Author: Alexander Elder
|The New Trading for a Living (2014) gives useful tips and tricks about stocks and trading for beginners. Moreover, the author being a professional trader and a teacher of traders guides us on how we can make money keeping in mind the risk management and tactics in trading.|
The book The New Trading for a Living is one of the best books for those who are interested in stocks and trading. It is written by Dr. Alexander Elder who is a professional trader and also a teacher of traders.
We all make money by legal means as we are all obsessed with the idea of making money but we don’t know how to do it. We hesitate while investing our money considering frauds and risks, we all have heard about trading and we know all of the people around us who are earning a lot by trading. It’s obvious that we can’t become a pro at trading overnight. We need guidance for it.
In this book, the author has guided the readers on how they can start making money through trading and become successful. All it requires is knowledge, discipline, and focus. The book adds fresh studies and approaches for the modern trader, bringing time-tested concepts into line with today’s fast-moving markets.
The New Trading for a Living Key Points
Find a broker that charges less
The first tip that the author gives to beginners is that they should find a broker that charges less as a commission. This is because in the beginning we don’t have a lot of money to invest and it’s always safe to invest a small amount. Moreover, there are online brokers that we have signed up with in order to get started with trading. So, brokers take a commission for every trade that we make.
So here, another tip is that you should keep your trading to a minimum in the starting so that the commissions will not eat up your profit. Move slowly and play safe.
Here we can understand it better through this example.
Consider investing $10,000 over the course of a year and making four trades per week, which isn’t much. You pay $40 every week in commissions at $10 per trade! If you do this for 50 weeks a year, you’ll end up paying $2000 in commissions, or 20% of your total trading capital!
Control your emotions
The second and the most important thing in trading is to control your emotions. Nobody literally nobody knows about the stock routes. Even the most seasoned investors have no idea where the stock is headed, and neither do you. If you rely on your emotional reaction to determine whether things are going well for you or not, you are a prime candidate for a financial setback.
Moreover, we need to analyze the behavior of the participants According to the author, there are two types of behavior: bulls and bears. Bulls emphasize the value of prices going up while bears emphasize the value of prices going down. Making a good decision is feasible only if the trader is willing to do the necessary testing. A highly competitive market indicates that there is a high price fluctuation, and you ought to distance yourself from such an environment.
Besides this, you’ll start to gamble if you put emotions into trading. When you can’t resist the impulse to trade, or when you think “that one stock is going to go off,” and you let your trades control your emotions, you’re trading like a gambler. But trading is just a way to generate money, and you can’t stress over it.
2% and 6% rule in trading
The author has shared the two rules in his book The New Trading for a Living in order to minimize your risks and losses.
Firstly, the 2% rule suggests we set a stop loss while investing. The rule states that you should never risk more than 2% of your trading capital on a single trade. You can buy 1000 shares if you have $100,000 to invest and buy a stock for $50 with a stop loss of $48. It means that the stock is automatically sold if it falls to $48. Your maximum loss is 2% of your total investment.
On the other hand, the 6% rule adds to the 2% rule by declaring that you can’t make any new transactions if your total losses + open risks in any given month surpass 6% of your total capital.
Let’s say you’ve already lost $2,000 this month and have four more deals open, each with a $1,000 loss potential. That works out to $6,000, which implies you shouldn’t make any new deals until the end of the month to ensure you don’t lose more than 6% of your entire capital if the other four trades also go bad.
Who would I recommend The New Trading for a Living book to?
The book The New Trading for a Living is highly recommended to those who are interested in trading and need guidance. And people who are obsessed with the idea of making legally while sitting at home. Moreover, anyone who has already invested but wants to learn new strategies and tips to play smarter in trading needs to read this book.