Van Tharp - Trade Your Way to Financial Freedom

TRADE YOUR WAY TO FINANCIAL FREEDOM

SECONDE DITION

VAN K. THARP

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This book is dedicated to my wife, Kalavathi Tharp.
Kala provides a very special spark in my life.
Without that spark and her tremendous love,
this book would not be possible.

PART ONE
THE MOST IMPORTANT FACTOR IN YOUR SUCCESS: YOU!

Chapter 1
The Legend of the Holy Grail

Chapter 2
Judgmental Biases: Why Mastering the Markets Is So Difficult for Most People

Chapter 3
Setting Your Objectives

PART TWO
CONCEPTUALIZING YOUR SYSTEM

Chapter 4
Steps to Developing a System

Chapter 5
Selecting a Concept That Works

Chapter 6
Trading Strategies That Fit the Big Picture

Chapter 7
Six Keys to a Great Trading System

PART THREE
UNDERSTANDING THE KEY PARTS OF YOUR SYSTEM

Chapter 8
Using Setups to Jumpstart Your System

Chapter 9
Entry or Market Timing

Chapter 10
Knowing When to Fold Em: How to Protect Your Capital

Chapter 11
How to Take Profits

PART FOUR
PUTTING IT ALL TOGETHER

Chapter 12
Theres Money for Everyone

Chapter 13
Evaluating Your System

Chapter 14
Position Sizingthe Key to Meeting Your Objectives

Chapter 15
Conclusion

Let me start by saying that Trade Your Way to Financial Freedom is required reading for all of my new traders. Of all of Dr. Van Tharps published books, this one gives the essence of his teachings from his workshops and home study courses. My name is Chuck Whitman, and I am the CEO of Infinium Capital Management, a proprietary trading firm located in the Chicago Board of Trade. We currently have 90 employees, trade on 15 different exchanges, and trade underlying instruments and options on all asset classes. I have personally purchased many copies of this book, but before I get into that, let me tell you about my experiences with Van Tharp.

I first became aware of Vans teachings in 1998, when one of my mentors, Bruce, obtained two of Vans home study courses, the Peak Performance Course for Traders and Investors and the Developing a Winning System That Fits You Course. Later, Bruce also attended one of Vans System seminars, and he came back telling me how impressed he was with the material and the quality of students that had attended the seminar.

At that time, I was in the midst of one of the most difficult periods of trading of my career. Ironically, 1997 was one of my most successful trading years, and in 1998 I had decided to commit myself to becoming absolutely the best trader I could be. However, the only approach I knew was to do more so I could hit my new revenue goal, and needless to say, I was overtrading and battling huge profit and loss swings in my account. In the fall of 1998, I put on a large trade that conceptually was a great trade. However, I mismanaged the trade, and it quickly spiraled into one of the largest losses of my career. Looking back at it now, Id made many mistakes, and this is according to Vans definition of a mistake which is not following my rules. I had not done any scenario planning before the trade, and I found myself in a position with a terrible reward-to-risk ratio. Furthermore, as I battled the loss, I responded emotionally and did everything I could to prevent it. Its what Van calls the loss trap. Instead of just taking a small loss, I struggled with it, trying to avoid it. And the more I struggled with the loss, the worse it became. And the bigger it got, the more I wanted to avoid it and not take it. Eventually, the loss became too painful and I liquidated the trade. The moment I was out of the trade, I made a vow that I was going to learn from what I had been through and make sure I would never repeat it. It turned out to be a major turning point in my trading career.