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The New Trading for a Living

Alexander Elder

313 Pages
2014

The New Trading for a Living

Psychology, Discipline, Trading Tools and Systems, Risk Control, Trade Management

John Wiley & Sons

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⚡ Free 3min Summary

The New Trading for a Living - Summary

"The New Trading for a Living" by Alexander Elder is a comprehensive guide for both novice and experienced traders looking to enhance their trading skills. This updated edition of a classic bestseller integrates time-tested concepts with modern market dynamics, offering a calm and disciplined approach to trading. Elder emphasizes the importance of risk management and self-management, providing clear rules and practical tools for developing an effective trading system.

Key Ideas

1

Psychology and Discipline

Elder stresses the importance of maintaining a calm and disciplined mindset while trading. He explains that emotional control and self-discipline are crucial for making rational decisions and avoiding impulsive actions that can lead to significant losses. By mastering your psychology, you can better manage stress and stay focused on your trading plan.

2

Risk Management

One of the core principles in "The New Trading for a Living" is effective risk management. Elder provides strategies for identifying asymmetrical market zones where the potential rewards outweigh the risks. He also offers practical advice on setting entries, targets, and stops to protect your capital and maximize your profits.

3

Trading Tools and Systems

The book introduces various trading tools and systems that can help traders make informed decisions. Elder includes templates for rating stock picks, creating trade plans, and assessing your readiness to trade. These tools are designed to help you develop a systematic approach to trading, ensuring consistency and improving your chances of success.

FAQ's

"The New Trading for a Living" primarily focuses on enhancing trading skills through a disciplined approach, emphasizing the importance of psychology, risk management, and the use of practical trading tools and systems.

Alexander Elder provides strategies for identifying market zones with favorable risk-reward ratios and offers practical advice on setting entries, targets, and stops to protect capital and maximize profits.

The book introduces various tools and systems, including templates for rating stock picks, creating trade plans, and assessing trading readiness, all designed to help traders develop a systematic and consistent approach to trading.

💡 Full 15min Summary

Successful trading requires emotional control, self-analysis, risk management with a focus on long-term survival and growth over immediate profits.
0:00 / 3:41

Cultivating a successful mindset for trading boils down to one thing: mastering your emotions. When you trade, emotions can become your biggest enemy or your greatest ally. Think about it: amateurs often get too excited with every win and too devastated with every loss. They let their feelings dictate their decisions. On the other hand, seasoned traders remain calm and make logical decisions, regardless of what their heart might be telling them.

Imagine the markets as an unpredictable ocean, flowing freely, caring little about what individual traders want. We can't control this vast ocean, but we have full control over our actions. It's similar to a sailor who can't change the tide but can adjust the sails. Beginners might taste success initially, feeling on top of the world. But if they become overconfident and take bigger risks, a sudden storm (or a series of losses) can sink them. Trading emotionally might give you an adrenaline rush, but it's the same way casinos serve drinks to cloud your judgment. Successful traders, much like skilled poker players, keep a clear head and analyze every move.

Sometimes, trading becomes a way for people to play out personal conflicts, leading to self-destructive decisions. Ever wondered why someone might repeatedly make poor choices even when they know better? It's because some underlying issue is steering the wheel. Writing down thoughts and actions in a diary can be a mirror, reflecting patterns and habits that need changing. It's like when a person hits a personal low – maybe using up their savings or borrowing money – and then realizes the need for change. They see their patterns, much like how someone addicted to alcohol realizes their dependency.

This is where the idea of "Losers Anonymous" comes in, drawing inspiration from Alcoholics Anonymous. Just as someone trying to stay sober focuses on being alcohol-free each day, traders need to concentrate on avoiding loss each day, sticking to their risk boundaries. A good rule of thumb is never to lose more than 1-2% of what you've invested in a single trade. If you're losing more, chances are emotions are in the driver's seat. Smart traders trust their strategies, not just gut feelings.

To keep this mindset sharp, imagine starting each day reminding yourself, "I could lose today." It's not about being pessimistic; it's about staying grounded. It reminds traders to always be vigilant, even if they've had a series of good days. It's about finding calm, not getting lost in the chaos. Even seasoned traders remind themselves of this mantra to stay focused.

The thing is, the best traders see things differently. They prioritize clear thinking over getting swayed by fear or greed. They invest time in self-reflection, understanding their motives, and making responsible choices. While some might chase a magical, one-size-fits-all solution, the truly successful ones apply the wisdom they've gained over the years. They recognize that changing established habits and thought processes isn't easy, but it's vital.

Committing to success in trading is like training for a marathon. It demands dedication, continuous learning, honing techniques, managing risks, and, most importantly, understanding oneself. While beginners might fixate on profits, the real goal should be staying in the game for the long run and achieving consistent growth. Armed with realistic expectations and a genuine passion, anyone can navigate the challenges and excel in the world of trading.

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