Dr. Alexandra Elder

Dr. Alexandra Elder whom write the popular trading books " Trading For a Living", "Come to My Trading Room" in town over the weekends, below are some of his sharing.

The "3M" in successful trading
Mind, Method, Money

Ocean of ignorance
We live in an island of knowledge and surrounded by an ocean of ignorance. As our island of knowledge expands, our boundary of ignorance increases too. The more things we learn, the more things we find that we do not know or understand. There is no way one can totally understand what the market is doing.

Elephant vs. Rabbit Hunting
I'm not claiming one style is better than the other, but one must find a method that is comfortable to execute. I'm a rabbit hunter – someone who trades in and out within a short period of time, taking smaller profits as compared to someone who trades for a longer time frame. I don't try to catch big trends like an elephant hunter. I am happy with a rabbit.

Keep a journal
The trading journal is necessary for a trader to improve his skills. He should grade his results in 3 areas.
Buy Grade (high – buy point) / (high – low). More than 50% is considered a good buy
Sell Grade (sell – low) / (high – low)
Trade Grade – how much of the moving envelope range did you capture? 30+% = A. 20-30% = B. 10-20% = C.

Learn to Survive First
As a newbie, the most important thing is learn how to survive. The two causes of trader's mortality are

1) a single disastrous loss
2) numerous small losses that add up to disaster
To survive, a trader must apply the 2% and 6% money management rules. Never risk more than 2% of your capital per trade and never risk 6% of your capital for your entire position. In other words, if you risk 2% per trade, you can only get into 3 trades.

Technical Analysis
There are 4 styles in trading
1) Insider trading
2) Fundamental analysis
3) Technical analysis
4) From the gut
FA cannot determine the waves of optimism and pessimism of the market participants. TA on the other hand is the reflection of psychology of the crowd. Dr Elder finds that TA suits him the most. Fundamental analysis may take a long time to realize profits. For example, Boeing had orders fully booked for the next 6 years but its stock price still fluctuates day to day.

Separate the Analyst and the Trader
In big institutions, there are analysts and traders. The analyst will plan trades while the trader will execute them. As an individual, you have to be the analyst and the trader. However, you can only be either one at any one time. Be an analyst outside trading hours and make your plans and decisions without emotions. During market hours, be the trader and execute the trade plans accordingly. The trader must adhere to the trade plan faithfully.

Why do people lose money in trading?
Many people traded out of boredom. A typical trader is a college educated 50 year-old who finds his work boring and mundane. He wish to trade his way out of the current lifestyle. He is trading for fun, and not for money. This is why most people lose, because they are simply engaging in the activity for pleasure. There are two objectives in every trade
1)To make money
2)To become a better trader.

Focus on Trading not Money
Although one of the objectives is to make money, one should not focus on how much money is made or on the Profit and Loss statement. The analogy given was about the medical doctor who runs a clinic. If you ask him how his business is doing, he would roughly estimate the number of patients he have seen. He is not going to say he had made $x amount of money. Focus on trading quality.