Dr. Alexander Elder: Safeguard Your Profits
“You can be free. You can live and work anywhere in the
world. You can be independent from routine and not answer to anybody.” - Dr. Alexander Elder
LEARN FROM GENERALS OF THE MARKETS - PART 17
Dr. Alexander Elder was born in Russia and raised in
Estonia. He attended a medical college when he was 16 years old. While working
as a doctor on a USSR vessel, he absconded and sought asylum in America. Having
worked as a psychiatrist in New York and as a lecturer at Columbia University,
he got a good understanding of traders’ mindset. He’s written a number of
books, articles and software reviews. He’s also credited with the creation of
the Force Index indicator – a unique technical analysis tool.
He’s a top expert when it comes to technical analysis,
position sizing, and trading psychology. Some of his books are titled: Trading
for a Living, Come into My Trading Room, Entries and Exits, etc. which are
popular among speculators. Those books
have been translated into many languages. Dr. Elder’s official website is:
Elder.com
Lesson
You’ll benefit greatly from the lessons below.
1.
As a trader, it’s better for your to be realistic than
to be idealistic. Many people approach the markets with terrible methodologies
and unrealistic expectations. It’s possible to become a successful trader, but
it’s not easy. For you to become successful, you’ll need to work hard at it and
learn what it takes to be a successful trader.
2.
According to Dr. Alexander Elder, every winner needs to
master three essential components of trading; a sound individual psychology, a
logical trading system and good money management. These essentials are like
three legs of a stool – remove one and the stool will fall, together with the
person who sits on it. Losers try to build a stool with only one leg, or two at
the most. They usually focus exclusively on trading systems. Your trades must
be based on clearly defined rules. You have to analyze your feelings as you
trade, to make sure that your decisions are intellectually sound. You have to
structure your money management so that no string of losses can kick you out of
the game.
3.
Dr. Elder is a living proof that one can be a
successful trader without being an expert in the area of fundamental analysis.
Dr. Elder’s entry and exit criteria are usually chart-based, not something
fundamental. Too many people have irrational belief in fundamental analysis as
an open sesame to great riches – only to experience negativity continually in
their portfolios. While fundamental analysis will always be a very useful and
effective decision making tool, long-lasting trading triumph really boils down
to risk and money management, self-control and trading only what you see.
4.
There should always be a maximum amount of money you’ll
to put at stake – as far as each trade is concerned. Dr. Elder believes that
the use of stop loss is necessary. He’s
a maximum amount he’d be willing to risk in a month. If he loses more than 6
per cent, he would stop trading for the month. This is very effective, especially
in avoiding further drawdown during a losing streak: something every top trader
encounters occasionally.
5.
Safeguard your profits! After you’ve made a substantial
profit on a position, you should try to safeguard it, so that it doesn’t turn
into a loss. In one interview in the year 2008, Dr. Elder said he developed
this rule after banging his head against the wall for 19 years. There are ways
one could safeguard his decent profits, and prevent them from turning into
losses. This is however, another topic. You can read my past articles on risk
control.
Conclusion:
Successful trading principles are like a rainbow for comeliness, like an oasis
in the wilderness, and like an anchor in a stormy ocean. Taking time to learn
the art of trading will enable you to control your future.
This piece is concluded with a quote from Dr. Elder:
“Markets offer unlimited opportunities for self-sabotage,
as well as for self-fulfillment. Acting out your internal conflicts in the
marketplace is an expensive proposition. Traders who are not at peace with
themselves often try to fulfill their contradictory wishes in their market. If
you do not know where you are going, you will wind up somewhere you never
wanted to be. You can succeed in trading only if you can handle it as a serious
intellectual pursuit. Emotional trading is lethal. To help ensure success,
practice defensive money management. A good trader watches his or her capital
as successfully as a professional scuba-diver watches his or her air supply.”
NB: You would be
exposed to world-class, cutting-edge, and top-notch trading experiences here: www.advfn.com
Azeez Mustapha
Market Analyst, Trading Signals Provider and Coach
NB: If you want
to receive permanently free winning Forex trading signals, please send me an
email titled: “A Request for Free Trading Signals.”
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