METHODS OF A WALL STREET MASTER REVIEW
“If there is one fatal flaw in this business, it is allowing isolated information to drive trading or investing decisions-committing money without understanding all the risks. And there is only one way to understand all the risks: through systematic knowledge.” -Victor Sperandeo
Victor Sperandeo also known as Trader Vic is a US trader and an index developer born in 1945. He is currently the President and CEO of Alpha Financial Technologies. In the book – Methods of a Wall Street Master throws light on tracking of stocks and commodities using different trends. Sperandeo explores the psychology of trading and the use and importance of emotional discipline. The book contains wealthy of information regarding trading.
According to the author, if you put your money to work, and are consistent in your execution, you will be profitable. He says there are three basic price trends that are simultaneously active in any market. The basic price trends are short-term trend, the intermediate-term trend and the long-term trend. Within each market there are three types of participant – traders, speculators and investors. Traders focus their activity on the intraday. Speculators are the one who focus on the intermediate trend. Moreover investors deal with the long term trend and hold their positions from months to years.
Further he has presented the essentials necessary to understand the markets. Victor also provided three steps for identifying a change in trend.
This three-step method will help you avoid losses and find great trading opportunities.
- A trend line is broken.
- There is a retest and failure.
- Price falls below the prior low
Sperandeo says it is very important to understand the principles of speculation. So if you want to be a successful market player abiding by the principles is important.
He highlights the three principals:
Further, if these principals are understood effectively by you, then you can make profits in the market. But implementing these ideas is not so easy. To start with them, you first need to understand the market movements. The best explanation for this is the Dow Theory. As William Peter Hamilton has put it, “Dow theory is a commonsense method of drawing useful inferences as to future market movements from the recorded daily price fluctuations of the market averages.”
Dow Theory is not the only way to forecast market behaviour. It is an invaluable component of knowledge that no speculator should ignore. Along with these things, as a trader, you should gain a deeper understanding of price trends. Once you know what exactly trend is and when it is going to change. Then you will really have all the knowledge you need to make money in the markets.
In addition to this, Victor Sperandeo devotes the further chapters on technical analysis and chart patterns. Also, he stated that technical analysis is known for what it is – a method of characterizing recurring patterns of price movements.
Technical analysis provides a method to measure the tendency of the market to react in a particular way under similar conditions throughout history. And for this recognition, technical analysis adds a valuable dimension to market analysis. It also adds significant value to economic forecasting. The author says that this is the part which is often overlooked by speculators and investors. He sums up by saying that if you understand the viability of technical analysis and the nature of market. Then no one can stop you from identifying profitable opportunities that would otherwise go unseen.