Trading for a Living Summary
The book, Trading for a Living was authored in 1993 by Dr. Alexander Elder and it delves deep into the art of investment and trading psychology. The book gives information regarding psychological factors that influence trading and therefore is aimed at enabling new Traders to gain knowledge quickly and leverage on the knowledge that Dr. Elder (1993) has built over the years. The book provides information on stock trading ranging from the necessary tools that one needs for chart analysis as well as risk minimization to increase the traders’ income from the process. It also guides new Traders through a series of small mistakes that individuals should avoid when starting stock trading to ensure that they do not lose their initial investment. The book is considered to be one of the most informative when it comes to stock trading and provide foundational skills that are highly needed for beginner stock traders.
The book provides a series of lessons that are divided into teams and one of the initial tips drawn from the book is that the traders should not allow commissions to eat from their profits (Elder 1993). Dr. Elder recognizes the fact that an individual can’t become a good Trader by just spending a night studying his book however by learning from other individuals it is possible to skip the amount of experience that is needed to earn income out of the trade. He informs individuals in his book that they should reduce the number of trades that they make because every trade attracts a commission from the broker and this will eat a lot into a person’s profits. The author also advises new traders to scout for various brokers before they settle for one based on the commission that they will receive from a particular broker.
The author also considers another issue that adversely affects Traders when they are engaging in stock trading and that his emotions (Elder 1993). Dr. Elder states that emotions are one of the greatest mistakes that amateur traders make especially when they do not think rationally through their decisions but rather put emotions into trading. One of his key advice is that individuals should not attach themselves to any stock whatsoever and they should just consider the whole practice as a business. For instance, is this that one cannot consider maintaining a particular stock just because they like the products that the company produces. stock trading is only but away that individuals used to make money and therefore invoking emotions into the process will only affect a person’s judgment and limit them from thinking through a decision effectively which will ultimately lead to losses.
The other advice provided in the book is reducing risk through various rules of stock trading. Dr. Elder first of all states that one ought not to risk a greater amount than 2% of their trading capital in a single trade. The rule that he provides is that individuals ought to limit their open risk and overall loss to a total of 6% in any month. If the percentage of the two exceeds 6% of the trade capital within a given month, then one should not be making any more trades. Taking such rules limits the possible losses that individuals.
Elder, A. (1993). Trading for a Living: Psychology, Trading Tactics & Money Management.