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van tharp's random entry system

  • #1
  • First Post: Apr 13, 2008 8:31pm Apr 13, 2008 8:31pm
For those of you who have not read the book (and it is well worth a read) Van Tharp discusses money management by saying that with correct money management you can get a profit even with a coin flip random system.

He Says
'Our system was very simple.We determined the volatility of the market by a 10 day exponential moving average of the average true range. Our initial stop was three times that volatility reading."

Could anyone tell me what this means .

Thanks

max
Gravity goes both ways in forex...
  • #2
  • Apr 13, 2008 8:36pm Apr 13, 2008 8:36pm
It means:

a) Calculate the ATR value for your pair, for the last ten days. Find a definition for ATR via investopedia if you're not sure what that is.
b) Calculate the exponential average of those 10 values.
3) Multiply by 3 to get your stop size.

PS: I'm only helping you experiment, I'm not suggesting you actually use it. Van tharp was just trying to say something IMHO, not actually give you a working system. His method can be used to calculate TP as well, but I think you don't really have to go to the trouble of calculating a 10-day EMA of the ATR. Just average out over 3 days or something. It's all good
Virtue finds and chooses the mean. Aristotle, Ethica Nichomachea
  • #3
  • Apr 13, 2008 9:13pm Apr 13, 2008 9:13pm
Quoting Plutonite
It means:

a) Calculate the ATR value for your pair, for the last ten days. Find a definition for ATR via investopedia if you're not sure what that is.
b) Calculate the exponential average of those 10 values.
3) Multiply by 3 to get your stop size.

PS: I'm only helping you experiment, I'm not suggesting you actually use it. Van tharp was just trying to say something IMHO, not actually give you a working system. His method can be used to calculate TP as well, but I think you don't really have to go to the trouble of calculating a 10-day EMA of the ATR. Just average out over 3 days or something. It's all good
thanks, i was not looking for it as a system although it seems better than my current one! I was trying to understand the meaning. An ATR value is very small , say .0011 and an ema of the atr is no different. Any chance you could give me a current example as I am struggling to understand the concept.

Thanks
Max
Gravity goes both ways in forex...
  • #4
  • Apr 13, 2008 11:21pm Apr 13, 2008 11:21pm
Quoting max pips
thanks, i was not looking for it as a system although it seems better than my current one! I was trying to understand the meaning. An ATR value is very small , say .0011 and an ema of the atr is no different. Any chance you could give me a current example as I am struggling to understand the concept.

Thanks
Max
Go to a daily chart of Eur/Usd. Put up the ATR indicator and choose the period of 10 (10 days that is, if you're on the hourly chart it will be 10 hours). I'm showing an ATR of 122 pips. That's the figure you use.
  • #5
  • Apr 14, 2008 8:10am Apr 14, 2008 8:10am
Quoting Dopey
Go to a daily chart of Eur/Usd. Put up the ATR indicator and choose the period of 10 (10 days that is, if you're on the hourly chart it will be 10 hours). I'm showing an ATR of 122 pips. That's the figure you use.
Thanks again for your help but maybe i'm the dopey one. If I insert the ATR indicator I get a chart at the bottom of my screen with a figure between .0055 and .019.

Help

max
Gravity goes both ways in forex...
  • #6
  • Apr 14, 2008 10:41pm Apr 14, 2008 10:41pm
Sorry, brain not working. Got it now
Thanks

Max
Gravity goes both ways in forex...
  • #7
  • Apr 14, 2008 11:59pm Apr 14, 2008 11:59pm
Van Tharp is good at writing books.
I bet that he sucks the hell when trading.

if you don't believe, u just trade according to what he says. I guess 99% u will burn your $$$.

Seriously. Look somewhere else. Just remember "DO NOT overtrading", that's the only thing valuable v.tharp said. He said 1 million times, and made a lot of money. geez...
  • #8
  • Apr 15, 2008 12:09am Apr 15, 2008 12:09am
Quoting max pips
For those of you who have not read the book (and it is well worth a read) Van Tharp discusses money management by saying that with correct money management you can get a profit even with a coin flip random system.

He Says
'Our system was very simple.We determined the volatility of the market by a 10 day exponential moving average of the average true range. Our initial stop was three times that volatility reading."

Could anyone tell me what this means .

Thanks

max
I tried this as an MT4 EA, it didn't work, it's not that easy.
Somebody on another forum suggested that the markets may have changed in nature post that book getting written, I think it's more likely he never tried it.
Even a 1% edge is a holy grail, if all it took was to flip a coil, we wouldn't be here talking about it.
The breaking of a wave cannot explain the whole sea.
  • #9
  • Apr 15, 2008 2:13am Apr 15, 2008 2:13am
it was the money management side I was interested in not the trading strategy!

Thanks

max
Gravity goes both ways in forex...
  • #10
  • Apr 15, 2008 1:55pm Apr 15, 2008 1:55pm
Sorry don't have an answer at this time but I will take your advise and read the book. Maybe I will come up with an answer that helps? Thanks again.
  • #11
  • Last Post: Oct 30, 2016 2:38pm Oct 30, 2016 2:38pm
Quoting charvo
Van Tharp is good at writing books. I bet that he sucks the hell when trading. if you don't believe, u just trade according to what he says. I guess 99% u will burn your $$$. Seriously. Look somewhere else. Just remember "DO NOT overtrading", that's the only thing valuable v.tharp said. He said 1 million times, and made a lot of money. geez...
I completely agree with you.
Sooner or Later FF will deny my membership
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