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 .
If you are ever going to be a successful trader, you must understand and embrace the fact that when trading in money, you need to have a long-term plan and you must have a principle to lead you both in life and in business. Alexander Elder explains in his book ‘ Trading for a Living : Psychology, Trading Tactics, Money Management’ that a successful trade must be based on the 3Ms: Mind, Method and Money and only trading in currencies for a living will ever get to you master all 3.
So what will you learn from this book? Quite a lot in terms of the general trading psychology and market behavior, something on money management and technical indicators, and almost nothing on modern Forex trading techniques.
The author of Trading for a Living makes the following points in the book:
- Psychology is the key to understanding of how the markets work and to explaining the behavior of the crowds of bulls and bears.
- Trading is a minus-sum game contrary to zero-sum, which many traders prefer to believe in. It means that your trading strategy have to beat the commission, spreads and slippage of a broker and still have an edge to be profitable.
- Trading is hard and difficult. There’s no easy money in financial markets:
- The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth.
- Losing in trading is psychologically very similar to alcohol addiction and thus can be treated with similar methods.
- Successful trading is based on three pillars: discipline, money management and the ability to find balance between bulls and bears.
- Elder gives detailed descriptions and explanations of many technical indicators, such as: moving averages, MACD, directional system, new high-new low index, etc.
- Volume is very important in markets where it is known.
- It is also useful to know who’s buying and selling in a given market at a given moment. It pays to follow “big money” and trade against “small money” traders.
- The author also introduces two indicators developed by himself — Elder Ray and Force Index.
- Triple Screen (using three timeframes) is recommended as a general trading method.
- Losers often “marry” to their losing positions, afraid to close them, in hopes for a reversal.
- Not even a great money management technique can rescue a losing system (one with negative expectancy), but poor money management practices can hurt even great trading system.
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