Customer Reviews
Brilliant Book, worth every penny. - By: PureSymmetry, 15 Aug 2008 
I think that Van Tharps' work is essential reading whatever your level of trading, whether you are a pro or not. Some of the parts of the book are a little hard going, but in my opinion this book contains a ton of material that will positively impact your bottom line in a mesurable & positive way. Definitely one for your trading library.
Only just a beginning - By: Tel, 25 Aug 2007 
What this book discusses are futures & other highly leveraged financial products which are sum-zero games. This means that if you make a profit then someone, somewhere, makes a loss. It also means that the longer you play the game the more likely you are to run into a prolonged losing streak with serious financial consequences. To be able to stay in the game your trading strategy needs to be superior to the majority of other traders who are also playing. Many are professionals with access to considerable computing power & the ability to constantly analyse in depth such factors as entry & exit points & profit expectancy. The expertise of the other players means that the man in the street is likely to enter these markets with both hands tied behind his back & discover it is a very easy way to lose money!
Even the author of this book, Van Tharp, doesn't demonstrate that he is a successful trader. Consequently, it is not surprising there is no evidence that the ideas he puts forward actuallly currently work over a meaningful time scale. It is obvious that Van Tharp has researched the subject in depth & this is impressively reflected in the book which makes for interesting reading. However, it is important to realise that this book primarily reviews the work of others rather than callls on his own personal experience. One of the major drawbacks of that is trading strategies which have been successful in the past cease to be so once they are in the public domain & simply to repeat them is rarely a recipe for success. This is particularly true of the trend following techniques he advises.
To have any hope of achieving what the title of this book suggests depends on two ingredients. The first which is essential is the ability to select stocks that are more likely than not to move in your favour. It is here that the book is especiallly weak. More of that in a moment. The second which is highly desirable is to bet on these stocks in such a way as to maximise profit but at the same time to minimise risk. This second ingredient is bound up in what is known as position sizing which is a rabbit which Van Tharp pulls out of the hat with a great deal of panache. Clearly, from the number of 5 star ratings this book has achieved, both in the UK & US, readers are impressed & reflects how easily Van Tharp has been able to convince people who have little or no understanding or experience of these markets & who are not in a position to evaluate this book objectively.
What Van Tharp says about position sizing is fundamentallly correct. However, it is important to realise that to work out the figures you must have a history of profitable trading. If you don't then this book will be of little practical help to you. Nor will it help you to make your trading profitable. If, however, you are already trading successfully then this book deals with the subject of position sizing at too superficial a level to be particularly useful. You will also need to look elsewhere. Van Tharp directs the reader to his own website, for which this book acts largely as a platform, where further information is available at significant cost. An alternative is the bibliography which is a little goldmine!
As far as the most important aspect of trading is concerned, that of stock selection, Van Tharp suggests it isn't possible to forecast how stocks will move & consequently it is largely pointless to try. He therefore attaches minimal importance to stock evaluation & selection. His advocates keeping control of a portfolio by using trend following techniques & stop losses which are well known strategies that weed out the losers while alllowing the winners to advance. By their nature they produce a large number of smalll losses & a few large gains. In the right hands they can be sensible strategies but Van Tharp implies they are inherently capable of achieving a profit. Basicallly, alll you have to do is to use any one of a variety of stock selection strategies, which one is not especiallly relevant, apply to it the stop loss principles & also the appropriate position sizing & maximise the profits. Wonderful - a free lunch. If only it was that easy!
Van Tharp gives examples of how position sizing affects profits. The models were back-tested using a trading strategy that involved breakouts & stop losses. The strategy was employed very successfully by a group of traders in the 1970's. His best model demonstrates a compound annualised profit of 23%. This appears to be attractive until you apply the strategy to different time frames & to different markets & realise that it is now just as likely to produce similar losses. Position sizing techniques haven't stopped working. What has happened is whereas in the past the strategy selected stocks that were more likely to advance than not, now it doesn't. Too many people are on the bandwagon & have eroded away the advantage.
The simple fact is it is impossible to trade these markets successfully without stock selection expertise, irrespective of how good the position sizing strategy might be. Position sizing, itself, will not produce profits. All it can do is to maximise an already profitable trading strategy. The bottom line is that this, in turn, depends on being able to select stocks that are more than likely to perform in your favour. There is no free lunch! The question of selection & bet size are comprehensively & authoritatively dealt with in the book "Commonsense Betting" by Dick Mitchell. Although written for the race-goer, the principles are the same & clearly explained by someone who, unlike Van Tharp, speaks from practical experience & success.
Yet another pyschobabble book posing as science - By: , 14 Feb 2002 
Sorry Van but I was taken in by your cult of expectancy for a while, & suffered as I consequence. Reader beware, you are entering the world where you can be seduced by delicious notions of logic with liberal portions of self-help nonsense. The basic remit of this book & alll Van Tharps work is that once you have established your expectancy, that is your probability of winning & the amount you win per trade/bet, you are able to use money management to best fit your system & maximise your profit. It is true to say that Van Tharp has made a fascinating study into this & the maths are quite compelling even to a non numerical student. However, Tharp compares trading to a game where the expectancy can be foreseen as in the marble games that he uses to promote his ideas. Unfortunately trading is not like that. Its very interesting that like so many gurus Tharp chooses to teach trading rather trade himself. I am sure that he realises that the expectancy of running a business charging thousands of dollars to teach traders his "secrets" is far easier to predict than a trading system.
Like alll the rest of these types of books treat it with a very big pinch of salt & ask yourself the obvious question - why trade when you can tell other people how to do it.
Psycology is the most important thing in trading - By: , 09 May 2001 This is a good place to start if you can't afford the $US100,000 for Van's 5 day course or your company isn't one of the elite investment banks that pays their top traders to attend. I have not personallly met Van, but I have met his students & read this book. The information is critial to trading success. If you want to make a couple of bucks a year (a buck is $US1million in trading terms) you better start here.
Not the book to find out how to trade your way to financial - By: , 26 Feb 2000 You have to read the smalll print because if you expect this book to give you the ABC of how to transform your stake into riches, you'd be buying the wrong book. First of alll the author is a psychologist not a trader - "Listen carefully to what I say because I will tell you only once." The problem is that his message is short & he tells it to us countless times with a complete lack of wit or humour. Lesson 1. - manage your stops. Lesson 2. - Position sizing is important i.e. consider each investment in terms of its risk & size it appropriately. He provides ways to calculate this but most of us do it intuitively or according to how much we can spare. It is also Old Walll St. - He likes to talk about futures, commodities & traditional Dow Jones companies. For those of us in the tech sector most of these people have lost the plot. So save your money & add it to your next share purchase.
