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Numerous people have told me that it
totally changed their thinking about trading, investing, and how they
approached markets.
My understanding has always been that you cannot trade the markets. Instead, you only trade your beliefs about the market. For example, if you believe that the market is going to go up (or generally goes up in the long run), and you believe that trend following works, then you might adopt a trend following approach to buy stocks that are going up. However, if you believe that the market is overvalued and likely to go down, then you might have trouble buying stocks that are going up because it conflicts with your beliefs.
"Van Tharp is a living legend. He is
opening the doors to what really matters in trading and investing.
He goes beyond suggesting ways to find potentially good stocks. He
helps the reader understand the importance of how much to buy, how
to get out when you are wrong, how to get out when you are right,
how to assess your winning percentage, how to assess your returns
from your system and most important of all- he explains the
importance of investor psychology. A must read for any trader or
investor." — Review from Amazon.com, January 2007
Everything that I said in the first
edition of this book (published 1999) reflected my beliefs about the markets and what
was necessary for trading success at the time that I wrote the book.
However, beliefs are not reality. Instead, they are your filters to
reality. I’ve acknowledged that for a long time, and I’ve
continually said that what I teach reflects the most useful beliefs
that I now have about the market and trading success.
Over the years, I
occasionally run across beliefs that seem to help people even more than
those reflected in the first edition of this book. And after seven years,
I’ve adopted many new, more useful beliefs. As a result, even though
most of the core concepts have NOT changed, I still believe that enough
things have changed that I can help people even further with a new edition
of this book.
Here are a few of
the major changes that reflect my current beliefs:
•
I believe that all trading systems should reflect the big picture. In
1999, we were nearing the end of a great secular bull market that had
begun in 1982. In 1999, you could buy any high tech stock and hang on to
it for six months and perhaps double your money. However, secular bull
markets are followed by secular bear markets such as the one that began in
2000. These tend to last for as long as twenty years, so people need
strategies that take advantage of such macro tendencies to make good
profits. The bear market isn’t bad news. It just requires a different
focus to make money.
•
My concept of expectancy in the first edition of this book was slightly
misleading and definitely confusing. I changed it in my other books, but
it is also important to make sure it is crystal clear in this book as
well.
•
I now strongly believe that systems can be thought of as distributions of
R-multiples, which you’ll understand better as you read the book. When
you understand this, your perspective on trading systems will totally
change.
•
Because systems can be thought of as distributions of R-multiples, it’s
also possible to use those distributions to simulate what your future
results might be like. And even more importantly, such simulations will
tell you how to position size your system to meet your objectives. I’ve
placed a strong emphasis on this topic in the new edition of this book.
The two brand new
features in this book include a study of seven traders whom I follow
through five trades. Each one has the same opportunities, but based on
their individual beliefs and strategies, what they do with those
opportunities is very different from one another.
Also, I have
analyzed the performance of nine prominent newsletters using R-multiple
distributions, and share the varying results with you.
In addition, there are
many small, but significant changes to this book that will help you become
a much better trader or investor. I hope you benefit as much from the
second edition as many people have claimed to benefit from the
first.
Below are book reviews from readers we've found on-line:
| From www.meta-formula.com |
Dr.
Tharp's book is one of the finest trading volumes written in the past ten years. While some books are chock full of hazy trading axioms and incoherent discussions of technical indicators,
Tharp's book is clear and meaningful.
The point of the book is to deemphasize entry and focus on position sizing & the value of following your own system.
By describing R-Multiples, stop losses, and profit-taking exits, Tharp discusses a subject overlooked by 99% of market manuals, answering questions such as:
- What do I do if my position declines? Where do I sell?
- When do I know that the market move is over and take a profit?
- How much do I risk on any one trade?
Investors and traders will be surprised to learn that you can create a very profitable system that is "correct" only 30% of the time, while you can also have a very unprofitable system that is correct 90% of the time.
In this respect, Tharps book is profound, teaching individuals the real secret Holy Grail of trading and how virtually any concept can make money with a few simple rules.-- www.meta-formula.com |
| From
www.bnsit.com |
| "Trade Your Way to Financial Freedom, published in 1998, is author Van K. Tharp’s generous contribution to the field of trading how-tos. Boiling down the complexities of profitable trading to provide a concise and well organized guide, Tharp presses the value of a low risk, personalized investment plan. Providing brilliant insight into and clear delineation between the fundamental aspects of a successful system, Tharp’s text is a good overview and deserves to be read. Even those day traders eager to move on and read his more specialized Financial Freedom Through Electronic Day Trading should give his 1998 work a good look first, as it has much to
offer." — www.bnsit.com |
| From
EliteTrader.com |
| "The
best 20 buck I ever spent, don't buy systems, don't buy other
books, don't go to seminars, invest your money here and then
precede from there." |
| "Great
book. I just wished I had read this book when I first started.
Then my life would have been so much easier." |
| "Okay,
the title is awful..., but this book is a real gem. The chapter on
expectancy is a real eye opener if a new topic, it gives a glimpse
in to how the professionals trade, ie for profits on average
rather than been obsessed with accuracy... Money management (or
position sizing as Tharp calls it) is briefly covered, and will
inspire to look closer at this very, very important subject.
Overall, excellent and I particularly like the way Tharp poses
intelligent questions to the reader making you actually think,
rather than just saying "this is the correct way" like
so many 'gurus'." |
| I
don't have much to say that hasn't already been said here.
However, if you want a book that has the potential to
revolutionize your trading mentality then buy this book. If you
realize that you are the only one stopping you from being a
complete success, then buy this book. Tharp's focus is on
developing a successful trader from the inside out, not from gadgets
as many would have you believe. He points out numerous
biases that affect traders and the shows you how to correct them.
He points out one basic idea that I
found to be profound. Making money in the markets is not about
finding the "right" entry points/signals or even being
right. The markets are about position sizing and money management.
One of the quotes from his book says: "Making money has
absolutely nothing to do with being right." While that quote
is easy to argue with, it also holds a lot of truth...
Tharp points out that a system
based entirely on random chance can make a great deal of money if
properly managed... this is how successful gamblers make money...
Excellent insights. I also
recommend that you visit his website and get his free demo...
The book is a must have / must read
/ must keep. |
| "I'd
have to agree with the good reviews on this one. Offers some
unusual insights which I haven't come across in other books. The
chapters about position sizing and money management are excellent
- it's not rocket science, it's 'obvious' once you've read it, but
I haven't seen it mentioned or explained before.
Lots on psychology and personality
issues - also useful, although I imagine some might throw the book
away and go looking at charts and candlesticks instead...."
|
| From Amazon.com |
"This
book, and a few others, are the type you NEED to read and KEEP. It
may not have all the answers and doesn't purport to, but as you
develop your understanding of the markets, it is this quality of
information that will allow you to retain the proceeds of your
efforts. IF you think you know about risk management and haven't
read Van Tharps books - its likely that you should
reconsider."
|
| "I've
been trading for about 20 years and I think the book is good. I
have already used some of the concepts over the years and they
work. It does help greatly if you trade in the same direction as
the general market and to diversify into as many un-correlated
markets as possible. Low risk entries can be found using simple
chart analysis and common sense. But, there is nothing magical
about charts, in the end, ALL entries are mere guesses. Stop loss
protection is what makes the money." |
"I
was living in the dark! Before I read this book. If you want to
trade for a living, this book is ABSOLUTELY essential. Dr. Tharp
opened my eyes on the basic math and probabilities involved in
developing a profitable trading system. Did you know that you can
be profitable even if most of your trades are losers? Did you know
that you can be losing money even if most of your trades are
winners? Did you know that the most important part of your system
is not entry (chart setups), but your strategy for position sizing
and your exit strategy? Did you know that depending on your
position-sizing model the same system can be very profitable,
barely profitable and ruinous? Did you know that there are 6
variables that determine profitability of any trading system? They
are 1) probability of successful trades; 2) relative size of
profits compared to losses; 3) cost of trading; 4) frequency of
trading (trading opportunities); 5) the size of your capital
compared to average trades; 6) position-sizing strategy;
Read this book! Stop doing whatever you are doing, because you are
probably just wasting your money without understanding the basics
of developing a profitable system."
|
"After
48 yrs if successful trading--this is the Best Book. The best of
over 200 trading books, cd's, video's--if you have failed at
trading ( the majority have ) read, re-read, re-re-read etc this
book to improve your trading."
|
| "This
book focuses on 4 things: (1) Be Open Minded (2) Focus on Exit
Strategies (3) Positive Expectancy (4) Create your own system by
studying other people's systems.
(1) Be OPEN MINDED: The book
attempts to point out why most investors are too narrow minded and
get too attached to a single trading system. It argues for the
importance of first knowing yourself, your habits, etc before
creating your own system.
(2) Exit Strategies: The book
attempts to explain why Exit Strategies are often more important
than Entry Strategies, how other systems often focus too much on
entering the market and not enough on exiting the market and why
this going against the grain is important.
(3) Positive Expectancy: It teaches
you how to create a system of keeping track of your trades so that
(1) you'll know your batting average and (2) don't get discouraged
like everybody else when a trade doesn't go your way.
(4) Create your own System: It
shows you a bunch of other people's systems in the hopes that you
can pick and choose the right trading tools for yourself.
This book is definitely not a
get-rich-quick book and it's more about developing a proper
trading mentality which the author sees as a key ingredient for
most successful trader. It does not spoon feed but it does force
you to think and do your homework."
|
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