Monday, April 27, 2015

Article From Trading Psychology- Alexander Elder

This article I quoted from Alexander Elder's Book " Trading for A Living "

Trading appears deceptively easy. When a beginner wins, he feels brilliant and invincible. 
Then he takes wild risks and loses everything. People trade for many reasons-some 
rational and many irrational. Trading offers an opportunity to make a lot of money in a hurry. 
Money symbolizes freedom to many people, even though they often do not know what 
to do with their freedom.

If you know how to trade, you can make your own hours, live and work wherever you please, 
and never answer to a boss. Trading is a fascinating intellectual pursuit: chess, poker, 
and a crossword rolled in one. Trading attracts people who love puzzles and brainteasers.

Trading attracts risk-takers and repels those who avoid risk. An average person gets up 
in the morning, goes to work, has a lunch break, returns home, has a beer and dinner, 
watches TV, and goes to sleep. If he makes a few extra dollars, he puts them into a savings account. A trader keeps odd hours and puts his capital at risk. Many traders are loners who abandon the
certainty of the present and take a leap into the unknown.


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.

Email me if you want a PDF copy of this book, Free of charge.