Product Description

The bestselling holy grail of trading information-now brought completely up to date to give traders an edge in the marketplace

“Sound trading advice and lots of ideas you can use to develop your own trading methodology.”-Jack Schwager, author of Market Wizards and The New Market Wizards

This trading masterpiece has been fully updated to address all the concerns of today's market environment. With substantial new material, this second edition features Tharp's new 17-step trading model. Trade Your Way to Financial Freedom also addresses reward to risk multiples, as well as insightful new interviews with top traders, and features updated examples and charts.

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Product Details

• Amazon Sales Rank: #6046 in Books
• Published on: 2006-12-01
• Original language: English
• Number of items: 1
• Binding: Hardcover
• 482 pages

From the Inside Flap
Tharp's proven 14 step model for developing a profitable trading system-as
well as his latest methods and techniques for winning in any market. Trade
Your Way to Financial Freedom also includes new information on secular bull
and bear markets and macro economics; as well as ways to think about and
evaluate trading systems as a set of R multiples (reward to risk). Tharp
also elucidates the concepts of expectancy and position sizing-the most
important, yet least understood, aspects of profitable trading.

In this performance-directed book, Tharp explains that the Holy Grail in
the market is different for each trader-one that can be uncovered quickly
and plugged into every trading program with surprisingly little effort. He
shows how the interplay of your style, goals, and personality-in
combination with a carefully designed and tested system-will ultimately
determine your true success.

Trade Your Way to Financial Freedom provides key information to help you
substantially increase your income:

The psychological biases against good system development
Ingenious concepts of orderliness that help you accurately predict turning
points in the market-and work them to your advantage
Stock and futures trading models-from Warren Buffett to Perry Kaufman-that
examine setups used by the masters
Position sizing variables, and how to use them to consistently carve out
the optimal profits
A free online game to let you practice your new position sizing skills
without risk
Complete with an all new analysis and review of real trading newsletters,
Tharp will show you the importance of evaluating their performance and
results, before you invest in anyone's recommendations. Trade Your Way to
Financial Freedom promises you a brighter, more lucrative trading future.

From the Back Cover
[flap copy]

Tharp's proven 14 step model for developing a profitable trading system-as well as his latest methods and techniques for winning in any market. Trade Your Way to Financial Freedom also includes new information on secular bull and bear markets and macro economics; as well as ways to think about and evaluate trading systems as a set of R multiples (reward to risk). Tharp also elucidates the concepts of expectancy and position sizing-the most important, yet least understood, aspects of profitable trading.

In this performance-directed book, Tharp explains that the Holy Grail in the market is different for each trader-one that can be uncovered quickly and plugged into every trading program with surprisingly little effort. He shows how the interplay of your style, goals, and personality-in combination with a carefully designed and tested system-will ultimately determine your true success.

Trade Your Way to Financial Freedom provides key information to help you substantially increase your income:

• The psychological biases against good system development
• Ingenious concepts of orderliness that help you accurately predict turning points in the market-and work them to your advantage
• Stock and futures trading models-from Warren Buffett to Perry Kaufman-that examine setups used by the masters
• Position sizing variables, and how to use them to consistently carve out the optimal profits
• A free online game to let you practice your new position sizing skills without risk

Complete with an all new analysis and review of real trading newsletters, Tharp will show you the importance of evaluating their performance and results, before you invest in anyone's recommendations. Trade Your Way to Financial Freedom promises you a brighter, more lucrative trading future.

[back cover copy]

You don't have to spend your entire career trying to crack the code to profitable trading.

In the bestselling first edition of Trade Your Way to Financial Freedom, Tharp revealed that a system for instant control over the market is within every trader's grasp. Now, he brings his bestselling classic completely up to date to address all the concerns of the current market environment. This breakthrough book will, quite simply, forever transform your perceptions of successful trading-and make you a better trader or investor.

[box]

Second Edition includes:

• New chapters on secular markets and the big picture
• Ways to evaluate your system in terms of reward to risk
• Updated examples and charts throughout
• A new foreword by super trader Chuck Whitman

Praise for the First Edition

“Filled with sound trading advice and lots of ideas you can use to develop your own trading methodology. And, if you don't think that's enough, then you really need this book.”-Jack Schwager, author of Market Wizards and The New Market Wizards

“Cuts right to the essence of professional trading: how to develop winning attitudes and approaches; how to forget trading for accuracy and trade for expectancy; how to master position sizing. If you intend to trade, you'd better know what's in this book.”-Ed Seykota, Professional Trader

About the Author

Van K. Tharp, Ph.D., is an internationally known consultant and coach to traders and investors, as well as the founder and president of the Van Tharp Institute. He is the author of multiple bestselling books on trading and investing, including Safe Strategies for Financial Freedom and Financial Freedom Through Electronic Day Trading. Tharp is a highly sought-after speaker who develops courses and seminars for large banks and trading firms around the world. He has published numerous articles and has been featured in publications such as Forbes, Barron's Market Week, and Investors Business Daily.

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Customer Reviews

Only just a beginning
What this book discusses are futures and other highly leveraged financial products which are sum-zero games. This means that if you make a profit then someone, somewhere, makes a loss. It also means that the longer you play the game the more likely you are to run into a prolonged losing streak with serious financial consequences. To be able to stay in the game your trading strategy needs to be superior to the majority of other traders who are also playing. Many are professionals with access to considerable computing power and the ability to constantly analyse in depth such factors as entry and exit points and profit expectancy. The expertise of the other players means that the man in the street is likely to enter these markets with both hands tied behind his back and discover it is a very easy way to lose money!

Even the author of this book, Van Tharp, doesn't demonstrate that he is a successful trader. Consequently, it is not surprising there is no evidence that the ideas he puts forward actually currently work over a meaningful time scale. It is obvious that Van Tharp has researched the subject in depth and this is impressively reflected in the book which makes for interesting reading. However, it is important to realise that this book primarily reviews the work of others rather than calls on his own personal experience. One of the major drawbacks of that is trading strategies which have been successful in the past cease to be so once they are in the public domain and simply to repeat them is rarely a recipe for success. This is particularly true of the trend following techniques he advises.

To have any hope of achieving what the title of this book suggests depends on two ingredients. The first which is essential is the ability to select stocks that are more likely than not to move in your favour. It is here that the book is especially weak. More of that in a moment. The second which is highly desirable is to bet on these stocks in such a way as to maximise profit but at the same time to minimise risk. This second ingredient is bound up in what is known as position sizing which is a rabbit which Van Tharp pulls out of the hat with a great deal of panache. Clearly, from the number of 5 star ratings this book has achieved, both in the UK and US, readers are impressed and reflects how easily Van Tharp has been able to convince people who have little or no understanding or experience of these markets and who are not in a position to evaluate this book objectively.

What Van Tharp says about position sizing is fundamentally correct. However, it is important to realise that to work out the figures you must have a history of profitable trading. If you don't then this book will be of little practical help to you. Nor will it help you to make your trading profitable. If, however, you are already trading successfully then this book deals with the subject of position sizing at too superficial a level to be particularly useful. You will also need to look elsewhere. Van Tharp directs the reader to his own website, for which this book acts largely as a platform, where further information is available at significant cost. An alternative is the bibliography which is a little goldmine!

As far as the most important aspect of trading is concerned, that of stock selection, Van Tharp suggests it isn't possible to forecast how stocks will move and consequently it is largely pointless to try. He therefore attaches minimal importance to stock evaluation and selection. His advocates keeping control of a portfolio by using trend following techniques and stop losses which are well known strategies that weed out the losers while allowing the winners to advance. By their nature they produce a large number of small losses and a few large gains. In the right hands they can be sensible strategies but Van Tharp implies they are inherently capable of achieving a profit. Basically, all you have to do is to use any one of a variety of stock selection strategies, which one is not especially relevant, apply to it the stop loss principles and also the appropriate position sizing and maximise the profits. Wonderful - a free lunch. If only it was that easy!

Van Tharp gives examples of how position sizing affects profits. The models were back-tested using a trading strategy that involved breakouts and stop losses. The strategy was employed very successfully by a group of traders in the 1970's. His best model demonstrates a compound annualised profit of 23%. This appears to be attractive until you apply the strategy to different time frames and to different markets and realise that it is now just as likely to produce similar losses. Position sizing techniques haven't stopped working. What has happened is whereas in the past the strategy selected stocks that were more likely to advance than not, now it doesn't. Too many people are on the bandwagon and have eroded away the advantage.

The simple fact is it is impossible to trade these markets successfully without stock selection expertise, irrespective of how good the position sizing strategy might be. Position sizing, itself, will not produce profits. All it can do is to maximise an already profitable trading strategy. The bottom line is that this, in turn, depends on being able to select stocks that are more than likely to perform in your favour. There is no free lunch! The question of selection and bet size are comprehensively and authoritatively dealt with in the book "Commonsense Betting" by Dick Mitchell. Although written for the race-goer, the principles are the same and clearly explained by someone who, unlike Van Tharp, speaks from practical experience and success.

Yet another pyschobabble book posing as science
Sorry Van but I was taken in by your cult of expectancy for a while, and suffered as I consequence. Reader beware, you are entering the world where you can be seduced by delicious notions of logic with liberal portions of self-help nonsense. The basic remit of this book and all Van Tharps work is that once you have established your expectancy, that is your probability of winning and the amount you win per trade/bet, you are able to use money management to best fit your system and maximise your profit. It is true to say that Van Tharp has made a fascinating study into this and the maths are quite compelling even to a non numerical student. However, Tharp compares trading to a game where the expectancy can be foreseen as in the marble games that he uses to promote his ideas. Unfortunately trading is not like that. Its very interesting that like so many gurus Tharp chooses to teach trading rather trade himself. I am sure that he realises that the expectancy of running a business charging thousands of dollars to teach traders his "secrets" is far easier to predict than a trading system.

Like all the rest of these types of books treat it with a very big pinch of salt and ask yourself the obvious question - why trade when you can tell other people how to do it.

A coup d'etat (in a positive way) of trading manuals!
Dr. Tharp's book is one of the finest trading volumes written in the past ten years, if not ever. While some books are chock full of hazy trading axioms and incoherent discussions of technical indicators, Tharp's book is clear and meaningful.

And don't let it put you off that he writes about systems. There is no expensive software or models necessary here. A complete, efficient system can be tested using a little ingenuity and an Internet connection. Indeed, Tharp evaluates everything from Warren Buffett's "system" to the more complicated ones. Even though there is a thorough examination of technical and fundamental entry points (including a brief segment on the techniques of the mysteriously successful Turtle Traders, who sell their techniques for $1,000), the point of the book is to deemphasize entry and focus on position sizing and the value of the trading system, or expectancy.

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 one can create a very successful system that is "correct" 30% of the time, and one can be very UNsuccessful with a system that is correct 90% of the time.

In this respect, Tharp's book is profound, teaching individuals the real secrets of a Holy Grail system of trading and how virtually any concept can make money if you have the right techique.