
When the first building was sold,
it seemed to start a boomerang
effect on Jeffrey’s business. Suddenly his cash flow was less and
he really was struggling to make
payments. And then some tenants
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moved out and the next thing Jeffrey knew, the bank was calling in
another loan. And then another
and another. Soon Jeffrey had
no other option but to declare
bankruptcy.
Jeffrey managed to hide some
money from his creditors, but
somehow his magic was gone.
He could no longer make deals.
Nothing he touched turned to
gold. Instead, what seemed to
be gold turned to lead if Jeffrey
touched it. Or, at least, that was
the way it seemed to Jeffrey.
Second, Jeffrey didn’t have a
business plan. He hadn’t planned
how he would react in certain
situations. He didn’t know how
his system would perform under
various market situations–to the
extent that he even had a system.
Therefore, he couldn’t develop
alternative plans when market
conditions changed. Jeffrey
certainly didn’t have worst case
contingency plans. But he really
wasn’t interested in all of that.
He just wanted to make money
again.
Jeffrey decided to try to day
trade. He spent a year learning
the craft. But somehow there
was no magic. He’d made 20%
in two months and then he’d give
it all back and more. He’d make
40% and then lose 60%. And
yet he felt like he should be able
to make a fortune trading stocks.
Other people were doing it, so
certainly he should be able to
do so. Why not? Wasn’t he the
golden boy? Or, at least, he used
to be the golden boy.
Third, Jeffrey was obsessed with
money. And sometimes when
that happens, the universe finds
a way to press your buttons.
But Jeffrey didn’t care. He just
wanted to make money again.
Fourth, Jeffrey had suffered some
horrible losses in the market.
Several of them were serious
enough to scare most people
away from the market, but they
didn’t stop Jeffrey from trading.
But that still wasn’t the source of
Jeffrey’s problem.
So, given that background, what
is the problem? Is it Jeffrey or
just unfortunately circumstances?
If it’s Jeffrey, how would you
fix it? What’s the source of the
problem?
Fifth, Jeffrey’s confidence had
been shaken horribly by his experiences in real estate. He seemed
to have the opinion that someone
was out to get him ever since his
first loan had been called. He still
wanted to kill the banker that ruined him, but he wasn’t sure who
he was. But even that wasn’t the
real root of Jeffrey’s problem.
Let’s take a look at it and see
how it might fit into the Matrix
model. Did Jeffrey somehow get
programmed to fail? And, if so,
how could one fix him? Or how
could he fix himself?
First, Jeffrey, like most traders,
didn’t have the fundamentals
down. He didn’t understand
expectancy, R-multiples, and
position sizing. And, interestingly enough, he didn’t want to
understand. He just wanted to
make money again.
Lastly, Jeffrey’s self-esteem had
been totally shaken by the death
of his best friend. He was lonely
and lost. His best friend had
filled a void in his life. When
Rick died, the void became even
bigger. In fact, Jeffrey made it
bigger by assuming that he was
to blame for Rick’s death by not
being there. If he’d been there,
his friend would still be alive.
4
And perhaps, he felt, he’d still be
the golden boy.
My experience with traders like
Jeffrey is that attempting to fix
the first four levels of problems
without fixing the deepest problem is doomed to failure. If
you teach Jeffrey R-multiples,
expectancy and position sizing,
it won’t work because he doesn’t
have a business plan to guide
him. If you get him to develop a
complete business plan, it probably won’t work because he’s
had some traumatic losses in the
market and they tend to make
him fearful. The money issue
is significant, because Jeffrey’s
focus is in the wrong place, but
changing the focus won’t change
the problem. And if you attempt
to fix the fear of trading issue,
it probably won’t work because
Jeffrey still feels that people are
out to get him from his experiences in real estate. And finally,
if you help him heal his wounds
from the real estate debacle, it
still might not work because of
the void in his life from the death
of his best friend. However, if
Jeffrey heals the issues with his
best friend, then he can begin to
solve all of the other problems
that developed on that foundation–especially if, by doing so,
Jeffrey can learn how to fill the
emptiness in his life.
The Reprogramming Fix
The “fix” needed in a situation
like Jeffrey’s is to find the belief
that Jeffrey made about himself
at the time of his friend’s death.
In this case, it was “I’m useless,
because I wasn’t there for my
friend. I didn’t save him.”
Once you know the belief, you
then have to get Jeffrey to look at
the impact of that belief in some
©2005, IITM, All Rights Reserved
way. Different techniques of doing so might include4 :
• Looking at the consequences
of the belief by asking questions
such as “What does a belief like
that get you into? What does a
belief like that get you out of?
(Dynamism)
• Taking the belief and imagining
yourself in the future with that
belief with the worst possible scenarios and noticing how painful it
is. And then imagining yourself
with an alternative belief and
noticing how wonderful things
could be. And in each case, really get into the feelings. (Tony
Robbins)
• Looking at the incident that lead
up to the belief and looking at the
positive learning that might be
there such as: “He did the best he
could with the resources he had.”
(Part of Timeline work).
• Looking at the belief from a
number of different perspectives,
including the past (i.e., before
the belief was formed) and the
perspective of different people
(i.e., a neutral party, other people
who were involved such as the
other person in the incident,
etc.). (Timeline and other NLP
techniques)
• Looking at the belief from a
spiritual perspective of “oneness”
or some other core state. (Core
Transformation)
• Looking at the feelings that
occur as a result of the belief
and really feeling those feelings
until they disappear. (S. Grof
techniques)
Once the core belief has been
found and transformed, a therapist can then begin to unravel
the consequences of having that
belief. In Jeffrey’s case, all of
the other reasons mentioned for
Jeffrey’s poor trading were really consequences of having that
original belief.
The techniques just listed tend
to work, if you can find the root
belief and transform it. However,
when they do work, are we really
undoing faulty programming? Or
are we doing something else?
Assumptions of the Matrix
Model
Let’s look at some of the assumptions of the Matrix model. It
basically assumes that we human
beings are like robots in that our
behavior is programmed. And
who does the programming? Our
parents? Our peers? Our teachers? Perhaps that’s what happens.
But are you really a robot? Is our
behavior really the result of what
others do or from events that happen to us. I don’t think so.
In the Matrix movie, our hero,
Neo, can develop superhuman
behaviors, but those behaviors
aren’t quite at the level of the
computers or robots that were
involved in developing the Matrix itself. After all, Neo was
operating out of the Matrix, so
he needed to abide by its rules.
However, something happens to
Neo. He suddenly realizes that
even the Matrix is made up and
that he is something more than
that. And in the end of the movie,
he transcends his programming
and moves into “Godlike abilities” in which he can stop time
and pick bullets out of mid air.
Our existence may be a lot like
that. Let’s look at some of the
evidence about the nature of selfsabotage:
• Let’s imagine that you have a
system; however, you always
seem to exit winning trades early
5
before you get a signal to exit.
This model would suggest that
somehow we’re programmed
to do that–perhaps because of
some big loss in the past, you
want to make sure it would
never happened again. But is
that programming or a choice
we make?
• I’ve personally worked on
clearing out my own blocks for
many years. The early part of that
clearing involved overcoming
negative experiences. However,
after a while, there were less negative experiences to overcome,
yet some of the self-sabotage
persisted. Why? What else was
going on?
• For many years, I’ve taught
that the most important trait for
a good trader is assumption that
you totally create your experience
as a trader. When you do so, you
are then in charge of your destiny.
However, if we were programmed
individuals, then we’d have to assume that the programming, not
us, produced the results. That’s
not a very useful assumption.
• Instead, we seem to be creative
beings. We imagine something
and then produce a result. This
might occur through “manifestation” or other forms of creation,
but it does seem to occur. Creation does not seem to involve
any form of programming. Everybody creates, even if it is to
create the status quo and be passive about it.
• My training in biological psychology, attempts to look at the
brain as if it were hard wired and
that just didn’t explain everything. In fact, it didn’t explain
much as far as I was concerned.
Memory could not even be localized in any particular place in the
©2005, IITM, All Rights Reserved
brain. Are we just our brains? I
think not!!
Figure 2
Creative Model
• Evidence from near death
experiences suggests that our
consciousness does not die, but
survives in another existence.
While it might be easy for some
to assume that a “flesh and blood”
human being can be programmed,
can we really say the same for our
consciousness as a spirit?
In addition, in every case I can
think of, the faulty programming
that needs to be undone occurs
when person adopts some belief
that seems faulty and illogical and
then gets stuck in that belief. Is
that faulty programming? Or is it
an active creative process? I tend
to think it is the latter.
The Creative Model of
Self-Sabotage
As a result, let’s look at another
possible model for self-sabotage–I
call it the Creative Model because
it assumes that we create our experiences through our beliefs. We
then get to enjoy and experience
those creations. However, if we
deny our experience or assume
that it is not us, then we give those
creations our power, and through
that, have an experience of selfsabotage. The creations seem to
control us. In Jeffrey’s case, for
example, he simply developed an
interesting creation when he took
on the belief that “I’m not worthwhile, because I wasn’t there for
my friend.”
Figure 2 shows a diagram of the
Creative Model of Self-Sabotage
in which self-sabotage simply
occurs because we deny our creations. In fact, the model actually
gives a very interesting definition
of self-sabotage: namely, selfsabotage occurs when you deny
your creations. Self-sabotage
occurs when you are unwilling
to experience the result of what
you create. In Jeffrey’s case, he
certainly didn’t like the results
he created when he decided he
wasn’t worthwhile. He wasn’t
willing to experience those creations. As a result, he continually
experienced them–both in real
estate and in trading.
I’ve already talked about this
model when it comes to feelings.
People are not willing to have
the experience of feelings that
they judge to be negative. The
example I’ve always used is that
of being rejected by a person of
the opposite sex when you are
looking for a date. He or she says
“no” just because he or she has
had a bad day. You interpret “no”
6
as a personal rejection. Since you
hate the feeling of rejection, you
try not to feel it and say, “I really
wouldn’t have had a good time
with that person anyway!”
When you are unwilling to feel
a feeling like that, what happens
is that you tend to stuff it and
store the feeling in your body.
The net result is that the next
time you want to ask someone
for a date, that feeling is there
for you to experience before this
person even responds. You hear
a voice in your head that says,
“Remember what happened last
time!” and you feel those feeling of rejection. As a result, you
feel rejected before you even
approach the new person. You
probably approach him or her
©2005, IITM, All Rights Reserved
as if you expect a negative response, by saying, “You wouldn’t
want to go out with me, would
you?” When you ask that way,
you’ll probably get the response
you expected. But even worse is
when you don’t ask because you
expected to be rejected. By not
asking and feeling rejected, you
prove yourself to be right.
In Jeffrey’s case the result is much
more subtle. First, he wasn’t
aware of forming the belief that
he wasn’t worthwhile. It just
seemed to happen. And when he
started to have experiences that
conformed to that belief, such
as his real estate empire falling
apart, he certainly wasn’t willing
to have those experiences. As a
result, he got stuck in them.
The market is a great place to
find a justification for all sorts
of experiences you don’t want
to feel, such as fear or anger or
whatever you feel when you don’t
feel worthwhile. What experiences are you not willing to have
while trading? Are you stuck in
them?
Next month I will continue with
this idea of self-sabotage coming from a belief that we create.
There are at least eight ways that
this could result in self-sabotage
and we’ll look at all of them in
the continuation of this series.
We will also look at the spiritual
model of self-sabotage (Personal
Responsibility: The Core Concept of Successful Trading).
Notes
1. In case you didn’t get this one, it
simply means now you have to worry
about payments on a $2 million dollar
loan instead of payments on a $20,000
loan.
2 .The odds of that happening
are about 0.00002 and so it’s not
something you’d be likely to see every
day.
3. In this particular case, I won’t tell
you what the mistake was until the
end of this article. Do you know? Or
would you do the same thing?
4. I’ve put the reprogramming
technique that uses this method in
parentheses after the technique. And
my list is far from exhaustive in terms
of techniques one might use These are
simply a few of the procedures with
which I have some experience.
Peak Performance Home Study Course
If you answer “yes” to any of the questions below, then you need to work on yourself to overcome self-sabotage. Dr. Tharp’s
Peak Performance Course for investors and traders is the perfect solution for you to overcome these problems.
•
Do you have trouble pulling the trigger and frequently miss big trades or investments that you are sure would be
winners?
•
Do you seem to have a ceiling in your investing/trading? For example, do you make a specific amount of money
only to find that you give it all back?
•
Do you invest for excitement? Do you find that you take high-risk trades and can’t help yourself?
•
Did you have a big loss at some point in your investing/trading history and then find that the loss still affects what
you do in the market today?
This home study course is Dr. Tharp’s masterpiece. It’s designed for all levels of investors and traders—beginners, advanced,
unsuccessful traders seeking to improve their performance, and successful traders who want to be more successful.
It contains five books by Dr. Tharp, and four CDs. These CDs help guide you through exercises in the course on such topics as:
how you think when you make profits and lose money; stress reduction; programming yourself not to repeat your mistakes; and
trading unemotionally.
Dr. Tharp carefully crafted the information from his studies into a model that people like you can use to improve your skills and
increase profits. Furthermore, Dr. Tharp only studied people whose professional and personal lives were balanced. As a result, when
yo
Dr. Van K. Tharp’s Peak Performance Course Five Book/Four CD Set is available on-line at www.vantharp.com.
The Van Tharp Institute
102A Commonwealth Court, Cary, NC 27511
(919)-466-0043 (800)-385-4486
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