The New Trading for a Living
By Dr. Alexander Elder
John Wiley & Sons, Inc.
$80; 286 pages
Alexander Elder, MD is an active trader and trading tutor, as well as the author of a handful of top-notch trading books with an emphasis on the importance of understanding the psychology of trading. Unfortunately too many traders fail to pay attention to this factor and end up losing all their trading capital. This book is the updated version of his prior 1993 best-selling book Trading for a Living 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 master the material.
According to the author, the three pillars of successful trading encompass psychology including independent thinking, market analysis and risk management. Additionally, he considers recordkeeping to be an important factor as well. He urges traders to avoid the common practice of capturing small gains and taking big losses. Although traders want to succeed, the number that actual do is small. The main reason for their failure is lack of discipline and not realizing 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 and trading systems and vehicles, risk and trade management, and practical details and record-keeping. The book is printed on high-quality paper and the charts are in color, which makes for easy viewing.
According to Elder, winning traders win inside their heads not on their computers. Moreover, it is not necessary for the trader to forecast the future direction of the market, as that is impossible. He urges traders to 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 the following: 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 of these indicators are used by many traders to help them assess the market’s situation. Moreover, a number of brokerage firms offer these indicators on their trading platforms.
Newbie 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. Elder pinpoints the real story about trading when he says “Trading is the most dangerous human endeavor, short of war.” Therefore, understanding what trading is all about, how you react to your trades, and your approach to those areas will ultimately determine your success. Implementing the principles of Elder’s time-tested knowledge and methodologies will go a long way in helping traders not only remain in the business but also 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 this one. If you wanted to buy only one book on the key elements of successful trading, then this book is the one.