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Van Tharp - Trade Your Way to Financial Freedom

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RichKid

RichKid

PlanYourTrade > TradeYourPlan
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Hey folks,
I've been following Tech's threads on positive expectancy and risk management etc. I note it's similar to Van Tharp's popular book (from my first look at it anyway). Found Tech's stuff a bit hard going as I'm a newbie so thinking of doing some extra reading on it to get a better grip on things so I can follow his thread and get myself a good plan.

So has anyone read Tharp's book and implemented the plans/techniques mentioned in it?

TechA, is your method (as discussed in your threads) different to his or is it the same concept?
 
Re: Van Tharp- Trade Your Way to Financial Freedom

I've been reading and listening to Van Tharp's different products and the material seems to be quite good. I don't trade (as really I'm doing well enough in property, plus also I would rather use any capital/funds to go back into my property to build a very solid foundation), but I do find it quite interesting and my aim is probably to start trading (probably options) within 2-3yrs (after my knowledge has built up a bit).

Anyway heres some free resource of Van Tharp’s: http://www.yourproductteam.com/vti/tutorials.htm
He also has a good newsletter you can signup to, as well as his forum:
http://www.mastermindforum.com/phorum/list.php?f=9 (US site, so for Aussie info - Stay on the AussieStockForums).

His latest book (Safe Strategies For Financial Freedom) is quite good, it talks about, in more simplistic terms, money management, postion sizing, etc, though the book is primarily concerned with financial freedom. It’s certainly less technical than his trade your way to financial freedom (which lost me at the half way point). Check out Amazons review of it first, some people like it, some people are disappointed with it http://www.amazon.com/exec/obidos/t...002-6443250-3444847?v=glance&s=books&n=507846

In the same book he talks about mutual fund trading in the US (where instead of stocks, mutual funds are traded). I am sure the same ideas are applicable to Aust. And I've been meaning to research this more.

Anyway hope I've somehow contributed to this discussion..... :)

Rgds.
Lucifer_au
 
Re: Van Tharp- Trade Your Way to Financial Freedom

Hi Lucifer,
Thanks for the great links, must have a look at it soon. It was WayneL and TechA that first got me interested in this aspect of things and with TechA's threads running I'm trying to get my trading in order. Only had very basic risk magmt in effect till now and have only had quick looks at Louise Bedford and Chris Tate's approaches. Bedford highly recommends Van Tharp in her books and Guppy seems to give him a good wrap too, except Guppy's 'Better Trading' book is supposed to take a different approach to position sizing etc. Van Tharp's appears to be the most comprehensive book although I have to read Guppy as well. It's the maths and spreadsheets that I'll have to get my head around. It would feel like a business or accountancy practice once I know how to use and collate all those trading figures.

I did see the new Van Tharp book on Financial Freedom but it just has a collection of different strategies to make money, with a smaller section on trading than his earlier book.
Anyway, glad to see you're doing well with property, if you are starting in stocks, if my experience is anything to go by it may be best to start with midcap to large cap shares to get a feel for the thing and then go into derivatives like options and warrants, at least until you get the hang of it.
Hope to hear more from you once you get into shares!

(TechA- I'm still interested in hearing your views as mentioned in the first post, hope you have time to reply, either here or in another thread.)
 
Re: Van Tharp- Trade Your Way to Financial Freedom

Lucifer_au said:
Anyway heres some free resource of Van Tharp’s: http://www.yourproductteam.com/vti/tutorials.htm
Click to expand...

Lucifer, Thanks again for that link, it's brief but is very succinct and to the point, a great tutorial imo, it's a shame they don't have more but I guess it's to introduce us to their theory and the other products. Much appreciated all the same!
 
Re: Van Tharp- Trade Your Way to Financial Freedom

Van Tarp book is good but you have to remember that half of the books written by US authors imply to trading style and formulas for people with capital of millions of dollars.
People who run big investments houses.
:)
 
Re: Van Tharp- Trade Your Way to Financial Freedom

Hi Oski,
Thanks for the tip, I was under the impression it applied to smaller investors too but do note your point about undercapitalisation- TechA makes that point very strongly in his posts and I'm going to have to make sure I understand its importance in the strategy.
 
Re: Van Tharp- Trade Your Way to Financial Freedom

Been reading Van Tharp, wish he'd provide more detailed info with figures and methods on building a system, I know you can get it via his expensive courses but a bit more info in his book would have been good. His special money mgmt report is good but I don't think he explains the concepts as simply as he could.
 
Re: Van Tharp- Trade Your Way to Financial Freedom

Cheers for the links Jesse, Trade your Way to Financial Freedom is quite an interesting read. We should set some individual topics once everyone has read it.

Cheers

Mick
 
Re: Van Tharp- Trade Your Way to Financial Freedom

Rich.

Sorry just saw this thread. I suppose an answer back in January would have been better.

Van Tharps methodology(Money Management principals) are applicable to ANY trading system or method. Be it mechanical or discretionary.

The application of those principals are most definately used in the developement of T/T.

VanTharp doesn't disclose a trading method rather the principals of sound money management which will ensure profit.

The way YOU apply those M/M principals in the end will be chosen by the trader.

Its basically very simple ---Cut Losses and let Profits run---

I'm happy to work with you and all here in developing another method which we can test and trade live like we have been doing with T/T for the last 3 yrs.

Starting from scratch and introducing many of Van Tharps principles.

For ideas on Systems Developement I suggest
Trading Systems and Methods by Kaufman a degree in Mathmatics is handy!
(I dont have one--unfortunately My son Kris fortunately has one).
The Encyclopedia of Technical Market Indicators by Colby is another gold mine.

I'm off again in June for a few weeks to Singapore but happy to get things kicked off if there is a decent interest.

A larger interest gives better feedback and more minds participating.
If there are also other Amibroker or Metastock/Tradesim users around that will also be a great help.

Anyway Rich Ill leave it to you to kick it off.
Did you get my snail mail? and is all OK.
 
Re: Van Tharp- Trade Your Way to Financial Freedom

tech/a said:
Rich.
Sorry just saw this thread,I suppose an answer back in Janurary would have been better.
Van Tharps methodology(Money Management principals) are applicable to ANY trading system or method.Be it mechanical or discretionary.
The application of those principals are most definately used in the developement of T/T.
VanTharp doenst disclose a trading method rather the principals of sound moneymanagement which will ensure profit.
The way YOU apply those M/M principals in the end will be chosen by the trader.
Its basically very simple--- Cut Losses and let Profits run---.
Im happy to work with you and all here in developing another method which we can test and trade live like we have been doing with T/T for the last 3 yrs.
Starting from scratch and introducing many of Van Tharps principals.
For ideas on Systems Developement I suggest
Trading Systems and Methods by Kuafman a degree in Mathmatics is handy!
(I dont have one--unfortunately My son Kris fortunately has one).
The Encyclopedia of Technical Market Indicators by Colby is another gold mine.
Im off again in June for a few weeks to Singapore but happy to get things kicked off if there is a decient interest.
A larger interest gives better feedback and more minds participating.
If there are also other Amibroker or Metastock/Tradesim users around that will also be a great help.
Anyway Rich Ill leave it to you to kick it off.
Did you get my snail mail? and is all OK.
Click to expand...

Thanks Tech for the great post, good to see you back, nice and refreshed I hope! yes did get the snail mail, thanks.

I saw a book recently by Penfold on trading the SPI. It sets out this structure, referred to as the 'holy trinity':
Money mgmt; Set up & method for trading that set up (trade plan); psychology.

Clearly with a mechnical system it's the middle bit that gets discussed alot. I'm trying to look at the first bit in isolation first (but obviously we need a system to use it with for examples).

I have tried to read Ryan Jones (the trading game) but it's hard going but he introduces some great concepts. Van Tharp is good but as you mention he doesn't tell us all (you need to buy his cd's and other 'porducts' to get a run down). So many futures trading books on money mgmt but few for non-leveraged (eg non-margined) traders like me- not sure what the difference is as they keep talking in 'contracts' rather than a portfolio of diverse stocks.

Still trawling through VAn tharp here but I'm slowly becoming familiar with it. Your expectancy thread (3% thread) is great too, no sure how we're to split up the topics. It's not easy getting up to speed to participate fully in the thread so we may have to be patient and take it a week or month at a time until the learning curve steepens. Each person has their own requirements but perhaps we can discuss the common elements here re MM. Personally I'm looking at a mainly disrcretionary system at present, stocks first culled from tips and fundamentals using charting for the final decision, I trade from a few days to a few months but rarely more. It's the money mgmt which can stand alone here for discussion.

Basically, how do share traders achieve geometric growth while avoiding or minimising asymmetric leverage? Assumption is use of some form of anti-martingale MM. How can we stop that equity curve from becoming too unruly and avoid ruin? These are the types of questions I need to understand via learning the math- which is what I'm trying to do. I'll share what I learn and can understand here on ASF. If any of you out there come across good (I Mean really good) books please mention it here. Jesse for example has kindly posted links to books. The Van Tharp money mgmt report book has p26 missing btw, not really important. IMHO Jones explains some of Van Tharps concepts far better, it's the maths that does me in as I can't translate it to share portfolios yet.

Hence the Van Tharps tutes mentioned earlier were helpful (re expectancy calculations etc) but they don't tell you all and is different to the Ryan Jones fixed ratio explanation.

Simple questions include- do we use a core equity model or something else? What are the differences? Anyone is welcome to contribute if they have expertise or helpful info.

Thanks Tech for offering your time and experience, I'll try to have my future posts a bit more structured than the one above. Maybe we need a new thread if we are really to wade into this?? Or should we discuss various aspects or chapters of VAn tharp?? Suggestions?? I'm keen to just start a thread on Ryan Jones's method and its application to share trading- any views tech/WayneL or others who are actually employing money mgmt successfully? If not might take me a year or two to complete my research (I might have to use some old highschool textbooks and learn stats too!!!).

See this thread for some links to free books, including The Trading Game: https://www.aussiestockforums.com/forums/showthread.php?t=1170
 
Re: Van Tharp- Trade Your Way to Financial Freedom

Rich a couple of things.

Trading futures or atleast developing positive expectancy models to trade, is easier than designing a method for trading a portfolio of stocks.

Simply your dealing with ONE entity not a potfolio of 10 or more and a universe of 100s.
You can also OPTIMISE your methodology on a singular entity.Not so on a portfolio as one optimisation for one isnt the same for another.
This can be done for a singular stock in a stand alone tradig method. (But thats another topic).

I think your choice of trading in a discretionary manner is a common error.
If you look carefully at your reason for this "Idea" Im sure youll be honest with yourself and say that by trading in a discretionary manner you have thet "False" sence of security that you can---react to the market to better enter and lock in profit--

Infact this is probably one of THE reasons that most fail.
There well laid plans of action become reactionary Guessing of market action.

You cannot test positive expectancy of a discretionary method either so your never going to be sure of profitability.

It really is SIMPLE.

This is ALL you need in any trading method.

An Entry
An Exit
A Stop
A postitive expectancy.
 
Re: Van Tharp- Trade Your Way to Financial Freedom

tech/a said:
Rich a couple of things.

Trading futures or atleast developing positive expectancy models to trade, is easier than designing a method for trading a portfolio of stocks.

Simply your dealing with ONE entity not a potfolio of 10 or more and a universe of 100s.
You can also OPTIMISE your methodology on a singular entity.Not so on a portfolio as one optimisation for one isnt the same for another.
This can be done for a singular stock in a stand alone tradig method. (But thats another topic).

I think your choice of trading in a discretionary manner is a common error.
If you look carefully at your reason for this "Idea" Im sure youll be honest with yourself and say that by trading in a discretionary manner you have thet "False" sence of security that you can---react to the market to better enter and lock in profit--

Infact this is probably one of THE reasons that most fail.
There well laid plans of action become reactionary Guessing of market action.

You cannot test positive expectancy of a discretionary method either so your never going to be sure of profitability.

It really is SIMPLE.

This is ALL you need in any trading method.

An Entry
An Exit
A Stop
A postitive expectancy.
Click to expand...

So does the increase in contracts for single markets mean they pyramid? Ryan Jones describes how you can trade a portfolio of stocks but I can't understand it yet. Will keep trying.

Very good points there about discretionary methods- I am having trouble 'testing' it, no wonder, I realised there were too many variables in my decision making (read 'far too discretinary'). I did and probably still do think that I have 'control' over things by being discretionary but I'm trying to get out of it. It's my 'perception' of what is happening in the market that is not a characteristic shared by a mechanical system. Food for thought. Lots more thinking for me now!

Maybe I'll have to find a particular universe of stocks, find 'mechanical' filters for narrowing it down, (eg if a gold stock leveraged to pog don't enter when pog is falling/sideways- check via comparing charts) and trade only certain 'reliable' patterns/set ups or if certain criteria are met (eg market cap or tipped by a particular tipsheet with a good record as a 'star performer')- that would take some of the discretion out of it?? There must be successful discretionary traders out there. Backtesting alone doesn't help as the future can't be backtested imo but in futures I suppose it's different as commodities may have more reliable cycles/patterns. Looking quickly at my current data I only need a small percentage of winners with speccies as long as I cut losses and lock in the profits etc as you mention in the first three points.

Your four points are great, I realise that even with my discretionary system if I'd had proper rules for entry/exit I'd still be ahead. Hence my brief breather from the market while I update my plans so that I don't have to 'think' about what to do since I'll have simple rules in place. Positive expectancy is the big issue for me now. Okay, time for me to get back to more work with my numbers...

Fortunately MM concepts can be fine tuned without worrying too much about the trading system.
 
Re: Van Tharp- Trade Your Way to Financial Freedom

RichKid said:
I have tried to read Ryan Jones (the trading game) but it's hard going but he introduces some great concepts. Van Tharp is good but as you mention he doesn't tell us all (you need to buy his cd's and other 'porducts' to get a run down). So many futures trading books on money mgmt but few for non-leveraged (eg non-margined) traders like me- not sure what the difference is as they keep talking in 'contracts' rather than a portfolio of diverse stocks.
Click to expand...

Besides the audience in America being Commodity traders another reason is that position sizing for futures is more complicated.

For example the most common (but not always the best) money management technique is fixed fractional. This is where you look at your entry price and your stop and buy enough shares so that loss is a fixed percentage of your capital most usually 1-2%.

So if you have 100k you may risk 2% on a trade which is $2000. If your stop is 20 cents from your entry you then buy 2000/0.20 or 10,000 shares. If you portfolio goes up to 101k then you can buy 10,100 shares.

Future contracts are harder. The minimum movement (pip) for our dear old SPI is $25 per contract. If your stop is 20 pips you would lose $500 per contract. So with $100k and 2% risk you can buy 4 contracts. However, as you can't buy a part of a contract you would need to have $125k to be able to have 5 contracts. If you lose $1k to 99k you could only have 3 contracts. As shares are 1c a pip or less you don't get this problem.

So some of the stuff in money management texts is a way of getting around this problem. If you can filter this out then the rest is applicable to shares.

MIT
 
Re: Van Tharp- Trade Your Way to Financial Freedom

mit said:
Besides the audience in America being Commodity traders another reason is that position sizing for futures is more complicated.

For example the most common (but not always the best) money management technique is fixed fractional. This is where you look at your entry price and your stop and buy enough shares so that loss is a fixed percentage of your capital most usually 1-2%.

So if you have 100k you may risk 2% on a trade which is $2000. If your stop is 20 cents from your entry you then buy 2000/0.20 or 10,000 shares. If you portfolio goes up to 101k then you can buy 10,100 shares.

Future contracts are harder. The minimum movement (pip) for our dear old SPI is $25 per contract. If your stop is 20 pips you would lose $500 per contract. So with $100k and 2% risk you can buy 4 contracts. However, as you can't buy a part of a contract you would need to have $125k to be able to have 5 contracts. If you lose $1k to 99k you could only have 3 contracts. As shares are 1c a pip or less you don't get this problem.

So some of the stuff in money management texts is a way of getting around this problem. If you can filter this out then the rest is applicable to shares.

MIT
Click to expand...

Thanks MIT for the clear explanation, very helpful and makes sense, especially about the smaller ticks in stocks alleviating the problem for us small timers. I'd figured out a bit of it after going through the tables of numbers Ryan Jones' book had but I still can't get the bit where pyramiding comes in. I know his approach is a bit of a hybrid of fixed fractional and somehthing else (ie levels at which he increases and decreases contracts- he gives formulae as well) but I still have to figure out the portfolio part of it as it applies to shares. Ryan Jones says increasing contracts is not the same as pyramiding so I've got to get that sorted out in my mind too, back to reading for me!

BTW, there is a small typo in one of the coin flipping tables at the end of the book (or so I think)- just a minor issue.
 
"The Holy Grail”

Hi, I'm a long time reader but first time poster. Thank you for sharing your wonderful finding with us Jesse.

I'm in the process of reading "Trade your way to financial freedom" by Tharp Van K. I noticed Foreword was written by David Mobley, Sr. Mobley had made headlines back in 2000. He conceived and carried out a US$59 million fraud on the investors. Mobley has consented to an asset freeze and preliminary injunctions and to cooperate with the Commission in preserving investor assets. In addition, the Commission's complaint seeks compensation.

http://www.sec.gov/litigation/litreleases/lr16446.htm
http://www.cftc.gov/enf/00orders/enfmobley.htm

I have utter respect for the Tharp Van K but IMO Mobley should not be in this book.
 
Has anyone used Tharp's "Design your own Winning System"? Is it worth investing $1000 in? Has anyone got a copy they want to sell?
 

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