Dr. Alexander Elder - Come Into My Trading Room

Review of Dr. Alexander Elder's Trading Guide

This book is the follow-up to Trading for a Living, which is very popular among futures traders. It is important to note that the author is a professional trader and a practicing psychiatrist. Obviously, he focuses on the psychology of trading and the mental reasons why traders either thrive or they are habitual losers. This book covers many of the same topics as his prior book, but his trading system has some revisions and his coverage of the psychology of trading has expanded, and is always worthwhile reading.

Mind Method and Money

Like many books on trading, the author chooses to cover trading in both futures and stocks. In reality - trading is trading. It doesn’t matter what you trade, most of the same trading principles apply. You just need to get a better feel for the unique characteristics of each market.

The title Come Into My Trading Room summarizes what the book is all about. Dr. Elder is a professional trader and he explains the trading system that he uses and the money management principles that are necessary to succeed in trading. Many people buy trading books solely for a revelation of the latest and greatest trading system. However, I believe that his discussion of the mental aspects of trading may be the most important information in the book.

Psychology of Trading

According to the author, many traders fail because they don’t follow some simple rules of trading. Many are in it for the excitement, which is a recipe for disaster.

They will overtrade or they are under-capitalized and they don’t respect the risks involved.

Having analyzed many amateur and professional traders, I think he has a good idea on what makes traders tick. Dr. Elder gives a good summary of the characteristics of winning traders and losing traders as well as several real-world examples.

He also explains the progression from novice trader to professional trader. However, most will never achieve that level - the reasons why are explained throughout the book.

I like to see authors that actual trade for a living and they are successful at it. Many authors write about trading commodities and futures and have little experience or success in trading. The more I trade, the more I realize the importance of the mental aspect of trading. Dr. Elder is considered one of the experts in this area and his education and advice in this book might help many would-be and struggling traders.

New Trading Methods

I was curious before I started reading this book to see if he would mention a new trading system – surely he couldn’t describe the same system as he did in his last book. Well, he did. I have to say I was a little disappointed initially, but more satisfied by the end of the book. I am always looking for new strategies, systems, techniques and insight on trading from successful traders – mainly in commodities and futures. The author gives sufficient reasoning on why he uses the same system.

Dr. Elder developed his trading system many years ago and still trades the same basic system – Triple Screen.

In this book, he describes the system and some of the modification he made to improve it. I like the fact that he developed a system that works and he sticks with it, while fine-tuning it along the way. Better yet, he claims this is what he uses to trade and he isn’t withholding any “secrets” on his methods.

I’m sure some readers were disappointed in this book as they were looking for the latest and greatest trading system. However, I’m sure a good amount of those people are not consistently successful in trading and they continually jump from one system to another looking for the Holy Grail. Trading has more to do with consistency. Why would you abandon something that works? The fact may be that some people can’t get any system to work. After reading his first book, I incorporated a version of Dr. Elder’s Triple Screen trading technique in my trading and it has worked quite well.

Triple Screen Trading System

The Triple Screen System uses a longer-term trend following technique and a shorter-term overbought/oversold indicator to time the trades. In essence, you will use a weekly chart to establish the direction of the trend – you should only take trades in this direction. Next, you use a daily chart where you will use an oscillator to give you overbought and oversold readings. Then, you can use a 60-minute chart to buy or sell on breakouts in the direction of the overall trend.

The good part about this system is that you can use any timeframes that you like to suit your trading style. The author recommends spreading out the timeframe by a factor of five.

The theory on the whole system is to trade in the direction of the trend and wait for pullbacks within the trend. Then, you enter the trade as the trend resumes. He also discusses using moving averages and channels to find optimum entry and exit areas. You still have to do a lot of work with this system to find and manage the trades.

No legitimate trading book would be complete without discussing risk and managing trades. I think he put much more emphasis on risk in this book. His 2 percent and 6 percent rule is a simple, yet sound money management plan. Record keeping of your trades is also a priority in his mind and I couldn’t agree more. You can learn a great deal from the history of your trades and many traders don’t keep records because they are lazy or their egos won’t allow them.

Review Regularly

Whether you read Dr. Elder’s previous book or not, Come Into My Trading Room is an educational book for futures, commodities, and stock traders. It basically walks you through the steps that are necessary to become a successful trader. The author also gives you a good system to examine and possibly use in your own trading. Also, do not overlook the importance of the mental side of trading. This applies to novice traders and struggling traders. This is a trading book to keep on your bookshelf and review periodically to keep your trading on track.