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Hi all, 

Interest to know if anyone has read "Trade your way to financial freedom" by Van Tharp and has used or uses his position sizes / management methods he outlines in the book. I'd like to understand how people have integrated it in their own trading / investing, particularly around the risk models he presents. If you could indicate markets trades that would be helpful also. 

Thanks

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Yes I have read, yes I use the % risk model in all my trading of the past 10 years

It's the only book I recommend on trading as it covers the most important aspect of trading that exists - Risk, risk management, expectancy and position sizing

All very boring but it is absolutely crucial to winning in this game, because trading is gambling and gambling is ruled by the laws if probabilistic returns as mentioned in his book

2% of account per trade, once up xR stop to breakeven, once up a further xR I then protect 40% of open profits until stopped out or target hit (My trading style has targets) - That simple - I know how many points/pips my stop will be, I know where I'll be entering = position size per trade in either £ per bet or shares to purchase etc  

 

 

 

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Quoting the book:

"I now strongly believe that systems can be thought of as distributions of multiples that they generate"

"Because systems can be thought of as distributions of R multiples, it’s also possible to use those distributions to simulate what your future results might be like. And even more importantly, such simulations will tell you how to position size your system to meet your objectives"

Great book.
 

Edited by jlz
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22 minutes ago, jlz said:

"Because systems can be thought of as distributions of R multiples, it’s also possible to use those distributions to simulate what your future results might be like. And even more importantly, such simulations will tell you how to position size your system to meet your objectives"

Dunno, sounds a bit w4nky.  It's like he's taking something that could be expressed in simple terms and turning it into a 'system' so that he can shift books and training courses.  'Trading in the zone' calls it thinking in probabilities.

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Thanks for the responses. 

53 minutes ago, THT said:

Yes I have read, yes I use the % risk model in all my trading of the past 10 years

I thought that may have been the case - this is what is used in your New Moon strategy thread. Interesting comment about gambling, as martingale (or non) is commonly used/promoted in blackjack. 

re: targets - how do you select them? support / resistance, fibo lels...etc.

32 minutes ago, jlz said:

Great book.

Yes - read the first edition in the mid 2000's prior to travelling for some time. I have just purchased the second edition and have only just cracked the spine of it...so looking forward to a refresher of his ideas..

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9 minutes ago, dmedin said:

Dunno, sounds a bit w4nky.  It's like he's taking something that could be expressed in simple terms and turning it into a 'system' so that he can shift books and training courses.  'Trading in the zone' calls it thinking in probabilities.

It is not going to be the golden rule for everyone, but for me it made a difference in order to understand positions.

If you are able to divide your trading progress into chunks of R units you can define actions to take at any multiple of R. It is very easy to get lost into percentages and sizes, by defining units you can understand instantly what should be your next action. That itself falls into a system immediately and for some of us that do not have any training in finance having the ability to measure a system performance that easily it is a big advantage.

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5 minutes ago, TFFX_ said:

re: targets - how do you select them? support / resistance, fibo lels...etc.

On "some" of my methods targets are set by the market, these can range from 4R (min range I'm prepared to trade) up to 20R and nothing to do with supp/res or fibs etc, on other methods fib levels over 100% are used 127% and 161.8% - but saying that there are times when the market respects 150% and 200% which are not fib levels, so I don't hold out for fib levels religiously 

In my "How to Win" Thread Gann's 4th Time Lucky trade - the range of the last swing is my target - if the range of the swing calls for a target of 5R then that is my target, if its 20R then that is the target, so the market set's it

Certain swing formations with "form" a certain shape, the shape of those formations determine the price target , so it's never static

 

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15 hours ago, jlz said:

Thanks, I haven't read this one

It's not bad, covers a broad range of items - TA, indicators, systems and psychology, but not in great detail. Mainly flogs his triple screen trading system (which is pretty widely recognised) and does tend to ramble a bit to paint a picture and get his point across. 

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17 minutes ago, TFFX_ said:

It's not bad, covers a broad range of items - TA, indicators, systems and psychology, but not in great detail. Mainly flogs his triple screen trading system (which is pretty widely recognised) and does tend to ramble a bit to paint a picture and get his point across. 

I find TA and Indicators like some kind of a religion that I am not able to believe in, produced by charlatans that are trying to create behaviours in retail traders so they can profit from them. So I normally bypass chapters that talk about TA all together. 

If there is anything related to risk management is what I will read, the rest will be ignored.

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This list points to the books that everyone should read (I haven't read them all, just a handful of them):

https://www.google.com/search?q=risk+management&client=opera&hs=h3O&tbs=cdr:1,cd_min:2000,cd_max:2099,sbd:1&tbm=bks&sxsrf=ALeKk02LkCoH2-bVjtbt3QtSwnumJ7rRFw:1598548938129&source=lnt&sa=X&ved=0ahUKEwiA0PPs8rvrAhXLOcAKHQKVAEUQpwUIIg&biw=1920&bih=939&dpr=1

Just by picking one book and reading through the references will keep anyone out of YouTube. 

TA and Youtube, the perfect mix for a disaster.

 

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1 hour ago, jlz said:

This list points to the books that everyone should read (I haven't read them all, just a handful of them):

https://www.google.com/search?q=risk+management&client=opera&hs=h3O&tbs=cdr:1,cd_min:2000,cd_max:2099,sbd:1&tbm=bks&sxsrf=ALeKk02LkCoH2-bVjtbt3QtSwnumJ7rRFw:1598548938129&source=lnt&sa=X&ved=0ahUKEwiA0PPs8rvrAhXLOcAKHQKVAEUQpwUIIg&biw=1920&bih=939&dpr=1

Just by picking one book and reading through the references will keep anyone out of YouTube. 

TA and Youtube, the perfect mix for a disaster.

 

 

Those look like books for a data scientist, statistician or some obscure kind of financial professional, not for a trader.

There are some excellent TA references and Youtube videos that will help people to trade and make money.

Edited by dmedin
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7 hours ago, dmedin said:

There are some excellent TA references and Youtube videos that will help people to trade and make money.

There is one and only one reason behind those videos and is to make you trade with a behaviour. If your behaviour is predictable groups with more buying power than you can profit from it. TA main goal is to convert a supposedly random market into a static cloud of retail traders. TA would be a fantastic tool if there wasn't a whale expecting you to be at a certain position, if you ignore all market participants you are at the mercy of their institutional moves. The reason why TA doesn't work is because it is used by many people at the same time and creates a cloud of positions. I could agree with using your own indicators out of a proper risk management system, that would give me confidence. Using what is provided by the platform will lead you to trade with many others at the very same place. It is easy to understand that your profit has to come from others loses, if your position is with the majority, in order to make a win who is loosing that amount? I am sure that using well known TA is the main cause of many traders' loses. If you ignore whales and praise your indicators it won't go well in the long run.

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4 hours ago, jlz said:

There is one and only one reason behind those videos and is to make you trade with a behaviour. If your behaviour is predictable groups with more buying power than you can profit from it. TA main goal is to convert a supposedly random market into a static cloud of retail traders. TA would be a fantastic tool if there wasn't a whale expecting you to be at a certain position, if you ignore all market participants you are at the mercy of their institutional moves. The reason why TA doesn't work is because it is used by many people at the same time and creates a cloud of positions. I could agree with using your own indicators out of a proper risk management system, that would give me confidence. Using what is provided by the platform will lead you to trade with many others at the very same place. It is easy to understand that your profit has to come from others loses, if your position is with the majority, in order to make a win who is loosing that amount? I am sure that using well known TA is the main cause of many traders' loses. If you ignore whales and praise your indicators it won't go well in the long run.

Just add my 2 pence worth as I trade using TA - BUT and its a big but, I use my own (well Gann's) style and it works exceptionally well - Peter Brandt wrote a book around 10 ish years ago and he traded the traditional TA formations returning low to mid double digit % returns, so it does work.

I think the typical trader on here is likely to break virtually every rule in the keys to success I mentioned in my how to win post - jumping from one method to the next, without realising the holy grail is sat there right in front of them on every chart they look at

I agree that traditional TA does not work as well as its touted, but it does still work - Obviously it depends on how you're defining TA - I personally class TA as trading off a chart, not trading Edward & Mcghees definitions 

I don't look at youtube 

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and because every trade is a gamble every trade is bound by the rules of probabilistic returns which is covered exceptionally well by Van Tharp, which is where risk, risk management and expectancy etc all come into the mix

It's exactly why I'm running the "NEW MOON" thread - to prove that a pre-set, semi-random method can not only beat the market in most years but can win in the trading game, simply by having the right risk to reward

Which is what Van Tharp is all about

You could set up a trading system that trades every Wednesday and with the correct risk and risk management would be successful to some degree

Throw in TA and you start to shove the odds of success well into your favour  

 

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I know the thread title is about Van Tharp but in the middle of the thread we changed topics and I started talking about the book that dmedin recommended, then OP highlighted TA and we created another branch of the conversation. Then we got into these TA religious facts. 

Saying that the turtles won with TA and a 30-40% win rate is like saying the Beatles became millionaires playing the same 5 chords and 2 scales, major and minor. Now try to do the same, pick a guitar and play songs with 2 chords about love, let's see how far you get. We are not in the 60's anymore, things have changed a little bit. 

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2 minutes ago, jlz said:

I know the thread title is about Van Tharp but in the middle of the thread we changed topics and I started talking about the book that dmedin recommended, then OP highlighted TA and we created another branch of the conversation. Then we got into these TA religious facts. 

Saying that the turtles won with TA and a 30-40% win rate is like saying the Beatles became millionaires playing the same 5 chords and 2 scales, major and minor. Now try to do the same, pick a guitar and play songs with 2 chords about love, let's see how far you get. We are not in the 60's anymore, things have changed a little bit. 

 

Okay well 'back to topic', that list of books you produced is ridiculous and if people 'need' to read all of them to make money, there can only be 0.001% of the population making any money.

So you're full of BS.

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26 minutes ago, dmedin said:

 

Okay well 'back to topic', that list of books you produced is ridiculous and if people 'need' to read all of them to make money, there can only be 0.001% of the population making any money.

So you're full of BS.

https://en.wikipedia.org/wiki/Ad_hominem

I never said that they need to read all of them. I said that just by picking one of them and reading through the book and references is enough to build an understanding of risk management, which is at the end what makes a profitable system. Not the entry point, the exit point.

New Moon post that you eloquently disliked was exactly to point that out, that you can lick a finger against the wind to excuse your entry, or as the example shows, look at moons. They are beautiful after all.
Which means that you can remove anything you use to enter in a trade all together, what matters is how you exit.  

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13 minutes ago, jlz said:

https://en.wikipedia.org/wiki/Ad_hominem

I never said that they need to read all of them. I said that just by picking one of them and reading through the book and references is enough to build an understanding of risk management, which is at the end what makes a profitable system. Not the entry point, the exit point.

New Moon post that you eloquently disliked was exactly to point that out, that you can lick a finger against the wind to excuse your entry, or as the example shows, look at moons. They are beautiful after all.
Which means that you can remove anything you use to enter in a trade all together, what matters is how you exit.  

 

No, the risk management is the easy bit (it's f*king common sense).  Finding a system that works (with a probabilistic outcome) is where the work is.  So I am diametrically opposed to what was said in that thread though I am sorry for the unpleasant language I used.

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