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The Psychology of Finance: Understanding the Behavioural Dynamics of Markets Hardcover – Apr 22 2002
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From the Inside Flap
This book is about an aspect of stock trading which is often shrouded in mystery. It is about the 'psychology of the market': about how the market's psychological phenomena arise, and how we can learn to see them.
From the Back Cover
Recognising that psychology shapes market movements, this revised and expanded edition of 'The Psychology of Finance', provides a thorough and up-to-date treatment of this fascinating and important area of finance. Outlining a coherent set of behaviourist/psychological theories that explain the essence of technical analysis, Lars Tvede outlines how psychology can drive movements in the prices of financial assets.
Including new material on framing and anchors, naturally occurring Ponzi schemes, and insights into why trading volume is often higher in bull- than in bear markets, Tvede provides a practical introduction to the 'psychology of the markets'. The Psychology of Finance is ideal reading for traders, financial analysts and bankers.
Top Customer Reviews
In the bookshelf there are numerous books telling either history of the investment market, or trading psychology, or technical analysis. This book is a rare breed that incorporates several dimensions into one. Chart reading, with elaboration of four basic market rules (1. market is ahead 2. market is irrational 3. environment is chaotic 4. charts are self fulfilling) interrelated with different schools of psychologyical theories (behaviourist, Gestalt, Cognitive, Psychoanalysis), forms the stem of this beautiful book with vivid "green leaves" of writings on momentum, sizing, turning points.....
One great thing of the book is that one does not need to know much about psychology to understand what the author tries to tell, because tables of examples are abundant to let you know when you had made specific mistakes. He does not teach you how to correct them, but it does lead the way of self improvement and really help to enlighten your trading style.
This book should be in any serious trader's bookshelf for fast recollection of some important trading principles, a regular dosage for cleansing mental dirt accumulated after his/her harsh trading life.
Also, please note that this book was published in two editions. The first edition successfully views the mechanics of trading through the emotional filters which affect our buy-sell decisions. The second edition is a complete rewrite which morphs the book into a nebulous psychology text that is only occasionally related to the trading process. You would be well-served to avoid this second edition! First edition - 4 stars; second edition - 1 star.
Later he goes into chart patterns and relates the material to chart formations. But nothing that is an improvement on similar discussions of the psycology of chart patterns we've all heard and read before.
As for one reviewer mentioning what is important in the markets, no where is M2 mentioned in the book.
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