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Trade Your Way To Financial Freedom, Second Edition

Book Description

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 of Market 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.

Table of Contents

  1. Cover Page
  2. Trade Your Way To Financial Freedom
  3. Copyright Page
  4. Dedication
  5. Contents
  6. Foreword by Chuck Whitman
  7. Preface to the Second Edition
  8. Preface to the First Edition
  9. Acknowledgments
  10. PART ONE THE MOST IMPORTANT FACTOR IN YOUR SUCCESS: YOU!
    1. Chapter 1 The Legend of the Holy Grail
      1. The Holy Grail Metaphor
      2. What’s Really Important to Trading
      3. Modeling Market Geniuses
    2. Chapter 2 Judgmental Biases: Why Mastering the Markets Is So Difficult for Most People
      1. Biases That Affect Trading System Development
      2. Biases That Affect How You Test Trading Systems
      3. Biases That Affect How You Trade Your System
      4. Summary
    3. Chapter 3 Setting Your Objectives
      1. Designing Objectives: A Major Part of Your System Work
      2. Tom Basso on Objectives
      3. Setting Your Own Objectives
  11. PART TWO CONCEPTUALIZING YOUR SYSTEM
    1. Chapter 4 Steps to Developing a System
      1. 1. Take an Inventory
      2. 2. Develop an Open Mind and Gather Market Information
      3. 3. Determine Your Mission and Your Objectives
      4. 4. Determine the Concept That You Want to Trade
      5. 5. Determine the Big Picture
      6. 6. Determine Your Time Frame for Trading
      7. 7. Determine the Essence of Your Trading and How You Can Objectively Measure It
      8. 8. Determine What Your Initial 1R Risk Will Be
      9. 9. Add Your Profit-Taking Exits and Determine the R-Multiple Distribution of Your System and Its Expectancy
      10. 10. Determine the Accuracy of Your R-Multiple Distribution
      11. 11. Evaluate Your Overall System
      12. 12. Use Position Sizing to Meet Your Objectives
      13. 13. Determine How You Can Improve Your System
      14. 14. Mentally Plan for Your Worst-Case Scenario
    2. Chapter 5 Selecting a Concept That Works
      1. Trend Following
      2. Fundamental Analysis
      3. Value Trading
      4. Band Trading
      5. Seasonal Tendencies
      6. Spreading
      7. Arbitrage
      8. Intermarket Analysis
      9. There’s an Order to the Universe
      10. Summary
    3. Chapter 6 Trading Strategies That Fit the Big Picture
      1. The Big Picture as I See It
      2. Factor 1. The U.S. Debt Situation
      3. Factor 2. The Secular Bear Market
      4. Factor 3. The Globalization of Economic Factors
      5. Factor 4. The Impact of Mutual Funds
      6. Factor 5. Changes in Rules, Regulations, and Taxes
      7. Factor 6. Human Beings’ Tendency to Play a Losing Economic Game
      8. Other Areas You Might Consider
      9. How Will You Monitor the Big Picture?
      10. Summary
    4. Chapter 7 Six Keys to a Great Trading System
      1. The Snow Fight Metaphor
      2. Looking at Expectancy under a Magnifying Glass
      3. Opportunity and Expectancy
      4. Prediction: A Deadly Trap
      5. Real Trading Applications
      6. Determining How Your System Will Perform
      7. Summary
  12. PART THREE UNDERSTANDING THE KEY PARTS OF YOUR SYSTEM
    1. Chapter 8 Using Setups to Jumpstart Your System
      1. The Five Phases of Entry
      2. Setups for Stalking the Market
      3. Filters versus Setups
      4. Setups Used by Well-Known Systems
      5. Summary
    2. Chapter 9 Entry or Market Timing
      1. Trying to Beat Random Entry
      2. Common Entry Techniques
      3. Designing Your Own Entry Signal
      4. An Evaluation of Entry Used in Some Common Systems
      5. Summary
    3. Chapter 10 Knowing When to Fold ’Em: How to Protect Your Capital
      1. What Your Stop Does
      2. Using a Stop That Makes Sense
      3. Stops Used by Common Systems
      4. Summary
    4. Chapter 11 How to Take Profits
      1. Purpose behind Profit-Taking Exits
      2. Just Using Your Stop and a Profit Objective
      3. Simplicity and Multiple Exits
      4. What to Avoid
      5. Exits Used by Common Systems
      6. Summary
  13. PART FOUR PUTTING IT ALL TOGETHER
    1. Chapter 12 There’s Money for Everyone
      1. How Seven Traders Approach Their Craft
      2. How Our Traders Would Look at Five Key Market Situations
      3. Results Six Weeks Later
      4. Results as R Multiples
      5. Summary
    2. Chapter 13 Evaluating Your System
      1. Several Approaches to Take
      2. Expectunity: Factoring in Opportunity
      3. The Cost-of-Trading Opportunity
      4. Peak Drawdowns
      5. Using Newsletter Recommendations as Sample Systems
      6. Summary
    3. Chapter 14 Position Sizing—the Key to Meeting Your Objectives
      1. Basic Position-Sizing Strategies
      2. Model 1: One Unit per Fixed Amount of Money
      3. Model 2: Equal Value Units for Stock Traders
      4. Model 3: The Percent Risk Model
      5. Model 4: The Percent Volatility Model
      6. The Models Summarized
      7. Position Sizing Used by Other Systems
      8. Summary
    4. Chapter 15 Conclusion
      1. Avoiding Mistakes
      2. What’s Left Now: An Interview with Dr. Tharp
  14. Glossary
  15. Recommended Readings
  16. Index