Wednesday, May 23, 2007

Book Review: Come Into My Trading Room: A Complete Guide to Trading

Wow. I cannot believe how much I enjoyed this book. Before I detail how great this book is, I think it is important to note the type of person I am. I am a college student hungry to learn how to maximize my investment account values and overall net worth. I also get very excited learning about new investment strategies and vehicles. If you match these characteristics, I encourage you to finish reading this post and start reading Dr. Alexander Elder’s Come Into My Trading Room.

Overview:
So I definitely took three full pages of typed notes and created a whole Excel workbook with four worksheets all in an effort to better replicate Elder’s strategies. I do not consider myself to be a big note taker, so be prepared to get a lot from this book. The book is basically divided into three parts: characteristics of a trader and an introduction to the trading game, money management, and technical analysis techniques.

Personal Takeaways:
Elder details the typical make-up of a trader and the different environments traders operate in. He explains that there no such thing as a typical trader, but often times successful traders have muted emotions, above-average mental math skills, patience, and a drive to make a lot of money. If you feel you meet the mold then Elder encourages the reader to read on as he describes the types of markets, where to trade, and the time frames one should trade. Once you select your ideal trader make-up you are ready to learn about technical analysis and making money on the psychology of investing.

The technical analysis section is certainly provides the deepest content by informing readers about indicators and oscillators as well as offering strategies for trading once readers understand the basics. I could really go on forever, but I will just give you a taste of what Elder offers. Elder suggest that before trading do the following: identify your favorite time frame and move to the next broad frame (if you like weekly trading, move to monthly charts) and use the indicators to locate a trend, move back to the intermediate time frame and wait for an entry point based on your oscillators, set your profit target and exit strategy, and set what you are willing to loss on the trade by setting a stop.

The final section discusses money management. The core of this section highlights the importance of sticking to your main goal of maximizing your account value. Elder preaches that an individual should never risk more than two percent of his/her account value on a trade and never have more than six percent of the account value at risk during a given month. Traders should also keep diligent records helping traders notice where they are succeeding and which strategies need to be modified.

Recommendation:
I recommend investors interested in active portfolio management seriously consider reading this book with pen and notebook. The book has help diversify my investment strategy and I am eager to use more technical analysis in my quest for wealth.

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