Top critical review
3 people found this helpful
Some good stuff, but lot's of hard reading
on October 21, 2003
First off, let me state that I am not a trader and know just a little bit about it. I am interested in learning, however, leading me to try this book out as it has received some good reviews here at Amazon. Much of it was way over my head and too confusing to do me any good. But some of the information was very good and very understandable and for that information I felt my investment in terms of both time and money was well spent with this work.
One of the things the author says near the end of the book is that it will take four or five readings for some of the information to sink in. And that's for people who actually know the topic to begin with. I can understand why; trading seems so easy when looked at from a distance, just buy low and sell high, hey, anyone can be a millionaire! Of course it isn't so easy and most people end up losing money or at least not making enough to justify the time spent.
I think the most important and helpful part of this book is the teaching on what many call "money management" (often erroneously); that the author refers to as "position sizing." This topic is part of investing that many over look.
I understood and appreciated this subject from the days (long past) that I used to enjoy both the ponies and blackjack. Position sizing in both these pursuits is vital and understanding why you don't sit at the $5 blackjack table with only $40 bucks, you go to the $2 table or get more money, is the same understanding you need when figuring out how much to "bet" when making trades in the stock market relative to your overall investment size (simply put "what percentage is at risk?") If you sit at the blackjack table with $40 and bet $5, you are risking too much with one "trade."
The other helpful part was how to look at "expectancy." What is the expectant overall rate of return based on both the success rate AND the amount won and lost on those respective trades. In other words, you can be wrong 70 percent of the time and still make money just as you can be right 70 per cent of the time and still lose money. The authors coverage of this area, and how some people put too much emphasis on one or two areas of investing was very helpful to me.
The area of entry's and exit's was covered well too. When too much consideration is put into entry's, without considering position sizing, expectancy and exit strategies, then the investor will be at a severe disadvantage.
While still a neophyte, I can give this book a recommendation to any that don't mind some difficult reading, it covers a lot of ground and makes a lot of sense in places while being overworked and confusing in others. I found it helpful that the author covers multiple strategies and why or how each one works or doesn't and how that system could be improved with (sometimes subtle) changes.
I also checked out the web site associated with Van K. Tharp's work and I'll concur with those that say "beware", because he is definitely out to sell something besides just this book. Whether that is a warning sign or not, is up to the individual.