The New Trading for a Living: Psychology, Discipline, Trading Tools and Systems, Risk Control, Trade Management

If I was doomed to pick only a single book on trading, I would seriously consider Alexander Elder’s The new trading for a living. My impression is that, so far, this is one of the best books in the genre of general trading that I came across.

Alexander Elder (MD), having his background in psychology, delivers invaluable insights about this incredibly important component of psychology in trader’s endeavor. One even will find a small test and a template for the readiness to trade. As it is well known, the weakest link in the trading system is the trader itself. If the nerve is not in control, it can be really devastating. Elder is an expert in this field and he discusses many important aspects of it throughout the book.

The strategies Elder proposes in his work are apparently working well for him. However, if one expects to be able to simply adapt the strategies presented in the book and start generating money straight away based on them, I would say, it would not be so simple. The author doesn’t provide a very structured step-by-step recipe what to do in terms of setting up a particular strategy with all required indicators etc. For a beginner without technical analysis background it might be quite difficult to grasp some concepts without additional studies. But this book is a good starting level. The intent of the book probably wasn’t to give a cook book (which is per se, in my opinion, is extremely hard, due to the nature of the markets and their plasticity and risk for strategy obsoleting), but rather to describe all important components in the process of trading, risk and money management issues, which are essential no matter what kind of strategy one intends to design and implement. The author provides a good and clear introduction to technical analysis, indicators, signals, instruments, what to trade, etc. He proposes his own methods together with some interesting points on trading vehicles and how to avoid being severely injured by the sharks or instantly consumed by a swarm of piranhas.

I liked how the author structures the book, wisely complements his theses with clear examples, good quality charts. The author’s style of writing is especially appealing, he uses a lot of beautifully fitting metaphors making important points live, convincing, and sometimes very funny.

Risk management chapter alone is a wisdom so credibly conveyed which could save many accounts and grievances of the beginners. The price on Amazon is 39 USD for this book now, which may turn into an investment with the highest return ever for many greenhorns out there who know it all without any preparatory studies. The author stresses on the importance of documenting the trading process, keeping structured records and journals, which I totally agree on and try to do myself, considering it as the critical part in building the edge and improvement. There are some great tips on that in the book.

For the experienced traders, the content of the book probably would not disclose something very revolutionary. I would rather seem to be a book filled with a lot of common sense, known technicalities, systems and rules, basically the things which we practice already with a certain level of discipline. However, even pros get wiped out from time to time, and that is often due to breaking some of the rules outlined in this book.

My overall take on this book is — a compulsory read for the beginners, and a valuable general wisdom of trading for the pros.

There’s a separate study guide available, and that will be my next step giving myself a firmer grasp of the essential trading rules and skills and help me master the key points of Elder’s excellent book.