Successful trading stands on three pillars: psychology, market analysis and\ trading systems, and money management. This book will help you explore all three.
The first chapter of this book shows you a new approach to managing your emotions as a trader. I discovered this method while practicing psychiatry. It has greatly improved my trading, and it can help you, too.
The second chapter describes the crowd psychology of markets. Mass behavior is more primitive than individual behavior. If you understand how crowds behave, then you can profit from their mood swings and avoid being swept up in their emotions.
The third chapter of the book shows how chart patterns reveal crowd behavior. Classical technical analysis is applied social psychology, like poll-taking. Trendlines, gaps, and other chart patterns actually reflect crowd behavior.
The fourth chapter teaches modern methods of computerized technical analysis. Indicators provide a deeper insight into mass psychology than classical technical analysis. Trend-following indicators help identify market trends, while oscillators show when trends are ready to reverse.
Volume and open interest also reflect crowd behavior. The fifth chapter focuses on them as well as on the passage of time in the markets. Crowds have a very short attention span, and a trader who relates price changes to time gains a competitive advantage.
Sentiment indicators measuring the opinions of investors and traders are profiled in the seventh chapter. Crowds follow trends, and it often pays to join them when prices are moving. Sentiment indicators show when it is time to abandon the crowd—before it misses an important reversal.
The eighth chapter reveals two proprietary indicators. Elder-ray is a price-based indicator that measures the power of bulls and bears below the surface of the markets. Force Index measures prices and volume. It shows whether the dominant market group is becoming stronger or weaker.
The ninth chapter presents several trading systems. The Triple Screen trading system is my own method. I have used it for years. This and other systems show you how to select trades and find entry and exit points.
The tenth chapter focuses on money management. This essential aspect of successful trading is neglected by most amateurs. You can have a brilliant trading system, but if your money management is bad, then a short string of losses will destroy your account. Trading without proper money management is like trying to cross a desert barefoot.
You are about to spend many hours with this book. When you find ideas that seem valuable to you, test them in the one crucible that matters—your own experience. You can make this knowledge your own only by questioning it.
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