1. Trading For A Living
Dr. Alexander Elder
Book Review

2. Psychology Trading Tactics Risk Management Money Management Individual
Mass Psychology
Trading Tactics
Classical Chart Analysis
Indicator Tools
Neglected Essentials – Volume, Time
Stock Market Indicators
Psychological Indicators
Trading Systems
Risk Management
Money Management
Exiting Trades

3. Trading is the most dangerous human endeavor, short of war.
Acting out your internal conflicts in the marketplace is a very expensive proposition.
The market does not know that you exist.
There is no easy money in the market.
Learning to trade takes hard work, time, energy and money

4. Psychological Factors
This is a man’s game and the odds are against you.
With Commissions and Slippage trading is a Minus Zero Sum Game
Trade with your eyes open
Is it Gambling? Resist the urge to bet.
Beware of Self-Sabotage
Control Self-destructiveness

5. Trading Lessons From AA
A trader being demolished by losses is not much different from an alcoholic.
Denial - A loser denies that he has lost control over his course in the market.
Rock Bottom – When you admit that you have a personal problem that causes you to lose, you can begin building a new trading life. You can start developing the discipline of a winner.

6. Take Charge of Your Trading Life
1. Decide to be in the market for the long haul – say 20 years from now
2. Learn as much as you can
3. Do not be greedy & rush to trade – take your time to learn
4. Develop a method for analyzing the market – test before using real money – markets change and you need to be able to identify the change

7. Take charge of your trading life
5. Develop a money management plan
First is long term survival
Second is a steady growth of capital
Third is making high profits
Beware that a trader is the weakest link in any trading system – so learn how to avoid losses and cut out impulsive trading
Learn to think, feel and act like a winner

8. What is Price but Mass Psychology?
What is the Market but a huge crowd of people?
In trading you compete against some of the brightest minds in the world while fending off the piranhas of commission and slippage
The only reason there is money in the markets is that other traders have put it there. The money you want to make belongs to other people who have no intention of giving to you….

9. Remember your goal is to trade well, not to trade often
Markets do not care about your well being
When you put on a trade, you feel the desire to imitate others and overlook objective trading signals. This is why you need to develop and follow trading systems and money management rules. These decisions are made before you enter a trade.
Price is the leader of the market crowd.
You must not change your plan while you have an open position!

10. Psychology of Trends
Technical Analysis is applied social psychology. It aims to recognize trends and changes in crowd behavior in order to make intelligent trading decisions.
Read the Market and Manage Yourself
- You need to analyze the balance of power between bulls and bears.
- You need to practice good money management.
- You need personal discipline to follow your trading plan and avoid getting high in the markets.

11. Chart Analysis
It pays to trade with the professionals and against the amateurs
The highest point of a bar represents the maximum power of the bulls
The low of each bar shows the maximum power of the bears
The closing tick of each bar reveals who won
The distance between the high and low reveals the intensity of the conflict between bulls and bears

12. Technical Analysis Topics
Support and Resistance exists because people have memories
The Hard Right Edge is extremely difficult to identify trends and trading ranges
Should one Trade or Wait?
Conflicting Trends in Different Timeframes
Trend-lines – note the effects of : angle, length, touches, timeframe, volume
The angle between a trend line and the horizontal axis reflects the emotional intensity of the dominant market crowd.

13. More Technical Analysis
Gaps – Common, Breakaway, Continuation, Exhaustion
Island Reversal Pattern
Chart patterns – Head & Shoulders (& Inverse), Double Tops & Bottoms
Rectangles
Lines and Flags
Triangles – Ascending, Descending, and Symmetrical

14. 3 Major Indicator Groups
Trend Following – coincident or lagging – turns After trends reverse
MACD, Directional, On Balance Volume, Advance/Decline, Moving Averages
Oscillators – help identify turning points - are leading indicators, coincident and often turn ahead of prices

15. Oscillator Names – Stochastics, Rate of Change, Momentum, Relative Strength Index, Williams % R, Commodity Channel Index
Miscellaneous – gives insight into intensity of bull or bear market opinion
New High/Low Index, Put Call Ratio, Bullish Consensus, Commitments of Traders, Advance/Decline Index, the Trader’s Index

16. Indicator Highlights Moving Averages suffer ‘whipsaw’ effect
MACD Histogram works like headlights on a car – it gives traders a glimpse of the road ahead. New highs or lows in this indicator are usually followed by new high or low prices.
Rate of Change shows Overbought or Oversold
Momentum measures speed of traders greed or fear

17. The Neglected Essentials
Volume – “Is the steam that makes the choo-choo go!” Joe Granville
Open Interest
Time Cycles
Factor of Five – awareness of other timeframes – 2 min, 10 min, 5-6 hours per day, 5 days per wk, 4.5 wks per month

18. Psychological Indicators
Consensus Indicators
Tracking Advisory Opinions
Advertising as a Contrary Indicator
Signals from Advertisers
Commitment of Traders (COT)
Insider Trading
Odd-Lot Activity
Parabolic
Channel Trading Systems
Standard Deviation Channels (Bollinger Bands)

19. Risk Management
Why Johnny cannot sell? He cannot cut losses because he hopes and hangs on…..
Most traders get killed by one of two bullets: ignorance or emotion – therefore always use a 2% loss limit!
Martingale Player in a casino bets $1, as long as he wins. If he loses he doubles up and bets $2 to win back the dollar lost. 46 losses in a row he has to bet $70 Trillion on the 47th bet…….

20. More Risk Management
You can take a small loss automatically if you have the discipline to set a stop the moment you enter a trade
The goal of a successful trader is to make the best trades. Money is secondary. Concentrate on quality and good trades. Money will follow.

21. More Risk Management Setting Stops: 1. Stop Loss Order
2. Break-Even Order
3. Protect Profit Order
Pulling the trigger is tough to do..
After the trade, Analyze and Learn
Start using a “before and after” diary

22. Questions