Study Guide for The New Trading for a Living E-Book

Alexander Elder

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Wiley Trading Series
• Sprache: Englisch

Seitenzahl: 149

Veröffentlichungsjahr: 2014

Beschreibung

Test your trading knowledge and skills--without risking any money You may read the best trading book, but how much of that knowledge will you retain a week later? This is why you need this Study Guide for The New Trading for a Living. It'll give you a firmer grasp of the essential trading rules and skills. This Study Guide, based on the bestselling trading book of all time, was created by its author to help you master the key points of his classic book. The Study Guide's 170 multiple-choice questions are divided into 11 chapters, each with its own rating scale. They cover the entire range of trading topics, from psychology to system design, from risk management to becoming an organized trader. Each question is linked to a specific chapter in the main book, while the Answers section functions like a mini-textbook. It doesn't just tell you that A is right or B is wrong--it provides extensive comments on both the correct and incorrect answers. This Study Guide also contains 17 charts that challenge you to recognize various trading signals and patterns. Everything is designed to help you become a better trader. Consider getting two books as a package--the Study Guide and The New Trading for a Living. They're designed to work together as a unique educational tool. The Study Guide for The New Trading for a Living is a valuable resource for any trader who wants to achieve sustainable market success.

Leseprobe

STUDY GUIDE FOR THE NEW TRADING FOR A LLIVING

The Wiley Trading series features books by traders who have survived the market’s ever-changing environment and have prospered—some by reinventing systems, others by getting back to basics. Whether you are a novice trader, professional or someone in-between, these books will deliver the advice and strategies you need to prosper today and in the future. For more on this series, visit our website at www.WileyTrading.com.

Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, Australia and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers’ professional and personal knowledge and understanding.

    

STUDY GUIDE FOR THE NEW TRADING FOR A LIVING

Psychology • Discipline Trading Tools and Systems Risk Control • Trade Management

Dr. Alexander Elder

www.elder.com

www.spiketrade.com

Cover design: Paul DiNovo

Copyright © 2014 by by Dr. Alexander Elder. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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Library of Congress Cataloging-in-Publication Data:ISBN 978-1-118-46745-9 (Paperback) ISBN 978-1-118-98470-3 (ebk) ISBN 978-1-118-98471-0 (ebk)

CONTENTS

ABOUT THIS STUDY GUIDE

PART I: QUESTIONS RATING SCALES

Introduction

ONE: Individual Psychology

TWO: Mass Psychology

THREE: Classical Chart Analysis

FOUR: Computerized Technical Analysis

FIVE: Volume and Time

SIX: General Market Indicators

SEVEN: Trading Systems

EIGHT: Trading Vehicles

Note

NINE: Risk Management

TEN: Practical Details

ELEVEN: Good Record-Keeping

PART II: ANSWERS AND COMMENTS

Introduction

Rating Yourself

ONE: Individual Psychology

Rating Yourself

Recommended Reading

TWO: Mass Psychology

Rating Yourself

Recommended Reading

THREE: Classical Chart Analysis

Rating Yourself

Recommended Reading

FOUR: Computerized Technical Analysis

Rating Yourself

Recommended Reading

FIVE: Volume and Time

Rating Yourself

Recommended Reading

SIX: General Market Indicators

Rating Yourself

Recommended Reading

SEVEN: Trading Systems

Rating Yourself

Recommended Reading

EIGHT: Trading Vehicles

Rating Yourself

NINE: Risk Management

Rating Yourself

Recommended Reading

TEN: Practical Details

Rating Yourself

ELEVEN: Good Record-Keeping

Rating Yourself

Afterword

Sources

About the Author

End User License Agreement

List of Illustrations

THREE

FIGURE 3.4 Medtronic, Inc. (MDT) weekly chart. (Chart by Stockcharts.com).

FIGURE 3.8 Walter Energy Inc. (WLT) daily. (Chart by Stockcharts.com).

FIGURE 3.10 JetBlue Airways Corp. (JBLU) daily. (Chart by Stockcharts.com).

FIGURE 3.12 Boeing Co. (BA) daily. (Chart by Stockcharts.com).

FOUR

FIGURE 4.7 Williams-Sonoma Inc. (WSM) daily, 13-day EMA. (Chart by Stockcharts.com).

FIGURE 4.8 BlackBerry Limited (BBRY) weekly, 13-week EMA. (Chart by Stockcharts.com).

FIGURE 4.11 DR Horton Inc. (DHI) daily, 26-day EMA and 12-26-9 MACD. (Chart by Stockcharts.com).

FIGURE 4.14 Alexco Resource Corporation (AXU) with 22-day EMA and a 13-day Directional System (green + DI, red – DI, black ADX). (Chart by Stockcharts.com).

FIGURE 4.18 Leapfrog Enterprises Inc. (LF) with 26-day EMA and 7/3 Slow Stochastic. (Chart by Stockcharts.com).

FIGURE 4.20 Tiffany & Co. (TIF) with 26-day EMA and 13-day RSI. (Chart by Stockcharts.com).

FIVE

FIGURE 5.3 Capstone Turbine Corp. (CPST) with 26-day EMA and daily volume. (Chart by Stockcharts.com).

FIGURE 5.13 Scorpio Tankers, Inc. (STNG) with 13-day EMA of price and a 2-day EMA of Force Index. (Chart by Stockcharts.com).

FIGURE 5.15 EMC Corp. (EMC) with 13-day EMA of price and a 13-day EMA of Force Index. (Chart by Stockcharts.com).

FIGURE 5.18 Molycorp, Inc. (MCP) with 13-day EMA of price and a 12-26-9 MACD-Histogram. (Chart by Stockcharts.com).

SIX

FIGURE 6.3 S&P 500 with a 22-day EMA, a New High–New Low Index, with a one year look-back period. (NH-NL data from Barchart.com, chart by TradeStation).

SEVEN

FIGURE 7.8 On the left: BBBY weekly chart with a 13-bar EMA and 12-26-9 MACD-Histogram. On the right: BBBY daily chart with a 13-bar EMA and 2-bar Force Index. (Chart by Stockcharts.com).

FIGURE 7.12 JCP daily with a 13-bar EMA, a 12-26-9 MACD-Histogram, and the Impulse system. (Chart by Stockcharts.com).

Guide

Cover

Table of Contents

Part One

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ABOUT THIS STUDY GUIDE

Experienced traders seem to glide through the markets, swinging into and out of trades. Their trading appears effortless, like downhill skiing on TV. The illusion of ease vanishes when you clamp on a pair of skis and discover the bumps on the slope. If you want to improve your trading skills, you have to work, study, and do your homework.

I created this Study Guide to help you grow and succeed as a trader. It is based on my years of experience as a trader and teacher of traders. The more you study the markets and your reactions to them, the more likely you are to succeed. You need to learn more about yourself as well as the markets—good traders always learn.

Each question in this Guide is linked to a specific chapter in The New Trading for a Living—psychology, risk management, indicators, and so on. Write down your answers and compare them with those in the book. When answering chart-related questions, cover each chart with a sheet of paper and move it slowly from left to right to imitate the unfolding of market action. Practice dealing with the uncertainty of the markets while working with this Guide.

This Guide asks questions and provides answers—but reasonable people may dis­agree with some of them. Trading is partly a science and partly an art—partly objec­tive and partly subjective. Let this Guide challenge you to think deeper about the markets and your reactions to them.

I am grateful to Henry Abelman and Jeff Parker, both repeat winners of Spike Trade's Eagle Eye award, for reviewing all questions and answers. Carol Keegan Kayne did the final check for clarity and precision.

Thanks to my former professors and students at the universities in Estonia and the United States for providing many opportunities to teach and develop my educational style.Thanks to the members of SpikeTrade.com, who keep sending me trading-related questions. Posting answers to them week after week keeps me on my toes.

I hope this Guide helps you to sharpen your skills and to become a better, more confident trader.

Dr. Alexander ElderNewYork—Vermont, 2014

PART I

QUESTIONSANDRATING SCALES

     

Introduction

To win in trading, you must outperform masses of competitors. The majority must lose in order to pay those who win. To become a successful trader, you must beat the odds against you. You must learn to think and act differently from the market crowd.

The New Trading for a Living contains several unorthodox trading ideas. The aim of this Introduction is to pause at the beginning of the journey and to see whether you are in tune with some of the unconventional thinking about trading.

Questions

Trial 1

Trial 2

Trial 3

Trial 4

Trial 5

1

2

3

4

5

6

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8

9

Correct answers

Question 0-1

Which of the following methods of making trading decisions can serve traders well in the long run?

Fundamental analysis

Inside information

Hunches and tips

Technical analysis

I and II

II and III

I and IV

III and IV

Question 0-2

Which of the following isn't needed for trading success?

Trading psychology

Analytic method

Connections with market insiders

Money management method

Question 0-3

The best approach to reading a book on trading is to

test all the ideas that interest you on your own market data.

incorporate all the ideas in your work.

not trust what you read—why would anyone share good trading ideas?

ask other traders whether the ideas in the book worked for them.

Question 0-4

Which of the following is not a major cause of trading losses?

Slippage

Commissions

Emotional trading

Theft

Question 0-5

Trader Jim and Trader John take the opposite sides of a trade. Both pay commissions, and both get hit with slippage. Trader Jim, the winner, collects $920, while Trader John, the loser, is out $1080. The result of this trade illustrates the fact that trading is a:

Zero-sum game

Positive expectations game

Random Walk

Minus-sum game

Question 0-6

You find a stock trading at $20 and plan to buy 100 shares. Your broker will charge a commission of $ 10. Which of the following statements is incorrect?

When dealing with thousands of dollars, don't quibble about $ 10.

You need to make 1% profit to avoid losing money on this trade.

Using 50% margin, you need to make more than 2% profit to avoid losing money on this trade.

Question 0-7

You place a market order to buy 100 shares of a rising stock that currently trades at $20. Your order gets filled at $20.08. Your slippage on the trade is

80 cents

$8

$16

$80

Question 0-8

The stock you bought in Question 7 rallied to $22. You expect the rally to continue but raise your stop to $21 to protect half of your paper profit. The stock sinks and hits your stop—you get filled at $20.88. Your slippage on this trade represents what percentage of your gross profit?

5 percent

10 percent

25 percent

50 percent

Question 0-9

In the trade described in Questions 7 and 8, the trading industry took what percentage of your gross gain?

25 percent

50 percent

75 percent

100 percent

ONE

Individual Psychology

Your greatest danger in trading comes from the person holding this book—you. Our emotions often tip the scale between winning and losing. If you can stay cool and make rational decisions, trading profits will follow.

A professional trader is calm and collected. He knows what he'll do if the market goes up, down, or sideways. On days when he is not sure, he stays out, patiently monitoring the market from the sidelines. A pro feels in control.

If you feel giddy with joy when the market goes your way but freeze in fear when it swings against you, your actions will be emotional and your account will suffer. When the mind becomes clouded by greed or fear, even the best trading systems fly out the window. The questions that follow are designed to help you focus on trading psychology.

Questions

Trial 1

Trial 2

Trial 3

Trial 4

Trial 5

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Correct answers

Question 1-1

A successful trader's attitude toward risk is usually one of

avoiding risk.

thriving on risk.

enjoying risky situations, even though losses hurt.

measuring each risk.

Question 1-2

The goal of a successful trader is to

become the best trader he can.

make more money than other traders.

buy things that will set him above other traders.

win respect of family and friends.

Question 1-3

A trader on a losing streak has lost 20 percent of his account. He would best be advised to

subscribe to a newsletter with a verified track record.

purchase a trading system with a history of profitability and low drawdowns.

stop trading until he has analyzed his losing trades and determined their causes.

continue to trade because the laws of probability indicate a likely turn in his favor.

Question 1-4

Having a large trading account is desirable for all of the following reasons except that

you can afford to lose more.

you can diversify among more markets.

you can trade different systems.

your expenses represent a smaller percentage of your account.

Question 1-5

Which two of the following statements about commercially sold trading systems are most accurate?

A track record provides confidence that a system will continue to perform well.

The fact that a system is sold by a prominent trader provides an extra margin of confidence.

Trading systems are designed to fit old data, and they self-destruct when markets change.

You can buy a system from a top analyst and lose money using it.

I and II

I and III

II and III

III and IV

Question 1-6

Which of the following is a key sign of a gambling attitude toward trading?

The inability to resist the urge to trade

Feeling elated when trades go well and ashamed after losing

Always reversing losing positions

A string of trading losses

I only

I and II

I, II, and III

I, II, III, and IV

Question 1-7

Within a year, all of the following occur in the life of a trader: he receives three traffic tickets, pays a penalty for filing his taxes late, gets two reprimands for tardiness on his non-trading job, and his trading account is down 35 percent. Which of the following would be the best advice for this trader?

It's a hard life. Try to make a lot of money trading, quit your job, and hire someone to handle your finances.

Traffic tickets have nothing to do with trading—don't worry about them.

You're sabotaging yourself and need to work on changing yourself as a person.

Hang in there; it is hard to keep a job and trade at the same time.

Question 1-8

Pick two correct statements about trading psychology.

Your feelings impact your equity.

To win you have to be more intelligent than most traders.

Feeling elated after profitable trades reinforces good trading habits.

Fear and greed have a greater impact on your equity than a brilliant trading system.

I and II

II and III

III and IV

I and IV

Question 1-9

You've made a series of successful trades in recent months. Now is the time to

congratulate yourself and increase the size of your positions.

use fewer stops.

take a vacation.

realize that you have become a competent trader and can spend less time studying the markets.

I and II

II and IV

I and III

III and IV

Question 1-10

The main similarity between a losing trader and an alcoholic is: