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Quotes from :Dr Alexander Elder's best seller Trading For A Living

  
  Education
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Proper money management is essential for successful trading.

A disciplined trader cuts his losses short and outperforms a loser who keeps hanging on and hoping.

As soon as you buy, place a stop-loss order.

Greed and fear destroy traders by clouding their minds. The only way to succeed in trading is to use your intellect.

The goal of a successful trader is to make the best trades. Money is secondary. If this surprises you, think how good professionals in any field operate. Good teachers, doctors, lawyers, farmers and others make money – but they do not count it while they work. If they do, the quality of their work suffers.

Serious traders place stops the moment they enter a trade.

We all like to hope that a trade will succeed – and a stop is a piece of reality that prevents traders from hanging on to empty hope.

Learning to place stops is like learning to drive defensively.

A stop is not a perfect tool but it is the best defensive tool we have.

What's the difference between winning traders and losing traders?

  
  Education
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winners-and-losers1Well, first, there are a few similarities. Both are completely consumed by the idea of trading. The winners as well as losers have committed to doing this, and have no intention of ‘going back’. This same black-and-white mentality was evident in their personal lives too. But what about the differences? Here’s what Williams observed:

The losing traders have unrealistic expectations about the kind of profits they can make, typically shooting too high. They also debate with themselves before taking a trade, and even dwell on a trade well after it’s closed out. But the one big thing Williams noticed about this group was that they paid little attention to money management (i.e. defense).And the winners? This group has an intense focus on money management, and will voluntarily exit a trade if it’s not moving – even if it’s not losing money at that time! There is also very little internal dialogue about trade selection and trade management; this group just takes action instead of suffering analysis paralysis. Finally, the winning traders focused their attention on a small niche in the market or a few techniques, rather than trying to be able to do everything. Hopefully the second description fits you a little better, but if the first one seems a little too familiar, you now at least know how to start getting past that barrier.

10 ways to Master the Trade

  
  Education
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How do you know you’re making progress on the road to successful trading? There’s one obvious answer: Check your financial  results. There is little doubt you’re doing well if you’re booking consistent profits. Thump

 But raw capital production may not be the best way to judge your growth as a trader. The road to success has many detours  where profitability isn’t the best measure of results. For example, we all go through phases in which introspection and skill  development are more urgent than short-term profits. So let’s look at 10 ways to know you’re making solid progress on the road  to market mastery: 

 1. Money management becomes your lifeline, and all your trading strategies start to revolve around its core. Risk control  becomes a key aspect of every position you take. You accept that controlling losses has a far-greater impact on your bottom line  than chasing gains. 

 2. You develop your own trading plans and strategies rather than relying on books, gurus or other people’s opinions. You notice  how you’re finding more opportunities than you have time to trade while looking through your charts. You look forward to the  trading day with a growing sense of confidence and empowerment. 

 3. You feel more like a student than a master. You learn new things every day and can’t wait to apply them to real-life trading  scenarios. You listen closely to everything you hear, trying to pick up hints and concepts that will improve your performance. You expand your studies into everything market-related, including economics, fundamentals and balance sheets. 

 4. You stop visiting stock boards and chatrooms, because they don’t add anything to your trading goals. You realize that  everyone in those places has ulterior motives. You develop a healthy skepticism about companies, market-makers and even  other traders. You realize that no one is really interested in your success as a trader, except for you.  (more…)

Why Trading Is A Performance Sport

  
  Education
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MB-TEAM

Learn about various trading software
Learn how to interpret candlestick charts and patterns
Learn Fib extensions and retracements
Try-out various time frames
Learn trade executions
Learn how to manage trades
Learn about emotional control and psychology
Learn about risk control
Devise a precise trading method
Learn about money management
Backtest set-up for several months
Internalize set-ups by paper trading
Have to be adequately capitalized
Specialize in gap trading
Learn about creating a daily watch list
Learn how to prioritize a daily hit list
Set up blog for recording daily diary of ideas and thoughts
Devise a system to analyze trading results – daily and monthly
Develop a daily precise routine

 

You Need To Learn How To Dance In The Rain

  
  Education
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Dance in RainEvery trader will experience storms during their trading career.

You might have days or even weeks without any storms, but they will come. Violent movements, large losses, markets that react opposite than your strategy tells you will happen and so much more.

We cannot keep these situations from happening; however we can make a decision to either wait for the storms to pass or step out and dance in the rain.

If we are planning on waiting until there are no storms, no struggles, no disappointments or no losing trades then we will be waiting for a very long time. Expect the storms to occur and have a plan as to how you will work through the storm.

When we work through the storm with a higher awareness of our risk management, money management and patience we will come out the other side stronger than before and will be ready for the next time a storm breaks out.

It is not the fact that storms happen, it is being ready to get out in the storm and still be productive. Instead of fearing the storm, learn how to dance in the rain.

Use discipline to eliminate impulse trading

  
  Education
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  • Have a disciplined, detailed trading plan for each trade; i.e., entry, objective, exit, with no changes unless hard data changes. Disciplined money management means intelligent trading allocation and risk management. The overall objective is end-of-year bottom line, not each individual trade.
  • When you have a successful trade, fight the natural tendency to give some of it back.
  • Use a disciplined trade selection system: an organized, systematic process to eliminate impulse or emotional trading.

  • Trade with a plan – not with hope, greed, or fear. Plan where you will get in the market, how much you will risk on the trade, and where you will take your profits.

    • 10 Trading Psychology Points

      
      Education
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    1) We are most likely to behave in inhibited or impulsive ways, violating trading rules and plans, when we perceive events to be threatening;

    2) What we perceive to be threatening is a joint function of events themselves and how we think about those events;

    3) A key to gaining control over trading and maintaining consistency is to be able to reduce the threat associated with market events and process adverse outcomes in normal, routine ways;

    4) We can reduce the threat associated with adverse market events through proper money management (position sizing) and through proper risk management (limits on losses per position);

    5) We can reduce the threat associated with adverse market events by training ourselves to respond calmly to adverse outcomes (exposure methods) and by restructuring how we think about those outcomes (cognitive methods);

    6) Optimal skill development in trading will occur in non-threatening environments in which learners can sustain concentration, optimism, and motivation;

    7) A proper mindset is therefore necessary to the development of trading skills, but does not substitute for such development;

    8) The cultivation of trading expertise is a function of the amount of time and effort devoted to learning and the proper structuring of that time and effort;

    9) Proper structuring of learning involves the setting of specific, doable, cumulative goals and the provision of rapid feedback and correction regarding the achievement of those goals;

    10) Practice does not make perfect in trading or anything else; perfect practice makes perfect. Training must gradually build competencies and correct deficiencies in a manner that sustains a positive mindset and optimal concentration and motivation.

    The Seven Mistakes Novie Traders Make

      
      Education
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    mistakes7

    MISTAKE ONE
    Lack of Knowledge and No Plan
    It amazes us that some people expect to trade the stock market successfully without any effort. Yet if they want to take up golf, for example, they will happily take some lessons or at least read a book before heading out onto the course. (more…)

    Book Review :Sell & Sell Short

      
    Analysis, Education
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    Sell and Sell Short (Wiley Trading) by Alexander Elder

    If you are searching for a book on trading stocks then look no further, this is it. I have been a successful trader for years and read over 160 books on trading,and in my opinion this is one of the very best. Alexander Elder actually read the change in the market from bull to bear in late 2007 and was able to get this books first edition released in early 2008 when it was needed most.

    While as the title suggests it teaches when to sell your stocks for profits, and also does the best job I have seen on explaining short selling and when technical indicators show to short. This book is a complete book for any trader. The main lessons of this book is when to lock in profits and exit a trade using a target, and how to double your potential for profits by not only buying stocks, but also selling stocks short and buying them back at a lower price for profit. Professionals sell short because while overall the stock market drifts upward, when a stock falls it falls over
    twice as fast as it rises. I sell short and it is a powerful tool when used correctly. This book will show you when it is appropriate to short.

    Dr. Alexander Elder is the only author I am aware of that integrates trading psychology, money management, technical analysis and keeping a trading journal into one book. These four factors will determine whether you are successful in the market or not, even more than the trading method you choose.

    You will learn the three great divides in trading:

    technical vs. fundamental
    trend vs. counter trend
    discretionary vs systematic
    The author follows a discretionary, technical approach trading counter trend for the most part. However what you learn in this book can be applied to any type of trading. The authors own technical approach uses prices, volume, exponential moving averages (13 day, 26 day), envelopes, MACD, and force index. Limit your tools to no more than five, more is less, any more just causes confusion. The main method you will learn in this book is using the moving averages as a technical base for agreed upon value and buying at the lower edge of the envelope and selling at the high edge of the envelope when you have favorable MACD and force index agreement, or buying at value between the EXP MAs.

    If you are going to be a trader you must follow the money management suggestions
    in this book. NEVER risk more than 2% of your total equity on a trade, and if you lose 6% of your equity in a month you must stop, clear your head and start back next month. If you follow the 2% rule from the book, it will be a major life lesson in your trading and save you a ton in equity draw downs and will almost completely eliminate your risk of ruin. (more…)

    Conventional Wisdom

      
      Education
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    conventional_wisdom_2Conventional wisdom is defined as: the generally accepted belief, opinion, judgment, or prediction about a particular matter.

    Conventional wisdom is almost universally agreed upon by everyone that it rarely gets questioned, even if sometimes the belief isn’t really true.

    The conventional wisdom with regards to investing is to buy and hold great companies for long periods of time so that your portfolio compounds with capital appreciation and dividend re-investment.  This approach has strong validity and is best exemplified by Warren Buffett.  He has the long term returns to prove it.

    But it may not be for everybody, or else everyone would have invested like Warren Buffett.  Very few have the right skill set to buy-and-hold and be successful like Buffett, or be successful for decades.

    In short term trading, the conventional wisdom is enter stocks at pivot points, trade small and cut your losses and let your gains run, and use risk and money management.  Very few can succeed with the short term trading approach, due to lack of skillset or lack of discipline.  Also, in the short term, the market fluctuates too much so that stoplosses get frequently hit.  Even if successful, it is doubtful many can beat the returns of buy-and-hold investors in the long run.

    Another conventional wisdom is that in order to get bigger returns, one has to dramatically increase risk.  Like getting into leverage instruments such as options, futures and penny stocks.  Very few can succeed long term via this route, mainly due to the extreme risk factor.  

    One can go through a lifetime or even several lifetimes and still cannot get through the stock market dilemma and confusion.  For many people, only through a paradigm shift in thinking and approach can they increase their chances of  market success.

    A paradigm shift is a change in accepted theories, opinions or approaches, a step above and beyond, and is almost always better than the conventional wisdom.  That’s why it’s called a paradigm shift.
     
    The question is:

    Is there such a paradigm-shifting stock market approach out there?

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