Hi Rishi,

The Van Tharp books are quite useful and here is a YouTube presentation for his risk management book which may be all you need. Very good:

VAN THARP Trade Your Way To Financial Freedom

You can find more excellent videos on the same channel, including Alex Elder and Mark Douglas.

Ohh! great I would love to read that book.

Thank you very much Richard for the suggestion

I wonder about the risk management thing. Al keeps reiterating in the course that beginners are always obsessing about risk but actually probability is more important so long as you follow the basic rules for managing risk. I tried reading a book on risk management and it didn't seem that useful, so I wonder how much is to be gained from reading the stuff outside of the course, which is basically, (correct me if I'm wrong) don't risk more than 3% on any one trade, put your stop at the bottom of the most recent major reversal, trail your stop to the next major reversal, aim for at least 1:2 RR and a couple of other things. So I wonder whether going beyond that as a beginner I'd just be fuelling my inner risk-aversion.

I think you would discover much more in the book, I already started reading and saw the chapters 

And I can assure you that there are Many other tactics to manage money that we don't know 

All the best 

I think you would discover much more in the book, I already started reading and saw the chapters 

And I can assure you that there are Many other tactics to manage money that we don't know 

Thanks both. Very interesting. I'm up to page 15 of the book and found that (a) he writes in an interesting and accessible way, (b) you need to find your own system instead of following others, (c) you need to do a lot of introspection to be successful, and (d) money management, which he defines as position sizing, is very important whereas (e) the actual system and setups are less important than most people think. My head is literally spinning.

First of all thank you very much Richard for that book recommendation 

Since I have completed that book can you please suggest me another book that deals with the same (Risk management and developing systems)

Hi Rishi, I started reading that book as well and got some way through it. Couple of points.

First, I found that Van Tharp as a couple of books just on money management/position sizing strategies, an introductory and a thick definitive volume.

Second, I found that he has some very good ideas, but I keep being frustrated and wondering whether I should be spending much more time on this:

(1) It seems to me that Al already incorporates this sort of material into the course.

(2) The psychological stuff on goals, beliefs about the market and cognitive biases/fallacies is very useful.

But Tharp keeps asking you to reflect on your beliefs but my sense was that I believe what I read, eg., what I'm learning from the Brooks course. It seems useful to reflect on what you believe and goals, but I just wonder whether I should be spending so much time on reflecting on my beliefs when I could be spending that time on Al's course.

(3) There seems to be some tension between the two approaches.

Tharp seems to think that it's all psychology whereas Al insists that you can improve your odds as a day trader if you get better at reading charts and understanding the math.

Al says on p. 437 of Vol. 2 under "Mathematics of Trading":

"The math changes with every tick, which is a barrier to those who don't understand what is going on and a great advantage to those who do."

I find Tharp frustrating because he insists that if you're not spending 50% of your time on reflecting on your goals, beliefs and biases that means that you probably have psychological problems whereas I just feel that it's not the best way to use my time, at least at this point.

So it seems that the emphasis is different and it's a question whether we should be reading thick volumes on money management and answering reflective questions about our beliefs and goals vs. improving skills in reading charts and understanding the math.

Wonder what others think about this.

We humans are emotional beings, but someone telling that you need to work on your psichology because it is more important than your skills is, in my opinion, a charlatan. 

Imagine you wanted to buid a wood chair, signed for a course and the very first day your teacher explained that he was going to spend two thirds of the of the course on the importat things, which are asking you to reflect on why you want to learn to build a chair, what are your beliefs about chairs not in general but especially in your case, and what biases you might have when you really want to build a chair given you can buy one much cheaper in your store. After the important part of the course is done and you are eager to learn the techniques to actually build the chair, he tells you that the carpentry techniques are not that important, that you should not follow others but find your own way with the saw...

Our emotions are not our enemies, rather, they are part of our cognition system. They scream when there is danger. They are the messenger, the alert system without wich we would be extinct, reason why we can't switch it off. Hence, instead on working on trying to tame the emotions, which mother nature made very difficult to do, we could work in avoiding the danger that causes the alarm to get off on the first place.

How do we do that? with skill, being aware of the possible outcomes with its associated probabilites, and placing trades with the I-don't-care position size. If you do so, no alarm, no psichology, you can trade calmy and enjoy the MKT. Otherwise you will waste a lot of money... and you will end up going to the store to buy the chair!

Thanks Ludo, that's kind of what I was thinking.

And also, it seems to me that Al's whole approach is based on money management, because he doesn't just focus on entries (which Tharp critiques) but on the risk/reward + probability.

For Tharp it's about position sizing that prevents you from blowing your account, and then the R value, whereas expectancy = R + opportunity (or something of that sort), which seems like the same thing.

And Al does tell you not to risk more than a small percentage of your account.

As for opportunity (how often you can trade) Al seems to be saying, from what I can tell so far, that there are always opportunities but you need experience to be able to take advantage of them.

So I was having trouble seeing what part Tharp is saying about money management, R and expectancy that Al isn't covering.

I think it's worth reading the book and thinking about some of those things but just think that he goes off on some tangents that I don't want to go down at this stage.

I didn't read Tharp's book but, as any one else, I read others when I was starting out and, yes, we can always get some good takeaways from every book, and I am sure this one as well, but we need to be sure that we are not sent down the wrong path.

Al teaching covers all you need to trade the MKT, he gives you several trading techniques so you can use the ones that better suit your trading style. And if you feel stressed, either your position size is too big or your knowledge too small so work on decreasing one as you increase the other and you will be fine, as far as the psichology goes. That's it. But it is not enough for me to write a book. Sad 😉

I find Tharp frustrating because he insists that if you're not spending 50% of your time on reflecting on your goals, beliefs and biases that means that you probably have psychological problems whereas I just feel that it's not the best way to use my time, at least at this point.

I totally agree with this point

But what I found interesting in Tharp's book are the points on

→ Risk management

→ Position sizing

→ HOW TO BUILD SYSTEM (most important one)

And these all things would be helping you once you are done with the course and ready for building your own systems

Dr. Brooks has compared trading to chess many times in the past, and my favorite quotes from Bobby Fischer are, 

"I don't believe in psychology. I believe in good moves."

"Psychologically, you have to have confidence in yourself and this confidence should be based on fact."

once you are done with the course and ready for building your own systems

Yeah, that's what I thought at first.

But then when I looked more closely at what Tharp means by "building a system" seems to be just going beyond what most people at the time (circa 2000) were teaching, ie., entry setups.

So a system is the other stuff as well which includes exits (stop losses, take profits, scaling in, scaling out), position sizing and different strategies for different kinds of markets.

But as far as I can tell this is already given in the Brooks course.

I'm not saying that you couldn't tailor it and develop your own style, but it does seem to me that once you've internalised the Brooks course you already have systems for the different markets (ie., different parts of the market cycle).

It seems to me that Tharp is responding to what was lacking before, say 2000, which is education that goes beyond setups for entries, but Al's course doesn't just give you setups for entries, it's a series of systems for trading in different markets.

I'm not sure but that's what it looks like to me.

Yea, you can have the best moves but the psychology still kill your account. I'm trying to be as objective as possible so can automated this.

So far I find it hard to be objective.