Forecasting Financial Markets (Tony Plummer)

Trader's Library #26 · Trading psychology. Why technical analysis works: the crowd psychology behind the chart.

Author: Tony Plummer · Original: Forecasting Financial Markets · Year: 1989 · Usefulness for traders: ★★★☆☆

What it's about

A book by a former bond and currency fund manager that tries to explain why technical analysis works at all. Plummer describes group psychology, bull and bear cycles and the rhythm of price movements, which he calls the “price pulse”.

What it gives a trader

The value for a trader is the answer to “why”, not “how”. Patterns and waves are traces of the behaviour of a crowd oscillating between fear and greed. Whoever understands the mechanism is less influenced by it.

Lessons for traders

• a chart is a record of crowd emotion
• independence from the group is a precondition for an edge (conformity, Atlas of biases #33)
• cycles and waves are tendencies rather than laws of nature

What to watch out for

Difficult, theoretical and, in the part on cycles, speculative.

Discussion

The discussion takes place in Hetman Capital Club (in Polish). Join the discussion in the Club →

Navigation

← #025 High Performance Trading (Steve Ward) · Library index · #027 The Inner Game of Trading and Investing and the Irrational Mind (Howard Abell, Robert Koppel) →

Educational content, not investment advice. The book description is my own summary and assessment, not quotations. Edition details were checked in catalogues and bookshops, and where there was doubt I said so plainly.