From the Publisher

The trading bible for the new millennium

In Come Into My Trading Room, noted trader and author Dr. Alexander Elder returns to expand far beyond the three M's (Mind, Method, and Money) of his bestselling Trading for a Living. Shifting focus from technical analysis to the overall management of a trader's money, time, and strategy, Dr. Elder takes readers from the fundamentals to the secrets of being a successful trader—identifying new, little known indicators that can lead to huge profits.

Come Into My Trading Room educates the novice and fortifies the professional through expert advice and proven trading methodologies. This comprehensive trading guide provides a complete introduction to the essentials of successful trading; a fresh look at the three M's, including a proven, step-by-step money management strategy; and an in-depth look at organizing your trading time. Come Into My Trading Room reviews the basics of trading stocks, futures, and options as well as crucial psychological tactics for discipline and organization—with the goal of turning anyone into a complete and successful trader.

By showing traders how to combine the elements of mind, method, and money, Come Into My Trading Room gives readers the knowledge and insight to enter the market with confidence and exit with profits. Unparalleled depth and a wide range of coverage will keep all levels of traders engaged, informed, and returning to Come Into My Trading Room again and again.

Dr. Alexander Elder (New York, NY) is a professional trader, technical analysis expert, and practicingpsychiatrist. He is the founder of Financial Trading Inc., providing intensive trading camps to traders all over the world. Elder's first book Trading for a Living (Wiley: 0471592242) and the companion study guide have sold over 160,000 copies.

Product Details

• Table of Contents
• Read a Sample Chapter

Table of Contents

Read a Sample Chapter

Come Into My Trading Room

John Wiley & Sons

Chapter One

Trading is serious business, no less so than building a house or teaching calculus. Being smart and having good ideas is not enough for winning. You must understand the mechanics of the markets and the essential principles of analysis and risk control.

You need to learn the key facts and rules before entering your first trade. The first chapter of the Study Guide tests your knowledge of some of those concepts. Answer these eight questions and write down your answers. Go to the Answers section, check your responses, and then enter your grade for each answer in the first column of the spreadsheet. There are five columns to enable you to return at a later date, retake the test, compare your results, and measure your progress.

Question 1-Decision Making

Match the statements on the decision-making process with the type of trader.

1. A person hears a tip at a party and buys that stock in the morning.

2. A person hears a tip at a party and spends the next morning researching that stock and the industry group.

3. A person hears several people gossiping about a stock at a party and pulls it up on his computer with a view to selling it short.

4. A person sees a TV show about a famous investor and buys the stocks that he mentions.

5. Aperson reads a news release regarding disappointing earnings from a high-tech company and pulls up its chart the next day to see how it reacts to the report.

6. A person buys a stock after receiving a call from a relative working for a penny stock company who tells him of that firm's technological breakthrough that has not yet been disclosed to the public.

A. Investor

B. Trader

C. Gambler

Question 2-Efficient Market Theory

Which of the following statements regarding the efficient market theory are true and which are false?

1. All traders focus on maximizing profits and minimizing losses.

2. The outcome of any single trade is largely a matter of luck.

3. A trader whose account has increased after a year of active trading is very lucky.

4. Trading in a room with a group of people leads to more objective decisions.

5. Markets become more efficient when they become less volatile.

Question 3-Trading Choices

Match the following statements with the trading terms:

1. Finding these points is the hardest aspect of trading.

2. Buy when a rally accelerates, and sell when it starts losing speed.

3. These must be planned in advance; do not chase the markets.

4. This is the most often ignored aspect of trading.

5. Buy when a downside breakout starts pulling back up into the range, and liquidate within the range.

A. Countertrend trading

B. Entries

C. Money management

D. Momentum trading

E. Exits

Question 4-Stocks, Options, and Futures

Match the following statements with one or more of the trading vehicles.

1. The buyer must be right on the vehicle, price, and time.

2. This is a certificate of business ownership.

3. Money management skills are essential for success.

4. This is a contract for future delivery.

5. It's OK to buy cheap, but not OK to buy down.

A. Stocks

B. Futures

C. Options

Question 5-Barriers to Winning

Match each statement with one or more of the external barriers to winning.

1. They impact your account more than market trends.

2. They must be monitored so as not to exceed a small percentage of your account.

3. This is the distance between the price at which you place a market order and at which it is executed.

4. This is a meaningless percentage of your account.

5. This is an inevitable cost of entering markets.

A. Commissions

B. Slippage

C. Expenses

D. None

Question 6-Account Size

Five traders with similar levels of skill and all using stops enter the stock market. Which is likely to generate the highest percentage return?

1. $50,000 account; $5,000 maximum stop on any trade

2. $15,000 account; $1,500 maximum stop on any trade

3. $250,000 account; $50,000 maximum stop on any trade

4. $50,000 account; $1,000 maximum stop on any trade

5. $250,000 account; $5,000 maximum stop on any trade

Question 7-Market Data

Which of the following statements are true?

1. Real-time data is essential for timing entries and exits.

2. The more markets you follow, the more money you will make trading.

3. You must keep abreast of earnings reports for the stocks you follow.

4. Futures can sell for less than the cost of production.

5. Having 12 months' worth of daily charts makes weekly charts unnecessary.

6. Good software makes up for traders' inexperience.

A. 1 and 2

B. 2 and 3

C. 3 and 4

D. 4 and 5

E. 5 and 6

Question 8-Types of Analysis

Match each phrase with the types of analysis.

1. Studies economic supply and demand

2. Forecasts future prices

3. Studies crowd behavior

4. Can be fully automated

5. Serves as a basis of trading decisions

A. Fundamental analysis

B. Technical analysis

C. Both

D. Neither

(Continues...)

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