Alexander Elder: A Respected Trader and Educator Who Empowers Traders Worldwide

Alexander Elder, a prominent trader, author, and educator, has made a significant impact on the trading community through his expertise, insights, and educational contributions. With a background in psychiatry, Elder brings a unique perspective to the world of trading by emphasizing the psychological aspects of trading success. Let's explore the life and teachings of this influential figure in the trading world.

Born in Estonia in 1950, Alexander Elder moved to the United States as a young adult and pursued a career in medicine. He obtained a medical degree and worked as a psychiatrist, which provided him with a deep understanding of human behavior and emotions. Combining his medical background with his interest in financial markets, Elder embarked on a journey to become a successful trader.

Elder's trading approach revolves around the concept of "triple screen trading," which he introduced in his book, "Trading for a Living." This methodology emphasizes the importance of using multiple timeframes to analyze the market, ensuring a comprehensive understanding of the market's trends and dynamics. The triple screen trading approach helps traders make informed decisions by aligning the short-term, intermediate-term, and long-term trends.

Beyond technical analysis, Elder places significant emphasis on the psychological and emotional aspects of trading. He believes that successful trading requires not only a solid understanding of market dynamics but also self-discipline, emotional control, and a proper mindset. Elder's teachings emphasize the need for traders to master their emotions, manage risk effectively, and maintain a disciplined approach to trading.

Elder's contribution to trader education extends beyond his books. He is a highly regarded speaker and educator, conducting seminars and workshops worldwide. His ability to communicate complex trading concepts in a clear and practical manner has earned him a dedicated following among traders seeking to improve their skills and achieve consistent profitability. Through his teachings, Elder empowers traders to develop their own trading systems and find their unique edge in the markets.

One of Elder's notable books, "Come into My Trading Room," delves deeper into the psychological aspects of trading. In the book, he explores the importance of developing a trading plan, managing risk, and maintaining a disciplined approach. Elder provides valuable insights into the mindset required for successful trading, helping traders overcome common psychological pitfalls and biases that can hinder their performance.

Elder's teachings have resonated with traders worldwide, and his contributions have had a lasting impact on the trading community. His emphasis on the psychological aspects of trading has helped countless traders improve their decision-making processes, manage their emotions, and achieve consistent profitability. Through his books, seminars and workshops, Elder continues to inspire and educate traders, providing them with the tools and knowledge needed to navigate the complexities of the financial markets.

Beyond his accomplishments as a trader and educator, Elder is also an advocate for financial literacy and investor education. He believes that by empowering individuals with the necessary knowledge and skills, they can take control of their financial futures and make informed investment decisions.

Alexander Elder's expertise, insights, and dedication to trader education have solidified his place as a respected figure in the trading world. Through his emphasis on the psychological aspects of trading and his practical approach to market analysis, Elder has helped traders worldwide improve their trading skills and achieve their financial goals. His legacy as a trader, author, and educator continues to shape the way traders approach the markets, highlighting the importance of both technical analysis and psychological discipline in achieving long-term trading success.

Passive Investing - Is It Really So Difficult?

I have always struggled with the thoughts of passive investing versus active management of my portfolio.

Today, I came across a quote by Oscar Wilde:

"To do nothing at all is the most difficult thing in the world, the most difficult and the most intellectual."

I am pretty sure he didn't have investing in mind when he came up with this line. Nevertheless, it does seem applicable even when it comes to the field of investing.

Forever Portfolio?

Too often, we find ourselves trying to time the market to buy at the lowest lows and selling at the highest points. We screen through the entire universe of stocks to find a few stocks that meet our criteria, only to sell them a few weeks later when their price has risen by 10 to 20%. We are left with nothing to invest in and end up lowering our criteria to buy stocks that we would not originally buy or end up just sitting on a pile of cash.

Sometimes, we get caught up with all the hysteria that seems to surround us. People are talking about how much money they made within a few trades and we start to look at our own portfolios and wonder : "Is Buffet really right?"

Passive investing (if I can so term it) is really difficult. To buy and hold for the long term without tinkering about too much can be extremely difficult especially when we are constantly bombarded by all the noise and distraction of the crowds.

Sooner or later, we start to find it impossible to resist the urge to make that phone call to the broker or to simply click the button on our online brokerage accounts that reads "Confirm order".

I know many people will not agree with passive investing. Many people out there have claimed to have the ability to time markets to perfection such that they have been able to make spectacular gains that are not possible by a buy and hold strategy. Of course, there must be some selection bias as the losers will never reveal themselves. Only the winners get boasting rights after all.

On the other hand, we should not find excuses if we are simply too lazy to monitor and tweak our portfolio such that we term it as passive investing or the Warren Buffet style. I am sure even Warren Buffet tweaks his portfolio every now and then!

Symptoms of a compulsive investor

Here are a few symptoms that shows you are toeing the line and moving towards a gambler mentality versus an investor mentality. (Deep down inside, human beings all like a little wager)

1. You scan the newspapers, online forums and chatboxes for the latest tips on which stocks to buy. You follow the opinions of experts and get in and out of the market at rapid pace.

2. You buy a stock and only start to do your research on it after you have completed the order.

3. You buy a stock and start to think whether you should contra it off within the next 3 days.

4. You buy a stock and keep checking its stock price every hour, hoping to make a quick buck.

5. You sell a stock and hope that it drops to a certain point so that you can buy it again.

6. You don't know why you bought a stock.

7. You don't know why you sold a stock.

I am sure you have all experienced the "symptoms" once in a while in your lives.

Preventing the onset of the disease

Prevention is better than cure. I would like to suggest a few methods to cure you of this ailment if you do suffer from it. Of course, I do not take responsibility if you lose any money.

1. Don't read the newspapers, forums and chatboxes for your stock purchases or sales.

2. Don't make a trade when you are angry.

3. Don't talk to others about investing.

This 3 strategies ought to keep y0u from making compulsive buys and sells. I realised that when I read less about the stock market, I tend to make fewer trades. When I am angry, I try not to make investment decisions and sometimes, the decisions I make can be rash. When I talk to others about investing, it always gets me excited and I feel like making a trade right away. All these are based on my personal experience.

I am not saying that you should not actively manage your stock portfolio. What I am against is the compulsive urge to tweak your portfolio so often that it is almost akin to gambling. But with all the media influences we get, it is very difficult to sit down and do nothing.

Doing nothing is a very difficult thing indeed.

Is it Possible to Time the Market?

I have always been wondering how good my technical analysis skills are in timing the market.

However, I have come to realise that when I speak about timing the market, I actually have no standard definition to measure my success or failures at timing the market.

If I could put it simplistically, timing the market would mean being able to buy the stock at its lowest and selling at its highest. That is of course a good definition.

However, one faces the problem of the timeframe.

When I buy a stock at say $1.00 and sell it a month later for $1.10, I might be very happy at the profit that I have made which is quite close to 10% return on capital after subtracting the various admin fees and brokerage charges.

However, should the stock rise to $1.20 the next week, does that mean that my timing of the market has failed?

Or let's say that the stock drops to $0.90 the next week, does that on the other hand mean that I am successful at timing the market?

The problem I guess is the time frame. Because if I were to look at the stock price say 1 year later, the price might be up or down compared to my sell price and I would then determine my success on whether my SELL price is above or below the current price of the stock.

So when we say that we can time the market, what do we REALLY mean?

What is the timeframe we are looking at? How do we measure our successes? Do we really keep good records of our trades to see whether a buy and hold strategy might have earned us more money or does our active trading actually earn us more money?

What is Dow Theory and Why It Matters to You

What Dow Theory?

Charles Dow never wrote about any Dow Theory nor presented it as a trading system.

However, Dow Theory today serves as a theory on underlying stock prices and is very much a pillar of technical analysis. The theory was derived based on editorial articles that Charles Dow had wrote and it was subsequently called the "Dow Theory" by others who referred to his work.

Dow himself never spoke about any such theory. If anything, Dow was more a scholar than a speculator.

Dow Moves to New York City

Dow was born in a small town in Conneticut in 1851. He apparently held around twenty jobs before he found his passion in journalism. After certain life events, Dow decided that carrying out journalism at the Providence Journal was too small for him. He packed and moved to New York City with an old friend, Eddie Jones.

Together with Jones and a friend named Charles Milford Bergstrasser, they decided to go into a news distributing business. They called their company Dow, Jones and Co.

Perhaps the most lasting contribution to finance was the Dow Jones Average that was the first attempt by someone to create a sort of aggregate indicator of stock market trends. The Dow Jones Average is still what most people turn to if they want to find out how the market is doing today.

6 Basic Tenets of Dow Theory?

One of the assumptions of Dow Theory is that trends in stock prices, once under way, will always tend to persists until the market itself sends out a signal that these trends are about to be reversed. The 6 basic tenets of Dow Theory are as follows:

1. The market has three movements. A main movement( measured in years), medium movement (months to a year) and short swing (hours to a month). It can be said that these 3 movements can occur simultaneously, for example: "a daily short swing in a bearish medium movement under an overall bullish main movement."

2. Market Trends Have Three Phases. The accumulation phase, public participation phase and distribution phase. The accumulation phase is when investors who are in the "know" are buying stocks against general market opinion. The stock price does not change much in the accumulation phase. The publich participation phase is when this information becomes known and there is a rapid price surge. The distribution phase is when astute investors exit their holdings.

3. The Stock Market Discounts All News. The stock market price quickly adapts to any information that becomes available.

4. Stock Market Averages Confirm Each Other. When two averages move together, it confirms that the direction is correct. If two averages diverge, it means change is likely to come.

5. Trends are confirmed by Volume. Low volume trading does not make up a trend. Only high volume indicates a trend.

6. Trends exist until definitive signals prove they have ended. There are times when there are market noises and small reversals occur against the trend. This noises should be ignored and the trend should be given the benefit of the doubt. Difficulty lies in deciding which tools to use to decide whether the trend has ended.

Analysis of Dow Theory & Why It Matters to You

Till date, there has been no conclusive evidence on the profitability of using the Dow Theory. While studies remain inconclusive, some have have argued that Dow Theory produces excess risk adjusted returns compared to a simply buy and hold strategy.
Today, many chartists or technical analysts still consider Dow Theory's definition of a trend and its insistence on the study of historical price action of stocks as one of the pillars of technical analysis.

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To Trade or To Buy and Hold

After years in the stock market, I still can't really figure out whether it is better to trade stocks for the short term or to just buy and hold them for the long term.

I have heard both sides of the arguments, have read books like A Random Walk Down Wall Street, and I must say - I agree with both TAs and FAs.

But I guess I will just choose the method that works best in making money.

While a stock might rise from $1 to $1.20 in 1 month, the person who holds the stock for 1 month only stands to earn a maximum of $200 per lot of shares.

The person who trades on the down and up trends might however be able to earn more than $200. By going in and out of the same stock, his POTENTIAL to earn is much higher. The probability that he losses money is of course also much higher compared to just holding on to the stock.

So what I do is to have two portfolios: One for holding and one for trading.

I enjoy the best of both worlds. There are benefits of buying and holding and there are benefits of trading. By doing both at the same time, I enjoy both benefits.

In addition, trading provides a form of income. More income brings me to financial freedom much faster.

The tortoise might win at the end of the day but the hare leads most of the way.

I believe that people can combine both approaches to bring out the best of both FA and TA.

Formula 1 Singapore

So its the Formula 1 Race for Singapore again. The whole town is jam packed and everybody (well almost) are suddenly Formula 1 fans. People who don't usually watch the race are now catching it on TV. Now that's what I call good marketing by F1. People here can't really tell the difference between any of the race drivers. I am still abit surprised that the F1 fever is actually quite hot in Singapore.

I sold away Suntec REITs @ 1.08 on Friday as I felt that the price should hopefully drop further. Been monitoring a few stocks lately and have been thinking of trading the stock market a bit more actively since now I have time on my hands.

Have been reading some ebooks on trading lately. Hope to brush up my skills on trading especially in terms of the Mind, Method and Money. What struck me perhaps was the focus on money management and how much of each stock one should buy when trading. It never cross my mind that money management was such an important aspect of trading.

Adsense earnings have been pretty decent this past few days and if this keeps up, I think my broadband expenses can be covered by my monthly expenses pretty soon. I still think it is possible that there are people who earn more than 3 digit per day from online income. If one really puts in the effort, everything is possible.

Signing off,
Sleepless in Singapore on Sunday 1.31AM


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Trader or Investor

I bought 2 lots of NOL at $1.15 yesterday. Today, the price of NOL shot up to $1.34 and I sold it.

Was it right for me to sell? Only time will tell. But it seemed like too good a deal to miss. More than 10% gains in a single day.

So I guess you can call me a trader - investor. Investor because I keep some stocks for the long term. Trader because I do keep some stocks for the short term.

These are my current list of stocks:

1. First REIT
2. Ascott REIT
3. Suntec REIT
4. Pac Andes
5. Kingboard
6. Innotek
7. Unifood
8. NOL
9. China Aviation Oil
10. Hongguo

My Monthly Passive Income has hardly budged over the past month as I have not bought any income stocks. The $300 plus that I got in dividends for the Month of November will go to my Maybank iSaavy Account.

During this financial turmoil, I also have rebalanced my portfolio under my investment linked policy.

Equity markets (US, China, Europe, Emerging Markets) - 60%
Bonds, Fixed Income - 20%
Global Resources/Commodities - 20%

Hopefully this rebalancing of my portfolio will aid me in my financial freedom journey as my ILP now has over $20k in it.

Wanted to end one of my life policies but decided against it as its current surrender value is lower than all the installments I (and my parents) have paid for. My parents bought it for me when I was young and handed it over to me when I started work. While the current surrender value is very low (13k), the bonuses accumulated is close to 18k. By paying it off for another few more years, I should be able to break even and maybe surpass the installments that I have been paying for it. It is a life policy anyway so I will just treat it as part of my retirement plan.

During this period, I also increased my life insurance coverage and critical illness coverage.