The Three Skills of Top Trading: Behavioral Systems Building, Pattern Recognition, and Mental State Management

By Hank Pruden

Book Overview

Praise for The Three Skills of Top Trading

"Professor Pruden's new book, The Three Skills of Top Trading, is unquestionably the best book on a specific trading method and the necessary attributes for trading that I have read. His logic, understanding of human foibles, and use of the Wyckoff method of trading are broadly referenced, readable, understandable, and entertaining."
- Charles D. Kirkpatrick, II, CMT, coauthor of

Technical Analysis: The Complete Resource for Financial Market Technicians, Editor of the Journal of Technical Analysis, and board member of the Market Technicians Association

"At long last, someone has taken the time and effort to bring the work and insight of Wyckoff to wider public attention-and Hank Pruden has done so masterfully, with great clarity and eloquence. Hank has taken the best of Wyckoff's work, combining it with the essential aspects of trader discipline and psychology, to provide a highly readable and particularly useful guide to trading. MUST READING!"
- Jacob Bernstein, www.trade-futures.com

"Hank Pruden puts all of the elements needed for successful trading into one volume. This book not only belongs on every trader's shelf but should be close enough for continuous reference."
- Martin J. Pring, President, www.Pring.com

"Dr. Pruden has brought together his lifetime of work in developing a modern approach to analyzing and trading the markets built upon classic market analysis from the early part of the twentieth century and topped off with modern-day tenets of behavioral finance and mental state management."
- Thom Hartle, Director of Marketing for CQG, Inc. (www.cqg.com)

"I usually consider a book to be well worth reading if it gives me one paradigm shift. I believe that this book will give the average investor a lot more than just one."
- Van K. Tharp, PhD, President, Van Tharp Institute

• Format: Hardcover
• Language: English
• ISBN: 0470050632
• ISBN13: 9780470050637
• Release Date: April 2007
• Publisher: Wiley
• Length: 304 Pages
• Weight: 1.15 lbs.
• Dimensions: 1.0" x 6.4" x 9.3"

Customer Reviews

One of the best trading books I've ever read

What can I say? This is, without a doubt, one the very best books on trading I've ever read. It is certainly the first trading book I've read that has given me a peak behind the curtain and into how the game is really played. Forget things like earnings, P/E ratio, the Fed, Obama, the talking heads on CNBC or anything else. And if you're a technician like I am, you can likewise forget about using mechanical systems, divining geometric patterns, oscillators and the myriad indicators available. Instead, as Deep Throat apparently said to Bob Woodward, "Follow the money." Or in this case, follow the volume and the order flow, which will lead you to the money. Pruden does a wonderful job explaining how the markets are truly guided by the large, savvy operators, who do exactly the opposite of what the public does. In doing so, he sheds light on why the public is always wrong and how to follow the true insiders. But the book is far more than theory. Using some revolutionary models of crowd behavior, Pruden then shows us precisely how to use the tried and true methods of Richard Wyckoff to understand how this behavior manifests itself in the markets and, most importantly, how to trade it. The result is a systematic way of trading that allows each trader to combine his natural, discretionary instincts with the structure necessary to support his decision making. An added bonus is his section on personal psychology - co-written with the noted trading coach and psychologist, Van Tharp - which will give you tremendous insight into your own mental states, and how to control them for maximum effectiveness. Whether you subscribe to Wyckoff's method or not, this book will change the way you see the markets and your own participation in them. Truly, it is a must-read for any trader who is serious about succeeding on his own merits, talents and intelligence. The great traders understand how the markets work, have a method to exploit this understanding and possess incredible self-awareness while they trade. Want to be one them? Buy this book.

Excellent book for the aspiring trader.

This book is written about how three mutually reinforcing links make a complete trader. 1). Pattern Recognition and Discretionary Trading. Using the Wyckoff method you will see chart representations of how hot stocks are accumulated in bases for long periods of time, have pull backs then break out to new highs. You will also see how they eventually have exhaustion tops that fail to rally and they behind to break down in distribution. The author encourages discretionary trading through experience by being able to identify market action through the past models. I agree completely. 2). Behavioral finance and systems building. You must be flexible in your trading. You are merely a ship on a sea of opinion. Follow the prevailing sentiment during the middle of the the trend, and go contrary to it at the extreme tops and bottoms. Hope, fear, and greed are the dangers in the market and move the markets in many ways. The action of the stock market is nothing more than a manifestation of mass crowd psychology in action. The Pruden model shows a chart of how accumulation, mark-up, distribution, and markdown works in the market tied to price, volume, sentiment, and time. It truly explains how the market in growth stocks works. 3). The ten tasks of top trading: Daily self analysis Daily mental rehearsal Developing a low risk idea Stalking Action Monitoring Take profits or abort Periodic review Daily briefing Out The book covers all the aspects of trading psychology in depth, I found this information to revolutionize my trading and I have read over 100 trading books. It is worth the price of the book alone. The book also discusses the principle of the "Composite Man", it is much like Benjamin Graham's "Mr. Market". It explains that you must think of the market as one person you are trading against and your job is to understand how he is trading to adjust your trading accordingly. This book is geared toward traders who rely on patterns and psychology, and will appeal to traders interested in these styles. This book is a key book for all traders who truly want to be successful.

Great contribution to Wyckoff's work!

Prof. Hank Pruden has done it again! His depth of Wyckoff's knowledge associated with his keen sense of behavioural science illustrated through the Pruden Model, has made this highly acclaimed book one of the nowadays indispensable elements of the investor's and trader's arsenal. This book not only describes the psychological aspects of trading but also the "nuts-and-bolts" of Wyckoff's trading method. Highly recommended for the trader at any level he/she would be, on his way to conquer the learning curve difficulties. [...]

Excellent description of Wychoff's system and how to use it

This is a gem of a book and well worth reading. It does an excellent job of describing Richard Wychoff's system, which is an incredibly powerful technique in the analysis of price movements, such as accumulation/distribution, supply/demand, and the topping/bottoming processes. Pruden also describes and charts specific events to look for as a stock moves from a base into it's rise, or from a top into it's fall. It's easy to look at charts now and match the patterns with Hank's checklists or the priceless figures in the book to know where in the price movement progression one is likely to be. The book also talks at length about how to get one's mind right in order to be successful in the market. I'm convinced that many systems can work when executed by disciplined investors, while the same systems will fail when executed by the undisciplined investors. This is a great bonus in this book beyond the powerful Wychoff trading system. I really like the simple nature of the point and figure chart to follow price movements, because it works. No need to overly complicate the system, like the Tom O'Brien's of the world try and do just to sell you on a $2500 trading class. In fact, I remember when Hank was interviewed by Tom on his radio show during the fall of 2007, and Hank was bullish (due to his simple point and figure chart) and Tom was bearish (due to his overly complicated "Timing the Trade" mumbo jumbo). Well, the next 5 to 10% move in the market was UP, which Hank had correctly predicted based on the classic point and figure methodology. This book is in my top 3 investment books for 2007. Well done, Hank!

Pruden Puts it All Together!

Hank Pruden's masterful book "The Three Skills of Top Trading" is a must-read for serious students of the art and science of trading. It would well serve the newcomer to the world of trading as well as an experienced trader. Whereas many trading gurus say "you must use stop-losses", Mr. Pruden gives you a three-legged system that creates the knowledge governing the use of a "stop". In other words, this book contains the "WHY" as well as the "WHAT" that will help users manage their trading effectively, at the buy and the sell ends of the trade. Thank you Mr. Pruden, for providing me with a foundational book that has already helped me.