Trading for a Living: Psychology, Trading Tactics, Money Management

You have just taken a big step away from the crowd of amateurs. By opening Trading for a Living, you’ve resolved to become a successful trader. Dr. Alexander Elder is a professional trader, a world-class expert in technical analysis, and a practicing psychiatrist. He believes that successful trading is based on three M’s: Mind, Method, and Money. First, you will see that the key to winning is inside your Mind. You will find out how to develop discipline and how to avoid the traps of emotional trading. Second, you will learn how to find good trades by using charts, computerized indicators, and other tools. You will discover how to combine several analytic Methods into a powerful trading system. Finally, you will learn how to manage Money in your trading account. The rules for limiting risks are as vital to a trader as a safety net is to a high-wire walker. With this book, you are on your way to mastering a new way of trading stocks, futures, currencies, and options. Dr. Alexander Elder helps you embark on an intense pursuit—trading for a living.

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

1.     there are more buyers than sellers
2.     buyers are more aggressive than sellers
3.     sellers are afraid and demand a premium
4.     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.

If somebody bought, read and judged the book by whether it could really help him or her to go "trading for a living", that somebody would definitely be disappointed. Even the author himself pointed out that the success rate for the conversion of ex institutional traders to independent traders was very low owing to the much higher psychological load of trading one's own money than that of trading OPM.

Despite the over-promise of the book title and the second half of it discussing mostly technical tools, the book is quite well written. There are plenty of bright ideas, some with originality that can be attributed to the author's M.D. and psychiatrist background. In particular I like the following points much:-

- That trading is a minus sum game (considering commission and slippage) and the mass media or gurus or prevalent market view are almost always wrong.
- The analogy of the market as an ocean and a huge crowd of people, in either case an individual can have no control of but have to follow (or leave) emotionlessly for long term profit.
- The analogy of Alcoholic Anonymous with Loser Anonymous that requires the same treatment for true recovery, whereas accepting oneself as an alcoholic or a loser is the very first step of healing.
- The need for discipline and patience as individual traders' only weapon to against institutional traders advantages in faster information, better research reports, lower psychological burden for trading OPM, etc
- Price is a psychological event, a momentary balance of opinion between bulls and bears, its pattern reflects the mass psychology of the market.
- Last but not least, the opening prices are determined primarily by amateurs whilst the closing prices are determined by professionals.

In short, the book is well worth the price and I do recommend it to those who study continuously for self improvement in their trading. Remarks:- The author claimed that he personally did so, too.

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