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One of the best Trading Psychology books I've ever read!

“Psychology of Intelligence Analysis” by Richards J Heuer, Jr., published by the CIA’s Center for the Study of Intelligence, 1999.

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Available as a pdf download from this webpage
 

Ok, so it’s a CIA book written for Intelligence Analysts, not a trading book written for traders. However, the information available in this book is superb. Well written and easy to follow. This is an excellent source of information on how we think, and the cognitive biases which undermine our ability to process information and conduct market analysis.
 

VERY APPLICABLE TO TRADING. HIGHLY RECOMMENDED.
 

Here’s what’s it covers:

 

Part 1 – Our Mental Machinery

  • Chapter 1: Thinking About Thinking

  • Chapter 2: Perception: Why Can’t We See What Is There to Be Seen?

  • Chapter 3: Memory: How Do We Remember What We Know?

Part 2 – Tools for Thinking

  • Chapter 4: Strategies for Analytical Judgment: Transcending the Limits of Incomplete Information

  • Chapter 5: Do You Really Need More Information?

  • Chapter 6: Keeping an Open Mind

  • Chapter 7: Structuring Analytical Problems

  • Chapter 8: Analysis of Competing Hypothesis

Part 3 – Cognitive Biases

  • Chapter 9 – What Are Cognitive Biases?

  • Chapter 10 – Biases in Evaluation of Evidence

  • Chapter 11 – Biases in Perception of Cause and Effect

  • Chapter 12 – Biases in Estimating Probabilities

  • Chapter 13 – Hindsight Biases in Evaluation of Intelligence Reporting

Part 4 – Conclusions

  • Chapter 14 – Improving Intelligence Analysis

 

Available as a pdf download from this webpage

The business end of the bible

biblealoneA Jewish businessman was in a great deal of trouble.
His business was failing and he had put everything he had into the business.
He owed everybody and it was so bad he even contemplated suicide.
As a last resort he went to a Rabbi and poured out his story of tears and woe.
When he finished, the Rabbi said, “Here’s what I want you to do”.
Put a beach chair and your bible in your car and drive down to the beach.
Take the beach chair and the bible to the water’s edge.  Sit down in the chair and put the bible in your lap.
Open the bible: The wind will riffle the pages, but finally the open Bible will come to rest on a page.
Look down at the page and read the first thing you see.
That will be your answer, that will tell you what to do.
A year later the businessman went back to the Rabbi and brought his wife and children with him.
The man was in a new custom-tailored suit, his wife in a mink coat, the children shining.
The businessman pulled out an envelope stuffed with money out of his pocket, gave it to the Rabbi as a donation in thanks for his advice.
The Rabbi recognized the benefactor, and was curious.  “You did as I suggested?” he asked.
“Absolutely”, replied the businessman.”
“You went to the beach?”
“Absolutely”.
“You sat in a beach chair with the Bible in your lap?”
“Absolutely?”
“You let the pages riffle until they stopped?”
“Absolutely?”
“And what were the first words you saw?”
“CHAPTER 11”.