Trade Your Way To Financial Freedom - With Comments - Van K Tharp(1).pdf - Forsa - xyzgeo

TO FINANCIAL FREEDOM

VAN K. THARP

Foreword by David Mob& Sr. xiii

Acknowledgements xvii

Preface xxi

PART ONE

THE MOST IMPORTANT FACTOR

IN YOUR SUCCESS: YOU!

The Legend of the Holy Grail 3

The Holy Grail Metaphor 6

What’s Really Important to Trading

Modeling Market Geniuses 11

Summary 14

chapter 2

Judgmental Biases: Why Mastering the Markets Is So Difficult

for Most People 17

Biases That Affect Trading System Development 20

Biases That Affect How You Test Trading Systems 35

Biases That Affect How You Trade Your System 38

Summary 41

Chapter 3

__-

Setting Your Objectives 45

Designing Objectives Is a Major Part of Your System Work 47

TRADE YOUR WAY

Tom Basso on Objectives 48

Setting Your Own Objectives 57

Chapter 6

Understanding Expectancy and Other Keys

to Trading Success 130

The Six Keys to Investment Success 130

The Snow Fight Metaphor 133

Looking at Expectancy under a Magnifying Glass 137

Expectancy and R Multiples 143

Expectancy Applied to the Market 148

Using Expectancy to Evaluate Different Systems 152

A Review of How to Use Expectancy 158

PART TWO:

CONCEPTUALIZATION OF YOUR SYSTEM

Chapter 4

Steps to Developing a System 61

1. Take an Inventory 61

2. Develop an Open Mind and Gather Market Information 63

3. Determine Your Objectives 66

4. Determine Your Time Frame for Trading 66

5. Determine the Best Historical Moves in That Time Frame and

Notice What Those Moves Have in Common 69

6. What’s the Concept behind Those Moves and How Can You

Objectively Measure Your Concept? 70

7. Add Your Stops and Transaction Costs 72

8. Add Your Profit-Exits and Determine Your Expectancy 73

9. Look for Huge Reward Trades 74

10. Optimize with Position Sizing 76

11. Determine How You Can Improve Your System 77

12. Worst-Case Scenari-Mental Planning 78

PART THREE:

UNDERSTANDING THE KEY PARTS

OF YOUR SYSTEM

Chapter 7

__-

Using Setups 165

The Four Phases of Entry 167

Setups for Stalking the Market 172

Filters versus Setups 179

Setups Used by Well-Known Systems 184

hnmary of Setups 196

Chapter 5

Selecting a Concept That Works 81

Trend Following 82

Fundamental Analysis 86

Seasonal Tendencies 91

Spreading 99

Arbitrage 103

Neural Networks 110

There’s am Order to the Universe 120

Summary of Key Points 126

Chapter 8

Entry or Market Timing 198

Trying to Beat Random Entry 200

Common Entry Techniques 202

Designing Your Own Entry Signal 220

An Evaluation of Entry Used in Some Common Systems

224

Sunmary 229

Chapter 9

chapter 13

Know When to Fold ‘Em: How to Protect Your Capital 233

What Your Stop Does 235

Using a Stop That Makes Sense 243

Summary: Preserving Capital 248

Stops Used by Common Systems 249

Conclusion! 314

APPENDICES

Appendix I: Recommended Readings 325

Appendix II: Key Words Defined 328

Chapter 10

How to Take Profits 254

Purpose behind Profit-Taking Exits 255

Just Using Your Stop and a Profit Objective 263

Simplicity and Multiple Exits 264

What to Avoid 265

Summary 266

Exits Used by Common Systems 266

Index 337

Chauter 11

The Opportunity and Cost Factors 270

Several Approaches to Take 270

Factoring in Opportunity 273

The Cost of Trading Opportunity 275

Summary 278

Chapter 12

What Do You Mean Position Sizing? I Only Have $10,000

in My Account! 280

Position-Sizing Strategies 284

Model 1: One Unit per Fixed Amount of Money 286

Model 2: Equal Value Units for Stock Traders 290

Model 3: The Percent Risk Model 292

Model 4: The Percent Volatility Model 296

The Models Summarized 298

Examples of the Impact of Position Sizing 300

Summary 306

Position Sizing Used by Other Systems 307

FOREWORD

The title of Chapter 1 of this book is: “The Legend of the Holy

Grail.” “The Holy Grail” is a phrase you often hear in some trading

and investment circles. Most people believe that it refers to some

mysterious trading system out there that is going to make them

millions with little or no risk. It’s not that at all.

But before I tell you about the Holy Grail, let me tell you a lit-

tle about who I am and why Dr. Tharp asked me to write the

Foreword to his book. I started managing other peoples’ money in

1992 and in just 5 years those assets have grown from about $3 mil-

lion to about $50 million. That has happened partially because my

hedge fund has compounded by better than 40 percent per year, net

to investors, over the last 5 years. We were up 61 percent net to

investors in 1996 and 53 percent net to investors in 1997. Since I met

Dr. Tharp, my net worth has grown many times over, and I do

believe that it comes from adopting many of the Holy Grail secrets

contained in this book. I think that Dr. Tharp understands and

teaches those,secrets better than anyone else I have ever met. Let

me tell you why:

When I was a young boy, I remember dreaming that I would

become a millionaire by the time I reached 25 years of age. I reached

that goal through real estate development in 1981, but only briefly

and then it all came tumbling down around me. I was devastated,

but I picked myself up and started again. My next attempt at real

success was in the investment field.

Yet I almost had a similar type of crash in my fortunes. I

remember the day clearly. I was sitting in my office in Naples,

Florida, in late 1992. It was a typical south Florida autumn day. I

was watching the palm trees sway in the breeze outside my win-

dow, wondering why my trading had become more difficult since

I began managing money for others. I wasn’t about to crash at the

xiii

time, but I had the same sort of feeling in my gut that I had had

before my first crash.

My interests in investing began in 1967, when I would make

regular trips to the local public library to devour every book I could

find on investing. I’d also study biographies of successful busi-

nesspeople. I certainly wish I had been aware of Dr. Tharp’s mod-

eling work back then, because it would have saved me so much

time and so many heartaches.

In 1969, at the age of 13, I talked my reluctant parents into

opening a brokerage account for me at the local Merrill Lynch office

in Toledo, Ohio. The conditions of the account: I had to fund the

account myself from lawn mowing and odd jobs, and every trade

had to be confirmed by my mother since it was a Unified Gift to

Minors Act account. Once open, my father would occasionally give

me a little money to put into the account, as long as I didn’t tell my

mom.

As I looked out the window, I realized how fortunate I was. I

now lived in a tropical climate. I had probably again achieved my

childhood dream of success doing something I loved to do.

Twenty-two years had gone by since I made my first trade; only

now I was doing it successfully. Yet, somehow, I was now begin-

ning to find trading difficult.

That nervous feeling helped me open up to whole new levels

of success-way beyond those of my first childhood dreams. That

feeling was the key to what was going on, and the key to my suc-

cess, but I didn’t know what that key was- not yet at least.

A few days later, I notice a magazine ad about Dr. Van Tharp.

I had read about him in Jack Schwager’s book Market Wizards, so I

decided to give him a call. That call was the start of a close profes-

sional and personal relationship that would end up affecting my

life, my family, and even my business interests and associates. I

already understood many of the secrets contained in this book.

However, through my association with Dr. Tharp, I now under-

stood the ultimate aspect of the Holy Grail secret-the part that Dr.

Tharp so eloquently describes in Chapter 1.

The Holy Grail is not what you would expect it to be. It is

something that is different for each person. It’s a hidden secret that

you have to discover for ydurself, but it is obvious ~once it is real-

ized.

I must admit that when I first learned what Dr. Tharp was

going to write about in this book, I was concerned. He was giving

away too many of our secrets! However, I’m not concerned any

more because I now realize that those secrets are so personal. My

Holy Grail is not the same as your Holy Grail. In addition, many of

you will just let those secrets pass by you, so I urge you to be care-

ful. Read this book carefully. Indeed, pay particular attention to:

. Understanding the psychological biases against good

system development (Chapter 2)

. Setting objectives for what you are trying to accomplish

(Chapter 3)

. Understanding expectancy and R multiples

(Chapters 6 through 10)

. Realizing that the golden rule of trading is created by how

you get out of the markets, not by picking some magic

stock (Chapters 9 and 10)

. Understanding the importance of position sizing

(Chapter 12)

And pay special attention to the meaning of the Holy Grail as

described in Chapter 1. Until you’ve mastered yourself, you’ll

always struggle with the market. I wish all of you could integrate

that meaning into your being and then truly apply it to your trading.

The material that Dr. Tharp presents in this book, in his Market

Mastery newsletter, in his home-study courses, and in his seminars

will change your life if you are open to them. I urge you to take the

first step today and open yourself up to the material found in this

book. Enjoy the journey It’s a great one!

David Mobley, Sr.

Naples, Florida

February 2998

Trade Your Way To Financial Freedom - With Comments - Van K Tharp(1).pdf

Plik z chomika:

Inne pliki z tego folderu:

Inne foldery tego chomika: