Trend Technician

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When I was in college, my cousin and I decided that we had a brilliant stock market strategy.  We would read the Wall Street Journal in the morning, find companies that had positive stories about them and buy them in the morning and sell them in the evening.  In the process of trying to implement this naive strategy, I started reading everything I could get my hands on in the stock market.  One of the first books that I started reading was Trading For a Living by Alexander Elder.  In the intervening time I have yet to find a book that does as good of a job of explaining technicial analysis indicators and their use.

One thing that this book does that is rarely seen in these kinds of tomes is the author explains exactly the mathematics behind each indicator he presents.  I have literally used this book to write implementations of the indicators.  While you may not want to do any programming any time soon, having a basic understanding of the math also helps you understand exactly what the tool is telling you.  You may have a vague understanding of the MACD and what it means, but if after reading this book you will understand it so much better.  This can only lead to making better trading decisions.

For those who only trade stocks and their derivatives, like myself, the focus of the book on futures may require an extra step to make sure that you understand how it applies to stocks.  In reality though, almost all of the information is almost immediately applicable to any market.  When the book was written, technical indicators were not so en vogue in the stock market.  Additionally the money management techniques he describes are just as valid for just about any kind of trader.

Ultimately the value of this book is in developing a strong fundamental education in technical trading.  Learning by rote, without understanding the indicators you’re trading on is a dangerous game that sounds more like gambling.  Buy Alexander Elder’s Trading for a Living if you really want to have the kind of background that can help you make quality decisions.

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