Thursday, June 28, 2007

Book Reviews and Investing

Starting shortly I will begin including book reviews as a regularly scheduled addendum to the Speculator. As perpetual students of the markets it is essential for investors to continually refresh our perspectives regarding the medium in which we trade. The reason for this is quite simple. The financial markets are dynamic and ever changing. This is made keenly apparent if one views the ebb and flow of a trending market. Even in a readily apparent bull market, surges and counter movements are expected. These movements and reactions are also apparent within the global economy as supply and demand imbalances oscillate between extremes, agitating prices along the way. As investors it is much to easy to remain stuck in the past as we dwell on our previous inadequacies and rudimentary trading mistakes. While the past does hold wisdom from experience, it is this and nothing more. Learn from one's missteps, and practice precision more precisely in the present.

I mention the present as apposed to the future, because traders often make the mistake of actively trying to predict the future. This is yet another inappropriate way to view trading. While some traders have proving track records of accurately predicting the future, the vast majority of us will fail if we believe we can develop a talent to read the signs of the time. Instead of trying to predict future price movement, it is more appropriate to, "Look at the future as unknowable in specifics but foreseeable in characters."(Faith 48). Essentially, we must look at the future not in terms of prediction, but in terms of probabilities.

One method, if not the best method of improving accuracy is to constantly read and learn from experienced traders and investors. Whether we are reading Warren Buffet's personal favorite The Intelligent Investor or a more contemporary piece such as The Master Swing Trader, it is imperative for us as students to continually thirst for knowledge.

Faith, Curtis M. Way of the Turtle. New York: McGraw-Hill, 2007.

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