Let me start by saying that Trade Your Way to Financial Freedom is required reading for all of my new traders. Of all of Dr. Van Tharp’s published books, this one gives the essence of his teaching from his workshops and home study courses. My name is Chuck Whitman, and I am the CEO of Infinium Capital Management, a proprietary trading firm located in the Chicago Board of Trade. We currently have 90 employees, trade on 15 different exchanges, and trade underlying instruments and options on all asset classes. I have personally purchased many copies of this book, but before I get into that, let me tell you about my experiences with Van Tharp.

I first became aware of Van’s teachings in 1998, when one of my mentors, Bruce, obtained two of Van’s home study courses, the Peak Performance Course for Traders and Investors and the Developing a Winning System That Fits You Course. Later, Bruce also attended one of Van’s System seminars, and he came back telling me how impressed he was with the material and the quality of students that had attended the seminar.

At that time, I was in the midst of one of the most difficult periods of trading of my career. Ironically, 1997 was one of my most successful trading years, and in 1998 I had decided to commit myself to becoming absolutely the best trader I could be. However, the only approach I knew was to “do more” so I could hit my new revenue goal, and needless to say, I was overtrading and battling huge profit and loss swings in my account. In the fall of 1998, I put on a large trade that conceptually was a great trade. However, I mismanaged the trade, and it quickly spiraled into one of the largest losses of my career.

I started on my evaluation of myself to discover what I could do to improve as a trader. As a result, I decided to borrow the first book of the Peak Performance Course from Bruce, and I found a chapter in there on the “loss trap.” I could see myself in the story and how I had responded to that difficult trade. All the mistakes I had made on that trade and how I approached my trading in general were described in that chapter. I was hooked. I immediately ordered myself a personal copy of the course.

In January, 1999, I had knee surgery, and I was required to be off my feet for 10 weeks. At the time I was a floor trader, so I was planning to test some of my “off-the-floor” trading ideas. I also started working through the Peak Performance Course, and I quickly decided that the best use of my time would be to clear my head from the markets and focus on my trading psychology. Early in the course, Dr. Tharp had said that the exercises you didn’t want to do were probably the ones you needed to do the most. As a result, I committed to doing every single exercise in the course, working at it every day for four to six hours for 10 weeks. And, in my opinion, I emerged from that process a trader with a totally different psychology that has served as the foundation of my trading ever since.

At that same time, I decided to attend one of Dr. Tharp’s workshops. It was given by Van and Robert Kiyosaki of Rich Dad, Poor Dad fame. That seminar changed my beliefs about wealth and wealth creation as radically as the Peak Performance Course had changed my psychology. I’m really glad to see that Dr. Tharp has incorporated a little of that material into this new edition of Trade Your Way to Financial Freedom by defining financial freedom in the preface. I learned that wealth was an idea, not a finite resource as was taught in my economic classes I realized that I was the biggest factor in my success and that time was more valuable than money. From that point on, I started to act on faith, and I made decisions that revolved around increasing my productivity and learning. If I could spend money to improve my productivity and give me more time to learn, I would do it. Shortly after that workshop, I returned to trading with a new perspective on trading and wealth. I made more money in the next four months than I had made in my entire career.

After that period, I backed off my trading, doing it instead on more of a part-time basis, and I started to work on a lifelong dream that I had, which was to build my own trading firm and become an upstairs speculator. I spent the next two years learning, researching, and building the plan of how I wanted to trade. As I built this plan, I used many of Van’s principles as the foundation. I read this book and his other published book at the time, Financial Freedom through Electronic Day Trading. I took several more of Van’s workshops, and I adopted five key principles around which I built my firm. Four of those principles I learned from Van. I have kept the principles consistent an in the order Van teaches them as well. Here they are:

1. Psychology. You could have the best opportunities and resources in the world but if your psychology is flawed, you won’t make it.  We operate on the belief that we create and manifest our own realities. If we think the world has problems, then we manifest those beliefs in what we see .But if we think the world is abundant, then we find lots of evidence to show that it is. We place the most amount of focus in this area from how we hire new employees to how we teach them and how we grow. And in this new edition of Trade Your Way to Financial Freedom, you’ll find that principle throughout the book. You are responsible for the results you get, which means that you are in charge of your trading. When you get results that you don’t like, you made a mistake in some way, and you can fix that mistake.

2. Position sizing. You could have the best trading plan, information, and execution systems, but if you bet too big, you’ll blow out. As Van points out in this new edition, a low-risk idea is an idea that’s traded at a risk level that allows you to survive the worst case contingencies in the long term, so that you can achieve the long-term expectancy of the system. This is one of the real keys to trading success, and you should read this book, several times, just to make sure that you understand this point. You are going to have losses, and it’s important to limit the damage of those losses to achieve optimal compounded returns. Position sizing is one of the most important aspects of trading yet so few people teach it. It’s that part of your system that helps you achieve your objectives. Make sure you really let that sink in as you read this book.

3. Market selection . This principle is my addition, although it’s part of Dr. Tharp’s model given in Chapter 4. The market you trade is far more important than how you trade. I’ve see this principle operating throughout my trading career. In the later 1990s, early 2000s there were stock options guys making enormous amounts of money, yet they had no idea what they were doing. A few short years later, some of these same traders were approaching me for jobs as clerks with our firm. In contrast, I saw some great traders make a solid living slugging it out in bad markets. If they were in some of the busy markets, they would have been legends. This confirmed my belief. Find the busiest, most volatile markets and focus on those. As John Paul Getty used to say, “Go where the oil is!” I’m really glad to see that Dr. Tharp has added a chapter to this new edition on assessing the big picture, and then finding markets and strategies that fit the big picture.

4. Exits. The key to making money in the markets is in how you exit the market. You must limit your losses by knowing when you are wrong and pulling the trigger on your bad trades. This is discussed extensively in Chapter 10. You must also know how to manage a winner and let it optimally run. This is discussed extensively in Chapter 11. Some of the greatest traders I know and have watched were masters at admitting they were wrong, exiting the position without ego, and doing it in a way that no one even knew they were getting out of the market.

5. Entries. In Chapter 9, you learn that you can enter the market randomly and still make money. Dr. Tharp even talks about his random entry system and shows you how to make money with it. If you have a sound psychology that allows you to trade without ego; a positive expectancy system, which is produced by making sure that your losses are kept to a minimum (Van calls this “making sure your losses are 1R or less”), and trading for excellent reward-to-risk ratios (which Van calls “having your winners be large multiples of our initial risk”); and trade in the best market, using position sizing to meet your objectives, then your entry just isn’t that important. These principles are discussed throughout this new edition of Trade Your Way to Financial Freedom.

These principles are the core of my business, and I teach them to all new recruits and to the employees of my firm. These principles are in sharp contrast to the following beliefs that are held by most of the general trading public:

  • You have to pick the right stock. If you haven’t made any money, you probably picked the wrong stock. Contrast this belief with Principle 5 above.
  • You should be fully invested at all times, and diversification is involved in controlled risk. Contrast this belief with Principle 2.
  • When you lose money in the market, it is probably because you are a victim of the market or your broker or advisor. Contrast this with Principle 1.

As a result, the general trading public is primarily focused on picking the right stocks at the right time and they ignore what’s really important for success. That’s why this book is so important.

In Chapter 2 you’ll learn why success is so elusive to so many people – it’s because of all the biases they have in their decision making. Dr. Tharp calls these “judgmental heuristics.” And, ironically, the people who know about them use them to try to predict the market. In contrast, we’ve adopted Van’s idea that most people lose because they are inefficient decision makers, so why not make ourselves more efficient.

As I mentioned earlier Trade Your Way to Financial Freedom is required reading for my new traders. It gives insight into all of Van’s other work that I have found so valuable. This book will help you learn hw to develop a trading system that fits your beliefs and helps you to achieve your objectives. If you read it again and again, you’ll gain even more insight into the five key principles, I use to run my company.

I would not have had the success and blessings I have had or had the opportunity to share them with so many others in the building of my firm if it had not been for the philosophies that Dr. Tharp taught me. I believe it was God’s plan that I ran into Dr. Tharp and had the chance to learn from him. I have seen these philosophies put to the test over and over again as I have built my firm. They are the principal reason my firm has become extremely successful.

I hope you too learn the wonderful lessons from this book and use them to trade more profitably and to live your life more purposefully.

Chuck Whitman
Chief Executive Officer
Infinium Capital Management
Chicago, Illinois