I’m having a good read of Van Tharp’s latest book: Super Trader: Make Consistent Profits in Good and Bad Markets. It’s quite a good read and captures some key trading principles including what he sees as the five components to trading well:

1. The trading process. The things you need to do daily to be a good trader.

2. The wealth process. Exploring your relationship with money, how you deal with it and how it deals with you.

3. Developing and maintaining a business plan to guide your trading. Entry into the world of trading may be very easy. All you need to do is sign a few forms, deposit some cash and away you go. Newcomers want trading to be easy fast and profitable. ‘Successful’ trading however, like success in any business, requires a development of and adherence to a solid plan.

4. Developing a system. Often people consider a system to be the magic secret for picking stocks or commodities. In reality, the entry decision is one of the least important aspects of good trading. The keys to a moneymaking system are elements such as determining objectives and risk management strategy. It’s the whole picture not the entry signal.

5. Position sizing to meet your objectives. Tharp showed by way of simulation games that 100 people at the end of a set of 50 trades will have 100 different and varied results. What was extreme variability in results was thought to be a function of the money risked on each trade (position sizing) and the personal psychology that determined their position sizing.

That last point is an interesting one. Those that have read anything about the Turtles or other trading system developers would have heard a similar message. I can also say I have seen this played out time and time again in the markets.

Anyhow to read more, buy the book…


Super Trader: Make Consistent Profits in Good and Bad Markets