The Psychology of Finance

LARS TVEDE has worked as a derivatives trader, portfolio manager and investment banker. He co-founded The Fantastic Corporation (www.fantastic.com), a broadband internet company, in 1996. He is also a director of European Focus (www.provalue.ch), a hedge fund. Lars Tvede lives in Zug, Switzerland with his wife and children.

Part I: The Dark Forces of Time and Ignorance.

Rational Agents and Real Worlds.

A Few Practical Terms.

Part II: The Four Terrible Truths about Finance.

The First Rule: The Market Is Ahead.

The Second Rule: The Market is Irrational.

The Third Rule: Chaos Reigns.

The Fourth Rule: Charts are Self-fulfilling.

Part III: The Psychology of Man.

The Beginning of Psychology.

The Major Schools Emerge.

Part IV: The Behaviour Of Groups.

The Alchemists.

Psychology Meets Finance.

Part V: The Psychology of Market Information.

The Fastest Game in Town.

Smoke without Fire?.

Little and Big Fish.

Frames and Attitudes.

Part VI: The Psychology of Trending Markets.

Entering the Staircase.

Harmony and Resonance.

Meet Mr Ponzi.

Differences between Bull and Bear Markets.

Part VII: The Psychology of Ranging Markets.

Doubt and Hesitation.

When Markets get Overextended.

Part VIII: The Psychology of Turning Points.

What's Really Going On when a Trend Reverses?

Warning Signals for Major Trend reversals.

Part IX: The Psychology of Panics.

Tracing the Monster's Tracks.

Animal Spirits.

Part X: Beating the Gun.

Exposure and Timing.

The Road to Ruin.

Appendix I: Timeline of General Psychology.

Appendix II: Timeline of Economic Psychology.

Appendix III: Timeline of Technical Analysis.

Appendix IV: List of Historical Financial Crises.

Appendix V: Summary of Possible Psychological Phenomena During Trends, Turning Points and Panics.