Forecasting Financial Markets

(11 customer reviews)

$14.50

Author(s)

Pages

423

Format

PDF

Published Date

2010

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Description

In FORECASTING FINANCIAL MARKETS, Tony Plummer provides a compelling insight into the psychology of trading behavior and shows how the herd instinct in decision-making cab have disastrous results. The ability to make money n markets, he stresses, depends critically on an individuals ability to make decisions independently of the crowd.

Introduction:

We learn from our mistakes, and we interpret the world in the light of our own experiences. Forecasting Financial Markets is a result of both these truths. The argument of Forecasting Financial Markets, then, is that flexibility in the decisionmaking process can be attained by generating three interrelated skills. The first of these is an ability to understand the market in logical terms. That is, an investor or trader should have a philosophical approach to markets that incorporates a genuine understanding of the forces at work.

The point is that markets fluctuate – regularly and, according to traditional theory, unpredictably. If an investor does not clearly recognize this, then they will be unprepared for the reality – the terror – of the situation. The second skill, in a sense, follows from this. An investor needs to be able to understand their own emotional response to market fluctuations. This is a part of what Daniel Goleman calls ‘emotional intelligence’.

If market participants understand their own vulnerability to the influences of financial markets, and if they can recognize those associated behaviours that are potentially self-defeating, then they can do something about it. In particular, they can adopt responses that are appropriate to market trends rather than responses that are hostile to them. The alternative, quite simply, is to become a victim. Finally, of course, an investor needs to be able to design an investment process, or trading system, that generates objective ‘buy’ and ‘sell’ signals. In other words, the signals must be based on predetermined criteria. This approach has two advantages:

–  first, it focuses attention on critical factors that tend to recur through time;
–  second, it helps to reduce the influence of any emotions that occur at that point in time.

Such a system need not be mechanical: it can have a facility to incorporate signals that cope with unusual circumstances or with investor preferences. The only criterion that ultimately matters is that the investor/trader is sufficiently confident about the signals that they will not continuously be doubted. Market participants should, therefore, be directly involved in the system testing procedures, so that they are aware of both the successes and the limitations. This, of course, also facilitates a creative response to unexpected market developments.

These three skills – the ability to understand market behaviour in logical terms, the ability to know the effects of the market in emotional terms and the ability to decide what to do in objective terms – are the basis of successful wealth creation in financial markets. Further, they enable investors and traders to be detached from the results of each individual investment position in a way that enables them, literally, to enjoy the whole process. In this way, wealth creation and personal fulfilment become a way of life.

Contents:

– Part One: The logic of non-rational behaviour in financial markets

  • Wholly individual or indivisibly whole
  • Two’s a crowd
  • The individual in the crowd
  • The systems approach to crowd behaviour
  • Cycles in the crowd
  • Approaches to forecasting crowd behaviour

– Part Two: The dynamics of the bull–bear cycle

  • The stock market crowd
  • The shape of the bull–bear cycle
  • Energy gaps and pro-trend shocks
  • The spiral and the golden ratio
  • The mathematical basis of price movements
  • The shape of things to come

– Part Three: Forecasting turning points

  • The phenomenon of cycles
  • The threefold nature of cycles
  • Economic cycles
  • Recurrence in economic and financial activity
  • Integrating the cycles
  • Forecasting with cycles
  • Price patterns in financial markets
  • The Elliott wave principle
  • Information shocks and corrections
  • The confirmation of buy and sell signals

– Part Four: The psychology of trading

  • The psychology of fear
  • The troubled trader
  • The psychology of success
  • Summary and conclusions
Forecasting Financial Markets: The Psychology of Successful Investing By Tony Plummer PDF
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11 reviews for Forecasting Financial Markets

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  1. Luella Schwartz (verified owner)

    This book will entertain and intrigue keen investors.

  2. Kenneth Reyna (verified owner)

    A brilliant, original, insightful work… deserves to be read by all serious technical analysts.

  3. Van Beck (verified owner)

    A fine, well-detailed introduction to investment psychology… Investment and business libraries at the college level will find this a fine classroom supplement.

  4. Antonio Dyer (verified owner)

    This book is just an incoherent collection of fancy words and phrases (like crowd psychology, feedback systems, fractals, etc). The book is supposed to show the scientific basis behind technical analysis. But, the reasoning (or lack thereof) is mediocre at best. I got the feeling that the author wants the book to sound scientific without any science.

    In certain cases, the book makes conclusions that are absolutely and shockingly false. For example, in page 58, the author makes a conclusion that boils down to this: as you increase the window of a moving average, there will be a very high correlation between the values of the moving average at any two times T and T-1. Hence, the author claims, this (the high correlation) shows that financial markets are predictable!!

    This “reasoning” is absolutely ridiculous. Moving averages BY DEFINITION smooth out curves and hence increase correlation between time steps of the smoothed curve. In fact, if the window is large enough the value of the moving average will be approximately constant and that will imply that the correlation between T and T-1 is almost 1. This will be the case for almost ANY stationary data series. Does that make any such data series predictable?! Absolutely not!

  5. Jericho Donaldson (verified owner)

    Yes. It helped me understanding better myself and the way I make my trading decisions. It also gave me some great ideas about developing a contrarian trading system. The psychology chapters are a must read!!! I did not buy too much into the waves theories but that’s just me…

  6. Tommy Beasley (verified owner)

    I found this book very interesting and liked it in an instant.

  7. Natasha Guevara (verified owner)

    Very philosophical. But a good reading

  8. Gia Fox (verified owner)

    What’s the point of this book? I really couldn’t get it. Is it a book about technical analysis? Yes, it is. It puts a great effort to expound how to predict markets by observing cycles and patterns. But the rest of the book about technical analysis is limited and shallow, except for its evaluation of the Elliott wave principle. It’s writing style is too complicated and hard to follow as well. I genuinely don’t think it can get the message across effectively to those who want to learn more about technical analysis in order to ‘forecast’ financial markets. Having said that, I found the fourth part of this book: ‘The trader at work’ actually quite useful. It helps you to understand your personality type toward financial markets; it also provide you with advice about how to rectify the drawbacks associated with your personality. Lastly, it’s never easy to forecast financial markets. I was impressed by the book title when I came across this book. Unfortunately, I didn’t find impressive arguments in it.

  9. Estrella Mayo (verified owner)

    This is a fascinating insight into, among other things, the influence of crowd behaviour on financial markets. Compelling and wonderfully written. This has really stood the test of time since its first edition. I recommend to anyone with an interest in stock markets, professional or as a layperson.

  10. Mikaela Hurley (verified owner)

    This is an exceptional piece of work that I would recommend to anyone with an interest in financial markets. It’s excellently written, and very clear. Not only is it a great exploration of technical analysis, but contains some amazing insights into psychology and the impact of crowd behaviour on the stock markets. The fact that it is in its 6th edition is testimony to its quality. An absolute must.

  11. Jaylah Wheeler (verified owner)

    The “price pulse” theory is terribly written and very hard to understand??? But saying that the last few chapters “The Trader at Work” are redeeming…but not enough to raise the book above a 1 star.

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