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Rating: 
Summary: Packed with Knowledge!
Review: Long time market commentator Woody Dorsey, the theorist behind market semiotics, sees Wall Street as a continuum of the agora or the medieval street fair: a place where people congregate and trade, motivated by their own psychological drives. But if investors are still behaving based on the same visceral emotions that drove exchanges of goats in ancient bazaars, what does that forecast about how the market will act today? According to Dorsey, quite a lot. Interspersed with anecdotes that range from biography to paleontology to horse training, he offers principles and techniques that explain marketplace behavior in a way investors can understand and utilize. Begin with how he scans newspapers, a methodology worth remembering, and continue through his explanation of the Triunity Theory, a new system for understanding behavioral finance. Agree or disagree with his contrarian thinking, we believe his interesting diversions and innovative economic thinking will sweep you along. Dorsey brings many subjects together, but the two most interesting are, of course, why people behave as they do and how it affects the market and your money.
Rating:
Summary: A great example of applied philosophy
Review: Most reviewers of Woody Dorsey's recent book, "Behavioral Trading," will probably approach it from the viewpoint of one interested or involved in the stock market or, at least, evaluate it as a work within the field of economics or finance. Since I am by training a philosopher and not a player in the market nor an expert in matters of business and finance, I am going to concern myself briefly with a "philosophical" view of the work. I will leave it to others to discuss whether or not the tactics and strategies suggested by Dorsey will actually prove profitable in the financial markets.
What does the scholarly discipline of philosophy have to do with Woody Dorsey's book about the marketplace and financial investing? Well, in a word, everything. Two of the three main branches of philosophy, specifically metaphysics and epistemology, help to provide the grounding for behavioral trading and Dorsey's Triunity Theory which analyzes and suggests the methods and strategies for profitable market investing. This is, in fact, a perfect example of what is called "applied philosophy," that is, the application of philosophical knowledge and principles to practical situations. And Dorsey is upfront about this. For instance, he states that his basic theory, the Triunity Theory, "is a practical philosophy of market behavior, which is based on the simple but profound structure of man himself." Furthermore, Triunity Theory "is a practical philosophy which can be very profitable." Dorsey suggests that his theory is both philosophical, regarding its foundations and implications, and practical, regarding its applicability to real situations and its profitability.
Triunity Theory is based on the proposition that we "have a brain composed of three distinct developmental levels: reptilian, mammalian, and specifically human. These three separate brain functions relate to emotion, thought, and action." The Triunity Theory itself contains three components: Mood, Mind, and Body, and these relate to the three separate brain functions. "Psychologicals" are the Mood of the market and draw on psychological knowledge. Financial traders need to explore what are called emotions in the financial market. The primary thrust of behavioral finance is to acknowledge the irrational aspects of investing. "Fundamentals" are transient investment themes that make up the Mind of the market; they are everything we think about the market. Behavioral traders need to be cognizant of the role that bias, propaganda or spin plays in the financial markets, and must be aware of the symbolic information in the marketplace and the media and incorporate this as part of their trading strategy. "Technicals" make up the Body of the market and represent the physical manifestations of the market's action, such as price, volume, and volatility. To understand and to predict the market requires the practice of all three parts of the Triunity Theory and the behavioral trader "must never draw a significant conclusion based on the metrics of only one of Triunity Theory's components."
The new investing paradigm described by Dorsey is called behavioral finance. It is the union of psychology and economics, applying ideas derived from both to trading in the financial markets. The role of irrationality in financial markets, says the author, has always been ignored by economics. At the heart of behavioral finance is the study of the emotional brain and "The nominal premise of behavioral finance is to reject the limitations of rationality and embrace the potential of irrationality." Thus far, according to Dorsey, behavioral thought has focused on "identifying the innumerable irrational quirks, fetishes and foibles, or human habits, which are aspects of human nature." Since the markets are more psychological than logical, the behavioral trader, to be successful, "must be prepared for, and acknowledge the role of, irrationality in the financial markets."
There are many metaphysical and epistemological ideas, principles, and implications involved in Triunity Theory and in the methodologies of behavioral trading. At various points throughout the book, philosophers, both ancient and modern, are referred to and some of the most important and traditionally debated philosophical problems are discussed. Moreover, their importance to contemporary financial practices is pointed out. In Chapter 8, for example, Dorsey brings up the famous body-mind problem which was mainly created by René Descartes in the 17th century. Descartes maintained that the Mind was most important and the body merely a lesser reality. What does this have to do with financial trading? Listen to Dorsey: "Descartes came down on the side that the mind is immortal and immutable compared to the body. This presumption is at the heart of the fallacy of 'rationalism.' On Wall Street they still think that the Mind, or Investment Themes, rule everything. They have always dismissed the body or, the 'Technicals,' just because Descartes effectively told them to." Then there is the problem of perception. Dorsey presents Plato's famous allegory of the cave, which suggests we live in a world of appearances. What do we know and how do we know it? In the context of behavioral trading, do we "know" the market? The "question of perception and interpretation is at the heart of behavioral finance."
And there is so much more discussed in this adventure into applied philosophy: the idea of the "random walk," chaos theory, the invisible hand, Thomas Kuhn's concept of paradigm shift, complexity theory, fractal geometry, and even a Buddhist koan. Besides Plato and Descartes, already mentioned, there is consideration of Carl Jung, Niccolo Machiavelli, Aristotle, Adam Smith, Charles Darwin, Claude Lévi-Strauss, Thorsten Veblen, and David Ricardo, all of them classical philosophical thinkers. Dorsey is to be commended for showing how the scholarly discipline of philosophy impacts the world "out there," the one that everyone lives and works in. In the spirit of the late philosopher Mortimer Adler, who taught that "philosophy is everybody's business," I recommend this book to all those who think the study of philosophy has nothing to do with real life. In fact, and Dorsey's book is an excellent illustration, philosophical concepts and principles are at the root of all human thought, emotions, and actions.
Rating:
Summary: A great example of applied philosophy
Review: Most reviewers of Woody Dorsey's recent book, "Behavioral Trading," will probably approach it from the viewpoint of one interested or involved in the stock market or, at least, evaluate it as a work within the field of economics or finance. Since I am by training a philosopher and not a player in the market nor an expert in matters of business and finance, I am going to concern myself briefly with a "philosophical" view of the work. I will leave it to others to discuss whether or not the tactics and strategies suggested by Dorsey will actually prove profitable in the financial markets.
What does the scholarly discipline of philosophy have to do with Woody Dorsey's book about the marketplace and financial investing? Well, in a word, everything. Two of the three main branches of philosophy, specifically metaphysics and epistemology, help to provide the grounding for behavioral trading and Dorsey's Triunity Theory which analyzes and suggests the methods and strategies for profitable market investing. This is, in fact, a perfect example of what is called "applied philosophy," that is, the application of philosophical knowledge and principles to practical situations. And Dorsey is upfront about this. For instance, he states that his basic theory, the Triunity Theory, "is a practical philosophy of market behavior, which is based on the simple but profound structure of man himself." Furthermore, Triunity Theory "is a practical philosophy which can be very profitable." Dorsey suggests that his theory is both philosophical, regarding its foundations and implications, and practical, regarding its applicability to real situations and its profitability.
Triunity Theory is based on the proposition that we "have a brain composed of three distinct developmental levels: reptilian, mammalian, and specifically human. These three separate brain functions relate to emotion, thought, and action." The Triunity Theory itself contains three components: Mood, Mind, and Body, and these relate to the three separate brain functions. "Psychologicals" are the Mood of the market and draw on psychological knowledge. Financial traders need to explore what are called emotions in the financial market. The primary thrust of behavioral finance is to acknowledge the irrational aspects of investing. "Fundamentals" are transient investment themes that make up the Mind of the market; they are everything we think about the market. Behavioral traders need to be cognizant of the role that bias, propaganda or spin plays in the financial markets, and must be aware of the symbolic information in the marketplace and the media and incorporate this as part of their trading strategy. "Technicals" make up the Body of the market and represent the physical manifestations of the market's action, such as price, volume, and volatility. To understand and to predict the market requires the practice of all three parts of the Triunity Theory and the behavioral trader "must never draw a significant conclusion based on the metrics of only one of Triunity Theory's components."
The new investing paradigm described by Dorsey is called behavioral finance. It is the union of psychology and economics, applying ideas derived from both to trading in the financial markets. The role of irrationality in financial markets, says the author, has always been ignored by economics. At the heart of behavioral finance is the study of the emotional brain and "The nominal premise of behavioral finance is to reject the limitations of rationality and embrace the potential of irrationality." Thus far, according to Dorsey, behavioral thought has focused on "identifying the innumerable irrational quirks, fetishes and foibles, or human habits, which are aspects of human nature." Since the markets are more psychological than logical, the behavioral trader, to be successful, "must be prepared for, and acknowledge the role of, irrationality in the financial markets."
There are many metaphysical and epistemological ideas, principles, and implications involved in Triunity Theory and in the methodologies of behavioral trading. At various points throughout the book, philosophers, both ancient and modern, are referred to and some of the most important and traditionally debated philosophical problems are discussed. Moreover, their importance to contemporary financial practices is pointed out. In Chapter 8, for example, Dorsey brings up the famous body-mind problem which was mainly created by René Descartes in the 17th century. Descartes maintained that the Mind was most important and the body merely a lesser reality. What does this have to do with financial trading? Listen to Dorsey: "Descartes came down on the side that the mind is immortal and immutable compared to the body. This presumption is at the heart of the fallacy of 'rationalism.' On Wall Street they still think that the Mind, or Investment Themes, rule everything. They have always dismissed the body or, the 'Technicals,' just because Descartes effectively told them to." Then there is the problem of perception. Dorsey presents Plato's famous allegory of the cave, which suggests we live in a world of appearances. What do we know and how do we know it? In the context of behavioral trading, do we "know" the market? The "question of perception and interpretation is at the heart of behavioral finance."
And there is so much more discussed in this adventure into applied philosophy: the idea of the "random walk," chaos theory, the invisible hand, Thomas Kuhn's concept of paradigm shift, complexity theory, fractal geometry, and even a Buddhist koan. Besides Plato and Descartes, already mentioned, there is consideration of Carl Jung, Niccolo Machiavelli, Aristotle, Adam Smith, Charles Darwin, Claude Lévi-Strauss, Thorsten Veblen, and David Ricardo, all of them classical philosophical thinkers. Dorsey is to be commended for showing how the scholarly discipline of philosophy impacts the world "out there," the one that everyone lives and works in. In the spirit of the late philosopher Mortimer Adler, who taught that "philosophy is everybody's business," I recommend this book to all those who think the study of philosophy has nothing to do with real life. In fact, and Dorsey's book is an excellent illustration, philosophical concepts and principles are at the root of all human thought, emotions, and actions.
Rating: 
Summary: A Useful Investment Tool
Review: This book gives you an inside view of one company's philosophy on using market psychology to make money in the market. Dorsey examines various approaches people use toward this end, before describing his own.He begins by showing us how the market is not rational. Never has been, never will be. I personally experienced this during the dotcom stock bubble. I had shares of stocks that, per rational theory, should have done remarkably well. I did not own shares of Yahoo--which, per rational theory, was a total dog. My stocks stayed flat, while Yahoo soared. So much for rational theory. If you get nothing else from this book, the explanation of that lesson alone makes it worth reading. Next, Dorsey delves into the three general concepts of psychological trading. All of these seem good on the surface, but results are inconsistent. Maritimers long ago learned how to navigate by triangulation. Dorsey navigates the stock market the same way, with his "triunity" approach. He shows how looking at the intersections of the three general concepts produces consistent results. You may have read books espousing some "can't miss" philosophy or another. Don't worry--Dorsey lets the reader know his triunity approach still requires judgment. For example, if the indicators are in a certain area, that would be an indication that the market is about to hit a peak. Dorsey explains that his method might miss the peak. And, it might miss a trough. But if you are not greedy, his method would appear to be a useful tool for profitable investing. Remember, pigs eat well but hogs get slaughtered.
Rating: 
Summary: This book is overpriced.
Review: This book is a tool for the author to market his service. I cannot get much insight nor technique out of this book. John Mauldin's Bull's Eye Investing is selling for $17 and it's packed with all the information you need about investing. For trading, I would turn to the all time classic: Reminiscences of a Stock Operator. Human behavior hasn't changed much in the past century.
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