The new trading for a living epub free download

If you allow your emotions to interfere with your trading, the battle is over. You are responsible for every trade that you make. A trade begins when you decide to enter the market and grids only when you decide to take your- self out.

Having a good trading system is not enough. Most traders with good systems wash out of the markets because psychologically they are not pre- pared to win. Markets evoke powerful greed for more gains and a great fear of losing what we've got. Those feelings cloud our perceptions of opportunities and dangers. Most amateurs feel like geniuses after a winning streak. It is exciting to believe that you are so good you can bend your own rules and succeed. That's when traders deviate from their rules and go into a self-destruct mode.

Traders gain some knowledge, they win, their emotions kick in, and they self-destruct. Most traders promptly give their "killings" back to the markets. The markets are full of rags to riches to rags stories. The hallmark of a suc- cessful trader is his ability to accumulate equity. You need to make trading as objective as possible. Keep a diary of all your trades with "before and after" charts, keep a spreadsheet listing all your trades, including commissions and slippage, and maintain very strict money management rules.

You may have to devote as much energy to analyzing yourself as you do to analyzing the markets. When I was learning how to trade, I read every book on trading psychol- ogy I could find. Many writers offered sensible advice.

Some stressed disci- pline: "You cannot let the markets sway you. Do not make decisions during trading hours. Plan a trade, and trade a plan. Change your plans when markets change. Others advised being open-minded, keeping in touch with other traders and soaking up fresh ideas. Each piece of advice seemed to make sense but contradicted other equally sensible advice. I kept reading, trading, and focusing on system development.

I also con- tinued to practice psychiatry. I never thought the two fields were con- nected-until I had a sudden insight. The idea that changed how I trade came from psychiatry. I also served as a consultant to a major drug rehabilitation program. Psychotherapy, medications, and expensive hospitals and clinics can sober up a drunk but seldom succeed in keeping him sober. Most addicts quickly relapse.

They have a much better chance to recover if they become active in Alcoholics Anonymous AA or other self-help groups. Once I realized that AA members were likely to stay sober and rebuild their lives, I became a big fan of Alcoholics Anonymous.

Now, if an alcoholic comes to me for treat- ment, I insist that he also go to AA. I tell him that to do otherwise would mean wasting our time and his money. One night, many years ago, I stopped by a friend's office on the way to a party at our department of psychiatry.

We had two hours before the party, and my friend, who was a recovering alcoholic, said: "Do you want to take in a movie or go to an AA meeting? I jumped at a chance to attend an AA meeting- it was a new experience. The meeting was held at a local YMCA. A dozen men and a few women sat on folding chairs in a plain room.

The meeting lasted an hour. I was amazed by what I heard - these people seemed to talk about my trading! They talked about alcohol, but as long as I substituted the word "loss" for "alcohol," most of what they said applied to me! My account equity was still swinging up and down in those days. Soon, the urge to drink overwhelms him again and he returns to the bottle.

He cannot resist his urge because he continues to feel and think like an alcoholic. Sobriety begins and ends inside a person's mind. Alcoholics Anonymous AA has a system for changing the way people think and feel about drinking.

AA members use a step program for changing their minds. These 12 steps, described in the book Twelve Steps and Twelve Traditions, refer to 12 stages of personal growth. Any member can get a sponsor - another AA member whom he can call for support when he feels the urge to drink. AA was founded in the s by two alcoholics - a doctor and a traveling salesman. They began meeting and helping each other stay sober.

They developed a system that worked so well, others began to join them. AA has only one goal - to help its members stay sober. It does no fund-raising, takes no political positions, and runs no promotional campaigns. AA keeps grow- ing thanks only to word of mouth.

It owes its success only to its effective- ness. The step program of AA is so effective that people with other prob- lems now use it. There are step groups for children of alcoholics, smok- ers, gamblers, and others. I have become convinced that traders can stop los- ing money in the markets if they apply the key principles of Alcoholics Anonymous to their trading. Denial A social drinker enjoys a cocktail or a glass of wine or beer but stops when he feels he's had enough.

An alcoholic's chemistry is different. Once an alcoholic takes a drink, he feels an urge to drink more, until he gets drunk. A drunk often says that he needs to cut down on alcohol, but he cannot admit that his drinking is out of control.

Most drunks deny that they are alco- holics. Try telling an alcoholic relative, friend, or employee that his drinking is out of control and damaging his life and you will run into a wall of denial. An alcoholic often says: "My boss fired me 'cause I was hung over and came in late. My wife took the kids and left 'cause she had no sense to begin with.

My landlord is trying to kick me out of the apartment 'cause I'm a little , behind on the rent. I'm gonna have to cut down on my drinking, and every- thing will be all right. He is about to lose the roof over his head.

His life is spinning out of control- but he keeps saying that he can cut down on his drinking. This is denial! Alcoholics deny their problems while their lives are falling apart. Most of them nurse the fantasy of being able to control their drinking. As long as an alcoholic believes that he can "control his drinking," he is headed downhill. Nothing will ever change, even if he gets a new job, a new wife, and a new landlord.

When they talk of reduc- ing drinking, they talk about managing the unmanageable. They are like a driver whose car spins out of control on a mountain road. When the car careens down a cliff, it is too late to promise to drive carefully. An alco- holic's life careens out of control while he denies he's an alcoholic. There is a starkparallel between an alcoholic and a trader whose account is being demolished by losses.

He keeps changing trading tactics, acting like an alcoholic who tries to solve his problem by switching from hard liquor to beer. A loser denies that he has lost control over his course in the market. Rock Bottom A drunk can begin his journey to recovery only after he admits that he is an alcoholic. He must see that alcohol controls his life and not the other way around.

Most drunks cannot accept this painful truth. They can face it only after they hit rock bottom. Some alcoholics hit rock bottom when they develop a life-threatening ill- ness. Others hit rock bottom after being rejected by their family or losing a job. An alcoholic needs to sink to a point so low, so deep down in the gutter, so unbearably painful that it finally penetrates his denial. The pain of hitting rock bottom feels intolerable. It makes an alcoholic see how deeply he has sunk.

This pain penetrates his denial. He sees a stark and simple choice-either turn his life around or die. Only then is an alcoholic ready to begin his journey to recovery. Profits make traders feel powerful and give them an emotional high. They try to get high again, put on reckless trades, and give back their profits. Most traders cannot stand the pain of a string of severe losses. They die as traders afrer hitting rock bottom and wash out of the markets.

The few survivors realize that the main trouble is not with their methods, the trouble is with their thinking. They can change and become successful traders. The First Step An alcoholic who wants to recover has to go through twelve steps - twelve stages of personal growth.

He needs to change how he thinks and feels, how he relates to himself and others. The first step of AA is the hardest. He must admit that his life has become unmanageable, that alcohol is stronger than he is. Most alcoholics cannot take that step, drop out, and go on to destroy their lives.

If alcohol is stronger than you, then you can never touch it again, not a sip for as long as you live. You have to give up drinking forever.

Most drunks do not want to give up that pleasure. They destroy their lives rather than take the first step of AA.

Only the pain of hitting rock bottom can supply the motivation to take that first step. One Day at a Time You have probably seen bumper stickers on cars that say "One day at a time" or "Easy does it.

Planning for life without alcohol can seem overwhelming. That's why AA encourages its members to live sober one day at a time. AA meet- tonight. Recovering alcoholics receive - and give others - invaluable support and fellowship at these meetings.

They are held at all hours, all over the world. Traders have much to learn from those meetings. I espe- cially recommend it to a trader on a losing streak. Call Alcoholics Anonymous and ask about the next "open meeting" or "beginners' meeting" in your area. A meeting lasts about an hour. You can sit in the back of the room and lis- ten carefully. There is no pressure to speak, and nobody asks for your last name. Each meeting begins with a long-term member getting up and speaking about his or her personal struggle for recovery from alcoholism.

Several other members share their experiences. There is a collection to cover expenses-most people give a dollar. You will feel as if the people in the meeting are talking about your trading!

He denies that alcohol controls and destroys his life - until he reaches a per- sonal crisis. It may be a life-threatening illness, unemployment, desertion by a family member, or another unbearably painful event.

AA calls it "hitting rock bottom. He sees a stark choice- to drown or to turn and swim up for air. His first step to recov- ery is to admit that he is powerless over alcohol. A recovering alcoholic can never drink again. Loss is to a loser what alcohol is to an alcoholic. A small loss is like a sin- gle drink. A big loss is like a bender.

A series of losses is like an alcoholic binge. A loser keeps switching between different markets, gurus, and trading systems.

His equity shrinks while he is trying to re-create the pleasurable sensation of winning. Losing traders think and act like alcoholics, except that their speech is not slurred.

The two groups are so much alike that you can predict what a loser will do by using alcoholics as a model. Alcoholism is a curable disease-and so is losing. Losers can change if they start using the principles of Alcoholics Anonymous. The Urge to Trade Successful traders treat drawdowns the way social drinkers treat alcohol. They have a little and stop. If they take several losses in a row, they take that as a signal that something is wrong: It is time to stop and rethink their analy- sis or methods.

Losers cannot stop- they keep trading because they are addicted to the excitement of the game and keep hoping for a big win. One prominent trading advisor wrote that the pleasure of trading was higher than that of sex or flying jet aircraft.

Just as an alcoholic proceeds from social drinking to drunkenness, losers take bigger and bigger risks. They cross the line between taking a business risk and gambling. Many losers do not even know that line exists. They make impulsive trades, go on trading binges, and try to trade their way out of a hole. Losers bleed money from their accounts. Most of them bust out, but some turn to managing other people's money after they lose their own; still others sell advisory services, like burned-out drunks who wash glasses in a bar.

Most losers hide their losses from themselves and from everyone else. They keep shuffling money, keep poor records, and throw away brokerage slips. A loser is like an alcoholic who does not want to know how many ounces of liquor he drank. Into the Hole A loser never knows why he loses. If he knew, he would have done some- thing about it and become a winner.

He keeps trading in a fog. A loser tries to manage his trading the way an alcoholic tries to manage his drinking. Losers try to trade their way out of a hole. They switch trading systems, buy new software, or take tips from a new guru. They act out a rescue fan- tasy - a charming belief in Santa Claus.

Their desperate belief in magic solu- tions helps many advisors sell their services to the public. When losses mount and equity shrinks, a loser acts like an alcoholic threatened with an eviction or a firing.

A loser grows desperate and converts outright positions into spreads, doubles up on losing positions, reverses and trades in the opposite direction, and so on. Losers get as much good from these maneuvers as an alcoholic who switches from hard liquor to wine. A losing trader careens out of control, trying to manage the unmanage- able. Alcoholics die prematurely, and most traders bust out of the markets and never come back.

New trading methods, hot tips, and improved software cannot help you until you learn to handle yourself. You have to change how you think in order to stop losing and begin your recovery as a trader.

Losers get drunk on losses; they're addicted to losses. Traders prefer prof- its, but even losses provide plenty of excitement. The pleasure of trading is very high. Few losers are actively trying to lose - but then few alcoholics are consciously trying to end up in the gutter. A loser keeps getting high from trading while his equity shrinks.

Trying to tell him that he is a loser is like trying to take a bottle away from a drunk. A loser has to hit rock bottom before he can begin to recover. It is painful and humiliating. You hit it when you lose money you cannot afford to lose. You hit it when you gamble away your savings. You hit it after you tell your friends how smart you are and later have to ask them for a loan. You hit rock bottom when the market comes roaring at you and yells: "You fool!

Others keep adding money to their account to postpone the day of reckoning. It hurts to see a loser in the mirror. We spend our lifetimes building up self-esteem. Most of us have a high opinion of ourselves. It hurts a smart and successful person to hit rock bot- tom.

Your first impulse may be to hide, but remember you are not alone. Almost every trader has been there. Most people who hit rock bottom die as traders. They slink away from the market and never look back. Brokerage records indicate that 90 out of people trading today will probably be gone from the markets a year from now. They will hit rock bottom, crumble, and leave. They will try to forget trading as they would a bad dream. Some losers will lick their wounds and wait until the pain fades away.

Then they will return to trading, having learned little. They will be fearful, and their fear will further impair their trading. Very few traders will begin the process of change and growth. For these rare individuals, the pain of hitting rock bottom will interrupt the vicious cycle of getting high from winning and then losing everything and crashing. When you admit that you have a personal problem that causes you to lose, you can begin building a new trading life.

You can start developing the disci- pline of a winner. The First Step An alcoholic needs to admit that he cannot control his drinking. A trader needs to admit that he cannot control his losses. He needs to admit that he has a psychological problem with the losses and that he is destroying his trading account. The first step of an AA member is to say: "I am an alco- holic, I am powerless over alcohol.

Recovering alcoholics struggle to stay sober, one day at a time. Now you have to struggle to trade without losses, one day at a time. You may say this is impossible. What if you buy, and the market immedi- ately ticks down?

What if you sell short at the bottom tick, and the market rallies? Even the best traders lose money on some trades. The answer is to draw a line between a businessman's risk and a loss. A trader must take a businessman's risk, but he may never take a loss greater than his predetermined risk. A storekeeper takes a risk every time he stocks new merchandise. If it does not sell, he will lose money.

An intelligent businessman takes only risks that will not put him out of business even if he makes several mistakes in a row.

Stocking two crates of merchandise may be a sensible business risk, but stocking a full trailer is probably a gamble. As a trader, you are in the business of trading. You need to define your businessman's risk- the maximum amount of money you will risk on any single trade. There is no standard dollar amount, just as there is no standard business. An acceptable businessman's risk depends, first of all, on the size of your trading account. It also depends on your trading method and pain tol- erance.

The concept of a businessman's risk will change the way you manage your money see Chapter 10, "Risk Management". A sensible trader never risks more than 2 percent of account equity on any trade.

If your account is small, limit yourself to trading less expensive markets, or mini-contracts. If you see an attractive trade but your stop would have to be placed where more than 2 percent of equity would be at risk-pass that trade. Avoid risk- ing more than 2 percent on a trade the way a recovering alcoholic avoids bars.

If you are not sure how much to risk, err on the side of caution. If you blame excess commissions on a broker and slippage on a floor trader, you give up control of your trading life. Try to reduce both, but take responsibility for them. If you lose even a dollar more than your business- man's risk, including commissions and slippage, you are a loser.

Do you keep good trading records? Poor record-keeping is a sure sign of a gambler and a loser. Good businessmen keep good records. If you bail out of a trade within your businessman's risk, it is normal busi- ness. There is no bargaining, no waiting for another tick, no hoping for a change.

Losing a dollar more than your established businessman's risk is like getting drunk, getting into a brawl, getting sick to your stomach on your way home, and waking up in the gutter with a headache. You would never want that to happen. A Meeting for One When you go to an AA meeting, you will see people who have not had a drink in years stand up and say: "Hello, my name is so-and-so, and I am an alcoholic.

Because if they think they have beaten alcoholism, they will start drinking again. If a person stops thinking he is an alcoholic, he is free to take a drink, then another, and will probably end up in the gutter again. A person who wants to stay sober must remember that he is an alcoholic for the rest of his life.

Traders would benefit from our own self-help organization-I'd call it Losers Anonymous. Why not Traders Anonymous? Because a harsh name helps to focus attention on our self-destructive tendencies.

After all, Alcoholics Anonymous do not call themselves Drinkers Anonymous. As long as you call yourself a loser, you focus on avoiding losses. Several traders have argued against what they thought was the "negative thinking" of Losers Anonymous. A retired woman from Texas, a highly suc- cessful trader, described her approach to me. She is very religious and thinks it would not please the Lord for her to lose money. She cuts her losses very fast because of that.

I thought that our methods were similar. The goal is to cut losses due to some objective, external rule. Trading within a businessman's risk is like living without alcohol. A trader has to admit that he is a loser, just as a drunk has to admit that he is an alcoholic. Then he can begin his journey to recovery. This is why every morning before trading I sit in front of the quote screen in my office and say: "Good morning, my name is Alex, and I am a loser.

I have it in me to do serious financial damage to my account. A trader who feels serene and relaxed can focus on looking for the best and safest trades.

A trader who is tense is like a driver who freezes at the wheel. When a sober man and a drunk enter a race, you know who is more likely to win. A drunk may win once in a while thanks to luck, but the sober man is the one to bet on. You want to be the sober man in the race. Most of us find that when we act in the market the way we do in our everyday life, we lose money.

Your success or failure in the market depends on your thoughts and feel- ings. It depends on your attitudes toward gain and risk, fear and greed, and on how you handle the excitement of trading and risk.

Most of all, your success or failure depends on your ability to use your intellect rather than act out your emotions. A trader who feels overjoyed when he wins and depressed when he loses cannot accumulate equity because he is controlled by his emotions. If you let the market make you feel high or low, you will lose money.

To be a winner in the market you must know yourself and act coolly and responsibly. The pain of losing scares people into looking for magic meth- ods. At the same time, they discard much of what is useful in their profes- sional or business backgrounds. Like an Ocean The market is like an ocean-it moves up and down regardless of what you want.

You may feel joy when you buy a stock and it explodes in a rally. You may feel drenched with fear when you go short but the market rises and your equity melts with every uptick. These feelings have nothing to do with the market - they exist only inside you. You can do nothing to influence it. You can only control your behavior. The ocean does not care about your welfare, but it has no wish to hurt you either.

You may feel joy on a sunny day, when a gentle wind pushes your sailboat where you want it to go. You may feel panic on a stormy day when the ocean pushes your boat toward the rocks. Your feelings about the ocean exist only in your mind. They threaten your survival when you let your feel- ings rather than intellect control your behavior.

A sailor cannot control the ocean, but he can control himself. He studies currents and weather patterns. He learns safe sailing techniques and gains experience. He knows when to sail and when to stay in the harbor. A suc- cessful sailor uses his intelligence. An ocean can be useful-you can fish in it and use its surface to get to other islands. An ocean can be dangerous-you can drown in it. The more rational your approach, the more likely you are to getwhat you want.

When you act out your emotions, you cannot focus on the reality of the ocean. A trader has to study trends and reversals in the market the way a sailor studies the ocean. He must trade on a small scale while learning to handle himself in the market. You can never control the market but you can learn to control yourself. A beginner who has a string of profitable trades often feels he can walk on water. He starts taking wild risks and blows up his account.

On the other hand, an amateur who takes several losses in a row often feels so demoralized that he cannot place an order even when his system gives him a strong signal to buy or sell. If trading makes you feel elated or frightened, you cannot fully use your intellect. When joy sweeps you off your feet, you will make irrational trades and lose. When fear grips you, you'll miss profitable trades.

A professional trader uses his head and stays calm. Only amateurs become excited or depressed because of their trades. Emotional reactions are a luxury that you cannot afford in the markets. Emotional Trading Most people crave excitement and entertainment. Singers, actors, and profes- sional athletes command much higher incomes in our society than do such mundane workmen as physicians, pilots, or college professors.

People love to have their nerves tickled- they buy lottery tickets, fly to Las Vegas, and slow down to gawk at road accidents. Losers who drop money in the markets receive a tremendous entertainment value. The market is among the most entertaining places on the face of the Earth.

It is a spectator sport and a participant sport rolled into one. Imagine going to a major-league ball game in which you are not confined to the bleachers. For a few hundred dollars you can run onto the field and join the game. If you hit the ball right, you will get paid like a professional. You would probably think twice before running onto the field the first few times.

This cautious attitude is responsible for the well-known "beginner's luck. Greedy amateurs start running out onto the field too often, even when there are no good playing opportunities. Before they know what hit them, a short string of losses destroys their careers. Emotional decisions are lethal in the markets. You can see a good model of emotional trading by going to a racetrack, turning around, and watching the humans instead of the horses. Gamblers stomp their feet, jump up and down, and yell at horses and jockeys.

Thousands of people act out their emo- tions. Winners embrace and losers tear up their tickets in disgust. The joy, the pain, and the intensity of wishful thinking are caricatures of what h a p pens in the markets. A cool handicapper who tries to make a living at the track does not get excited, yell, or bet the bulk of his roll on any race. Casinos love drunk patrons. They pour gamblers free drinks because drunks are more emotional and gamble more.

Casinos try to throw out intel- ligent card-counters. There is less freg liquor on Wall Street than in a casino, but at least here they do not throw you out of the game for being a good trader. Your browser is not compatible with Shopee Video Favorite 3.

Shipping Loading Active 11 months ago. Ratings Product Specifications. In every business, the psychological impact is very important. Moreover, for a trader, it is important to read the mind of others in the market. What are they thinking and how they will react?

When you have to take benefit from them. Just the book Iwas looking forBy CustomerExcellent, actionable advice, especiallyin the area of risk management, and trading psychology. I picked upthis book after a string of poor trades even though I was followinga specific strategy. The guidance around risk management, how toset stops and targets, as well as keeping yourself honest withvarious tools and templates was invaluable. Good for the beginner. By Jason B. Not theinformation I was looking for but a nice review none the less.

Don't get me wrong, it is informative but seems to written for thenew trader or someone struggling with getting started. Psychology, trading tactics, and money management are the three pillars of success, but there is the fourth factor that ties them together.

That factor—which integrates all others—is record-keeping. Trading for a Living was published in and became an international best seller. It remains at the top of many reading lists, as friends recommend it to friends and trading firms give it to their new hires.

All these years, I resisted revising my book because I trusted and liked its internal logic. I traded, traveled, wrote other books, and taught a few classes. In planning this update, I thought of a building complex in Vienna, Austria called the Gasometer.

At its core are multistory storage tanks, erected by Austrian bricklayers in When modern technology made huge gas cylinders obsolete, architects converted them into modern apartments. I used to stay in one of them and wanted my new book to follow that model of blending old craftsmanship with new technology. Psychology is important. Since I was actively practicing psychiatry while writing the original Trading for a Living , its psychology part stood the test of time and I changed it very little in this new edition.

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