To Trade or Not to Trade: A Beginner’s Guide
2nd expanded edition
Elder.com e-book Series
Dr. Alexander Elder
Copyright Dr. Alexander Elder 2011-2012
Published by elder.com at Smashwords
ISBN 978-1-4524-5509-9
License Notes
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DISCLAIMER OF WARRANTY: Although the author has used his best efforts in preparing this book, he makes no representations or warranties in respect to the accuracy or completeness of the contents. The advice and strategies contained herein may not be appropriate for your situation. You should consult with a professional where appropriate. The author shall not be responsible for any loss.
Last revised: March 29, 2012
Books by Dr. Alexander Elder
Trading for a Living
Study Guide for Trading for a Living
Rubles to Dollars
Come into My Trading Room
Study Guide for Come into My Trading Room
Straying from the Flock
Entries & Exits: Visits to 16 Trading Rooms
Study Guide for Entries & Exits
The New Sell & Sell Short (with Study Guide)
Two Roads Diverged: Trading Divergences (e-book)
Dedication
To the memory of Michael S. Hart (1947 – 2011), the man who invented e-books, founded Project Gutenberg, and died while I was working on my first e-book.
Is it possible to trade for a living?
Can anyone become a successful trader?
Method: Trading Rules for Beginners
Mind the gap between price and value
Going long, selling short, or spreading
Discretionary and systematic trading
Money Management for Beginners
The three essential numbers for every trade
The 2% Rule – risk control for every trade
The 6% Rule – protect your account
Trade sizing – the iron triangle of risk control
What account size is good for beginners?
Continuing education: books, software, etc.
To Trade or Not to Trade: A Beginner’s Guide
2nd expanded edition
The market attracts us with its promise of riches and freedom. In the excitement of entering a new arena many newcomers forget to prepare for its tough challenges. Inexperienced traders keep making serious mistakes and getting hurt.
I once ran into a group of Japanese tourists near the top of a ski mountain in New Zealand. They flew in, bought the best gear, and managed to take a lift to the top. There they huddled in fear: they had not taken skiing lessons and had no idea how to get back down to the base. Later in the evening I had a drink with a surgeon at the base who ended up treating some of their injuries.
I want you to get started in the right way and trade in a safe and intelligent manner. Also – there are some people who should never trade; this book will help them recognize that and stay out of trouble. After writing several bestsellers for advanced traders, I felt I owed this one to beginners.
The chapters are brief and each begins with ‘In a nutshell’ – a one-line summary. Some chapters include referrals to additional sources of information.
Let’s begin with some basic questions, such as ‘can anyone become a successful trader?’ and ‘what do you need to succeed?’ If these short chapters make you feel energized, then keep on reading: we’ll have a lot of ground to cover. On the other hand, after reading them you may decide that trading is not for you, at least not at this time. That too would be a good decision if it saves you from frustration and losses.
Success in trading is based on three Ms: Mind (psychology), Method (tactics), and Money (risk management). We’ll dedicate a section to each area. In the final section, we will address such practical topics as record-keeping, finding a broker, and continuing education. This may be your first trading book, but it certainly should not be your last!
What this book is not: it’s not an instructional manual that teaches one specific method. I’ll give you the essential basic rules that will work with any method. Along the way, you’ll see several suggestions on how to find a method that’s right for you.
Free updates & the honor code
I put my key rules for beginners into this book, but may have overlooked something. I plan to update this book in the future and send those updates to all purchasers at no charge. If you bought this book from Elder.com, we will automatically send you an update. If you bought it elsewhere, please let us know, and we will put you on the list for future updates as well. We will keep your email in the strictest confidence.
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