Alexander Elder, M.D., is a professional trader and a teacher of traders. He is the author of Trading for a Living, considered a modern classic among traders. First published in 1993, this international best-seller has been translated into more than a dozen languages and is being used to educate traders around the world. His Come into My Trading Room: A Complete Guide to Trading was named a 2002 Barron’s Book of the Year. His Entries & Exits: Visits to 16 Trading Rooms was named a 2007 SFO Magazine Book of the Year. His latest book is The New Sell & Sell Short: How to Take Profits, Cut Losses, and Benefit from Price Declines (2011). 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.
— novice traders, especially the so-called ‘techies’, ‘geeks’, tend to underestimate the importance of psychology; they are surprised each time when the methods which looked so well in testing, do not work in a real trading; gradually they open the simple truth: when emotions run high – rational thinking fades into the background; you can repeat for hours that you have to be calm, restrained, but in five minutes, you’ll forget about everything when the prices on the monitor will start jumping up and down; the best way to stay calm and be disciplined – to keep a diary in good faith; make a trading plan for the day ahead, put it next to the keyboard, follow it and in any case do not change it during the trading session
— What I do not do ever, I’m not selling «in short», when the daily charts say «Buy it!»
— good records are essential to improve the efficiency of the trader; when you enter a trade, you have two objectives: first – to make money, and the second – to increase the level of skill; if the first one is not always possible to achieve, the second must be gained in all circumstances; you can learn both from successful, as well as the bad trades; if the second target is not reached, the trade did not give anything
— trade less, hold the position as long as possible, follow the rules – consciously.
— learn to not be influenced by others; get rid of the addiction to financial TV programs, reduce the number of subscriptions and learn to exercise extreme caution when talking about the market
— be patient; act deliberately; wait for perfect conditions, and then proceed without hesitation; If the situation is otherwise, refrain from action
— try not to make too many decisions during the trading day; premeditate strategy mainly in the non-trading time
— never trade beyond measure; opening larger positions than your capital allows brings trouble
— never double the bet; never deploy a position all at once
— whoever loses within reasonable limits, will ultimately be successful in trading as he captures the losses, as long as they are small, and thus has a chance to live up to a major trend; once system tells you to exit – then exit! No one has lost yet because of the small losses; good risk control makes sure that eventually you’ll stay in the win
— «Developing trading system is partly an art, a science and a common sense. I’m not looking for a system that shows the maximum return on historical data, but the sensible idea that works acceptably on historical data and, apparently, will work in the future»
— Markets can remain irrational longer, than any rational investor may fight with these irrational markets.
— crowd usually follows the trend, and its “bullish mood” intensifies as prices increase; beginners tend to buy during breaks up in expectation of strong growth; from time to time their hopes are justified, but in the long term, most breakouts are false; which is why professionals usually play against them
— Market is not a place to ask “Am I right or not? » there is necessary to ask, “Do I apply my methods right?”
— The closer you sit to the screen, the stronger the emotions and psychology affect the trade; the picture on the screen creates a desire to do something, a feeling of missed opportunity; really it is necessary to be much more selective, to stay away until necessary conditions appear
—each player must have his trading plan – even a bad plan is better than nothing
— «Let’s take auto chemistry market – there’s a technology of production, in accordance with which all is done. Either wooden houses production. There’s no one saying “I know how to build, but I will do otherwise.” If you do the same on the stock market, the results should appear automatically. But many people cannot tolerate the risk associated with their own money. Anyone, who cannot bear the risk psychologically, is not able to trade»
— when the stress too high, and the heart is beating too fast, something’s wrong – don’t make a trade, exit the market and take a little rest
— an additional source of income helps until you learn how to trade; the less pressure on you, the more chances to succeed
— first of all it is not necessary to leave your regular job if you have no other funds; whichever period to start of a successful trade you may have set for yourself, increase it by 3 times; if you’re going to use the profits designed to pay your bills, then ‘say goodbye’ to your trading account
— “What kind of trade do you want to make? If you look at the charts and do not know what to look for, then how you determine that there’s a possibility for trade? ”
— professional is not reaching for each piece of pie; He knows that only a few models give him a chance, and doesn’t make a trade until he sees them; each trader decides for himself on which models to trade; You can buy and sell on the basis of fundamentals, technical signals or news, but in any case it is necessary to stick to your method
— trading is associated with the huge emotional load; it causes strong emotions – fear, greed, etc., which lead to making bad decisions; a person with arranged private life has an advantage over those who are deprived of it, and therefore they are under the dual pressures; man who comes home to his smiling, beloved wife, and does not waste mental energy on ‘building bridges’ in his personal relationships, is in a much better position when sitting in front of screen, analyzing charts and making decisions.