Alexander Elder is a professional trader, a teacher and an author. He wrote such bestsellers as “Trading for a Living”, “Come into My Trading Room: A Complete Guide to Trading” and “Entries & Exits: Visits to 16 Trading Rooms”. He is also the man behind the Elder Impulse System indicator.
In his books, Alexander shares his wisdom that comes from years of trading, but also from his education. Elder is a practicing doctor and he worked as a psychiatrist in New York City. It gave him great insights in the psychology of trading. Let’s have a look at some of Alexander’s quotes from his books and see how they can be of use for novice traders.
“When a beginner wins, he feels brilliant and invincible. Then he takes wild risk and loses everything.”
“It is hard enough to know what the market is going to do; if you don’t know what you are going to do, the game is lost.”
What Elder means by these phrases is that traders need to learn to act rationally, without making impulsive decisions. Quite often novice traders rush into trading without thinking it through or realizing the risks. They open deals quickly and do not analyze the market. A random in-the-money deal makes them believe that they can trade based on guessing. They take higher risks which leads to losses.
Executing orders may feel good, especially if they turn into in-the-money deals, but one should not get carried away. A balanced and rational approach is very important for any trader, but novice traders need to spend more time planning their deals and realize the responsibility that they have over managing their risks.
“The market does not know you exist. You can do nothing to influence it. You can only control your behavior.”
In his trading career, Alexander Elder had many suссesses and many failures. One thing that he knows is that a trader’s psychology is the key to improvement. Getting angry at the market and revenge trading is a shortcut to losses. Instead, try to accept the losses that come your way and learn from your past experience. By the way, Elder is a big supporter of keeping a trading journal. It might be helpful on the way to improving your trading approach.
“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.”
This quote sums up the approach to trading that novice traders may strive for. Sound individual psychology will help manage the rollercoaster of emotions that one may feel while trading. A logical trading system is a trading plan, carefully considered by the trader, who sticks to it no matter what. A money management strategy is a combination of the previous two and additional measures like a money limit for deals and a set Stop Loss level for trades.
You may remember these quotes for the next time you are about to trade. They might help you put your actions into perspective and allow you to make better-informed decisions.
