Stock-market

You want to know Elliott Wave theory better than you know the menu at McDonald's? This is the book to study. Figures, facts, rules, laws...it's all here. Don't expect the wisdom to come easily though. This is seriously hard stuff to absorb. If you do absorb it however, you'll KNOW the markets you follow and what they're doing intimately.

Actually I gave this book only four stars only because I subtracted a penalty star for bogus reviews. Really now...did whoever (the author?)think we wouldn't catch on? And in the future maybe they could at least put in something other than the endorsements on the back of the book.

Just about 5 years ago, I began seriously studying the markets. I was heavily influenced by many experts that this thing called Tecnical Analysis was a bunch of BS.

Five years, and thousands of dollars (in profits) later, I can tell you that technical analysis is a crucial tool in dealing with the fundamental uncertainty we traders deal with every day.

Even when I was basing decisions on conventional technical techniques, Elliott Wave Theory seemed like tea-leaf reading. But knowing what I know about the markets, I kept an open mind. I learned how to apply the basic rules, and was amazed at what I saw. There is much more to Elliott than I thought.

Neeley gives a thorough method for applying the Wave theory based strictly on price action. He guides you from analysing individual swings, to grouping them correctly into wave patterns. Once you have a workable count, it is possible to place a low risk, high profit trade on.

The key value in all of this is that you can see a number of possible scenarios. The one problem with Elliott is the issue of alternate counts. I've found that alternate counts often disagree as to the magnitude of a comming move, and less often on the direction, if you are using multiple timeframes.

I've actually worked through most of Neely's rules. I set up a spreadsheet to calculate the retracement levels he indicates in his text. Having said that, Neely omits one crucial bit of info. His method is based on retracement levels. Yet, he never tells you whether to use price levels, or percentages to measure the length of waves. Since he indicates you should use recent data, I've assumed he meant price lengths in dollars (or whateve currency you use).

This is a crucial omission, as price targets are determined by the relationships among waves. Sometimes using price lengths, rather than percentages, renders impossible targets. The only way around this is to use percentages for longer longer time periods, and price lengths for shorter ones. Posner covered this in Applying Elliott Wave Theory Profitably.

One problem is that Neely gives extensive wiggle room in his use of retracements to define patterns. This means his categories, while appearing rigorously objective, actually overlap to a considerable degree. You will often be left with 2 choices for a label, despite applying the rules consistently. That isn't necessarily Neely's fault--he is being realistic. No one ever said the market was easy.

I wouldn't tackle this text if you are unfamilliar with classical technical analysis. Elliott wave can be a frustrating theory. I've gotten headaches trying to count corrective patterns. Despite what Neely says, conventional indicators, candlesticks, and chart patterns can be very helpful when wave counts are not. Classical technicals and Elliott often overlap--suggesting the same conclusion. When they do, then you know you have a potential profit opportunity.

But if you are familiar with classical methods, and you are serious about learning Elliott Wave, then I can recommend this book.

I read many writings and books about Elliott Wave Theory, but this book is different. It gives you all information for applying it not the basic theory and waves. If you say "I cannot see the waves on graphs" read this book, and then start to use EW on your trades...

This book was excellent. The wording of the book was great. It was very understandable. This book had so many facts. It also had a lot of details. It talks about the great depression. I give this book 5 STARS, because the Physical form was great, and the wording was absolutely easy!

If you want an elpanation of how various oscillators are calculated and applied this is a good resource for active traders. The book contains some solid explanations of how to interpret divergences between an underlying security and oscillators. Additionally, several good points made for traders and investors.

Why three stars? Mr Pring's book was a very heavy dry read. There was very little comment on how he might have approaced these trades, or if he took them at all. There was a lot of reference to other people's work. Which is fine, but I look for two things in an investment book. The first is ideas that can help me be a better investor/trader, but the second is enjoyment.
Something like The Visual Investor (John Murphy) is just much more practical for all but die hard TA students.

Readers of reviews on financial books need to be careful. For every 100 people who speculate in the financial markets, less than 10 are successful. People often have psychological blindspots that prevent them from noticing profitable info when they see it. I'm convinced that blindspot applies not only to the market, but books about profiting in the market.

Despite my skepticism, I had decided to study technical analysis after reading Larry McMillian's advice in Options as a Strategic Investment. Pring's book on Momentum was one of my first purchases. Combined with observation of market action using my TC2000 software, I'd say it is one of my best purchases. And that was over 4 years ago.

This isn't easy reading. It requires you to--THINK! Imagine that! Those who are looking for wealth through trading and investing expect the process to be easy. When they discover it isn't, they blame authors for writing accuarte, but difficult books, rather than changing their ideas about profiting from the market.

Other books cover momentum indicators in brief detail, but
Pring devotes significant space to principles of momentum interpretation, as well as how different indicators are constructed. Of crucial importance is the pros and cons of the construction of various indicators: Momentum or Rate of Change vs RSI, MACD vs Stochastics. After reading this, you will learn which indicators complement each other, and which ones are simply different variations of the same idea.

Unfortunately, as Pring instructs, interpreting momentum indicators requires practice as well as judgement. Knowing how to interpret momentum doesn't mean you can trade eaily. There is much more to trading than understanding momentum indicators.

Read this book, THINK about the logic of the indicators, then observe the market action using what you have learned. In due time, you will use the ideas in this book to develop your own indicators, improving on the ideas in this book to suit your own style.

You will find the KST formula in Chapter 7 on page 159. This is not a book on day trading. It is a book on momentum. It can be applied to all time frames like daily, weekly, and monthly. For day trading, you need to read a lot more books on day trading to prepare for that task. The KST is a superb indicator. It allows you to zero in on the maintrend. You know the addage, the trend is your frend. KST will show you if the trend is your frend before you put on your trade. Most traders who lose money trade against the main trend. With KST, you can make sure you are trading with the trend.

Mr. Pring does a superb job in a layman language as to how to interpret and use momentum. No other author does as a good job and most books will mislead you and cost you big losses as a result. Martin has it all when it comes to momentum!!

I would like to know if it is possible to have the email address of Martin Mayer? In reference to a book about daytrading from home.

thanks Marcus De Hon mdehon@hotmail.com marcusd@mindspring.com

This book is very easy reading, with a lot of pictures and charts, and doesn't bore you with pages upon pages on text. It traces the history of the DJIA, showing what was happening in the world when the Dow hit certain benchmarks, and provides a "Readers Digest" version of market trends, biographical profiles, and cycles in the Dow. A great coffee table book.

I do not plan on going gentle on this book, so if you are fond of the book or the author, you needn't read any farther.

My first complaint about this book is it implies that mathematicians, by virtue of their chosen profession, are all world class fools when it comes to investing. Surely Mr. Paulos is outstanding in that regard, and he has no business blaming mathematics or anything other than his own lack of character for his stock market fiasco.

Time was, if you did something shameful or grossly stupid, you suffered sociatal approbation. Mr. Paulos, in keeping with current ethos, chose to write a book about it.

Mr. Paulos regals his readers with how he managed his investments, which is a chronocol of almost every mistake a person could make:
$he bought at the top
$he did'nt put in a stop-loss order
$he used margins to increase his investment
$he willfully ignored all signals that something was wrong
$he threw good money after bad
$he was unlucky to have chosen Worldcom in the first place

Interspersed with this confessional is a lot of mathematically oriented stories which illustrate the counter-intuitive nature of probability. If you are interested in the psychology of investing, I highly recommend "Why Smart People Make Big Money Mistakes" by Blesky.

Perhaps the silliest thing about this book is that Paulos does not even entertain the possibility that it is theoreticlly possible to beat the market. It seems obvisous that if some people (such as Mr. Paulos) have above average losses, somebody somewhere has to have above average gains. Mr. Paulos, who is obviously highly intellegent, seems unable to make this observation.

This book is a two hundred page affirmation of what anybody who ever went to high school already knows: the smartest kids in the class often lack common sense.

If you're an experienced trader or investor you probably won't find much new in this book, but I would recommend it to anyone who's just starting out or who doesn't consider themselves that knowledgeable about how to think about the markets yet. Written in an easy to understand, engaging style, and using the author's facility with math where it illuminates the important points, the author discusses the various approaches and styles to investing, discussing the strengths and weaknesses of both value investing and technical chart reading, for example, with wit and humor.

After reading this book you may be convinced that nobody can really beat the markets, and perhaps that's true, but at least you'll have a basic understanding of some of the important history and technical aspects of market analysis after reading this book. And remember, there's always the strategy of dollar-cost averaging into a broad-based market index, which has always worked over the long run, since 90% of mutual fund managers fail to beat the indexes. It's only necessary to match the market to do quite well over the long term.

And as far as the long term goes, remember that in the last 100 years, there have only been two instances where the market went down three years in a row--in the recent correction which started in 2000, and back in 1929 to 1931, where the greatest buy point in U.S. market history was reached in the spring of 1931, when the market was down 90% from it's 1929 highs.

But getting back to the present book, this is an informative and fun book on how to think and understand the markets which should give you a better perspective if you do decide to get your feet wet or go on to read other, more advanced works.

This is an excellent book on investment theory. It reviews fundamental analysis, technical analysis, option theory and many other topics. The author explains exceptionally well the Efficient Market Hypothesis and the debate surrounding it. He also introduces basic concepts of behavioral finance.
Abstract.

As a mathematician having studied the stock market, he believes the stock market is pretty efficient; and that both technical analysis and fundamental analysis do not have much predictive value.

Technical analysis according to him should be renamed trend analysis, as it consists in graphing and extrapolating current stock price trends. He covers the major strategies technical analysts use such as buying stocks when their current price breaks through its moving average, and selling them when they fall under this same moving average.

He covers fundamental analysis and their associated metrics in good details. Reading this section, you will become familiar with all the usual metrics, including P/E, PEG, P/Book value, P/Sales.

Mr. Paulos makes a case that the stock market captures the aggregate of all our psychological foibles, and goes on giving a good introduction in behavioral finance. He illustrates the common psychological flaws associated with investor behavior, including: the confirmation bias, anchoring effect, status quo bias, endowment effect, and Richard Thaler's mental accounts. He also illustrates flaws we incur when doing investment research, such as: data mining back testing, and the survivor bias. But, in aggregate these human errors partly cancel themselves out rendering the stock market pretty efficient.

The book's gem is the debate on the Efficient Market Hypothesis (EMH). The fewer the investors believe in EMH, the more they will engage in technical and fundamental analysis to extract excess return above the index. These "active" investors will render the market increasingly efficient, and negate their opportunities to earn excess return. The opposite is also true. If investors believe in EMH, they will become "passive" and just buy the stock index through a Vanguard fund or an ETF. As a result, the market will not be so efficient, and the EMH will not hold up in such a situation. So if you believe in EMH, it is false. But, if you don't believe in it, it is valid.

Paulos argues that enough active investors do not believe in the EMH to render it valid. This argument is convincing when you think of the thousands of mutual funds, hedge funds, and private managers on Wall Street. Thus, there are plenty of professional active investors to render the market very efficient. But, Paulos does not deny that certain markets at certain times, temporarily ignored by Wall Street, may be less than efficient. Thus, for him the EMH debate is not just a true or false question, it is a matter of degree.

Active investors play a crucial role in making the market efficient. Paulos makes an interesting distinction between the technical analyst and fundamental analyst. He states that technical analysts are momentum investors. Thus, they cause market volatility to increase. When stock prices increase, these guys buy even more. When stock prices decrease, they sell. Thus, they accentuate the swings in stock movements. Notice that they break the rule of Buy Low Sell High. The fundamental analysts are really value investors or contrarians. They do just the opposite of the technical analysts, and cause stock price movements to moderate. Thus, the two types of analysts/investors play a different role. But, together their active analysis make the stock market very efficient. The EMH states that all information is disseminated and absorbed immediately within the investment community, and thus is fully reflected within stock prices. But, somebody has to process this information. And, that is what the technical and fundamental analysts do.

One of Paulos other big concept concerns the statistical distribution of stock price movements. According to the EMH, stock price movements are random. And, this is true as confirmed by the autocorrelation on any time series of stock prices that is typically very close to zero. If stock prices move randomly, they should assume a normal distribution. But, Paulos indicates it is not always the case. In other words, extreme events (stock crashes or booms) happen more frequently than in a normal distribution. He adds that at the tails, the price movement of stocks is better captured by the power laws. Check page 178 for a detailed explanation on power laws. This is fascinating, and it may represent an upgrade to the EMH that relies solely on the normal distribution.