Trade Your Way to Financial Freedom

by Tharp, Van

• ISBN13: 9780071478717
• ISBN10: 007147871X
• Edition: 2nd
• Format: Hardcover
• Copyright: 2006-12-13
• Publisher: McGraw Hill

Summary

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 ofMarket 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.

Author Biography

Van K. Tharp is an internationally known consultant and coach to traders and investors and the author of multiple bestselling books on trading and investing.

Table of Contents

Foreword by Chuck Whitman	xiii
Preface to the Second Edition	xix
Preface to the First Edition	xxiii
Acknowledgments	xxvii
PART ONE THE MOST IMPORTANT FACTOR IN YOUR SUCCESS: YOU!
Chapter 1 The Legend of the Holy Grail	3	(16)
The Holy Grail Metaphor	6	(3)
What's Really Important to Trading	9	(2)
Modeling Market Geniuses	11	(8)
Chapter 2 Judgmental Biases: Why Mastering the Markets Is So Difficult for Most People	19	(28)
Biases That Affect Trading System Development	22	(15)
Biases That Affect How You Test Trading Systems	37	(3)
Biases That Affect How You Trade Your System	40	(4)
Summary	44	(3)
Chapter 3 Setting Your Objectives	47	(22)
Designing Objectives: A Major Part of Your System Work	49	(1)
Tom Basso on Objectives	50	(9)
Setting Your Own Objectives	59	(10)
PART TWO CONCEPTUALIZING YOUR SYSTEM
Chapter 4 Steps to Developing a System	69	(28)
1. Take an Inventory	70	(2)
2. Develop an Open Mind and Gather Market Information	72	(3)
3. Determine Your Mission and Your Objectives	75	(1)
4. Determine the Concept That You Want to Trade	76	(5)
5. Determine the Big Picture	81	(1)
6. Determine Your Time Frame for Trading	82	(3)
7. Determine the Essence of Your Trading and How You Can Objectively Measure It	85	(2)
8. Determine What Your Initial 1R Risk Will Be	87	(1)
9. Add Your Profit-Taking Exits and Determine the R-Multiple Distribution of Your System and Its Expectancy	88	(1)
10. Determine the Accuracy of Your R-Multiple Distribution	89	(1)
11. Evaluate Your Overall System	90	(1)
12. Use Position Sizing to Meet Your Objectives	91	(1)
13. Determine How You Can Improve Your System	92	(1)
14. Mentally Plan for Your Worst-Case Scenario	93	(4)
Chapter 5 Selecting a Concept That Works	97	(56)
Trend Following	98	(4)
Fundamental Analysis	102	(5)
Value Trading	107	(3)
Band Trading	110	(6)
Seasonal Tendencies	116	(8)
Spreading	124	(5)
Arbitrage	129	(7)
Intermarket Analysis	136	(6)
There's an Order to the Universe	142	(6)
Summary	148	(5)
Chapter 6 Trading Strategies That Fit the Big Picture	153	(36)
The Big Picture as I See It	156	(1)
Factor 1. The U.S. Debt Situation	157	(6)
Factor 2. The Secular Bear Market	163	(5)
Factor 3. The Globalization of Economic Factors	168	(4)
Factor 4. The Impact of Mutual Funds	172	(4)
Factor 5. Changes in Rules, Regulations, and Taxes	176	(4)
Factor 6. Human Beings' Tendency to Play a Losing Economic Game	180	(2)
Other Areas You Might Consider	182	(1)
Flow Will You Monitor the Big Picture?	183	(2)
Summary	185	(4)
Chapter 7 Six Keys to a Great Trading System	189	(28)
The Snow Fight Metaphor	191	(5)
Looking at Expectancy under a Magnifying Glass	196	(4)
Opportunity and Expectancy	200	(1)
Prediction: A Deadly Trap	201	(1)
Real Trading Applications	202	(7)
Determining How Your System Will Perform	209	(3)
Summary	212	(5)
PART THREE UNDERSTANDING THE KEY PARTS OF YOUR SYSTEM
Chapter 8 Using Setups to Jumpstart Your System	217	(34)
The Five Phases of Entry	219	(7)
Setups for Stalking the Market	226	(6)
Filters versus Setups	232	(6)
Setups Used by Well-Known Systems	238	(10)
Summary	248	(3)
Chapter 9 Entry or Market Timing	251	(36)
Trying to Beat Random Entry	253	(2)
Common Entry Techniques	255	(20)
Designing Your Own Entry Signal	275	(4)
An Evaluation of Entry Used in Some Common Systems	279	(5)
Summary	284	(3)
Chapter 10 Knowing When to Fold 'Em: How to Protect Your Capital	287	(22)
What Your Stop Does	289	(10)
Using a Stop That Makes Sense	299	(4)
Stops Used by Common Systems	303	(3)
Summary	306	(3)
Chapter 11 How to Take Profits	309	(20)
Purpose behind Profit-Taking Exits	310	(8)
Just Using Your Stop and a Profit Objective	318	(1)
Simplicity and Multiple Exits	319	(1)
What to Avoid	320	(1)
Exits Used by Common Systems	321	(3)
Summary	324	(5)
PART FOUR PUTTING IT ALL TOGETHER
Chapter 12 There's Money for Everyone	329	(56)
How Seven Traders Approach Their Craft	331	(7)
How Our Traders Would Look at Five Key Market Situations	338	(32)
Results Six Weeks Later	370	(10)
Results as R Multiples	380	(2)
Summary	382	(3)
Chapter 13 Evaluating Your System	385	(20)
Several Approaches to Take	386	(2)
Expectunity: Factoring in Opportunity	388	(2)
The Cost-of-Trading Opportunity	390	(4)
Peek Drawdowns	394	(3)
Using Newsletter Recommendations as Sample Systems	397	(6)
Summary	403	(2)
Chapter 14 Position Sizing—the Key to Meeting Your Objectives	405	(32)
Basic Position-Sizing Strategies	411	(4)
Model 1: One Unit per Fixed Amount of Money	415	(4)
Model 2: Equal Value Units for Stock Traders	419	(2)
Model 3: The Percent Risk Model	421	(5)
Model 4: The Percent Volatility Model	426	(2)
The Models Summarized	428	(2)
Position Sizing Used by Other Systems	430	(4)
Summary	434	(3)
Chapter 15 Conclusion	437	(18)
Avoiding Mistakes	439	(2)
What's Left Now: An Interview with Dr. Tharp	441	(14)
Glossary	455	(12)
Recommended Readings	467	(4)
Index	471