ALEXANDER ELDER FULL AUDIOBOOK

 Trading for a Living helps you discipline your Mind, shows you the Methods for trading the markets, and shows you how to manage Money in your trading accounts so that no string of losses can kick you out of the game. To help you profit even more from the ideas in Trading for a Living, look for the companion volume--Study Guide for Trading for a Living.

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TRADING FOR A LIVING.

Psychology Trading Tactics

Money Management

by Dr. Alexander Elder.

INTRODUCTION

TRADING-THE LAST FRONTIER

You can be free. You can live and work anywhere in the world. You can be independent from routine and not answer to anybody. This is the life of a successful trader. Many aspire to this but few succeed. An amateur looks at a quote screen and sees millions of dollars sparkle in front of his face. He reaches for the money-and loses. He reaches again-and loses more. Traders lose because the game is hard, or out of ignorance, or lack of discipline. If any of these ail you, I wrote this book for you.

How I Began to Trade In the summer of 1976,I drove from New York to California. I threw a few books on psychiatry (I was a first-year psychiatric resident), several histories, and a paperback copy of

Engels How to Buy Stocks into the trunk of my old Dodge. Little did I know that a dog-eared paperback, borrowed from a lawyer friend, would in due time change the course of my life. That friend, incidentally, had a perfect reverse golden touch-any investment he touched went under water. But that’s another story. I gulped down the Engel book in campgrounds across America, finishing it on a Pacific beach in La Jolla. I had known nothing about the stock market, and the idea of making money by thinking gripped me.

I had grown up in the Soviet Union in the days when it was, in the words of a former U.S. president, an evil empire I hated the Soviet system and wanted to get out, but emigration was forbidden. I entered college at 16, graduated medical school at 22, completed my residency, and then took a job as a ship’s doctor. Now I could break free! I jumped the Soviet ship in Abidjan, Ivory Coast.

I ran to the U.S. Embassy through the clogged dusty streets of an African port city, chased by my ex-crewmates. The bureaucrats at the embassy fumbled and almost handed me back to the Soviets. I resisted, and they put me in a safe house and then on a plane to New York. I landed at Kennedy Airport in February 1974, arriving from Africa with summer clothes on my back and $25 in my pocket. I spoke some English, but did not know a soul in this country.

I had no idea what stocks, bonds, futures, or options were and sometimes got a queasy feeling just from looking at the American dollar bills in my wallet. In the old country, a handful of them could buy you three years in Siberia. Reading How to Buy Stocks opened a whole new world for me. Returning to New York, I bought my first stock-it was KinderCare. Ever since then, I have avidly studied the markets and invested and traded stocks, options, and now mostly futures. My professional career proceeded on a separate track. I completed a residency in psychiatry at a major university hospital, studied at the New York Psychoanalytic Institute, and sewed as book editor for the largest psychiatric newspaper in the United States. These days, I am busy trading and go to my psychiatric office, across the street from Carnegie Hall, only a few afternoons a week, after the markets close. I love practicing psychiatry, but I spend most of my time in the markets. Learning to trade has been a long journey with soaring highs and aching lows. In moving forward -or in circles-I repeatedly knocked my face against the wall and ran my trading account into the ground. Each time I returned to a hospital job, put a stake together, read, thought, did more testing, and then started trading again.

My trading slowly improved, but the breakthrough came when I realized that the key to winning was inside my head and not inside a computer. Psychiatry gave me the insight into trading that I will share with you.

Do You Really Want to Succeed?

For the past 17 years I’ve had a friend whose wife is fat. She is an elegant dresser, and she has been on a diet for as long as I have known her. She says she wants to lose weight and she does not eat cake or potatoes in front of people- but when I come into her kitchen, I often see her go at it with a big fork. She says she wants to be slim, but remains as fat today as the day we met. Why? The short-term pleasure of eating is stronger for her than the delayed pleasure and health benefits of weight loss. My friends wife reminds me of a great many traders who say they want to be successful but keep making impulsive trades-going for the short-term thrills of gambling in the markets.

People deceive themselves and play games with themselves. Lying to others is bad enough, but lying to yourself is hopeless. Bookstores are full of good books on dieting, but the world is full of overweight people. This book will teach you how to analyze and trade the markets and how to deal with your own mind. I can give you the knowledge. Only you can supply the motivation.

PSYCHOLOGY IS THE KEY

You may base your trades on fundamental or technical analysis. You may trade because of hunches about economic and political trends, use inside information, or simply hope. Remember how you felt the last time you placed an order? Were you anxious to jump in or afraid of losing? Did you procrastinate before picking up the phone? When you closed out a trade, did you feel elated or humiliated? The feelings of thousands of traders merge into huge psychological tides that move the markets.

Getting Off the Roller Coaster

The majority of traders spend most of their time looking for good trades. Once they enter a trade, they lose control and either squirm from pain or grin from pleasure. They ride an emotional roller coaster and miss the essential element of winning-the management of their emotions. Their inability to manage themselves leads to poor money management of their accounts. If your mind is not in gear with the markets, or if you ignore changes in mass psychology of crowds, then you have no chance of making money trading. All winning professionals know the enormous importance of psychology in trading. All losing amateurs ignore it.

Friends and clients who know that I am a psychiatrist often ask me whether this helps me as a trader. Good psychiatry and good trading have one important principle in common. Both focus on reality, on seeing the world the way it is. To live a healthy life, you have to live with your eyes open. To be a good trader, you need to trade with your eyes open, recognize real trends and turns, and not waste time or energy on regrets and wishful thinking.

A Man’s Came?

Brokerage house records show that most traders are male. The files of my educational firm, Financial Trading Seminars, Inc., confirm that approximately 95 percent of traders are men. For this reason, you’ll find that I commonly use the masculine pronoun (he) in the anecdotes and cases throughout this book. Of course, no disrespect is intended to the many successful women traders. The percentage of women is higher among institutional traders-employees of banks, trading firms, and the like. In my experience, however, the few women who get involved in trading succeed more often than men. A woman needs exceptional drive to plunge into this male preserve. Trading is similar to such thrilling and dangerous sports as sky-diving, rock-climbing, and scuba-diving. They also attract mostly men-fewer than 1 percent of hang gliders are female. Men are drawn to risky sports in our increasingly regulated society. Dr. David Klein, a sociologist at the University of Michigan, was quoted in the New York Times as saying, as work becomes more and more routinized . . . we turn to recreation for a sense of accomplishment.

 The safer and more routine we make work, the more we will push people into recreations where individual distinction and discretion, adventure and excitement play a part. These sports provide intense pleasure but have a stigma of danger because many participants ignore the risks and take thoughtless chances. Dr. John Tongue, an orthopedic surgeon in Oregon who studied accidents among hang gliders, found that the chance of death rises among more experienced pilots because they take greater risks. An athlete who wants to enjoy risky sports has to follow safety rules. When you reduce risks, you gain an added sense of accomplishment and control. The same goes for trading. You can succeed in trading only if you handle it as a serious intellectual pursuit. Emotional trading is lethal. To help ensure success, practice defensive money management. A good trader watches his capital as carefully as a professional scuba diver watches his air supply.

How This Book Is Organized

Successful trading stands on three pillars: psychology, market analysis and trading systems, and money management. This book will help you explore all three. The first chapter of this book shows you a new approach to managing your emotions as a trader. I discovered this method while practicing psychiatry. It has greatly improved my trading, and it can help you, too. The second chapter describes the crowd psychology of markets. Mass behavior is more primitive than individual behavior. If you understand how crowds behave, then you can profit from their mood swings and avoid being swept up in their emotions. The third chapter of the book shows how chart patterns reveal crowd behavior. Classical technical analysis is applied social psychology, like poll-taking. Trend lines, gaps, and other chart patterns actually reflect crowd behavior.

The fourth chapter teaches modern methods of computerized technical analysis. Indicators provide a deeper insight into mass psychology than classical technical analysis. Trend-following indicators help identify market trends, while oscillators show when trends are ready to reverse. Volume and open interest also reflect crowd behavior. The fifth chapter focuses on them as well as on the passage of time in the markets.

Crowds have a very short attention span, and a trader who relates price changes to time gains a competitive advantage. The sixth chapter focuses on the best techniques of stock market analysts. They can be especially helpful for stock index futures and options traders. Sentiment indicators measuring the opinions of investors and traders are profiled in the seventh chapter. Crowds follow trends, and it often pays to join them when prices are moving. Sentiment indicators show when it is time to abandon the crowd - before it misses an important reversal. The eighth chapter reveals two proprietary indicators. Elder-ray is a price-based indicator that measures the power of bulls and bears below the surface of the markets. Force Index measures prices and volume. It shows whether the dominant market group is becoming stronger or weaker.

The ninth chapter presents several trading systems. The Triple Screen trading system is my own method. I have used it for years. This and other systems show you how to select trades and find entry and exit points. The tenth chapter focuses on money management. This essential aspect of successful trading is neglected by most amateurs. You can have a brilliant trading system, but if your money management is bad, then a short string of losses will destroy your account. Trading without proper money management is like trying to cross a desert barefoot. You are about to spend many hours with this book. When you find ideas that seem valuable to you, test them in the one crucible that matters-your own experience. You can make this knowledge your own only by questioning it.