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Trading for a Living: Psychology, Trading Tactics, Money Management
Trading for a Living Successful trading is based on three M's: Mind, Method, and Money. Trading for a Living helps you master all of those three areas:
* How to become a cool, calm, and collected trader
* How to profit from reading the behavior of the market crowd
* How to use a computer to find good trades
* How to develop a powerful trading system
* How to find the trades with the best odds of success
* How to find entry and exit points, set stops, and take profits
Trading for a Living helps you discipline your Mind, shows you the Methods for trading the markets, and shows you how to manage Money in your trading accounts so that no string of losses can kick you out of the game. To help you profit even more from the ideas in Trading for a Living, look for the companion volume--Study Guide for Trading for a Living. It asks over 200 multiple-choice questions, with answers and 11 rating scales for sharpening your trading skills. For example: Question Markets rise when
* there are more buyers than sellers
* buyers are more aggressive than sellers
* sellers are afraid and demand a premium
* more shares or contracts are bought than sold
* I and II
* II and III
* II and IV
* III and IV
Answer B. II and III. Every change in price reflects what happens in the battle between bulls and bears. Markets rise when bulls feel more strongly than bears. They rally when buyers are confident and sellers demand a premium for participating in the game that is going against them. There is a buyer and a seller behind every transaction. The number of stocks or futures bought and sold is equal by definition.
* How to become a cool, calm, and collected trader
* How to profit from reading the behavior of the market crowd
* How to use a computer to find good trades
* How to develop a powerful trading system
* How to find the trades with the best odds of success
* How to find entry and exit points, set stops, and take profits
Trading for a Living helps you discipline your Mind, shows you the Methods for trading the markets, and shows you how to manage Money in your trading accounts so that no string of losses can kick you out of the game. To help you profit even more from the ideas in Trading for a Living, look for the companion volume--Study Guide for Trading for a Living. It asks over 200 multiple-choice questions, with answers and 11 rating scales for sharpening your trading skills. For example: Question Markets rise when
* there are more buyers than sellers
* buyers are more aggressive than sellers
* sellers are afraid and demand a premium
* more shares or contracts are bought than sold
* I and II
* II and III
* II and IV
* III and IV
Answer B. II and III. Every change in price reflects what happens in the battle between bulls and bears. Markets rise when bulls feel more strongly than bears. They rally when buyers are confident and sellers demand a premium for participating in the game that is going against them. There is a buyer and a seller behind every transaction. The number of stocks or futures bought and sold is equal by definition.
289 pages, Hardcover
First published January 1, 1993
440 people are currently reading
6658 people want to read
About the author
Alexander Elder
59 books215 followersDr. Alexander Elder is a professional trader based in New York City. He is the author of a dozen books, including Come into My Trading Room (Barron's 2002 Book of the Year) and Trading for a Living, considered modern classics among traders.
Dr. Elder was born in Leningrad and grew up in Estonia, where he entered medical school at the age of 16. At 23, while working as a ship's doctor, he jumped a Soviet ship in Africa and received political asylum in the United States. He worked as a psychiatrist in New York City and taught at Columbia University. His experience as a psychiatrist provided him with unique insight into the psychology of trading. Dr. Elder's books, articles, and software reviews have established him as one of today's leading experts on trading
Dr. Elder is the originator of Traders' Camps week-long classes for traders, as well as the Spike group for traders. He continues to trade and is a sought-after speaker at conferences in the US and abroad.
Dr. Elder was born in Leningrad and grew up in Estonia, where he entered medical school at the age of 16. At 23, while working as a ship's doctor, he jumped a Soviet ship in Africa and received political asylum in the United States. He worked as a psychiatrist in New York City and taught at Columbia University. His experience as a psychiatrist provided him with unique insight into the psychology of trading. Dr. Elder's books, articles, and software reviews have established him as one of today's leading experts on trading
Dr. Elder is the originator of Traders' Camps week-long classes for traders, as well as the Spike group for traders. He continues to trade and is a sought-after speaker at conferences in the US and abroad.
Ratings & Reviews
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Displaying 1 - 30 of 161 reviews
February 19, 2015
I don't think this is necessarily a book for beginners. However, it's a book that beginners should read. You will learn that it's all about hard work, and that the folks who sell you systems are selling you fool's gold. (I learnt this the hard way, and then had it demonstrated by my mentor.) You'll also learn exactly why you will fail, and what to do to turn yourself into a successful trader.
One of the best and most comprehensive books I've read on trading - and that's saying something. It was expensive (£55, c.$80) but worth every penny. The author is a doctor who escaped to the US from the former Soviet Union, became a psychiatrist and then a very successful trader. I bought this book for its comprehensive section on trading psychology. Alex Elder tells it like it is, in very plain terms. If you trade, you are your biggest enemy. He tells you what to do about it from within quite a harsh frame of reference: that of Alcoholics Anonymous.
It misses out on that fifth star because it has not been updated since 1992. The result is that it's very much a pencil-and-paper approach to trading signals, and there's no mention of the internet at all. That didn't bother me too much, but I think it would make some readers feel a bit robbed. On the plus side, he actually talks through the psychology of all the indicators. For me, that was a huge bonus. Even though I'm not big on indicators, the people I trade against are - so I have to know them and read the moves of the crowd.
Actually, I'm going to give this five stars. It's a rare thing for me to start re-reading a book on the same day I finished it.
One of the best and most comprehensive books I've read on trading - and that's saying something. It was expensive (£55, c.$80) but worth every penny. The author is a doctor who escaped to the US from the former Soviet Union, became a psychiatrist and then a very successful trader. I bought this book for its comprehensive section on trading psychology. Alex Elder tells it like it is, in very plain terms. If you trade, you are your biggest enemy. He tells you what to do about it from within quite a harsh frame of reference: that of Alcoholics Anonymous.
It misses out on that fifth star because it has not been updated since 1992. The result is that it's very much a pencil-and-paper approach to trading signals, and there's no mention of the internet at all. That didn't bother me too much, but I think it would make some readers feel a bit robbed. On the plus side, he actually talks through the psychology of all the indicators. For me, that was a huge bonus. Even though I'm not big on indicators, the people I trade against are - so I have to know them and read the moves of the crowd.
Actually, I'm going to give this five stars. It's a rare thing for me to start re-reading a book on the same day I finished it.
March 24, 2020
"Trading for a living" is a comprehensive and magnificent guide for beginners who want to enter the world of trading. Alexender Elder divides his book into three categories: The Psychology section, where he addresses the important mindset for this type of enterprises; Trading tactics, a section dedicated to practical examples of the real world of trading; Money Management, the last part of the book that approaches the most efficient methods for risk management.
"Emotional trading is the enemy of success"
The most interesting and relevant section of the book is the Psychology chapter. In this section, the author discusses the psychological mindset of a trader. He claims that irrational and emotional actions are the enemy for a successful trading business. The psychological part has a relevant weight for success. After all, trading is not only an intellectual process but also a temperamental process.
The second part (Trading tactics) addresses real-time/practical measures during the Trading process.
On the third part, Alexander Elder gives out some tips for better management of one's trading accounts, including how to not risk all the available capital.
The details are left for those who are eager to start in the trading world. This book is a good starting point for those who want to have a larger perspective of this complex mechanism.
"Emotional trading is the enemy of success"
The most interesting and relevant section of the book is the Psychology chapter. In this section, the author discusses the psychological mindset of a trader. He claims that irrational and emotional actions are the enemy for a successful trading business. The psychological part has a relevant weight for success. After all, trading is not only an intellectual process but also a temperamental process.
The second part (Trading tactics) addresses real-time/practical measures during the Trading process.
On the third part, Alexander Elder gives out some tips for better management of one's trading accounts, including how to not risk all the available capital.
The details are left for those who are eager to start in the trading world. This book is a good starting point for those who want to have a larger perspective of this complex mechanism.
March 29, 2016
Fascinating beginning about the psychology of trading and prices. Read the whole first section and last section. The middle portion of the book about technical analysis was a bit too much for me to read in full.
June 19, 2019
Never done a single trade before reading this book
Never did a single trade after reading book
But loved the way the author has presented the concepts
Never did a single trade after reading book
But loved the way the author has presented the concepts
August 29, 2024
Trading for a Living
Psychology TradingTactics Moeny Management
Dr. Alexander Elder
Lying to others is bad enough, but lying to yourself is hopeless
Bookstores are full of good books on dieting, but the world is full of overweight people.
Essential element of winning - the management of your emotions
To be a good trader, you need to trade with your eyes open, recognize real trends and turns,
and not waste time or energy on regrets and wishful thinking.
Slippage = difference between the price at which you place your order and the price at which
it gets filled. You pay commissions for entering and exiting trades.
Commissions and slippage are to traders what death and taxes are to all of us.
Design a trading system that will trade less often.
Three kinds of slippage: common, volatility-based and criminal.
Common slippage is due to a spread between buying and selling prices. Bid & Ask
Slippage rises with market volatility.
To reduce slippage, trade liquid markets and avoid thin and fast-moving markets.
Go long/short when the market is quiet. Use limit orders = buy or sell at a specified price.
The market consists of tough men who look for ways to take money away from you.
Every winner needs to master 3 essential components of trading: a sound individual psychology,
a logical trading system, and a good money management plan
Your trades must be based on clearly defined rules. You have to analyze your feelings as you
trade, to make sure that your decisions are intelectually sound. You have to structure your money
management so that no string of losses can kick you out of the game.
Freud believed that gambling was universally attractive because it was a substitute for masturbation.
After practicing psychiatry for many years, I became convinced that most failures in life are due to
self-sabotage. We fail in our professional, personal and business affairs not because of stupidity or
incompetence, but to fulfill an unconscious wish to fail. !
The mental baggage from childhood can prevent you from succeeding in the markets. You have to find your
weaknesses in order to change. Keep a trading diary - write down your reasons for entering and exiting
every trade. Look for repetitive patterns of success and failure. !
You are responsible for every trade you make. A trade begins when you decide to enter the market and ends
only when you decide to take yourself out.
Successful traders treat drawdowns the way social drinkers treat alcohol.
If they take several losses in a row, they take that as a signal that something is wrong: It is time to stop
and rethink their analysis or methods.
Your trading records must show the date and price of every entri and exit, slippage, commissions, stops,
all adjustments of stops, reasons for entering, objectives for exiting, maximum paper profit, loss etc
A trader who feels serene and relaxed can focus on looking for the best and safest trades.
"Good morning, my name is Alex, and I am a loser. I have it in me to do serious financial damage to my account."
You can never control the market but you can learn to control yourself.
The traders who can make money consistently .. approach trading from the perspective of a mental discipline.
Rules:
1. Decide that you are in the market for the long haul - you want to be a trader even 20 years from now.
2. Learn as much as you can, but keep a degree of healthy skepticism about everything. Ask questions
3. Do not get greedy and rush to trade - take your time to learn
4. Develop a method for analyzing the market : "If A happens, then B is likely to happen".
5. Develop a money management plan
First Goal : Long-term Survival
Second Goal : A Steady Growth of Capital
Third Goal : Making High Profits
6. Be aware that a trader is the weakest link in any trading system.
7. Winners think, feel and act differently than losers. Strip away your illusions and change your old way
of being, thinking and acting.
Price is what the greater fool is ready to pay.
The price of stock has very little to do with the company it represents. The price of IBM stock has very little to do with IBM
Price is the intersection of supply and demand curves.
Ask is what a seller asks for his merchandise. Bid is what a buyer offers for that merchandise.
The crowd may be stupid, but it is stronger than you. Crowds have the power to create trends.
You do not have to run with the crowd - but you should never run against it.
Trading means trying to rob other people while they are trying to rob you.
Your goal is to trade well, not to trade often.
Black box in trading software: What goes inside it is a secret. You feed it data and it tells you when to buy & sell
Each price represents the consensus of the crowd at the moment of transaction.
You have to observe yourself and notice changes in your mental state as you trade. Write down reasons for entering and exiting
a trade and the rules for getting out of it, including money management rules. You must not change
your plan while you have an open position.
Prices move up or down because of the changes in the intensity of greed and fear among buyers and sellers!
Not because there were more buyers than sellers. The number of stocks bought and sold is equal in the stock market.
Technical analysis is a study of mass psychology.
To make money trading, you do not need to forecast the future. You have to extract information from the market and find out
whether bulls or bears are in control. You need to measure the strength of the dominant market group and decide how likely
the current trend is to continue.
You must observe how your mind works and avoid slipping into greed or fear. A trader who does all of this will succeed more
than any forecaster.
Successful trading stands on three pillars. You need to analyze the balance of power between bulls and bears. You need to practice
good money management. You need personal discipline to follow your trading plan and avoid getting high in the markets.
Chart patterns reflect the tides of greed and fear among traders.
In bull markets, prices often make their low for the week on Monday or Tuesday on profit taking by amateurs, then rally to a new
high on Thursday or Friday.
In bear markets, the opposite (the high for the week is often set on Monday...)
It pays to enter your trades during short of normal bars. Tall bars are good for profit taking.
Trying to put on a position when the market is running is like jumping on a moving train. Wait for the next one.
The longer a support or resistance area - the stronger it is.
Trading rules:
1. Whenever the trend you are riding approaches support or resistance tighten your protective stop (= an order to sell below the market
when u are long or to cover shorts above the market when u are short)
2. Support and resistance are more important on long-term charts than on short-term charts. Weekly chart are more important than dailies.
A good trader keeps an eye on several timeframes.
Directional system indicator = good at catching early stages of new trends.
When pros are in doubt they look at the big picture, but amateurs focus on the short-term charts.
The longer the timeframe, the longer the treadline, the more contacts between prices and trendline, the more important and valid that
trendline is.
Try to find out the angle of your trendline?
A trendline break is valid only if prices close on the other side of the trendline.
Trading Rules:
1. Trade in the directionof the slope of a trendline. If it points up, look for buying opportunities and avoid shorting.
2. A trendline provides support or resistance
3. Steep trendlines precede sharp breaks.
4. Prices often retest their latest extreme after breaking a steep trendline
Chart patterns:
2 types - continuation and reversal
Continuation patterns include flags and pennants. They suggest trading in the direction of the current trend.
Reversal patterns include head&shoulders, inverse h&s and double tops and bottoms. They indicate it is time to take profits on positions.
Trading Rules:
1. Sell when you recognize the head or the right shoulder of a h&s pattern, based on low volume,a break of an uptrend, a divergence
between indicators and prices.
2. The decline from the head establishes a neckline. Place a stop below the neckline if you still hold a position.
3. Once the neckline is broken, a pullback on low volume offers an excellent shorting opportunity.
Volume is really important. Ex: Price is coming close to support. If volume is low, it is probably going to be a false breakout.
If volume is higher (one-third to one-half higher than the average of the last 5 days ) it is probably a valid breakout.
Triangles:
A triangle whose lower boundary is rising is called an ascending triangle => tell you to expect an upside breakout.
A descending triangle has a declining upper boundary => shows that the prices are more likely to break down
Upper line connects 2 or more peaks, and the lower line connects 2 or more bottoms.
In trying to decide whether a triangle on a daily chart is likely to lead to an upside or a downside breakout, look at the weekly chart.
IF the weekly trend is up, then a triangle on the daily charts is more likely to break out to the upside and vice versa.
When a breakout from a triangle is followed by a pullback, pay attention to volume.
A pullback on heavy volume threatens to abort the breakout, but a pullback on light volume offers a good opportunity to add to ur position.
Black box software tells you what to buy and sell and when to buy or sell it without telling you why.
Position traders enter and exit positions within days or weeks.
You need to become a competent position trader before you can day-trade. You can compare position trading and day-trading to playing
a video game at level one and level nine. The pace of the game is so fast that at level nine your reactions must be almost automatic.
Pros divide indicators into 3 groups: trend-following indicators, oscillators and miscellaneous.
Trend-following indicators work when markets are moving but give bad and dangerous signals when the market is flat.
Oscillators catch turning points in flat markets but give premature and dangerous signals when markets begin to trend.
Miscellaneous indicators provide special insights into mass psychology.
The secret is to combine several indicators from diff groups so that their negative features cancel each other out.
Trend-following indicators: MA, MACD, the Directional System, On-Balance Volume
Oscillators: Stochastic, Rate of Change, Momentum, RSI etc.
Miscellaneous provide insights into the intensity of bullish or bearish market opinion: New High-New Low Index, Put-Call Ratio etc.
A modern computerized trader is better off using Exponential Moving Averages.
Author is using 13-day EMA.
When an EMA rises, trade that market from the long side. Buy when prices dip near or slightly below the moving average.
When an EMA falls, trade that market from the short side. Sell short when prices rally toward or slightly above the EMA.
Donchian = one of the originators of trading with moving averages.
MACD creator = Gerald Appel (analyst and money manager in NY)
Moving Average Convergence-Divergence consists of 3 EMAs.
Standard MACD: 12, 26, 9 bar EMAs
MACD Rules:
1. When the fast MACD line crosses above the slow Signal line, it gibes a buy signal, go long.
2. When the fast line crosses below the slow line, it gives a sell signal, go short.
MACD Histogram Rules:
1. Buy when MACD-Histogram stops falling and ticks up. Place a protective stop below the latest minor low.
2. Sell short when MACD-Histogram stops rising and ticks down. Place a protective stop above the latest minor high.
When prices rally to a new high, but MACD-Histogram traces a lower top, it creates a bearish divergence.
Sell short when MACD-Histogram ticks down from its second, lower top, while prices are at a new high.
Buy when MACD-Histogram ticks up from its second, more shallow bottom while prices are at a new low.
Class A bearish divergence - prices reach a new peak while an indicator reaches a lower peak. This is the strongest
sell signal.
Class A bullish divergence - prices fall ti a new low while an indicator stops at a more shallow low than before.
This is the strongest buy signal.
Class B bearish divergence - prices trace a double top while an indicator reaches a lower peak.
This is the second strongest sell signal.
Class B bullish divergence - prices trace a double bottom while an indicator traces a higher second bottom.
This is the second strongest buy signal.
7-day Momentum of closing prices = today's closing prices minus the closing price 7 days ago.
Momentum is positive if today's price is higher, negative if today's price is lower.
7-day Rate of Change (RoC) divides the latest price by the closing price 7 days ago.
S-RoC (Smoother Rate of Change) another good indicator, better than RoC
A rule of thumb with all oscillators - when in doubt, make them shorter. This is the opposite of trend-following
indicators - when in doubt, make them longer.
Williams %R - oscillator that measures the capacity of bulls and bears to close prices each day.
- shows which group is capable of closing the market in its favor.
A very short-term Stochastic (5days or so) helps catch short-term reversals.
A longer Stochastic (14-21 days) helps identify more significat market turns.
Stochastic shows when bulls or bears become stronger or weaker.
Weekly Stochastic usually changes its direction one week prior to weekly MACD-Histogram.
Divergencies between RSI and prices give the strongest buy and sell signals.
Buy signals are especially strong if the first RSI bottom is below its lower reference line and second bottom
is above that line.
Sell signals are especially strong if the first RSI top is above its upper reference line and the second top
is below it.
RSI trendlines are usually broken one or two days before price trendlines.
It pays to buy using overbought signals of daily RSI only when the weekly trend is up.
It pays to sell short using sell signals of daily RSI only when the weekly trend is down.
V. The Neglected Essentials (178/306)
Daily Volume is the number of contracts or shares traded in one day.
Volume reflects the activity of buyers and sellers. If you compare volume between 2 markets, it will show which
one is more active/liquid. You are likely to suffer less slippage in liquid markets than in thin.
Rule of thumb for volume: "High Volume" for any given market is at least 25% above average for the past 2 weeks
"Low volume" is at least 25% below average.
Volume represents the emotions of market participants.
When you analyze the market in two timeframes, the shorter of them has to five times shorter than the longer one.
If you want to analyze daily charts, you must first examine weekly charts, and if you want to day-trade using
10-minute charts, you first need to analyze hourly charts.
The New High - New Low Index tracks the strongest and the weakest stocks on the exchange and compares their
numbers. It measures the balance of power between the leaders in strength and the leaders in weakness.
S&P tends to follow the trend of NH-NL.
TRIN = The Trader's Index -> it shows when major rallies and declines get ready to reverse
- it measures the ratio of advancing to declining stocks and compares it to the ratio of advancing to declining
volume.
NH-NL, TRIN, Advance/Decline, Most Active Stocks are probably the best stock market indicators.
When the crowd reaches a strong consensus, the trend is ready to reverse.
ex: When the crowd becomes highly bullish, it pays to get ready to sell.
Hedgers = firms or individuals who deal in actual commodities in the normal course of business.
Elder Ray = technical indicator
- to be a successfull trader, you do not have to forecast the future. You need to find when bulls or bears
are in control and trade with the dominant group. Elder-ray helps you see when bulls and bears become stronger
or weaker.
Triple Screen technique:
Triple Screen demands that you examine the long-term chart first. It allows you to trade only in the direction
of the tide/trend - the trend on the long-term chart. (First Screen)
Second Screen: Apply an oscillator to a daily chart. Use daily declines during weekly uptrends to find buying
opportunities and vice-versa.
- identify a wave that goes against the trend on a daily chart
Third Screen is a technique for entering the market after the first and second screens gave a signal to buy
or sell short.
Triple Screen Summary:
Weekly Trend Daily Trend Action Order
Up Up Stand None
Up Down Long Trailing buy-stop
Down Down Stand None
Down Up Short Trailing sell-stop
Pros trade against deviations and for a return to normalcy. It is normal for prices to remain within channels.
Most breakouts are exhaustion moves that are quickly aborted. Pros like to fade them - trade against them. They
sell short as soon as an upside breakout stalls and buy when a downside breakout stops reaching new lows.
The unique feature of Bollinger bands is that their width changes in response to market volatility.
MACD-Histogram + Bollinger Bands = good combo?
Risk Management:
A trader who get giddy from profits is like a lawyer who starts counting cash in the middle of a trial.
A trader who gets upset at losses is like a surgeon who faints at the sight of blood.
A real pro does not get too excited about wins or losses.
The goal of a successful pro in any field is to reach his personal best!
Money flows to them almost as an afterthought.
Once you have your trading system, it is time to set the rules for money management.
1 Trade = MAX 2% of Your Equity (including commissions and slippage)
When in doubt, risk less.
The goal of a successfull trader is to make the best trades. Money is secondary.
A real pro devotes all his energy to practicing his craft the best he can - not to counting money.
Concentrate on quality - on finding trades that make sense and having a money management plan
that puts you in control.
A trade does not end when you close out your position. You must analyze it and learn from it.
Have you identified a good trade? Which indicatos were useful and which did not work?
How good was your entry?
Fear of placing an order is the biggest problem that a serious trader can have.
Psychology TradingTactics Moeny Management
Dr. Alexander Elder
Lying to others is bad enough, but lying to yourself is hopeless
Bookstores are full of good books on dieting, but the world is full of overweight people.
Essential element of winning - the management of your emotions
To be a good trader, you need to trade with your eyes open, recognize real trends and turns,
and not waste time or energy on regrets and wishful thinking.
Slippage = difference between the price at which you place your order and the price at which
it gets filled. You pay commissions for entering and exiting trades.
Commissions and slippage are to traders what death and taxes are to all of us.
Design a trading system that will trade less often.
Three kinds of slippage: common, volatility-based and criminal.
Common slippage is due to a spread between buying and selling prices. Bid & Ask
Slippage rises with market volatility.
To reduce slippage, trade liquid markets and avoid thin and fast-moving markets.
Go long/short when the market is quiet. Use limit orders = buy or sell at a specified price.
The market consists of tough men who look for ways to take money away from you.
Every winner needs to master 3 essential components of trading: a sound individual psychology,
a logical trading system, and a good money management plan
Your trades must be based on clearly defined rules. You have to analyze your feelings as you
trade, to make sure that your decisions are intelectually sound. You have to structure your money
management so that no string of losses can kick you out of the game.
Freud believed that gambling was universally attractive because it was a substitute for masturbation.
After practicing psychiatry for many years, I became convinced that most failures in life are due to
self-sabotage. We fail in our professional, personal and business affairs not because of stupidity or
incompetence, but to fulfill an unconscious wish to fail. !
The mental baggage from childhood can prevent you from succeeding in the markets. You have to find your
weaknesses in order to change. Keep a trading diary - write down your reasons for entering and exiting
every trade. Look for repetitive patterns of success and failure. !
You are responsible for every trade you make. A trade begins when you decide to enter the market and ends
only when you decide to take yourself out.
Successful traders treat drawdowns the way social drinkers treat alcohol.
If they take several losses in a row, they take that as a signal that something is wrong: It is time to stop
and rethink their analysis or methods.
Your trading records must show the date and price of every entri and exit, slippage, commissions, stops,
all adjustments of stops, reasons for entering, objectives for exiting, maximum paper profit, loss etc
A trader who feels serene and relaxed can focus on looking for the best and safest trades.
"Good morning, my name is Alex, and I am a loser. I have it in me to do serious financial damage to my account."
You can never control the market but you can learn to control yourself.
The traders who can make money consistently .. approach trading from the perspective of a mental discipline.
Rules:
1. Decide that you are in the market for the long haul - you want to be a trader even 20 years from now.
2. Learn as much as you can, but keep a degree of healthy skepticism about everything. Ask questions
3. Do not get greedy and rush to trade - take your time to learn
4. Develop a method for analyzing the market : "If A happens, then B is likely to happen".
5. Develop a money management plan
First Goal : Long-term Survival
Second Goal : A Steady Growth of Capital
Third Goal : Making High Profits
6. Be aware that a trader is the weakest link in any trading system.
7. Winners think, feel and act differently than losers. Strip away your illusions and change your old way
of being, thinking and acting.
Price is what the greater fool is ready to pay.
The price of stock has very little to do with the company it represents. The price of IBM stock has very little to do with IBM
Price is the intersection of supply and demand curves.
Ask is what a seller asks for his merchandise. Bid is what a buyer offers for that merchandise.
The crowd may be stupid, but it is stronger than you. Crowds have the power to create trends.
You do not have to run with the crowd - but you should never run against it.
Trading means trying to rob other people while they are trying to rob you.
Your goal is to trade well, not to trade often.
Black box in trading software: What goes inside it is a secret. You feed it data and it tells you when to buy & sell
Each price represents the consensus of the crowd at the moment of transaction.
You have to observe yourself and notice changes in your mental state as you trade. Write down reasons for entering and exiting
a trade and the rules for getting out of it, including money management rules. You must not change
your plan while you have an open position.
Prices move up or down because of the changes in the intensity of greed and fear among buyers and sellers!
Not because there were more buyers than sellers. The number of stocks bought and sold is equal in the stock market.
Technical analysis is a study of mass psychology.
To make money trading, you do not need to forecast the future. You have to extract information from the market and find out
whether bulls or bears are in control. You need to measure the strength of the dominant market group and decide how likely
the current trend is to continue.
You must observe how your mind works and avoid slipping into greed or fear. A trader who does all of this will succeed more
than any forecaster.
Successful trading stands on three pillars. You need to analyze the balance of power between bulls and bears. You need to practice
good money management. You need personal discipline to follow your trading plan and avoid getting high in the markets.
Chart patterns reflect the tides of greed and fear among traders.
In bull markets, prices often make their low for the week on Monday or Tuesday on profit taking by amateurs, then rally to a new
high on Thursday or Friday.
In bear markets, the opposite (the high for the week is often set on Monday...)
It pays to enter your trades during short of normal bars. Tall bars are good for profit taking.
Trying to put on a position when the market is running is like jumping on a moving train. Wait for the next one.
The longer a support or resistance area - the stronger it is.
Trading rules:
1. Whenever the trend you are riding approaches support or resistance tighten your protective stop (= an order to sell below the market
when u are long or to cover shorts above the market when u are short)
2. Support and resistance are more important on long-term charts than on short-term charts. Weekly chart are more important than dailies.
A good trader keeps an eye on several timeframes.
Directional system indicator = good at catching early stages of new trends.
When pros are in doubt they look at the big picture, but amateurs focus on the short-term charts.
The longer the timeframe, the longer the treadline, the more contacts between prices and trendline, the more important and valid that
trendline is.
Try to find out the angle of your trendline?
A trendline break is valid only if prices close on the other side of the trendline.
Trading Rules:
1. Trade in the directionof the slope of a trendline. If it points up, look for buying opportunities and avoid shorting.
2. A trendline provides support or resistance
3. Steep trendlines precede sharp breaks.
4. Prices often retest their latest extreme after breaking a steep trendline
Chart patterns:
2 types - continuation and reversal
Continuation patterns include flags and pennants. They suggest trading in the direction of the current trend.
Reversal patterns include head&shoulders, inverse h&s and double tops and bottoms. They indicate it is time to take profits on positions.
Trading Rules:
1. Sell when you recognize the head or the right shoulder of a h&s pattern, based on low volume,a break of an uptrend, a divergence
between indicators and prices.
2. The decline from the head establishes a neckline. Place a stop below the neckline if you still hold a position.
3. Once the neckline is broken, a pullback on low volume offers an excellent shorting opportunity.
Volume is really important. Ex: Price is coming close to support. If volume is low, it is probably going to be a false breakout.
If volume is higher (one-third to one-half higher than the average of the last 5 days ) it is probably a valid breakout.
Triangles:
A triangle whose lower boundary is rising is called an ascending triangle => tell you to expect an upside breakout.
A descending triangle has a declining upper boundary => shows that the prices are more likely to break down
Upper line connects 2 or more peaks, and the lower line connects 2 or more bottoms.
In trying to decide whether a triangle on a daily chart is likely to lead to an upside or a downside breakout, look at the weekly chart.
IF the weekly trend is up, then a triangle on the daily charts is more likely to break out to the upside and vice versa.
When a breakout from a triangle is followed by a pullback, pay attention to volume.
A pullback on heavy volume threatens to abort the breakout, but a pullback on light volume offers a good opportunity to add to ur position.
Black box software tells you what to buy and sell and when to buy or sell it without telling you why.
Position traders enter and exit positions within days or weeks.
You need to become a competent position trader before you can day-trade. You can compare position trading and day-trading to playing
a video game at level one and level nine. The pace of the game is so fast that at level nine your reactions must be almost automatic.
Pros divide indicators into 3 groups: trend-following indicators, oscillators and miscellaneous.
Trend-following indicators work when markets are moving but give bad and dangerous signals when the market is flat.
Oscillators catch turning points in flat markets but give premature and dangerous signals when markets begin to trend.
Miscellaneous indicators provide special insights into mass psychology.
The secret is to combine several indicators from diff groups so that their negative features cancel each other out.
Trend-following indicators: MA, MACD, the Directional System, On-Balance Volume
Oscillators: Stochastic, Rate of Change, Momentum, RSI etc.
Miscellaneous provide insights into the intensity of bullish or bearish market opinion: New High-New Low Index, Put-Call Ratio etc.
A modern computerized trader is better off using Exponential Moving Averages.
Author is using 13-day EMA.
When an EMA rises, trade that market from the long side. Buy when prices dip near or slightly below the moving average.
When an EMA falls, trade that market from the short side. Sell short when prices rally toward or slightly above the EMA.
Donchian = one of the originators of trading with moving averages.
MACD creator = Gerald Appel (analyst and money manager in NY)
Moving Average Convergence-Divergence consists of 3 EMAs.
Standard MACD: 12, 26, 9 bar EMAs
MACD Rules:
1. When the fast MACD line crosses above the slow Signal line, it gibes a buy signal, go long.
2. When the fast line crosses below the slow line, it gives a sell signal, go short.
MACD Histogram Rules:
1. Buy when MACD-Histogram stops falling and ticks up. Place a protective stop below the latest minor low.
2. Sell short when MACD-Histogram stops rising and ticks down. Place a protective stop above the latest minor high.
When prices rally to a new high, but MACD-Histogram traces a lower top, it creates a bearish divergence.
Sell short when MACD-Histogram ticks down from its second, lower top, while prices are at a new high.
Buy when MACD-Histogram ticks up from its second, more shallow bottom while prices are at a new low.
Class A bearish divergence - prices reach a new peak while an indicator reaches a lower peak. This is the strongest
sell signal.
Class A bullish divergence - prices fall ti a new low while an indicator stops at a more shallow low than before.
This is the strongest buy signal.
Class B bearish divergence - prices trace a double top while an indicator reaches a lower peak.
This is the second strongest sell signal.
Class B bullish divergence - prices trace a double bottom while an indicator traces a higher second bottom.
This is the second strongest buy signal.
7-day Momentum of closing prices = today's closing prices minus the closing price 7 days ago.
Momentum is positive if today's price is higher, negative if today's price is lower.
7-day Rate of Change (RoC) divides the latest price by the closing price 7 days ago.
S-RoC (Smoother Rate of Change) another good indicator, better than RoC
A rule of thumb with all oscillators - when in doubt, make them shorter. This is the opposite of trend-following
indicators - when in doubt, make them longer.
Williams %R - oscillator that measures the capacity of bulls and bears to close prices each day.
- shows which group is capable of closing the market in its favor.
A very short-term Stochastic (5days or so) helps catch short-term reversals.
A longer Stochastic (14-21 days) helps identify more significat market turns.
Stochastic shows when bulls or bears become stronger or weaker.
Weekly Stochastic usually changes its direction one week prior to weekly MACD-Histogram.
Divergencies between RSI and prices give the strongest buy and sell signals.
Buy signals are especially strong if the first RSI bottom is below its lower reference line and second bottom
is above that line.
Sell signals are especially strong if the first RSI top is above its upper reference line and the second top
is below it.
RSI trendlines are usually broken one or two days before price trendlines.
It pays to buy using overbought signals of daily RSI only when the weekly trend is up.
It pays to sell short using sell signals of daily RSI only when the weekly trend is down.
V. The Neglected Essentials (178/306)
Daily Volume is the number of contracts or shares traded in one day.
Volume reflects the activity of buyers and sellers. If you compare volume between 2 markets, it will show which
one is more active/liquid. You are likely to suffer less slippage in liquid markets than in thin.
Rule of thumb for volume: "High Volume" for any given market is at least 25% above average for the past 2 weeks
"Low volume" is at least 25% below average.
Volume represents the emotions of market participants.
When you analyze the market in two timeframes, the shorter of them has to five times shorter than the longer one.
If you want to analyze daily charts, you must first examine weekly charts, and if you want to day-trade using
10-minute charts, you first need to analyze hourly charts.
The New High - New Low Index tracks the strongest and the weakest stocks on the exchange and compares their
numbers. It measures the balance of power between the leaders in strength and the leaders in weakness.
S&P tends to follow the trend of NH-NL.
TRIN = The Trader's Index -> it shows when major rallies and declines get ready to reverse
- it measures the ratio of advancing to declining stocks and compares it to the ratio of advancing to declining
volume.
NH-NL, TRIN, Advance/Decline, Most Active Stocks are probably the best stock market indicators.
When the crowd reaches a strong consensus, the trend is ready to reverse.
ex: When the crowd becomes highly bullish, it pays to get ready to sell.
Hedgers = firms or individuals who deal in actual commodities in the normal course of business.
Elder Ray = technical indicator
- to be a successfull trader, you do not have to forecast the future. You need to find when bulls or bears
are in control and trade with the dominant group. Elder-ray helps you see when bulls and bears become stronger
or weaker.
Triple Screen technique:
Triple Screen demands that you examine the long-term chart first. It allows you to trade only in the direction
of the tide/trend - the trend on the long-term chart. (First Screen)
Second Screen: Apply an oscillator to a daily chart. Use daily declines during weekly uptrends to find buying
opportunities and vice-versa.
- identify a wave that goes against the trend on a daily chart
Third Screen is a technique for entering the market after the first and second screens gave a signal to buy
or sell short.
Triple Screen Summary:
Weekly Trend Daily Trend Action Order
Up Up Stand None
Up Down Long Trailing buy-stop
Down Down Stand None
Down Up Short Trailing sell-stop
Pros trade against deviations and for a return to normalcy. It is normal for prices to remain within channels.
Most breakouts are exhaustion moves that are quickly aborted. Pros like to fade them - trade against them. They
sell short as soon as an upside breakout stalls and buy when a downside breakout stops reaching new lows.
The unique feature of Bollinger bands is that their width changes in response to market volatility.
MACD-Histogram + Bollinger Bands = good combo?
Risk Management:
A trader who get giddy from profits is like a lawyer who starts counting cash in the middle of a trial.
A trader who gets upset at losses is like a surgeon who faints at the sight of blood.
A real pro does not get too excited about wins or losses.
The goal of a successful pro in any field is to reach his personal best!
Money flows to them almost as an afterthought.
Once you have your trading system, it is time to set the rules for money management.
1 Trade = MAX 2% of Your Equity (including commissions and slippage)
When in doubt, risk less.
The goal of a successfull trader is to make the best trades. Money is secondary.
A real pro devotes all his energy to practicing his craft the best he can - not to counting money.
Concentrate on quality - on finding trades that make sense and having a money management plan
that puts you in control.
A trade does not end when you close out your position. You must analyze it and learn from it.
Have you identified a good trade? Which indicatos were useful and which did not work?
How good was your entry?
Fear of placing an order is the biggest problem that a serious trader can have.
January 23, 2010
This gentleman is clearly smart and I gained some good nuggets of wisdom from listening to this on CD. But I am just not wired to try to predict fluctuations in the market based on the statistics of graphed wave lengths of human behavior - I gravitate toward looking at the business's model of performance & intent.
July 24, 2014
perhaps the best book in technical analysis for a beginner
August 7, 2015
A difficult read. This book made a lot more sense after I had read a few other books about the stock market and then read this again. Ok, I read this a second time.
August 28, 2018
Useful
An extensive book on trading, covering all the important points like charts, graphs, indicators, psychological factors etc.
The author, Alexander Elder has written in depth about the following points.
1. Risk Management
2. Money Management
3. Trading charts/graphs (There are a lot of charts)
4. Buy low, Sell high
5. Emotions and Trading
6. Indicators and trading systems/setups
And a few others, that you should get to read in this book.
I find this book helpful as an amateur trader, and I'll find this book helpful as a professional trader too because this book tells you the difference between the amateur traders and the professional ones, who dare to eat whatever amateur traders are losing.
In this book, in the end, you will find a short explanation of what is stock, futures, options chains that I think should have been written in the first chapters as it might have been way more useful for the amateur traders, but I think the author has written keeping in mind that most of the amateur traders know this thing.
The author has focused on and emphasized more on risk and money management. He thinks these two things are more important because only if you survive the shark bites, you will be able to swim deep in the sea and in the ocean, otherwise, all we see is water getting bloody red.
It's a must-read book for the traders, investors, too.
Do read this book.
Akshat Solanki
An extensive book on trading, covering all the important points like charts, graphs, indicators, psychological factors etc.
The author, Alexander Elder has written in depth about the following points.
1. Risk Management
2. Money Management
3. Trading charts/graphs (There are a lot of charts)
4. Buy low, Sell high
5. Emotions and Trading
6. Indicators and trading systems/setups
And a few others, that you should get to read in this book.
I find this book helpful as an amateur trader, and I'll find this book helpful as a professional trader too because this book tells you the difference between the amateur traders and the professional ones, who dare to eat whatever amateur traders are losing.
In this book, in the end, you will find a short explanation of what is stock, futures, options chains that I think should have been written in the first chapters as it might have been way more useful for the amateur traders, but I think the author has written keeping in mind that most of the amateur traders know this thing.
The author has focused on and emphasized more on risk and money management. He thinks these two things are more important because only if you survive the shark bites, you will be able to swim deep in the sea and in the ocean, otherwise, all we see is water getting bloody red.
It's a must-read book for the traders, investors, too.
Do read this book.
Akshat Solanki
June 5, 2021
Great book. It exposes a lot of brutal truths about the trading industry at large, while explaining in detail how social psychology of the masses manifests itself into the charts patterns that people bank on to make money.
It talks extensively about the underlying principles that make a great trader, and what gets losers wiped out.
It includes a lot of technical jargon, so it is not recommended for a complete trading newbie but is very useful and enjoyable read once some trading knowledge is acquired.
It talks extensively about the underlying principles that make a great trader, and what gets losers wiped out.
It includes a lot of technical jargon, so it is not recommended for a complete trading newbie but is very useful and enjoyable read once some trading knowledge is acquired.
March 3, 2021
A great book to learn the basics and of trading. Some things are a little out of date like trading commissions but others are good rules to follow such as trade with no emotions and never risk more than 2% on any trade.
I found this book to move really quick and was worth the small few tips I got from it.
I found this book to move really quick and was worth the small few tips I got from it.
November 1, 2018
Hace tiempo que sentía curiosidad por el mundo del trading, y debo decir que he conseguido saciarla. Por un lado, aproveché para poner en práctica algunos consejos en un mercado dentro de un videojuego, ya que es un libro que se centra en uno de los tres pilares del trading: la psicología (concretamente, la psicología de masas). Me gustó la forma que tuvo el autor de explicar ciertas acciones que ponen a los iniciados en peligro, y cómo evitarlo.
Pero esto no es todo: los conceptos más técnicos me perdían, sinceramente. Esto me llevó a pensar que, como todo, si quieres trabajar de algo, más vale enfocar todas tus energías en ello durante el proceso de aprendizaje (y con más razón si vas a poner en juego tu capital).
Dejo el libro para futuras revisiones, nunca se sabe
Pero esto no es todo: los conceptos más técnicos me perdían, sinceramente. Esto me llevó a pensar que, como todo, si quieres trabajar de algo, más vale enfocar todas tus energías en ello durante el proceso de aprendizaje (y con más razón si vas a poner en juego tu capital).
Dejo el libro para futuras revisiones, nunca se sabe
January 15, 2010
I first read this classic in 1995, when I was more or less holding my own in commodity trading (a dangerous pasttime I eventually gave up because the modest profits I saw did not justify the emotional wringer I was going through every day). I remember being a little annoyed with Elder's way of restating fairly basic points again and again in choppy, repetitious paragraphs. That style is still a problem. At times it seems that he must have dictated his thoughts into a recorder and never took time to go through the transcript and clean it up.
On the other hand, simple though his points may be, they are worth learning. I particularly like his early chapter about gurus and the tendency so many of us have to put our trust in anybody but ourselves (and not only when it comes to trading, I've observed!). Likewise, he has a great analysis of crowd behavior. He's trained as a psychiatrist, so I guess it figures.
As far as actual guidance goes, what he has are mostly truisms that nevertheless need to be part of any trader's education. For example:
- "Your goal is to trade well, not to trade often."
- "You need to know exactly under what conditions you will enter and exit a trade."
- "You must not change your plan while you have an open position."
It does get a little more technical than that, but for a thorough treatment of indicators like Fibonacci sequences, moving averages, etc. another book would be needed. Elder is best simply at defining what every trader is up against ("The money you want to make belongs to other people who have no intention of giving it to you."). His book doesn't provide a clear path to success at that endeavor. On the other hand, no one should jump into the markets without knowing what it says.
On the other hand, simple though his points may be, they are worth learning. I particularly like his early chapter about gurus and the tendency so many of us have to put our trust in anybody but ourselves (and not only when it comes to trading, I've observed!). Likewise, he has a great analysis of crowd behavior. He's trained as a psychiatrist, so I guess it figures.
As far as actual guidance goes, what he has are mostly truisms that nevertheless need to be part of any trader's education. For example:
- "Your goal is to trade well, not to trade often."
- "You need to know exactly under what conditions you will enter and exit a trade."
- "You must not change your plan while you have an open position."
It does get a little more technical than that, but for a thorough treatment of indicators like Fibonacci sequences, moving averages, etc. another book would be needed. Elder is best simply at defining what every trader is up against ("The money you want to make belongs to other people who have no intention of giving it to you."). His book doesn't provide a clear path to success at that endeavor. On the other hand, no one should jump into the markets without knowing what it says.
May 7, 2017
This 3 hours audio book is great introduction to trading psychology if you are new to the concepts and probably can learn a few things even if you have experience in this area. The book is about a quarter of a century old but still has great concepts that can be applied to today's market.
This is not my first trading psychology book that I have read and still I was introduced to some new aspects. There is the popular believe that trading is a Zero sum game. However, when you pay your commissions to your broker the odds against you are greater. In addition, there is the chance to slippage both negative and positive but chances are you are going to pay extra for negative slippage. So if two people enter into a trade at the same time in opposite direction with same take profit and sell loss one of them is going to be a winner and one of them is going to be a loser. But the one that looses money will be greater than the one that is making money. Personally I do not use the go with the trend technique but it is a personal choice.
This is not my first trading psychology book that I have read and still I was introduced to some new aspects. There is the popular believe that trading is a Zero sum game. However, when you pay your commissions to your broker the odds against you are greater. In addition, there is the chance to slippage both negative and positive but chances are you are going to pay extra for negative slippage. So if two people enter into a trade at the same time in opposite direction with same take profit and sell loss one of them is going to be a winner and one of them is going to be a loser. But the one that looses money will be greater than the one that is making money. Personally I do not use the go with the trend technique but it is a personal choice.
May 23, 2015
It was my second re-read of the Russian version, which includes workbook which amounts to almost half of the volume. Going through exercises was interesting and revealed that areas I thought I knew well were not so good and vice versa.
One controversy which bugs me after reading this book is that on one hand Dr. Elder talks about "not trading against a long term trend", i.e. going along with weekly and monthly trends ("first screen"). On the other hand, most of the "strongest technical signals" he describes are about divergences, i.e. catching the moments when the trend breaks and going against it. It's seems almost impossible to combine these two techniques, because divergences on daily graphs are rarely occur in the direction *along* with the weekly trend, they are mostly happening against, before weekly trend changes too.
One controversy which bugs me after reading this book is that on one hand Dr. Elder talks about "not trading against a long term trend", i.e. going along with weekly and monthly trends ("first screen"). On the other hand, most of the "strongest technical signals" he describes are about divergences, i.e. catching the moments when the trend breaks and going against it. It's seems almost impossible to combine these two techniques, because divergences on daily graphs are rarely occur in the direction *along* with the weekly trend, they are mostly happening against, before weekly trend changes too.
July 16, 2014
Excelent, MUST READ book for traders.
It may not be as extensive as Murphys (considered the bible of AT), but its a bit more complex in some aspects, giving more of the authors particular views on trading, his indicators and strategies.
I think it would have been a perfect book if it had more about money management and portfolio management.
I enjoyed reading it. Simple and direct style from the author makes it easy to go through.
It may not be as extensive as Murphys (considered the bible of AT), but its a bit more complex in some aspects, giving more of the authors particular views on trading, his indicators and strategies.
I think it would have been a perfect book if it had more about money management and portfolio management.
I enjoyed reading it. Simple and direct style from the author makes it easy to go through.
May 12, 2016
Treat this book like a text book on the psychology behind trading stocks. The author is basing his approach to trading stocks on the thought processes of crowds. It sounds well thought out; but does it really help trade for a profit? Expect to put a lot of time into this one if you really want to learn enough to try it out, even if only on paper.
December 8, 2018
old book, gives some insight, audiobook is about 3 hours long. I found a good part of it to be filler, and most of the concepts you learn elsewhere. He does drive home some good points about strategy and how it's not really a zero sum game; it's worse. Time can be better spent on other books, or maybe the new version (haven't listened to it yet)
April 12, 2016
Un libro interesante con todo lo básico del trading, la parte más importante no son el manejo de los indicadores técnicos sino la psicología del trading y el money management. En definitiva, este libro debe estar en la biblioteca de los traders.
Read
March 17, 2015This book was published in 1992. The new version just came out last year. Great book for anyone starting out.
July 31, 2015
Good book, however there is a new updated version: The New Trading For a Living
November 4, 2015
Very interesting book which teaches anybody how to start trading with confidence
January 16, 2016
A great read to look into how traders think and good views on psychology
November 19, 2024
Trading for a Living is, without a doubt, one of the most influential books I’ve come across in my journey as a trader. As someone who has been trading for several years, I’ve read a fair share of books on the subject, but Elder’s work stands out for its combination of psychological insight, practical trading strategies, and sound money management principles. This book is not just about learning how to analyze charts or pick stocks; it’s about understanding the mental and emotional aspects of trading that can often make or break a trader’s success.
One of the things I appreciate most about this book is how Elder emphasizes the importance of psychology in trading. He explains that, more than any technical skill, a trader’s mindset and emotions are the key factors that determine success. The ability to manage your emotions, particularly fear and greed, is essential. This is something I’ve learned the hard way—trading can be a rollercoaster, and maintaining discipline is far harder than I initially imagined. Elder’s advice on how to stay calm under pressure, deal with losses, and avoid overtrading was eye-opening for me and helped me develop a more balanced approach to my own trading.
Elder’s systematic approach to trading tactics is also incredibly valuable. He introduces several tools and indicators, such as the Triple Screen Trading System, which have become staples in my own trading routine. What I appreciate most is that these strategies are practical and actionable, rather than just abstract concepts. Elder doesn’t just tell you what to do—he explains why certain strategies work and how to apply them in real-market scenarios. This made the book feel less like a theoretical read and more like a practical guide that I could actually use in my day-to-day trading.
Another key component of the book is its emphasis on risk management and money management. Elder stresses that the key to surviving in trading is not necessarily making big profits, but protecting your capital and managing your risk effectively. This was a revelation to me, as I used to focus too much on potential gains and not enough on controlling losses. His advice on position sizing, setting stop-loss orders, and managing risk exposure has significantly improved my trading results and given me a better understanding of how to manage my portfolio with a long-term perspective.
However, it’s important to note that while the book provides excellent tools and strategies, it also acknowledges that trading is not an easy endeavor. It requires constant learning, adaptation, and emotional control. Elder is realistic about the challenges of trading and doesn’t sugarcoat the difficulties. That’s one of the things I respect most about the book—it doesn’t promise quick riches, but instead offers a solid framework for becoming a disciplined, thoughtful trader over time.
I found that this book helped me take a more strategic approach to my trades and, more importantly, to my mindset. It’s not just a technical manual—it’s a guide to becoming a better, more disciplined person in the market. I highly recommend Trading for a Living to anyone serious about trading, whether you’re a novice or an experienced trader looking to refine your skills.
Interestingly, I also used this book as one of my key references while working on my own book, Math Bitcoin Price Prediction: 2030, 2040, 2050. Elder’s insights into trading psychology and strategy played a significant role in shaping my approach to cryptocurrency trading, particularly when developing long-term investment strategies. You can read more about how I incorporated this and other sources in my blog post: How Math Bitcoin Price Prediction: 2030, 2040, 2050 Differs from Similar Works.
April 23, 2025
trading is a minus sum game due to slippage and fees, commissions. Track you records. the greater the increase in volume the more pain there is in the market. Falling volume gives a sign what the trend is about to reverse.
trading rules:
whenever the trend aproaches support or resistence, tighten stop loss.
support and resistance is more important for long term than short term trrends
support and resistance is useful for placing stop loss and take profit levels.
Many people avoid to place stop loss on round numbers. Place your stops at logical levels.
Trend line slope is important, longer timeframe- more important trend
follow big money
traders love to optimize their sistems, but robust system holds well when conditions change, most traders destroy good systems by trying to make them perfect.
including slippage and commisions, most you can risk is 2 percent.
Rules for placing stops:
place your stop the moment you enter trade
breakeven order- as soon as price has reached a point, move stop loss and protect gains.
Paper profit is real money, protect it at all costs
Open interest:
open interest is the number of contracts held by buyers or owed by short sellers in a given market on a given day it shows a number of existing contracts, it equals either to total long or total short position, futures and options traders ( buyer) who wants to accept delivery and seller have to wait until the first notice day, this waiting day ensures that the number of contracts that are llong or short are always equal, most tarders close out positions before the first notice day, open interest rises or falls depending whether new participants enter market or exit it, it rises only when buyer and seller open a market, it falls when the trader who is long trades with someone who is short, when both of them close their position, open interest falls by one contract, if a new bull buys from a new bull who is getting out of his old position, open interest remains unchainged, similar to sellers. It takes 1 bull and 1 bear to create a futures or options contract. Open interest reflects the intensity of conflict between bulls and bears, it reflects the willingness of longs to remain long or shorts to remain short positions. There are 2 people on opposite sides of each trade, a rise in open interest shows that confident bulls are facing confident bears. the trend will continue as long as potential losers pour in. if open interest rises during downtrend it shows that shorts are agressively selling while bottom pickers are buying, those bargain hunters are likey to bail out when falling prices hurt them and their selling will push prices even lower, an increase in open interest gives a green light to the existing trend. When bull is convinced that prices will go up, bull can buy from another bull only, it creates no contract, when it stays flat during the rally, it shows that the supply of losers had stoped growing, when bear is convinced, but no bulls to offer, he can only buy from another bear, their trade creates no new contract, when it stays flat ( open interst) during the decline, it show that supply of bottom hunters is not growing whenever it falttens out, a warning that the trend is aging, best gains are behind. Fallin OI shows that losers are bailing out while winners are taking profits. OI falls when losers abandon hope and there is no replacement. falling oi signals the end to the trend.
trading rules:
whenever the trend aproaches support or resistence, tighten stop loss.
support and resistance is more important for long term than short term trrends
support and resistance is useful for placing stop loss and take profit levels.
Many people avoid to place stop loss on round numbers. Place your stops at logical levels.
Trend line slope is important, longer timeframe- more important trend
follow big money
traders love to optimize their sistems, but robust system holds well when conditions change, most traders destroy good systems by trying to make them perfect.
including slippage and commisions, most you can risk is 2 percent.
Rules for placing stops:
place your stop the moment you enter trade
breakeven order- as soon as price has reached a point, move stop loss and protect gains.
Paper profit is real money, protect it at all costs
Open interest:
open interest is the number of contracts held by buyers or owed by short sellers in a given market on a given day it shows a number of existing contracts, it equals either to total long or total short position, futures and options traders ( buyer) who wants to accept delivery and seller have to wait until the first notice day, this waiting day ensures that the number of contracts that are llong or short are always equal, most tarders close out positions before the first notice day, open interest rises or falls depending whether new participants enter market or exit it, it rises only when buyer and seller open a market, it falls when the trader who is long trades with someone who is short, when both of them close their position, open interest falls by one contract, if a new bull buys from a new bull who is getting out of his old position, open interest remains unchainged, similar to sellers. It takes 1 bull and 1 bear to create a futures or options contract. Open interest reflects the intensity of conflict between bulls and bears, it reflects the willingness of longs to remain long or shorts to remain short positions. There are 2 people on opposite sides of each trade, a rise in open interest shows that confident bulls are facing confident bears. the trend will continue as long as potential losers pour in. if open interest rises during downtrend it shows that shorts are agressively selling while bottom pickers are buying, those bargain hunters are likey to bail out when falling prices hurt them and their selling will push prices even lower, an increase in open interest gives a green light to the existing trend. When bull is convinced that prices will go up, bull can buy from another bull only, it creates no contract, when it stays flat during the rally, it shows that the supply of losers had stoped growing, when bear is convinced, but no bulls to offer, he can only buy from another bear, their trade creates no new contract, when it stays flat ( open interst) during the decline, it show that supply of bottom hunters is not growing whenever it falttens out, a warning that the trend is aging, best gains are behind. Fallin OI shows that losers are bailing out while winners are taking profits. OI falls when losers abandon hope and there is no replacement. falling oi signals the end to the trend.
October 14, 2019
This book changed my life and changed the way I trade. Part of the reason I can say that is the fact that I developed my all-time most reliable and profitable trade from Elder's simple explanations. Fully 80% of my trades are based on a formation that occurs using two indicators described in this book. Elder even identifies the formation as being "the strongest signal in technical analysis." I will certainly agree, though it took me some time to find the ideal market and time-frame for it. If you trade futures, stocks, or currencies with Candlesticks, the secret is in this book. It gave me the edge I needed to become consistently profitable. I own more than 60 trading related books (those are just the keepers) and I think what makes Elder stand out is the fact that he is/was a successful trader for many years and that the content of this book is the hard-won wisdom of those years. This is not a book written by some infomercial peddler who makes his living selling trading "courses." I chuckle when I see the price for this book is $47.25 because I would have counted it a steal at a hundred times that. To unlock the strategies in Trading for a Living you will have to adapt them to your own trading style, vehicle, and funds. I agree with another reviewer who said this book is for a person who is more than an amateur but not yet a pro. I believe that the techniques used by most very sophisticated professional traders are built on the indicators and principles found in this book.
September 17, 2020
When I was barely 25 years old, my interest in investing in the stock market and other financial instruments began. Unfortunately for me it was a complete disaster, since it is very difficult to gather money to invest and not need it; as recommended by those who teach us to invest.
Now my son Jose Luis Rivera wants to be an investor, and he is going to learn to be one.
His “sensei” recommended the book “Trading for a Living: Psychology, Trading Tactics, Money Management” by Alexander Elder.
At ITAM, where I studied, they teach us that markets are efficient and you cannot beat the market, however there are some who beat it, and by a lot. Elder teaches us some important techniques, including:
- Have a system based on multiple tests, and only invest if all tests are positive.
- Do not link your investment with emotions. An investor can be like an alcoholic wanting to have a good time (like I was in my youth).
- Investing is a lifetime job. If you are going to do it, you will always.
The technical part of the book is pretty good at what is called "technical analysis", however you have to study efficient markets and "fundamental analysis."
Good book to study, not just for casual reading.
Now my son Jose Luis Rivera wants to be an investor, and he is going to learn to be one.
His “sensei” recommended the book “Trading for a Living: Psychology, Trading Tactics, Money Management” by Alexander Elder.
At ITAM, where I studied, they teach us that markets are efficient and you cannot beat the market, however there are some who beat it, and by a lot. Elder teaches us some important techniques, including:
- Have a system based on multiple tests, and only invest if all tests are positive.
- Do not link your investment with emotions. An investor can be like an alcoholic wanting to have a good time (like I was in my youth).
- Investing is a lifetime job. If you are going to do it, you will always.
The technical part of the book is pretty good at what is called "technical analysis", however you have to study efficient markets and "fundamental analysis."
Good book to study, not just for casual reading.
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