Summary of TRADING FOR A LIVING (BY DR ALEXANDER ELDER)

Summary of "Trading for a Living"

The video "Trading for a Living" by Dr. Alexander Elder discusses essential strategies and principles for successful trading. It emphasizes the importance of self-discipline, emotional control, and a structured approach to trading. Here are the main financial strategies, market analyses, and business trends presented in the video:

Main Financial Strategies:

• Three Pillars of Trading:
  • Psychology: Understand and control your emotions while trading.
  • Market Analysis & Trading Systems: Develop a reliable trading system that has a positive expected return.
  • Money Management: Implement strict Money Management rules to protect your trading account.
• Emotional Control:
  • Keep a trading diary to learn from past mistakes.
  • Set rules before entering trades to avoid being influenced by market crowd behavior.
  • Step back from trading if results are poor to reassess strategies.
  • Avoid translating paper profits into potential purchases to maintain objectivity.
• Indicator Usage:
  • Combine different indicators for comprehensive Market Analysis.
  • Use exponential moving averages over simple ones for better responsiveness.
  • Confirm signals with related markets to enhance reliability.
  • Focus on longer time frames for more significant price movements.
• Triple Screen Trading System:
  • Market Tide: Identify long-term trends using indicators like the MACD histogram.
  • Market Wave: Time entries using oscillators to find optimal buying/selling points.
  • Intraday Breakout: Enter trades using trailing buy/sell stops based on previous day’s price action.
• Money Management Principles:
  • Prioritize survival by never risking more than 2% of equity on a single trade.
  • Use stop-loss orders to enforce risk limits and only move stops in the direction of the trade.

Methodology / Step-by-Step Guide:

• Three Pillars of Trading:
  • Focus on Psychology, Market Analysis, and Money Management.
• Emotional Control:
  • Keep a diary of trades.
  • Set pre-trade rules.
  • Take breaks from trading when necessary.
• Indicator Usage:
  • Start with a few indicators, then expand as you gain experience.
• Triple Screen Trading System:
  • Identify long-term trends (Market Tide).
  • Time entries using oscillators (Market Wave).
  • Use trailing stops for entries (Intraday Breakout).
• Money Management:
  • Never risk more than 2% of equity per trade.
  • Set and adjust stop-loss orders properly.

Presenters/Sources:

• Dr. Alexander Elder
• Mark Douglas (referenced in emotional control segment)

Notable Quotes

— 00:34 — « Freddy is very similar to how many traders behave in the markets. »

— 00:52 — « It is bad enough to deceive other people, but to deceive yourself is hopeless. »

— 02:10 — « Money management can't help you unless you have a trading system with a positive expected return on investment. »

— 06:18 — « The main point here is that there is no one indicator to rule them all. »

— 10:39 — « Most traders take a good system and destroy it when they try to turn it into a perfect one. »

Category

Business and Finance

Video