Van Tharp is a high level trading consultant, coach and best-selling author who has produced many outstanding resources to help educate and improve trader performance. Van has coached and interviewed many of the worlds best traders and even appeared in one of the interviewees in Jack Schwager’s excellent book ‘Market Wizards’ because of his knowledge of the drivers of trading success.
While many trading educators focus excessively on entry rules and trading signals, Van Tharp’s approach is decidedly different and is grounded in trader psychology. As a psychologist and modeller of peak performance traders Van has discovered that personal psychology is the single most important driver of trader profitability.
Dr Tharp’s work demonstrates that trading psychology is so important that even with the same rules, performance varies wildly between traders because of their individual psychology. In fact I have attended a live Van Tharp workshop in which the 30 odd participants ended up with vastly different results from exactly the same series of trades due to the different psychology of each participant.
An excellent example of the impact of trader psychology on performance is trading mistakes, as I have shown here, mistakes are extremely costly in terms of trading performance and profitability. Dr Tharp provides good illustrations of the impact of trading mistakes in his outstanding books ‘Trade your way to financial freedom’ and ‘Super Trader’. All trading mistakes can be attributed to some form of trader psychology issue.
Dr Tharp also places a strong emphasis on understanding yourself as a trader, your objectives and your personal characteristics. This is important because if your trading system does not fit your objectives and personal characteristics it will be very difficult for you to trade it consistently without making mistakes. This emphasis has been extremely influential in my own trading system development and success. As a result I am an enthusiastic student of Van’s work.
After understanding your own objectives and building a trading system to suit you, Van emphasizes the need for focus on sizing your trades to meet your objectives. He coined the term Position Sizing™ to define how much you risk on each trade.
How much you risk on each trade makes a massive difference to the outcomes generated by your trading system. If you risk too little then you won’t make enough money to bother trading… Risk too much and you are likely to have an unbearable drawdown or worse – blow up your account.
Tharp suggests that the vast majority of traders do not spend enough time on Position Sizing™ and therefore fall short of achieving their objectives. He has even developed a game and e-learning program to educate traders on the importance of position sizing as a profit and risk control lever. I highly recommend you get this course and game as it will give you a new perspective on how to control risk and achieve your objectives.
As we discussed here, after the system rules have been developed and optimized the same amount of effort again should be placed on the position size model to give you the best chance possible of meeting your objectives. This is the key to meeting your trading objectives.
Traders at the novice level who want to get started on the right path and experienced traders who want to take their performance to the next level will benefit from Dr Tharp’s many books and courses.
In particular we recommend you consider the following resources depending on your situation:
Recommended Van Tharp Books:
- Trade your way to financial freedom
- Super trader
- The definitive guide to position sizing
- Safe strategies for financial freedom
Recommended Van Tharp Self Study Programs:
- Introduction to Position Sizing™ Strategies
- Peak Performance Home Study
- How to Develop a Winning Trading System Home Study
- The Position Sizing™ Game
Recommended Van Tharp Seminars: