Trading Realities: The Truth, the Lies, and the Hype In-Between is designed to help investors understand the economic and political forces that drive financial markets and to invest alongside those forces instead of against them. It also provides a blunt assessment of the limitations that most private investors face.
Understanding these limitations and being able to manage risk are as important as choosing the right investments. The following basic principles are central to the theme of this book:
- Financial markets, and stock markets in particular, always move in the direction that will do the most damage to the most investors.
- Financial markets are interrelated. Understanding the effects of one market on another is critical to successful investing.
- Individual stocks tend to be swept along by the market. Even the best companies suffer declines during a market correction, and the worst companies can rally in a strong bull market.
- Many investors blame the market when their stocks decline and credit themselves with wise investing when the same stocks rise.
- Experienced investors tend to overrate their knowledge about the companies they invest in. Gaining insights not already known to the market is a very difficult undertaking.
- The ability to interpret and understand government reports and news releases is a critical skill.
- Understanding and avoiding risk is a key component of basic investing. Understand the relative risks of different financial instruments and avoid overusing leverage.
- Global Economic Forces and the Average Investor
- The Harsh Realities of the Marketplace
- Betting with the House
- Identifying Trends
- A New Era
- The Importance of Volatility
- Strategies for a New Market
- Options Primer