The New Trading for a Living
By Dr. Alexander Elder
John Wiley & Sons, Inc.
$80; 286 pages
Alexander Elder, MD is an active trader/trading tutor and the author of a handful of top-notch trading books with an emphasis on the psychology of trading. Unfortunately, too many traders fail to pay attention to psychological factors and end up losing all their trading capital. “The New Trading for a Living” is the updated version of his prior 1993 best-selling book “Trading for a Living” which was read by thousands of individual and institutional traders worldwide. At an added cost, the latest version also comes with a 170-page study guide composed of multiple-choice questions to help readers master the material.
According to the author, there are three pillars of successful trading: psychology, including independent thinking, market analysis and risk management. Although traders want to succeed, the number that actually do is low. Why? According to Elder, mainly due to lack of discipline. Elder urges traders to avoid the common practice of capturing small gains and taking big losses, instead urging them to focus on the idea that trading is hard work that requires time, patience, and tested methodology.
The book covers the full gamut of trading subjects, including chapters on individual and mass psychology, discipline, basic technical analysis, market indicators, trading systems and vehicles, risk and trade management, practical details and record-keeping. It is printed on high-quality paper and the charts are in color, which makes for easy viewing.
In Elder’s eyes, winning traders win inside their heads, not on their computers. Moreover, it is not necessary for the trader to attempt to forecast the future direction of the market. He urges traders to instead focus on trading right and improving their skills, and above all, to avoid self-sabotage. He believes that horizontal support and resistance levels are viable trading parameters and that diagonal trend lines are too subjective to use effectively, but he does recommend using exponential moving averages to ascertain the market’s trend.
In his discussion of indicators, the author includes ADX, MACD, moving averages, On-Balance Volume, and accumulation/distribution. He developed the well-known Daily Force Index, the Impulse System and the Elder-Ray, all indicators used by many traders to assess the market’s situation. Moreover, a number of brokerage firms offer these indicators on their trading platforms.
Both new and experienced traders can benefit from Elder’s comprehensive review of the keys to successful trading, which include having a written trading plan, never trading without stops to limit losses, maintaining a trading diary and using technical indicators to pinpoint entry, stop and target prices. “Trading is the most dangerous human endeavor, short of war,” Elder says. Therefore, success is determined by understanding what trading is all about and reacting appropriately to trades. Implementing the principles of Elder’s time-tested knowledge and methodology will go a long way in helping traders remain in the business and prosper.
Many books have been written over the past twenty years about trading the markets. However, very few contain the nitty-gritty details, common sense and thoroughness that Elder provides in all his books, including “The New Trading for a Living.” If you want to buy only one book on the key elements of successful trading, this book is it