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THENEWTRADINGFORALIVINGPsychology - DisciplineTradingToolsandSystemsRiskControl - TradeManagementDr.AlexanderElderwww.elder.comwww.spiketrade.comWILEY


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ContentsPrefaceIntroduction1.Trading-- TheLastFrontier2.PsychologyIstheKey3.TheOddsagainstYouPART1: IndividualPsychology4.WhyTrade? 5.RealityversusFantasy6.Self-Destructiveness7. TradingPsychology8.TradingLessonsfromAA9.LosersAnonymous10.WinnersandLosersPART2: MassPsychology11.WhatIsPrice? 12. WhatIstheMarket? 13. TheTradingScene14.TheMarketCrowdandYou15.PsychologyofTrends16.ManagingversusForecastingPART3: ClassicalChartAnalysis17.Charting18.SupportandResistance19.TrendsandTradingRanges20.KangarooTailsPART4: ComputerizedTechnicalAnalysis21.ComputersinTrading22.MovingAverages23.MovingAverageConvergence-Divergence: MACDLinesandMACD-Histogram24. TheDirectionalSystem25.Oscillators


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26. Stochastic27.RelativeStrengthIndexPART5: VolumeandTime28.Volume29.Volume-BasedIndicators30. ForceIndex31.OpenInterest32.Time33.TradingTimeframesPART6: GeneralMarketIndicators34.TheNewHigh-- NewLowIndex35.Stocksabove50-DayMA36. OtherStockMarketIndicators37.ConsensusandCommitmentIndicatorsPART7: TradingSystems38.SystemTesting, PaperTrading, andtheThreeKeyDemandsforEveryTrade39.TripleScreenTradingSystem40.TheImpulseSystem41.ChannelTradingSystemsPART8: TradingVehicles42.Stocks43.ETFs44.Options45.CFDs46.Futures47.ForexPART9: RiskManagement48.EmotionsandProbabilities49.TheTwoMainRulesofRiskControl50.TheTwoPercentRule51.TheSixPercentRule52.AComebackfromaDrawdownPART10: PracticalDetails53.HowtoSetProfitTargets:"Sufficient"IsthePowerWord54.HowtoSetStops: SayNotoWishfulThinking55.IsThisanA-Trade?


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56. ScanningforPossibleTradesPART11: GoodRecord-Keeping57. YourDailyHomework58.CreatingandScoringTradePlans59.TradeJournalCONCLUSION: AJourneywithoutanEnd: HowtoContinueLearning


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PrefaceTradingforaLivingwaspublishedin1993andbecameaninternationalbestseller.Itremainsatthetopofmanyreadinglists, asfriendsrecommendittofriendsandtradingfirmsgiveittotheirnewhires.Alltheseyears, IresistedrevisingmybookbecauseItrustedandlikeditsinternallogic.Itraded, took a trip, wroteotherbooks, andtaughtafewclasses.Now,21 yearslater, IagreedtoupdatemymostpopularbooksothatyoucanbenefitfromthenewtechnologiesaswellasthelessonsI'velearned.MylategreatfriendLouTaylor, towhomthisbookisdedicated, usedtojoke:"IfIgethalfapercentsmartereachyear, I'llbeageniusbythetimeIdie."Revisingmyveryfirstbookfeltlikerelivingmyyouthwiththebenefitofexperience.Inplanningthisupdate,IthoughtofabuildingcomplexinVienna,AustriacalledtheGasometer.Atitscorearemultistorystoragetanks,erectedbyAustrianbricklayersin1927.Whenmoderntechnologymadehugegascylindersobsolete,architectsconvertedthemintomodernapartments.Theypunchedwideopeningsinbrickwalls,creatingpanoramicviews,installedfloorsandelevators,andaddedglass-enclosedpenthouses. Iusedtostayinoneofthemandwantedmynewbooktofollowthatmodelofblendingoldcraftsmanshipwithnewtechnology.Beforeyoubeginreadingthisbook, askyourself: what'sthesinglemostimportantstepyoucantaketobecomeasuccessfultrader?Psychologyisimportant.SinceIwasactivelypracticingpsychiatrywhilewritingtheoriginalTradingforaLiving, itspsychologypartstoodthetestoftimeandIchangeditverylittleinthisnewedition.Marketanalysisisveryimportant-- butrememberthatwhenwelookatachart, wedealwithonlyfivepiecesofdata-- theopen, thehigh, thelow, thecloseandvolume.Pilingupmassesofindicatorsandpatternsontopofthosefivevaluesonlyincreasesconfusion.Lessisoftenmore.Ifyou'vereadTradingforaLiving, you'llseethatI'vereducedthenumberoftechnicalchaptersandmovedsomeofthemintoadownloadableaddendum.Ontheotherhand, Iadded


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severalnewchaptersthatfocusonnewtools, notablytheImpulsesystem.Ialsoaddedasectiononstops, profittargetsandotherpracticaldetails.Moneymanagementisextremelyimportantbecausefinancialmarketsarehotbedsofrisk.Thatwastheweakestpartoftheoriginalbook, andIcompletelyrewroteit.Oneofmanytoolsyou'lldiscoverwillbetheIronTriangleofriskcontrol.Psychology, tradingtactics, andmoneymanagementarethethreepillarsofsuccess, butthereisthefourthfactorthattiesthemtogether.Thatfactor-- whichintegratesallothers-- isrecord-keeping. Keepinggoodrecordswillenableyoutolearnfromyourexperiences.It'llhelpyoubreakoutoftheviciouscircleofsmallgainsandbiglosses, runninglikeasquirrelinabarrel, sweatingandstressedbutnevergettinganywhere.Keepinggoodrecordswillmakeyouyourownteacherandabettertrader.I'llshowyouseveraltypesofrecordsyouneedtokeepandwillshareseveralofmytradediaries.Ifyou'reanewreader, welcometothejourney.Ifyou'vealreadyreadTradingforaLiving, Ihopeyou'llfindthisnewbooktwodecadessmarterthanthefirst.Dr.AlexanderElderNewYork-- Vermont,2014


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Introduction1.Trading-- TheLastFrontierYoucanbefree.Youcanliveandworkanywhereintheworld.Youcanbeindependentfromroutineandnotanswertoanybody.Thisisthelifeofasuccessfultrader.Manyaspiretoitbutfewsucceed.Anamateurlooksataquotescreenandseesmillionsofdollarssparkleinfrontofhisface.Hereachesforthemoney-- andloses.Hereachesagain-- andlosesmore.Traderslosebecausethegameishard, oroutofignorance, orfromlackofdiscipline.Ifanyoftheseailyou, Iwrotethisbookforyou.HowIBegantoTradeInthesummerof1976, IdrovefromNewYorktoCalifornia.Itookalongafewbooksonpsychiatry(Iwasafirst-yearpsychiatricresident), severalhistories, andputapaperbackcopyofEngel'sHowtoBuyStocksintothetrunkofmyoldDodge.LittledidIknowthatadog-earedpaperback, borrowedfromalawyerfriend, wouldinduetimechangethecourseofmylife.Thatfriend, by the way, hadaperfectreversegoldentouch-- anyinvestmenthetouchedwentunderwater.Butthat'sanotherstory.IgulpeddowntheEngelbookincampgroundsacrossAmerica, finishingitonaPacificbeachinLaJolla.Ihadknownnothingaboutthestockmarket, andtheideaofmakingmoneybythinkinggrippedme.IgrewupintheSovietUnioninthedayswhenitwas, inthewordsofaformerU.S.president,"anevilempire."IhatedtheSovietsystemandwantedtogetout, butemigrationwasforbidden.Ienteredcollegeat16, graduatedmedicalschoolat22, completedmyresidency, andthentookajobasaship'sdoctor.NowIcouldbreakfree!IjumpedtheSovietshipinAbidjan, IvoryCoast.IrantotheU.S.Embassythroughthecloggeddustystreetsofan