In Investment Psychology Explained Martin J. Pring, one of the most respected independent investment advisors in the world, argues that in the revisionist ’90s there are no quick, magical paths to market success. Rather, he emphasizes the timeless values of hard work, patience, and self-discipline-and much more. Reading this book will give you a renewed appreciation of the classic trading principles that, through bull and bear markets, have worked time and again. You’ll see, with the help of numerous illustrative examples, what goes into making an effective investor-and how you can work toward achieving that successful profile.
Many legendary investment role models have likened trading and investing in the markets to other forms of business endeavor. As such, it should be treated äs an enterprise that is slowly and steadily built up through hard work and careful planning and not äs a rapid road to easy riches.
People make investment decisions involving thousands of dollars on a whim or on a simple comment from a friend, associate, or broker. Yet, when choosing an item for the house, where far less money is at stake, the same people may reach a decision only after great deliberation and consideration. This fact, äs much äs any, suggests that market prices are determined more by emotion than reasoned judgment. You can help an emotionally disturbed person only if you yourself are relatively stable, and dealing with an emotionally driven market is no different. If you react to news in the same way äs everyone eise, you are doomed to fall into the same traps, but if you can rise above the crowd, suppressing your own emotional instincts by following a carefully laid out investment plan, you are much more likely to succeed. In that respect, this book can point you in the right direction. Your own performance, however, will depend on the degree of commitment you bring to applying the principles you find here.
At this point, clarif ication of some important matters seems appropriate. Throughout the book, I have referred to traders and Investors with the male pronoun. This is not in any way intended to disparage the valuable and expanding contribution of women to the investment community but merely to avoid “he or she” constructions and other clumsy references. In the following chapters, the terms “market” or “markets” refer to any market in which the price is determined by freely motivated buyers and sellers. Most of the time, my comments refer to individual Stocks and the stock market itself. However, the principles apply equally, regardless of whether the product or specific market is bonds, commodities, or Stocks.
All markets essentially reflect the attitude and expectations of market participants in response to the emerging financial and economic environment. People tend to be universally greedy when they think the price will rise, whether they are buying gold, cotton, deutsche marks, Stocks, or bonds. Conversely, their we also know that this is far easier said than done. We will examine why this is so, and we will learn when contrary opinion can be profitable and how to recognize when to “go contrary.”
Part III examines the attributes of successful traders and investors, the super money-makers—what sets them apart from the rest of us and what rules they follow. This Part also incorporates many of the points made earlier to help you set up a plan and follow it successfully. To solidify and emphasize the key rules and principles followed by leading speculators and traders in the past hundred years or so, I have compiled those guidelines followed by eminent individuals. While each set of rules is unique, you will see that a common thread r uns through all of them. This theme may be summarized äs follows: Adopt a methodology, master your emotions, think independently, establish and follow a plan, and continually review your progress. This recurring pattern did not occur by chance but emerged because these individuals discovered that it works. I hope that it can work for you äs well. All that is needed is your commitment to carry it out.
- There Is No Holy Grau
- How to Be Objective
- Independent Thinking
- Pride Goes Before a Loss
- Patience Is a Profitable Virtuc
- Staying the Course
- A New Look at Contrary Opinion
- When to Go Contrary
- How to Profit from Newsbreaks
- Dealing with Brokers and Money Managers the Smart Way
- What Makes a Great Trader or Investor?
- Nineteen Trading Rules for Greater Profits
- Making a Plan and Sticking to It
- Classic Trading Rules
Investment Psychology Explained: Classic Strategies to Beat the Markets By Martin J. Pring pdf