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A Complete Insight Into Zen in the Markets
on June 26, 2002
Here's a book that gets to the point quickly. I read this book in less than an hour. But in that amount of time, it really packed a punch and I suspect that many traders will find its key points to be of immense help from the next opening bell.
Author Edward Allen Toppel is a trader with a background in the S&P Futures Pit of the Chicago Mercantile Exchange. He's been at it for 20 years. So he isn't your typical vendor just in it to sell you books, courses, and seminars.
His book is based on his experiences both as a winning and losing trader. His thesis is simply this:
To succeed as trader, you have to trade with the flow with the market.
As incredibly simplistic and mystical this sounds, Toppel gives powerful suggestions on how to accomplish this.
Here are three of my favorites:
1) A loss is a loss, whether or not it's unrealized. Many traders mistakenly think that if a position goes against them, they haven't lost any money until they sell the stock.
2) Buy high, sell higher. The odds of success are much better if you buy stocks that are trending higher, than if you try to bottom fish and buy a stock because it's cheap.
3) Keep your positions small enough that you ego does not get in the way of good judgment.
On that last point about keeping position sizes small, I want to expand a bit.
To me, that was the single most profound statement in the book. I've heard it hundreds of times before, but Toppel's discussion of position size was riveting and had me thinking deeply about my own performance as a trader. His thesis is this:
We all have some threshold of position size which, when exceeded, transforms us into complete morons.
Keep your position size below this threshold, and you'll likely make money over the long haul if you're any kind of decent trader. But exceed the threshold, and your ego will inevitably cloud your judgment when something unexpected happens on a trade.
Think about it.