April 10, 2012 (Last updated on May 21, 2012)

Ive read a lot of positive reviews of a rather old trading book by a psychiatrist and trader Alexander Elder called Trading for a Living . Its mentioned in a praising manner in Brandts Diary of a Professional Commodity Trader and remains quite a popular book on Amazon. Naturally, Ive decided to fill this gap in my trading education and read Elders first book.

The first thing that impressed me negatively was the price more than $40 for a Kindle version of a book, which is almost 20 years old, is just too much in my opinion. Such a high price raised my expectations regarding the books content but, admitting the fact that its a good book, I must say that the abundance of the outdated information turned out to be a huge drawback.

So what will you learn from this book? Quite a lot in terms of the general trading psychology and market behavior, something on money management and technical indicators, and almost nothing on modern Forex trading techniques. The author of Trading for a Living makes the following points in the book:

• Psychology is the key to understanding of how the markets work and to explaining the behavior of the crowds of bulls and bears.
• Trading is a minus-sum game contrary to zero-sum. which many traders prefer to believe in. It means that your trading strategy have to beat the commission, spreads and slippage of a broker and still have an edge to be profitable.
• Trading is hard and difficult. Theres no easy money in financial markets:

The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth.

While I didnt like the price paid for this book, I cant say that its a useless read. If you can borrow one from your friend, its definitely worth your time reading it. I would like to point out the following advantages of Trading for a Living:

• The parts on psychology are perfect. Elder is a good psychiatrist and he manages to capture and explain the psychological part of financial trading very well.
• The author speaks the truth about losing, winning, failures and success. Trading is difficult but is viewed as some El Dorado by the newbie traders.
• If you wonder how the basic market indicators work, this book will serve an excellent explanation to them.
• The book will also teach you some complete trading system that can be adjusted to almost any traders needs and almost any market.
• The book is written in a simple language and doesnt require much of the previous trading experience for understanding.

Despite the mentioned advantages, this book isnt worth its money, in my opinion. Thats because there are few but strong disadvantages in it:

• The biggest disadvantage is that it is very very outdated. It was published in 1993 but it took the author two and a half year to write it, so its about 20 years old. To help you understand how old it is, I just mention that the author uses two pages of text to persuade a reader to use computers in technical analysis.
• It has little to do with the Forex market but thats not the authors fault. OTC trading wasnt that popular in early 1990s, but the closest thing to Forex youll read about will be the currency futures market, which gets only two or three mentions in the book.
• Alexander Elder looks to be strongly biased against the automated trading systems and says that they dont work, but, as we know, high-frequency trading is very profitable to many institutions and HFT is possible only using the automated trading systems.
• There are two important factual errors that caught my eye in the book. The first one is in the Trading Rules part of the Trendlines chapter: Steep trendlines precede sharp breaks. If a trendline is steeper than 45 degrees, place your stop right at the trendline and adjust it daily. Obviously, measuring the absolute angles in degrees doesnt make any sense in technical analysis as the time and price scales are independent and can be zoomed in and out separately; thus any angle can be produced for a trendline simply by scrolling the scales. The second one is in the Rectangles part of the Chart Patterns chapter: The maximum target is obtained by taking the length of the rectangle and projecting it vertically from the broken wall in the direction of the breakout. Adding time to price makes no sense its like using your body temperature to calculate stop-loss .

It seems to be all that I wanted to tell you about the book Trading for a Living by Alexander Elder. If you can borrow one from a friend or buy a used one for $10-$20, go ahead and do it. Spending its full current price is a bad trade. Avoid bad trades :-).

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