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Perfect Trader - Van K. Tharp [Review]
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Perfect Trader - Van K. Tharp [Review]

created Michał SielskiJanuary 12 2021

If you have read a few or even a dozen or so books on the stock exchange, Forex market or just an investment and you think that you already know a lot, then you are right - you think. A book by Van Tharp "Perfect Trader" not only reminds you of it, but it is also a great position for those who want to see themselves in it, or rather their own trading mistakes. 

All traders make mistakes, regardless of whether they manage millions of dollars or several thousand zlotys, which in their dreams they want to exchange for these millions. Moreover, many make the same mistakes. It all depends on what definition of the error we adopt. 

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Error, which is what?

Most often we think that we have made a mistake in assessing the market situation, we have taken a short position and the market is growing, or on the contrary: we have decided to go long and we have declines. This is a bug? According to Van K. Tharp, not necessarily.

What is an error according to the author of the book "Perfect Trader"? Not a bad assessment of the market situation at all. The basic definition of error for him is… failure to stick to pre-set rules, not a wrong decision. Consistency is the key to success on the trading scene. 

This is hard to believe at first, but the following examples and exercises are eye-opening. Thoroughly described types of traders, from those who always try to be right and close profitable trades too quickly, so as not to lead to declines, after operating without a plan, or rather "by feeling", which in the long run is not enough, can allow others a look at profitable trading. And it does not matter what market it concerns.

Knowledge above all

van tharp

Van K. Tharp, author of the book

The author - as probably everyone who writes investment guides - also points out how key knowledge is. Most people start trading completely without preparation. The entry threshold is small: all you need to do is have a little savings and the account is opened online. At the same time, almost every novice trader thinks that he is educated above average: he watches economic programs, reads articles, knows about economics. Getting paid for it seems easy. 

Unfortunately, in fact it is very little, and it is the same in every aspect: karate, skydiving, chicken farming - easy, right? Of course, there are experts, but we are convinced that on a basic level, anyone can handle it. Meanwhile, the more we know about a given topic, the more we realize how much we don't know yet. And the financial market is similar, because knowing how a computer works, we certainly won't be able to build it.

Lots of details and interesting observations

The beginning of the book, however, can be boring, because it is practically entirely about psychology. However, you cannot be discouraged by the texts about getting to know yourself, and even meditation, because this is only an introduction (although actually long) to specific calculations and examples of how the risk-potential earnings ratio should look like. 

Here you will find directly described proportions that are worth using and calculations when a given system will be effective. For some, it will also be a surprise that you need to have at least three different investment systems, tailored to the phase of the market. And here we come to the heart of what the author wants to convey: we do not speculate on the market (although we think so), but on our beliefs about the market. 

So it is undoubtedly a book worth reading, regardless of our experience and level of trading. Even if we only remember a few details, they may turn out to be crucial for improving our results and regularly building the value of the investment portfolio.

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About the Author
Michał Sielski
Professional journalist for over 20 years. He worked, among others, in Gazeta Wyborcza, recently associated with the largest regional portal - Trojmiasto.pl. He has been present on the financial market for 18 years, he started on the Warsaw Stock Exchange when the shares of PKN Orlen and TP SA were just being introduced to the market. Recently, his investment focus has been exclusively on the Forex market. Privately, he is a parachutist, a lover of Polish mountains and a Polish karate champion.