Sunday, January 20, 2013

"Entries & Exits"

 Just before Christmas I communicated with Dr. Alexander Elder regarding his first book "Trading for a Living". He said he will send me a copy of his book "Come Into My Trading Room". It has not arrived yet, but in the meantime I bought "Entries and Exits" and found it to be a good addition to my library of trading books.

In "Entries & Exits" Dr. Elder presents stories of the traders that he has come across in the course of the trading camps that he runs around the world. There are short chapters on 16 different traders. Most of them are semi-professional traders, at least at the time of the writing of the book in 2006.
The book has many color charts of the traders winners and losing trades. The traders give their rationale for putting on the trades and for getting out of the trades, whether winners or losers, and then Dr. Elder gives a short critique of each trade.

There are a variety of trading styles presented. For the most part I found the traders to be more short term focused than I like to trade. And most of them used mechanical trading systems that they had developed or that evolved from Dr. Elders teachings. Dr. Elder uses the MACD (Moving Average Convergence/Divergence) indicators that he developed along with his Force Index which measures the force of a move using volume and price as an input.

While most of the trades were short term, usually just a few days, the two traders that stand out in the book were William Doane and David Weiss. In particular Mr. Doane is a very long term trader. He looks at price charts in a variety of timeframes in order to locate the good investment/trading opportunities. I have found the long basing patterns to be very powerful patterns when trying to pick bottoms. The breakout to the upside can often be explosive as the sentiment of the market changes and as shorts are forced to cover. Myself all I look at is price and volume. I have found that when I look at the MACD and Force Index indicators they tell me the same things that I see by just looking at price and volume in different timeframes.

The trade advice in this book is of an intermediate level and is appropriate for anyone who wants to learn or reinforce the basics of market psychology and risk control. Which is the basis for successful trading and investing and is the basis for success in life for that matter!
A few charts follow. Some of the basing patterns discussed having taken place recently. The last two months have been a good time to trade although the last couple weeks have been dull as the market is in one of those in between times.
(I hope Dr. Elder did not forget to send the book he promised.)

A recap of some recent posts and good trades...

Is the dollar set to go down again??
Are interest rates set to rise? Still waiting!
And the RIMM story from some time ago....
Notice how volume tells the stories.

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