Trading to Win: The Psychology of Mastering the Markets

272 Pages·1998·1.256 MB·English

by  KIEV, Ari

WILEY TRADING ADVANTAGE
Trading without Fear / Richard W. Arms, Jr.
Neural Network: Time Series Forecasting of financial Markets / E. Michael Azoff
Option Market Making / Alan J. Baird
Money Management Strategies for Futures Traders / Nauzer J. Balsara
Trading to Win
Genetic Algorithms and Investment Strategies / Richard J. Bauer
Technical Market Indicators: Analysis and Performance /
Richard J. Bauer and Julie R. Dahlquist
Seasonality: Systems, Strategies & Signals / Jake Bernstein
The Hedge fund Edge/ Mark Boucher
Beyond Technical Analysis / Tushar Chande
The New Technical Trader / Tushar Chande and Stanley S. Kroll
Managed futures: An Investor's Guide / Beverly Chandler
Trading on the Edge / Guido J. Deboeck
Trading the Plan / Robert Decl
The New Science of Technical Analysis / Thomas R DeMark
Point and figure Charting / Thomas J. Dorsey
Trading for a Living / Dr. Alexander Elder
Study Guide for Trading for a Living / Dr. Alexander Elder
The Day Trader's Manual / William F. Eng
The Options Course: High Profit &Low Stress Trading Methods / George A. Fontanills
The Options Course Workbook: Step-by-Step Exercises to Help Tou Master
The Options Course / George A. Fontanills
Trading 101 /Sunny J. Harris
Trading 102 /Sunny J. Harris
Analyzing and Forecasting futures Prices / Anthony F. Herbst
Technical Analysis of the Options Markets / Richard Hexton
Pattern, Price & Time: Using Gann Theory in Trading Systems / James A. Hyerczyk
Profits from Natural Resources: How to Make Big Money Investing in Energy, Food
& Metals / Roland A. Jansen
Trading Systems & Methods, 3rd Edition /Perry Kaufman
Trading to Win / Ari Kiev
Understanding Options / Robert Kolb
The Intuitive Trader / Robert Koppel
McMittan on Options / Lawrence G. McMillan
Trading on Expectations / Brendan Moynihan
Intermarket Technical Analysis / John J. Murphy
Forecasting financial Markets, 3rd Edition / Mark J. Powers and Mark G. Castelino
Neural Networks in the Capital Markets / Paul Refenes
Cybernetic Trading Strategies / Murray A. Ruggiero, Jr.
The Option Advisor: Wealth-Building Techniques Using Equity and Index
Options / Bernie G. Schaeffer
Gaming the Market / Ronald B. Shelton
Option Strategies, 2nd Edition / Courtney Smith
Trader Vie IT. Principles of Professional Speculation / Victor Sperandeo
Campaign Trading / John Sweeney
The Trader's Tax Survival Guide, Revised / Ted Tesser
The Mathematics of Money Management / Ralph Vince
The New Money Management: A framework for Asset Allocation / Ralph Vince
Portfolio Management Formulas / Ralph Vince
Trading Applications of Japanese Candlestick Charting /
Gary Wagner and Brad Matheny
New Trading Dimensions: How to Profit from Chaos in Stocks, Bonds,
Trading Chaos: Applying Expert Techniques to Maximize Tour Profits /
and Commodities / Bill Williams
WILEY TRADING ADVANTAGE
Trading without Fear / Richard W. Arms, Jr.
Neural Network: Time Series Forecasting of financial Markets / E. Michael Azoff
Option Market Making / Alan J. Baird
Money Management Strategies for Futures Traders / Nauzer J. Balsara
Genetic Algorithms and Investment Strategies / Richard J. Bauer
Technical Market Indicators: Analysis and Performance /
Trading to Win
Richard J. Bauer and Julie R. Dahlquist
Seasonality: Systems, Strategies & Signals / Jake Bernstein
The Hedge fund Edge/ Mark Boucher
Beyond Technical Analysis / Tushar Chande
The New Technical Trader / Tushar Chande and Stanley S. Kroll
Managed futures: An Investor's Guide / Beverly Chandler THE PSYCHOLOGY OF
Trading on the Edge / Guido J. Deboeck
Trading the Plan / Robert Decl MASTERING THE MARKETS
The New Science of Technical Analysis / Thomas R DeMark
Point and figure Charting / Thomas J. Dorsey
Trading for a Living / Dr. Alexander Elder
Study Guide for Trading for a Living / Dr. Alexander Elder
The Day Trader's Manual / William F. Eng
The Options Course: High Profit &Low Stress Trading Methods / George A. Fontanills
retsaM uoT pleH ot sesicrexE petS-yb-petS :koobkroW esruoC snoitpO ehT
The Options Course / George A. Fontanills
Trading 101 /Sunny J. Harris
sirraH .J ynnuS/ 201 gnidarT
Analyzing and Forecasting futures Prices / Anthony F. Herbst
Technical Analysis of the Options Markets / Richard Hexton
Pattern, Price & Time: Using Gann Theory in Trading Systems / James A. Hyerczyk
Ari Kiev
Profits from Natural Resources: How to Make Big Money Investing in Energy, Food
& Metals / Roland A. Jansen
Trading Systems & Methods, 3rd Edition /Perry Kaufman
Trading to Win / Ari Kiev
Understanding Options / Robert Kolb
The Intuitive Trader / Robert Koppel
McMittan on Options / Lawrence G. McMillan
Trading on Expectations / Brendan Moynihan
Intermarket Technical Analysis / John J. Murphy
Forecasting financial Markets, 3rd Edition / Mark J. Powers and Mark G. Castelino
Neural Networks in the Capital Markets / Paul Refenes
Cybernetic Trading Strategies / Murray A. Ruggiero, Jr.
The Option Advisor: Wealth-Building Techniques Using Equity and Index
Options / Bernie G. Schaeffer
Gaming the Market / Ronald B. Shelton
Option Strategies, 2nd Edition / Courtney Smith
Trader Vie IT. Principles of Professional Speculation / Victor Sperandeo
Campaign Trading / John Sweeney
The Trader's Tax Survival Guide, Revised / Ted Tesser
The Mathematics of Money Management / Ralph Vince
The New Money Management: A framework for Asset Allocation / Ralph Vince
Portfolio Management Formulas / Ralph Vince
Trading Applications of Japanese Candlestick Charting /
Gary Wagner and Brad Matheny
New Trading Dimensions: How to Profit from Chaos in Stocks, Bonds,
and Commodities / Bill Williams .cnI ,snoS & yeliW nhoJ
Trading Chaos: Applying Expert Techniques to Maximize Tour Profits /
WILEY TRADING ADVANTAGE
Trading without Fear / Richard W. Arms, Jr.
Neural Network: Time Series Forecasting of financial Markets / E. Michael Azoff
Option Market Making / Alan J. Baird
Money Management Strategies for Futures Traders / Nauzer J. Balsara
Genetic Algorithms and Investment Strategies / Richard J. Bauer
Technical Market Indicators: Analysis and Performance /
Trading to Win
Richard J. Bauer and Julie R. Dahlquist
Seasonality: Systems, Strategies & Signals / Jake Bernstein
The Hedge fund Edge/ Mark Boucher
Beyond Technical Analysis / Tushar Chande
The New Technical Trader / Tushar Chande and Stanley S. Kroll
Managed futures: An Investor's Guide / Beverly Chandler THE PSYCHOLOGY OF
Trading on the Edge / Guido J. Deboeck
Trading the Plan / Robert Decl MASTERING THE MARKETS
The New Science of Technical Analysis / Thomas R DeMark
Point and figure Charting / Thomas J. Dorsey
Trading for a Living / Dr. Alexander Elder
Study Guide for Trading for a Living / Dr. Alexander Elder
The Day Trader's Manual / William F. Eng
The Options Course: High Profit &Low Stress Trading Methods / George A. Fontanills
retsaM uoT pleH ot sesicrexE petS-yb-petS :koobkroW esruoC snoitpO ehT
The Options Course / George A. Fontanills
Trading 101 /Sunny J. Harris
sirraH .J ynnuS/ 201 gnidarT
Analyzing and Forecasting futures Prices / Anthony F. Herbst
Technical Analysis of the Options Markets / Richard Hexton
Pattern, Price & Time: Using Gann Theory in Trading Systems / James A. Hyerczyk
Ari Kiev
Profits from Natural Resources: How to Make Big Money Investing in Energy, Food
& Metals / Roland A. Jansen
Trading Systems & Methods, 3rd Edition /Perry Kaufman
Trading to Win / Ari Kiev
Understanding Options / Robert Kolb
The Intuitive Trader / Robert Koppel
McMittan on Options / Lawrence G. McMillan
Trading on Expectations / Brendan Moynihan
Intermarket Technical Analysis / John J. Murphy
Forecasting financial Markets, 3rd Edition / Mark J. Powers and Mark G. Castelino
Neural Networks in the Capital Markets / Paul Refenes
Cybernetic Trading Strategies / Murray A. Ruggiero, Jr.
The Option Advisor: Wealth-Building Techniques Using Equity and Index
Options / Bernie G. Schaeffer
Gaming the Market / Ronald B. Shelton
Option Strategies, 2nd Edition / Courtney Smith
Trader Vie IT. Principles of Professional Speculation / Victor Sperandeo
Campaign Trading / John Sweeney
The Trader's Tax Survival Guide, Revised / Ted Tesser
The Mathematics of Money Management / Ralph Vince
The New Money Management: A framework for Asset Allocation / Ralph Vince
Portfolio Management Formulas / Ralph Vince
Trading Applications of Japanese Candlestick Charting /
Gary Wagner and Brad Matheny
New Trading Dimensions: How to Profit from Chaos in Stocks, Bonds,
and Commodities / Bill Williams .cnI ,snoS & yeliW nhoJ
Trading Chaos: Applying Expert Techniques to Maximize Tour Profits /
,sillyhP efiw ym roF
with love and admiration
This book is printed on acid-free paper. ©
.devreser sthgir llA .veiK irA yb 8991 © thgirypoC
Published by John Wiley & Sons, Inc.
.adanaC ni ylsuoenatlumis dehsilbuP
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in
ro ,gninnacs ,gnidrocer ,gniypocotohp ,lacinahcem ,cinortcele ,snaem yna yb ro mrof yna
thgirypoC setatS detinU 6791 eht fo 801 ro 701 noitceS rednu dettimrep sa tpecxe ,esiwrehto
Act, without either the prior written permission of the Publisher or authorization through
doowesoR 222 ,retneC ecnaraelC thgirypoC eht ot eef ypoc-rep etairporppa eht fo tnemyap
rehsilbuP eht ot stseuqeR .4474-057 )879( xaf ,0048-057 )879( ,32910 AM ,srevnaD ,evirD
,.cnI ,snoS & yeliW nhoJ ,tnemtrapeD snoissimreP eht ot desserdda eb dluohs noissimrep rof
605 Third Avenue, New York, NY 10158-0012, [phone], fax [phone],
E-Mail: [email protected].
This publication is designed to provide accurate and authoritative information in regard to the
subject matter covered. It is sold with the understanding that the publisher is not engaged in
eht ,deriuqer si ecnatsissa trepxe rehto ro ecivda lanoisseforp fI .secivres lanoisseforp gniredner
.thguos eb dluohs nosrep lanoisseforp tnetepmoc a fo secivres
Library of Congress Cataloging-in-Publication Data:
Kiev, Ari.
Trading to win : the psychology of mastering the markets / Ari
Kiev.
p. cm.—(Wiley trading advantage)
Includes index.
ISBN 0-471-24842-8 (cloth : alk. paper)
.sisylana tnemtsevnI .3 .segnahcxe kcotS .2 .stnemtsevnI .1
I. Title. II. Series.
HG4521.K455 1998
332. 024'01—dc21 98-20497
Printed in the United States of America.
,sillyhP efiw ym roF
with love and admiration
This book is printed on acid-free paper. ©
.devreser sthgir llA .veiK irA yb 8991 © thgirypoC
Published by John Wiley & Sons, Inc.
.adanaC ni ylsuoenatlumis dehsilbuP
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in
ro ,gninnacs ,gnidrocer ,gniypocotohp ,lacinahcem ,cinortcele ,snaem yna yb ro mrof yna
thgirypoC setatS detinU 6791 eht fo 801 ro 701 noitceS rednu dettimrep sa tpecxe ,esiwrehto
Act, without either the prior written permission of the Publisher or authorization through
doowesoR 222 ,retneC ecnaraelC thgirypoC eht ot eef ypoc-rep etairporppa eht fo tnemyap
rehsilbuP eht ot stseuqeR .4474-057 )879( xaf ,0048-057 )879( ,32910 AM ,srevnaD ,evirD
,.cnI ,snoS & yeliW nhoJ ,tnemtrapeD snoissimreP eht ot desserdda eb dluohs noissimrep rof
605 Third Avenue, New York, NY 10158-0012, [phone], fax [phone],
E-Mail: [email protected].
This publication is designed to provide accurate and authoritative information in regard to the
subject matter covered. It is sold with the understanding that the publisher is not engaged in
eht ,deriuqer si ecnatsissa trepxe rehto ro ecivda lanoisseforp fI .secivres lanoisseforp gniredner
.thguos eb dluohs nosrep lanoisseforp tnetepmoc a fo secivres
Library of Congress Cataloging-in-Publication Data:
Kiev, Ari.
Trading to win : the psychology of mastering the markets / Ari
Kiev.
p. cm.—(Wiley trading advantage)
Includes index.
ISBN 0-471-24842-8 (cloth : alk. paper)
.sisylana tnemtsevnI .3 .segnahcxe kcotS .2 .stnemtsevnI .1
I. Title. II. Series.
HG4521.K455 1998
332. 024'01—dc21 98-20497
Printed in the United States of America.
Foreword
If you want to learn how to be a super-trader, then closely examine the
taht margorp gnidart evitcaorp a no desab si tI .koob siht ni stpecnoc
-02$ a morf worg ,CLL ,tnemeganaM latipaC CAS ,mrif ym depleh sah
retfa yllaunna noillim 005$ revo gnildnah eno ot dnuf egdeh noillim
.sraey evif ylno
I have been trading the stock market for twenty years. Originally, I
rekcit eht fo swolf dna sbbe eht gnihctaw yb snoisiced gnidart ym edam
tape. I knew very little of the fundamentals of the companies I was trad-
ing and based my decisions on the tape action. Later, as I refined my
-adnuf eht fo gnidnatsrednu repeed a htiw ti enibmoc ot nageb I ,tra
mentals of the underlying companies, the industries, and the general
.sdnert tekram
I have worked with and met many traders in my life. Most combine
some forf mcoh art reading, tape analysis, and/or fundamental analysis
to make their decisions. The super-traders, though, share certain com-
yehT .eusrup thgim yeht enilpicsid revetahw edesrepus taht stiart nom
etartsnomed dna elyts ralucitrap nwo rieht ot dettimmoc yllatot era
complete conviction when trading. Because of this conviction they are
able to take large financial risks and have the confidence and belief that
probability is on their side. They also have the ability to admit their mis-
era yeht nehw—sessol ,si taht—secneuqesnoc rieht eziminim dna sekat
ton era yeht ;sevlesmeht rof kniht dna tnednepedni era yehT .gnorw
:taht ekil ton era ,ylgnisirprus ,sredart tsoM .srehto yb decneulfni ylisae
dna sksir gnikat fo diarfa era dna ,noitcivnoc kcal ,evisicedni era yehT
era taht snomed lanosrep eht fo erawanu era yehT .sekatsim gnikam
.sseccus eurt morf kcab meht gnidloh
Foreword
If you want to learn how to be a super-trader, then closely examine the
taht margorp gnidart evitcaorp a no desab si tI .koob siht ni stpecnoc
-02$ a morf worg ,CLL ,tnemeganaM latipaC CAS ,mrif ym depleh sah
retfa yllaunna noillim 005$ revo gnildnah eno ot dnuf egdeh noillim
.sraey evif ylno
I have been trading the stock market for twenty years. Originally, I
rekcit eht fo swolf dna sbbe eht gnihctaw yb snoisiced gnidart ym edam
tape. I knew very little of the fundamentals of the companies I was trad-
ing and based my decisions on the tape action. Later, as I refined my
-adnuf eht fo gnidnatsrednu repeed a htiw ti enibmoc ot nageb I ,tra
mentals of the underlying companies, the industries, and the general
.sdnert tekram
I have worked with and met many traders in my life. Most combine
some forf mcoh art reading, tape analysis, and/or fundamental analysis
to make their decisions. The super-traders, though, share certain com-
yehT .eusrup thgim yeht enilpicsid revetahw edesrepus taht stiart nom
etartsnomed dna elyts ralucitrap nwo rieht ot dettimmoc yllatot era
complete conviction when trading. Because of this conviction they are
able to take large financial risks and have the confidence and belief that
probability is on their side. They also have the ability to admit their mis-
era yeht nehw—sessol ,si taht—secneuqesnoc rieht eziminim dna sekat
ton era yeht ;sevlesmeht rof kniht dna tnednepedni era yehT .gnorw
:taht ekil ton era ,ylgnisirprus ,sredart tsoM .srehto yb decneulfni ylisae
dna sksir gnikat fo diarfa era dna ,noitcivnoc kcal ,evisicedni era yehT
era taht snomed lanosrep eht fo erawanu era yehT .sekatsim gnikam
.sseccus eurt morf kcab meht gnidloh
viii Foreword
That is why I brought Ari Kiev in to help my group. He has had ex-
perience with Olympic athletes, helping them maximize performance
by setting goals and then improving on those goals. I felt the same con-
tsoM .ynapmoc ym ni sredart eht htiw llew yllauqe krow dluoc stpec
traders have only a vague idea of why they are underperforming and at-
tribute this underperformance to the market or other trivialities that Acknowledgments
nwo rieht taht ezilaer t'nod yehT .revo lortnoc on evah yeht leef yeht
deveihca t'nevah yeht yhw nosaer yramirp eht eb yam swalf ytilanosrep
.sseccus mumixam
Ari and I hold weekly meetings where we attempt to help our
traders identify and modify those limiting thoughts and bad habits.
-rocni dna roivaheb gnidart rieht yfidom ot nrael sredart eht ylevitcaorP
porate successful changes into their strategies. Additionally, we monitor Numerous people have helped in the preparation of this book. Most of
eseht ot dettimmoc sniamer redart hcae taht erusne ot stluser eht all I am indebted to the various traders I have worked with in the past
rof gnikrow sredart evah I .sevlesmeht rof kaeps stluser e-nhaTM .s elagtnipaahCc CAS ta ffats eht dna nehoC evetS ralucitrap ni ,sraey xis
me whose profits have gone up 100 percent since implementing this agement, LLC. I am also appreciative of the support given me by Peter
program. Kellogg, Gary Goldring, and Chip Weinberg at Spear, Leeds and Kel-
snoziroh ruo dnapxe ot su depleh sah hcaore phTpTar anidWin ogt -xe ot tnaw I ,noitidda nI .CLL ,namdloG .J ta namdloG yaJ dna ,ggol
and branch out from equity trading into various strategies such as for- press my thanks for editorial assistance given me by Tricia Brown in the
eign exchange, convertibles, options, junk bonds, risk arbitrage, and early stages and Grace Lichtenstein in the later stages of the manuscript,
-hguosryhstte mesc tnraaddinigu.g reh rof ,nesseiG nav alemaP ,rotide ym knaht ot dna
The ideas and concepts that Ari presents in this b.okooko wb islli hht eflop naoniytaraperp eht tuo
trader increase profits. Combining good commosanh sysaewnlas sea owhwi t,shill yhePs teafiwb -ym ot detbedni ma I ,lla fo tsoM
klaw ot redaer eht elbane lliw koob eht ,selpicnirp lacigolohcysp dehsil ta tnemegaruocne dna troppus fo ecruos tnatsnoc a eb ot deunitnoc
away with a greater understanding of the complexities of being a suc- every stage of this process.
lliw pam daor a sa stpecnoc dna selpicnirp eseht gnisU .redart lufssec
benefit anybody who has chosen trading as a profession and livelihood. A. K
Happy trading.
STEVE COHEN
viii Foreword
That is why I brought Ari Kiev in to help my group. He has had ex-
perience with Olympic athletes, helping them maximize performance
by setting goals and then improving on those goals. I felt the same con-
tsoM .ynapmoc ym ni sredart eht htiw llew yllauqe krow dluoc stpec
traders have only a vague idea of why they are underperforming and at-
tribute this underperformance to the market or other trivialities that Acknowledgments
nwo rieht taht ezilaer t'nod yehT .revo lortnoc on evah yeht leef yeht
deveihca t'nevah yeht yhw nosaer yramirp eht eb yam swalf ytilanosrep
.sseccus mumixam
Ari and I hold weekly meetings where we attempt to help our
traders identify and modify those limiting thoughts and bad habits.
-rocni dna roivaheb gnidart rieht yfidom ot nrael sredart eht ylevitcaorP
porate successful changes into their strategies. Additionally, we monitor Numerous people have helped in the preparation of this book. Most of
eseht ot dettimmoc sniamer redart hcae taht erusne ot stluser eht all I am indebted to the various traders I have worked with in the past
rof gnikrow sredart evah I .sevlesmeht rof kaeps stluser e-nhaTM .s elagtnipaahCc CAS ta ffats eht dna nehoC evetS ralucitrap ni ,sraey xis
me whose profits have gone up 100 percent since implementing this agement, LLC. I am also appreciative of the support given me by Peter
program. Kellogg, Gary Goldring, and Chip Weinberg at Spear, Leeds and Kel-
snoziroh ruo dnapxe ot su depleh sah hcaore phTpTar anidWin ogt -xe ot tnaw I ,noitidda nI .CLL ,namdloG .J ta namdloG yaJ dna ,ggol
and branch out from equity trading into various strategies such as for- press my thanks for editorial assistance given me by Tricia Brown in the
eign exchange, convertibles, options, junk bonds, risk arbitrage, and early stages and Grace Lichtenstein in the later stages of the manuscript,
-hguosryhstte mesc tnraaddinigu.g reh rof ,nesseiG nav alemaP ,rotide ym knaht ot dna
The ideas and concepts that Ari presents in this b.okooko wb islli hht eflop naoniytaraperp eht tuo
trader increase profits. Combining good commosanh sysaewnlas sea owhwi t,shill yhePs teafiwb -ym ot detbedni ma I ,lla fo tsoM
klaw ot redaer eht elbane lliw koob eht ,selpicnirp lacigolohcysp dehsil ta tnemegaruocne dna troppus fo ecruos tnatsnoc a eb ot deunitnoc
away with a greater understanding of the complexities of being a suc- every stage of this process.
lliw pam daor a sa stpecnoc dna selpicnirp eseht gnisU .redart lufssec
benefit anybody who has chosen trading as a profession and livelihood. A. K
Happy trading.
STEVE COHEN