Book Review — Its time to review the book “Way Of Turtle”, March 2021

Faith, C. (2007). Way of the Turtle: The Secret Methods that Turned Ordinary People into Legendary Traders. McGraw-Hill.

Attitude, emotion and mindset decide how much profit you deserved to gain in the market.

Since March of 2020 great recession in U.S., lots of friend have started their investment on U.S. Stock Market. There is nothing but profit gathered them together giving “liquidity” to the market. Until last few weeks(the beginning of March 2021), I still heard a lot confident “advise” from “fresh investors” claiming that they were the example of success. The GMC’s short squeeze even further boost their confident. But now, no more. They are yelling at lost, they are feeling regret and sad, even anger with themselves about greed.

The book “ Way of Turtle” may refresh investor’s mind after a skyrocketing market.

Fear and greed are human nature, we don’t have to fight with our own nature. Instead, we should fully utilize its feature to achieve our goal. Therefore, “did we get our greed and fear on a right position?” is the question we should reflect.

“Way of Turtle” summarized 8 cognitive bias that may help fresh investors to overcome the pain of losing money and make a rational decision in market drop. That’s really worthy for all traders / investors to read the book again. Yes, again. I knew most of experienced investors had read it before. Some of traders may not be the trend trader, however, it cannot be admitted that all traders are going to make profit with trend, no matter how short or small it is.

1. Loss aversion:

The tendency for people to have a strong preference for avoiding losses over acquiring gains

2. Sunk costs effect:

The tendency to treat money that already has been committed or spent as more valuable than money that may be spent in the future.

3. Disposition effect:

The tendency for people to lock in gains and ride losses.

4. Outcome bias:

The tendency to judge a decision by its outcome rather than by the quality of the decision at the time it was made.

5. Recency bias:

The tendency to weigh recent data or experience more than earlier data or experience.

6. Anchoring:

The tendency to rely too heavily, or anchor, on readily available information.

7. Bandwagon effect:

The tendency to believe things because many other people believe them.

8. Belief in the law of small numbers:

The tendency to draw unjustified conclusions from too little information Although this list is not comprehensive, it includes some of the most powerful misperceptions that affect trading and prices. Let’s look at each cognitive bias in greater detail.

Keep Calm investors….its just a part of the game.

“As Turtles, we were lucky since our boss, Richard Dennis, did not look at drawdowns that happened as a result of giving back profits in the same way that he looked at drawdowns that happened because of a string of losses. He knew that giving back part of the profits was a part of the game for trend followers.”

Don’t forget the existence of market is because of people, figuring our own way of thinking is the way figuring out what is happening in the market. What’s more, giving back profit is just part of the game, newcomers.

Good luck and trade green.