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Position sizing settings are made on the Position Sizing menu, shown in Fig. You can choose from six different position sizing methods. You can also choose whether you want the build process to select the method for you and/or whether the build process will select the position sizing parameter value, such as the fixed fraction for fixed. Nov 20, 2019 Your position size, or trade size, is more important than your entry and exit when day trading stocks. You can have the best strategy in the world, but if your trade size is too big or small you'll either take on too much or too little risk.
Author: Van K. Tharp
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Commonsense Rules for Financial Freedom--Anyone Can Do It! Safe Strategies for Financial Freedom shows you how to know in 30 seconds whether you should be in or out of the market. The authors show you how great investors avoid mistakes--and win big. With Van Tharp's legendary risk-control techniques, learn how the world's most profitable investors reduce their risk and leave their wealth-generating potential unlimited, and how you can too. You'll learn how to invest wisely--in every type of market, protecting what you earn, and developing sources of regular income to achieve financial independence. Safe Strategies for Financial Freedom provides you with a specific program for freeing yourself from the workplace--forever. Let it show you how to seize control of your financial life by investing in the assets that will provide you with steady income until the day when your investment income surpasses your monthly expenses--and you are, once and for all, financially free.
Trade Your Way To Financial Freedom
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Author: Van K. Tharp
Editor: McGraw Hill Professional
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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.
Author: BusinessNews Publishing
Editor: Primento
ISBN: 2511019787
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The must-read summary of Van Tharp, D. Barton and Steve Sjuggerud's book: 'Safe Strategies for Financial Freedom'. This complete summary of the ideas from Van Tharp, D. Barton and Steve Sjuggerud's book 'Safe Strategies for Financial Freedom' shows that it is possible to become financially free. All you have to do is begin the journey and systematically put sound investment strategies in place. In their book, the authors provide a four-step process that will lead you to becoming financially free. This summary describes this process in detail and gives you the tools to begin your journey to financial freedom. Added-value of this summary: • Save time • Understand key concepts • Expand your knowledge To learn more, read 'Safe Strategies for Financial Freedom' and discover the four-step process that you can use and adapt to finally achieve financial freedom.
Financial Freedom With Super Trader Ebook Bundle
Author: Van K. Tharp
Editor: McGraw Hill Professional
ISBN: 0071808132
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TWO E-BOOKS IN ONE Trade Your Way to Financial Freedom Van Tharp's proven 14 step model for developing a profitable trading system-as well as his latest methods and techniques for winning in any market. Trade Your Way to Financial Freedom includes information on secular bull and bear markets and macro economics; as well as ways to think about and evaluate trading systems as a set of R multiples (reward to risk). Tharp also elucidates the concepts of expectancy and position sizing-the most important, yet least understood, aspects of profitable trading. Super Trader, Expanded Edition Super Trader provides a time-tested strategy for creating the conditions that allow you to reach levels of trading success you never thought possible. Providing expert insight into both trading practices and psychology, Tharp teaches you how to steadily cut losses short and meet your investment goals through the use of position sizing strategies--the keys to steady profitability. Tharp offers concepts and tactics designed to help you: CREATE AND MEET YOUR SPECIFIC UNDERSTAND THE BIG PICTURE CONQUER COUNTERPRODUCTIVE THINKING MASTER THE ART OF POSITION SIZING STRATEGIES
Author: Van K. Tharp
Editor: John Wiley & Sons
ISBN: 1118542029
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How to transform your trading results by transformingyourself In the unique arena of professional trading coaches andconsultants, Van K. Tharp is an internationally recognized expertat helping others become the best traders they can be. InTrading Beyond the Matrix: The Red Pill for Traders andInvestors, Tharp leads readers to dramatically improve theirtrading results and financial life by looking within. He takes thereader by the hand through the steps of self-transformation, fromincorporating 'Tharp Think'—ideas drawn from his modelingwork with great traders—making changes in yourself so thatyou can adopt the beliefs and attitudes necessary to win when youstop making mistakes and avoid methods that don't work. You'llchange your level of consciousness so that you can avoiding tradingout of fear and greed and move toward higher levels such asacceptance or joy. A leading trader offers unique learning strategies for turningyourself into a great trader Goes beyond trading systems to help readers develop moreeffective trading psychology Trains the reader to overcome self-sabotage that obstructstrading success Presented through real transformations made by othertraders Advocating an unconventional approach to evaluating tradingsystems and beliefs, trading expert Van K. Tharp has produced apowerful manual every trader can use to make the best trades andoptimize their success.
Super Trader Make Consistent Profits In Good And Bad Markets
Author: Van Tharp
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How do you transform yourself from mild-mannered investor to Super Trader? Think clearly. Plan accordingly. Commit completely. In other words, become a trader. And no one is better suited to help you make the transformation than legendary trading educator and author Van K. Tharp. Combining the sharp insight and technical brilliance that has drawn legions of investors to his books and seminars, Tharp provides a holistic approach for becoming a successful full-time trader. His system—a meld of investing psychology and sound trading practice—is the secret to achieving optimum conditions that produce results in both bull and bear markets. Using the lessons of Super Trader, you will approach trading as you would a small business—realistically, systematically, and enthusiastically. Drawing on his decades of experience, Tharp has created a simple plan designed to help anyone master the market. You can put this plan to use immediately in order to: Master the psychology of trading Craft a “business plan”—a working document to guide your trading Develop a trading system tailored for your personal needs and skills Create position-sizing strategies to meet your objectives Monitor yourself constantly to minimize mistakes Throughout the book, Tharp asks the pertinent questions you must ask yourself about becoming a trader, being a trader, and succeeding as a trader. The rewards that come with being a Super Trader—both financial and personal—make you feel as if you can leap small buildings in a single bound. Whatever your skill level, Tharp provides the formula for succeeding in a field where most people fail.
Author: D. R. Barton, Jr.
Editor: John Wiley & Sons
ISBN: 1118856708
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Offers strategies and ideas for those nearing retirement age who are looking to fast-track their investment income by using non-traditional investment vehicles like private equity and covered calls to generate significant returns.
Financial Freedom
Author: Gisela Enders
Editor: BoD – Books on Demand
ISBN: 3744893715
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For many people, financial freedom is a major goal. If they no longer needed to work for money, so much would be possible. For people who have to go to work every day that seems like paradise. But how do people actually live once they have reached the goal? Gisela Enders interviewed people mostly from Germany and Europe who are already financially free. She met very interesting people. Some who do not work at all anymore and others who spend every day working on their own projects out of sheer passion. Some who make their living from stocks and others who live from rental income. And others who live abroad and need very little money to live on. People who want to enjoy spending time with their kids and others who put all their passion into their own projects. Most of the people interviewed live frugally and from the outside, the only thing different about them is that they are rich in time. What would your own ideal life be like? A life that you planned yourself rather than one planned for you. You can put that plan into practice step by step. The ideas in this book will inspire you to consider a life beyond the rat race.
Author: Van Tharp
Editor: McGraw Hill Professional
ISBN: 9780071760850
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Think like a trader. Act like a trader. Become a Super Trader. 'Let your profits run!' It's the golden rule by which all Super Traders live. With the help of investing guru Dr. Van K. Tharp, you can join the ranks of full-time traders who consistently master the market. Super Trader provides a time-tested strategy for creating the conditions that allow you to reach levels of trading success you never thought possible. Providing expert insight into both trading practices and psychology, Tharp teaches you how to steadily cut losses short and meet your investment goals through the use of position sizing strategies--the keys to steady profitability. Tharp offers concepts and tactics designed to help you: CREATE AND MEET YOUR SPECIFIC UNDERSTAND THE BIG PICTURE CONQUER COUNTERPRODUCTIVE THINKING MASTER THE ART OF POSITION SIZING STRATEGIES With Tharp's proven methods, you can live the dream of enjoying above-average profits under various market conditions--up, down, and sideways. Tharp's wisdom, perspective, and tactical expertise are legendary in the world of trading. Follow the master down the path to trading excellence with Super Trader. How do you transform yourself from a mild-mannered investor into a proactive trader who outperforms the market day-in and day-out. Think clearly. Plan accordingly. Commit completely. In other words, become a trader. No one is better suited to help you make the transformation than legendary trading educator Dr. Van K. Tharp. Combining the sharp insight and technical brilliance that have drawn legions of investors to his books and seminars, Tharp provides a holistic approach for becoming a successful full-time trader. His system--a meld of investing psychology and sound trading practice--is the secret to achieving optimum conditions that produce results in both bull and bear markets. Using the lessons of Super Trader, you will approach trading as you would a small business--realistically, systematically, and enthusiastically. Drawing on his decades of experience, Tharp has created a simple plan designed to help anyone successfully navigate the market that includes the following: Mastering the psychology of trading Crafting a 'business plan'--a working document to guide your trading Developing a trading system tailored to your personal needs and skills Creating position sizing strategies to meet your objectives Monitoring yourself constantly to minimize mistakes You can put this plan to use immediately. Throughout the book, Tharp raises the pertinent questions you must ask yourself about becoming a trader, being a trader, and succeeding as a trader. The rewards that come with being a Super Trader--both financial and personal--make you feel as if you can leap small buildings in a single bound. Whatever your skill level, Tharp provides the formula for succeeding in a field where most people fail.
Eight Edges You Must Have
Author: Van K. Tharp
Editor: John Wiley & Sons
ISBN: 1118556895
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Why investors lose money and how NOT to Wall Street makes it easy to jump into the game of trading. After all, they love taking your money. Trading without proper preparation could be a windfall for your broker, but fatal for your account. In this e-book, bestselling financial writer and trading expert Van K. Tharp shares eight essential rules that will help you NOT lose your shirt and even make a profit in the world of trading. In Eight Edges You Must Have: Your Written Trading Plan, Van K. Tharp explains that success in the markets takes the same amount of—perhaps even more—work, study, and commitment that any other profession requires. For those people who are committed to learn how to trade properly, who do the obligatory work and possess the necessary talents, it is quite possible to make a lot of money in the market in the long run. To that end, he outlines the eight key reasons why people lose money in their trading and investing and shows how to avoid them. Lists the eight essential reasons people fail at trading—from the fact that you're playing Wall Street's game to the common misconception that trading is technical when in fact, it’s 100% psychological Written by recognized trading expert Van K. Tharp, bestselling author of Trade Your Way to Financial Freedom Reveals the secrets of trading psychology that can give traders a significant advantage Utilizing charts and solid data throughout the book, Tharp arms traders with eight essential rules to follow to protect themselves from falling into the traps awaiting the poorly prepared and to maximize their potential for coming out winners in the game of the trade.
12.1 –Defining Equity Capital
The last chapter we laid down few key thoughts on position sizing and with that, I guess it is amply clear as to why one has to incorporate position sizing at the core of every trading strategy. Position sizing technique helps you identify how much of your equity capital has to be exposed for a given trade. In this chapter, we will take that discussion forward and explore ways to position size.
A quick recap of sorts before we proceed. What is position sizing?
Position sizing is all about answering how much capital you will expose to a particular trade given that you have ‘x’ amount of trading capital. One classic position sizing strategy which most people employ is the standard 5% rule. The 5% rule does not permit you to risk more than 5% of the capital on a given trade. For example, if the capital is Rs.100,000/-, then they will not risk more Rs.5000/- on any single trade.
Here 5000 is the exposure to a trade and 10000 is the equity capital. You have decided to invest 5000 a trade based on a position sizing rule or a strategy.
Needless to say, there are many different ways to position size, which by the way, also means (unfortunately) that there is no single guided technique to position size. You as a trader need to experiment and figure out what works for you. Of course, I will discuss few position sizing techniques soon.
Now, irrespective of which position sizing technique you will follow, at some point the technique will require you to estimate your equity capital. For this reason, we will address the technique of estimating equity capital first and then proceed to learn position sizing techniques.
What do I mean by equity capital?
Equity capital is the basically the amount of money you have in your trading account based on which you decide how much capital to deploy in a trade. This may seem very trivial to you at this point. But allow me to illustrate why this is a tricky task.
Assume you have Rs.500,000 capital and you work with a simple position sizing principle of exposing not more than 10% capital to a single trade. Given this, assume you take a position worth Rs.50,000/-.
Now for the next trade, how much is your equity capital?
- Is it Rs.450,000?
- Is it still Rs.500,000 considering the fact 50K is deployed in a trade?
- Should it be 450,000 plus 50K ± the P&L from the trade that exists in the market?
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Given that there are numerous outcomes and possibilities, estimating equity for the trade is not really a straightforward task. Hence, getting our act right in estimating the equity capital is very important before we proceed to learn position sizing concepts.
12.2 – Estimating Equity Capital
At this point, I’d like to go back to good old Van Tharp and talk to you some of the techniques he uses to estimate equity capital. These are some of the better techniques compared to the many out there. Essentially there are three techniques or models as he calls them –
- Core Equity model
- Total Equity model
- Reduced total equity model
The core equity model requires you to deduct the capital allocated to a trade from the existing capital. This way, the exposure to a trade goes on reducing as you ladder up more and more positions. Let me give you an example – assume your equity capital is Rs.50,000/- and you follow a simple 10% position sizing formula. The 10% rule implies that you do not expose or risk more than 10% of your capital to a trade. So the first trade gets an exposure of Rs.5000. The core equity is now reduced to Rs.45000. Have a look at the following table –
Download the excel sheet here.
So, the first trade assumes the equity available is Rs.50,000, hence 10% of the available equity is exposed first trade i.e Rs.5000/-. The core equity model requires you to deduct the capital deployed to a trade and re work on the core equity model. So, the core equity is now Rs.45000/-, which is also the available equity for the 2nd trade.
For the 2nd trade, we again deploy 10% of the equity available i.e 10% * 45000 = Rs.4500/-. We deduct this amount to calculate the new core equity, which is now Rs.40,500/-. This also is now the newly available equity for the 3rd trade.
So for the 3rd trade, the capital exposure for the trade is Rs.4050 and the new core equity is Rs.36,450/-. So on and so forth, I’m assuming you get the drift.
I consider this as a slightly conservative equity estimation model as you tend to reduce the capital allocation as the number of opportunities increases. For all you know, your 5th trade (for which the equity exposure is far lesser) may be a great winner. The other side of the argument is that the 5th trade could be the worst loser compared to the rest.
Having said that, I like this model for the sake of its simplicity. Once you commit the capital to a trade, you kind of forget about that and move on with what is available.
The Total equity model aggregates all the positions in the market along with its respective P&L and cash balance to estimate the equity. Let me straight away take an example to explain this –
Free cash available – Rs.50,000
Margin blocked for Trade 1 = Rs.75,000
P&L on Trade 1 = + Rs.2,000
Margin blocked for Trade 2 = Rs.115,000
P&L on Trade 2 = + Rs.7000
Margin blocked for Trade 3 = Rs.55,000
P&L on Trade 1 = – Rs.4,000
Total Equity = 50000 + 7000 + 2000 +115000+7500+55000-4000
= Rs.300,000/-
So, as you can see, in the total equity model, free cash along with margins blocked and the P&L per position is taken into consideration. Now, if my position sizing strategy suggests a 10% exposure to a new position, then I’d expose Rs.30,000/- on a new trade. If the free balance in my account does not permit me to take this position, then I’d not really initiate a new position. I’d wait to close one of the existing positions to take a new position.
The fact that this model considers a live position along with its P&L into account for estimating equity makes it a little risky. I’m personally not a big fan of this equity estimation model. This is somewhat like counting the chicken before they hatch.
I do like the 3rd model to estimate the equity, this one is called the ‘Reduced Total Equity Model’.
This model kind of combines the best of both the core equity model and the total equity model. It basically reduces the capital allocation to a particular trade (similar to core equity model) and at the same time includes the P&L of the trade which is already in place (similar to total equity model). However, the P&L is only on the locked in profits.
Let me work with an example to help you understand this better. Assume I have a capital of Rs.500,000/-. Further, assume my position sizing strategy allows me to invest not more than 20% on a single trade, which is Rs.100,000/- per trade.
I’m looking at the chart of ACC and I decide to go long on ACC futures at 1800 by blocking a margin of approximately Rs.90,000/-, which is well within my position sizing limit of Rs.100,000/-.
I’ve now entered a position and waiting for the market to move. Meanwhile, as per the reduced total equity model, my the capital available for the 2nd trade is –
20%*( 500,000 – 90,000)
= Or about 20% of Rs.410,000/-
= Rs. 82,000/-
Note, because of the existing position, the exposure capital has reduced from Rs.100,000 to Rs.82,000/-. Up to this point, it works exactly like the core equity capital model.
Now, assume the stock moves, and ACC jumps by 25 points to 1850. Considering the lot size of 400, I’m now sitting on a paper profit of –
400*50
= Rs.20,000/-
I would now put in a trailing stop loss and lock in at least about 25 points out of 50 point move or in Rupee terms, I want to lock in Rs.10,000 as profits.
This means, for the long ACC position at 1800, I have to now place a stop loss at 1825 and locked in Rs.10,000/- as profits.
I will now add this locked in profits back to the total equity. Hence my total equity now stands at –
410,000 +10,000
=420,000/-
This means, my new exposure capital will be 20% of the total equity –
=20% * 420000
= Rs.84,000/-
As you notice, the exposure capital has now increased by an additional 2000/-.
I kind of like the reduced total equity model to estimate the total capital available to position size. If one follows tends to follow this technique, then it kind of forces you to practice basic stop loss principles, which according to me is very good.
Anyway, I’d like to close this chapter at this point. In the next chapter, we will consider one of the above-stated methods to estimate equity and look into few position sizing technique.
Key takeaways from this chapter
- Estimating equity capital is crucial for position sizing
- Core equity model deducts the capital allocated to a trade and recalculate the capital available
- Total Equity model requires you to add the free cash, margins blocked, and the P&L of the positions to estimate the equity capital
- Reduced Total Equity model requires you to add the free cash to the locked in profits of an existing position
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