Hiya Traders, Hot topic.. Trading psychology & emotions ->...

Hiya Traders,

Hot topic..
Trading psychology & emotions -> Trading rules,tactics & strategies.


I enjoy reading back up on things to remind and keep myself on track..

We traders can't beat the market and anyone who thinks they can ultimately falls from grace. What we can do is recognise and manage the 3 killer emotions.. 'hope, greed and fear''. I think very few  has been able to master this art (and  I haven't either), but i do believe the better traders are ones who are able to manage this better. I suppose well defined trading rules ,tactics and strategies are ways traders do this. Sticking to them consistently is another story.  


A few readings  below that can be accessed immediately by link for your weekend reading or to-read-list.





The Day Trader’s Bible Or… My Secrets of Day Trading In Stocks By Richard D. Wyckoff
http://www.nowandfutures.com/large/...radersBibleOrMySecretInDayTradingOfStocks.pdf


The great and famous R.D.W !
In this text, Richard presents an approach called  "Tape reading" :

----"It seems to us, based on our experience, that Tape Reading is the defined science of determining from the tape the immediate trend of prices. It is a method of forecasting, from what appears on the tape now in the moment, what is likely to appear in the immediate future. Tape Reading is rapid-fire common sense. Its object is to determine whether stocks are being accumulated or distributed, marked up or down, or whether they are being neglected by the large investors."

It is gauging the momentary supply and demand in particular stocks and in the whole market, comparing the forces behind each and their relationship, each to the other and to all.

A day trader is like the manager of a department store; into his office are submitted hundreds of reports of sales made by the various departments. He notes the general trend of business -- whether demand is heavy or light throughout the store but lends special attention to the products in which demand is abnormally strong or weak. When he finds it difficult to keep his shelves full in a certain department or of a certain product, he instructs his buyers accordingly, and they increase their buying orders for that product; when certain products do not move he knows there is little demand (or a market) for them, therefore, he lowers his prices (seeking a market) to induce more purchases by his customers.---


“The professional day trader must be able to say: "The facts are in front of me; my analysis of the situation is this; therefore I will do this and this."

"“The trader of little experience suffers mental anguish if the stock does not go his way immediately; he fears he made a mistake and a loss of his money…”

“Fear, hesitation and uncertainty are deadly enemies of the Tape Reader. The chief cause of fear is over-trading.”

"“…do not let yourself be deceived as to your ability to make money on paper. Imaginary trades prove nothing. The way to test your powers is to get into the game.”

"“Having detected the accumulation, the Tape Reader has only to watch its progress, holding himself in readiness to take on some of the stock the moment the markingup period begins.”

"“The Tape Reader must be quick to detect such changes, switch his position and go with this newly formed trend."

"“The scientific elimination of loss is one of the most important factors in the art, and the operator who fails to properly protect his paper profits will find that many at point which he thought he had cinched has slipped away from him.”








Market Psych: How to manage fear and build your investor identity by Richard L. Peterson, Frank F. Murtha
http://www.imd.inder.cu/adjuntos/article/481/Market Psych.pdf


"An investor's guide to understanding the most elusive (yet most important) aspect of successful investing - yourself.
Why is it that the investing performance of so many smart people reliably and predictably falls short? The answer is not that they know too little about the markets. In fact, they know too little about themselves.
Combining the latest findings from the academic fields of behavioral finance and experimental psychology with the down-and-dirty real-world wisdom of successful investors, Drs. Richard Peterson and Frank Murtha guide both new and experienced investors through the psychological learning process necessary to achieve their financial goals.
In an easy and entertaining style that masks the book’s scientific rigor, the authors make complex scientific insights readily understandable and actionable, shattering a number of investing myths along the way. You will gain understanding of your true investing motivations, learn to avoid the unseen forces that subvert your performance, and build your investor identity - the foundation for long-lasting investing success.
Replete with humorous games, insightful self-assessments, entertaining exercises, and concrete planning tools, this book goes beyond mere education. MarketPsych: How to Manage Fear and Build Your Investor Identity functions as a psychological outfitter for your unique investing journey, providing the tools, training and equipment to help you navigate the right paths, stay on them, and see your journey through to success."





""PRINCIPALS AND PSYCHOLOGY OF DAY TRADING" By George Slezak "
http://www.sit1.com/rp/psycho.pdf

Example of some trading rules. Debatable but the emphasis here is that successful trading requires structure and discipline.



How To Trade In Stocks by Jesse_Livermore (1940)
http://www.r-5.org/files/books/trad...How_To_Trade_In_Stocks_(1940_original)-EN.pdf

A another great figure in the trading world ... J.L is a nice case study of the fact that no one can beat the market as we know from his prolific success followed by a period of fall from Grace. Still a very interesting character that has offered some very insightful and interesting perspectives in his lifetime and trading career.


Review from online :
"This is a book written by Jesse Livermore which was published in 1940, with new material added by Richard Smitten. The full title of the book is “How to Trade in Stocks: The Classic Formula for Understanding Timing, Money Management, and Emotional Control”.
This is a terrific book on trading. It totally changed my view of trading and technical analysis. I had always felt that technical analysis’ ways of trying to match patterns as something more of a self-fulfilling prophecy without any logic behind it, but this book presents trading in a very logical and coherent manner with strong persuasive arguments.
I had come across the name “Jesse Livermore” several times before but I had stayed away from trading and technical analysis-related books because I did not see the logic behind them. For some reason, I picked up this book recently to have a read through (probably because it looked thin enough to finish quickly!). My understanding of trading then was an approach where you basically keep making tons of bets, cut your losses quick and let your winners run, and use pattern matching to increase the probability of your trades being a winner. Jesse Livermore’s approach however moves towards the Value Investing approach, and is similar in many respects: focus on a small number of stocks, have patience to wait until everything is in your favor, ignore the minor market fluctuations, do due diligence on the fundamentals of the company, establish your position gradually, keep a cash reserve, etc. I wish I had picked up this book sooner.
The content of the book is great. It presents the overall trading methodology (top down trading, industry groups, sister stock), elaborates on the tools (pivotal points), goes deep into how pivotal points are determined (Livermore Market Key), presents applicable money management advice, and explains in logical detail many of the trading philosophy (need for patience, focus on a selective group rather than any other stocks, etc.). This is the first book I read on trading/technical analysis that explains the rationale for applying certain rules, as opposed to the usual “if this line crosses that line, buy”, or “if this pattern appears, the price will end up there”, with no logical explanation backing it whatsoever."



Happy readings