The Psychology of Risk Mastering Market Uncertainty ARI KIEV PDF
Preview The Psychology of Risk Mastering Market Uncertainty ARI KIEV
visit for more: http://eBookBits.com Your Source For Knowledge The Psychology of Risk Mastering Market Uncertainty ARI KIEV John Wiley &Sons, Inc. The Psychology of Risk Mastering Market Uncertainty ARI KIEV John Wiley &Sons, Inc. Copyright © 2002 by Ari Kiev. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-750-4740, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008, e-mail: permcoordinator @ wiley.com. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, inci- dental, consequential, or other damages. For general information on our other products and services, or technical support, please con- tact our Customer Care Department within the United States at 800-762-2974, outside the United States at 317-572-3993 or fax 317-572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. Library of Congress Cataloging-in-Publication Data: Kiev, Ari. The psychology of risk : mastering market uncertainty / Ari Kiev. p. cm. ISBN 0-471-40387-3 1. Investments—Psychological aspects. 2. Portfolio management. 3. Risk management. I. Title. HG4529.5 .K54 2001 332.6′01′9—dc21 20001007197 Printed in the United States of America. 10 9 8 7 6 5 4 3 2 1 For Phyllis, with all my love PPRREEFFAACCEE Since 1990, I have been helping Wall Street traders master psy- chological obstacles to trading success and develop strategies for winning that would sustain them in the face of the uncertainty and unpredictability of the markets. My first book on this subject, Trading to Win: The Psychology of Mastering the Markets(Wiley, 1998), presented a step-by-step goal-oriented program for building the mental and emotional stamina not only to win but to win on an unprecedented level. A second book, Trading in the Zone: Maximizing Performance with Focus and Discipline (Wiley, 2001), examined specific techniques for achieving and sustaining peak performance levels by entering into the zone—a focused state of concentration and goal-directedness. The present book provides further explorations into the psychology of trading to win, focusing in particular on the appetite for risk taking, on ways of modulating and managing risk, and dealing with some of the pathological patterns of risk taking that often incapacitate traders. What is it that allows some traders to assume risk with considerable impunity and translate their analyses into action, whereas others with equally good understanding of the companies they are analyzing and the stocks they are trading are inhibited from trading as effectively as they can? A willingness to take risks, set goals, persevere, and not be influ- enced by the opinions of others is critical for success. What distin- guishes the best traders is their willingness to acknowledge their feelings, to ask for help, and to keep monitoring and adjusting their performance in light of specific trading objectives. Traders who “trade not to lose” don’t take enough risk or trade recklessly and v Preface emotionally when in drawdown and jeopardize their capital. Trading success requires you to manage your risk objectively to be able to cut losing trades and stay longer in winners. To do all of these things well requires an appetite for risk and risk management and the ability to handle such distinct tendencies as perfectionism, decision paralysis, hoarding, and impulsiveness. I explore these and other psychological obstacles to trading suc- cess in this book. I also examine a variety of psychological techniques or principles that may help you to trade independently of your emo- tional responses to the stress of trading. To convey a sense of the kind of communication that transpires in my coaching sessions, I have in- cluded a few dialogues with traders. Traders who have reviewed them have found them useful in exploring some of their own trades. My hope is that the examples and recommended solutions I describe will give you a glimpse into the trading world from my perspective and enhance your ability to take risk and master market uncertainty. You will notice that I have deliberately avoided naming specific companies traded because I have been more interested in illuminat- ing useful trading strategies than in specifics about particular compa- nies. Finally, as in my previous books, I have disguised the identities of traders because my purpose is more to draw out generic principles that might be applicable to other traders than to talk about their own unique personal experiences. It is my hope that, as with my previous two books, you will profit from your reading and periodic perusal of the concepts in this book, and that it will provide you with a new and stimulating per- spective that will enhance your trading success. ARI KIEV New York, New York March 2002 vi
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