Customer Reviews

Come Into My Trading Room: A Complete Guide to Trading

5 star:		(97)
4 star:		(13)
3 star:		(10)
2 star:		(5)
1 star:		(1)

 

 

Book Review - Come Into My Trading Room by Dr Alexander Elder

It was with a great deal of curiosity that I began to read Come Into My Trading Room. Trading for a Living, Elders first and classic book was the second trading book I ever read and even 40 or so books on from there I still rate it in my top five and frequently recommend it to others who want a considered and honest introduction to trading.

I was interested to see how the themes and emphasis had changed and developed in the nine years since the first book was published. I had briefly read a couple of reviews that suggested it didn't add much to the previous book but I was eager to make my own mind up.

So the first question I asked myself was what hasn't changed?
The style of writing is as clear and engaging as in the first book. The layout is logical and in all key areas he suggests further, more specialised reading to take you deeper into the subjects that may interest you. For the size of the book (only 313 pages), it is very comprehensive and covers the three main areas of competence for a trader. Psychology, Technical Analysis and Money Management. So the three pillars from the first book are still very much standing.

What is different? A great deal in my opinion. The psychology section is vastly improved. I thought that to be the main weakness in the first book, with an over reliance on the AA model which (because of my professional background I have issues with) He draws the title of the psychology section from another excellent book by Mark Douglas, again giving the impression that Elder himself has been learning a lot over the past few years.

The technical analysis section goes much less into describing basic TA than the first book did and instead focuses more on the application of TA to trading. It also includes an update on a method first described in the first book the "triple screen" and a section on systems trading and system testing. As someone who is toying with developing systems at the current time I particularly enjoyed his discussion of the distinction between systems and discretionary traders.

The book is not just aimed at day traders, in fact he lays great emphasis on people examining their own motives to become day traders suggesting that you require at least a years successful experience with end of day trading before you move to intraday trading. He does ask his readers to answer tough questions about themselves and if you are able to give honest answers you will profit greatly from this book.

He also concurs with one of my prejudices, which I am happy to repeat here, he stresses that traders should take their first steps in inexpensive markets to trade. So with futures for example trading the Eurostoxx50 at 10 euros per point is a better starting point for the new trader than Dax at 25 euros per point. He also provides a helpful method for working out which markets you can afford to trade. It is this applied aspect of the book that makes it so valuable. There is no irrelevant padding here, every paragraph has relevance.

The overall balance of the book is about perfect now. In the first book the basic TA took up a large percentage of the volume, this time the sections are much more equitable, with quite rightly, money management and record keeping getting a much more through treatment than in the previous book.

One change in this book (and I did wonder if he had read Tony Oz's wonderful "The Stock Trader") is an addition of some actual trade examples. I always like seeing these because following them through gives a real insight into the traders mind in a way simple chart examples can't.

I think there is a more cautious/warning tone about this book than the first. I suspect this might be because Elder runs trading camps and has had lots of experiences with wannabe traders since writing the first book. He's very aware of the main reasons why people fail and makes these very explicit in the text.

There is also a very good and well referenced basic description of the major trading instruments their advantages and disadvantages something that was missing from the first book.

The section for new traders (or babes in the wood) as he calls them covers the basics of setting up to trade from home, which instruments and markets to look at and the issues of commission, slippage and expenses. He stresses the importance of the bottom line and the need to keep trading expenses such as commission under control

Conclusion

This is a book written by a mature trader and trader educator, who has seen and done it all and can now give the most balanced, practical and honest description of learning to trade you will find anywhere. I highly recommend it to new traders and improvers alike.

Alexander Elder gained well-deserved prominence for his first book, Trading For a Living. It's one of my favorite books on trading. Out of this classic came such new indicators as the Force Index, which is one of the indicators I use regularly in my chart software. I read Elder's follow-up, Come Into My Trading Room, in hopes of learning additional insights of the Force Index. While I found some new information here, I was even more impressed by the following lessons Elder shared:

1) "Some of the best trading opportunities occur after false breakouts" - I'm finding this more and more these days, which is why I actively use my Momentum Divergence indicators to separate the fakeouts from the real breakouts. Elder does a great job showing numerous charts throughout his book, laying the groundwork for the divergence examples he explains in great depth when you step into his trading room in the final chapter with many actual trading examples. You need to understand the concept of divergence to trade today's markets more profitably, and this book will be a great help in showing you how to trade divergence setups.

2) Triple Screen - Elder explains the important of using multiple timeframes, though he advocates two to no more than three time frames. The key concept is that whatever timeframe you use, you need to go up to the next longer timeframe to get confirmation. This provides the bigger picture trend to define the nature of your trades, and then you can return to the shorter timeframe and make more tactical decisions with this broader trend in mind as well.

3) Grade Your Performance - Elder actually quantifies trading effectiveness by defining the width of the channel for a stock, and what percentage of the move the trader actually captured to determine his grade. Regardless of how a trader measures his performance, it must be tracked in order to make improvements and experience constant improvement.

4) The SafeZone Stop - While I have not tested this indicator in my systems yet, Elder's SafeZone Stop looks like a more effective way to place a trailing stop than standard moving averages. The SafeZone Stop appears to adjust more rapidly to trending versus flat periods for a stock, compared to moving averages. This new technique should easily be worth many times the price of this book by itself.

5) Chapter 9: Trading for a Living - This chapter was my most highlighted chapter, as Elder covers the stages of growth from beginning to professional trader, covering a wide range of topics on trading discipline, time management, organization and developing a viable trading plan, to highlight just a few.

All in all, Come Into My Trading Room is an excellent follow-up to Elder's Trading For A Living, and I think you'll also find it a quick and thought-provoking read.

Too well written for a 1-star, and you just have to respect the author of Trading for a Living. But I was quite disappointed.

Essentially it's a trend following methodology of entering on pullbacks to the 20 MA and exiting when they extend to the outer band (envelope, band, channel, it doesn't matter). Classic indicators are tweaked slightly and pitched as "Elder Indicators" which of course you can buy the disks for. Really this whole book could have been condensed to a 3 or 4 page .pdf file and not left any of the concepts out.

He advises against day-trading and questions whether it can actually be done profitably. That is pretty short-sighted of him in light of all the known profitable daytraders out there. His reasoning is that with his method it would be too difficult. That came across as egotistical and closed-minded to me.

The thing that really threw me off is that after a book teaching a trend-following system (and warning against other methods), the last section of chart examples are all counter-trend trades! Every single one of them is completely the opposite of what is taught in the book. You would think he could have thrown in at least one actual example that actually was trading the method in the book?

I joined his mailing list after reading the book and after almost two years of being on it, not one example of a trade set-up that comforms to the method in this book has been given. Instead, periodic "opinions" of market direction have been given for copper, oil, bonds, and the S&P 500. This from a guy who says don't have opinions on market direction. Too boot, all of them have been wrong! Got to wonder about this guy now, was Trading for a Living just a lucky fluke?

[...]

I read Dr. Elder's first book, Trading for a Living back in 1994 and have reread it several times since then. It truly set the standard for defining the psychology of the market and why understanding this will help you beat the market. His level of thinking on defining the math of a technical indicator, then articulating the mass psychology that drives the indicator was truly groundbreaking. It's been the one book that I consistantly refer to, while the other 30+ books I've read on investing are comingled in a large bookshelf collecting dust.

His second book, Come into my Trading Room, is the essential follow-through on the best way to apply the first book. In delivering the basic goal of helping you make money in the capital markets - it's even better. He clearly explains how to take the ideas of the first book (and a lot of new ideas) and make money with them. Day to day, trade by trade - how do you keep records? Which exact indicators to use? What do they mean? When to get in? When to get out? How to get out? What seperates the amatuers from the pros? What to avoid? Yardsticks of performance? The list goes on....... At the same time, he points out that there aren't any recipes, magic wands, exact procedures ....that good trading remains a product of good judgement, hard work, discipline, wisdom, and artwork.

On top of all this ... he gives solid perspective on making the jump form a corporate job into a profession of trading ..and other psychology gems that I found useful and generating self-reflection.

This book (or the first one) is the very next book you should on investing. You can't afford not to.

I really enjoyed the first book by Dr Elder, "Trading for a Living" very much. I have just finished Dr Elder's new book, "Come Into My Trading Room" and have enjoyed it very much too. There are several new ideas in the new book. A lot of the material in this book was presented in "Trading for a Living". It is the best book that combined the 3Ms -- Mind, Method and Money Management -- required for successful traders. It expands on the methods presented in "Trading for a Living" and makes the triple screen concept very clear.

I think the great difference between this book and other trading books is Dr Elder's background as a psychiatrist. He provides valuable insights into understanding the human element of market behavior, and the individual trader that makes his work unique. Dr Elder shares his own, successful trading strategy in a clear, concise, and easy to understand style. He does a great job showing some of his successful trades. I'm sure this is one of the finest books on developing trading skills. It is not only fun and easy to read but it is profitable. It pays back.

I had read and gained great insight from his first book called Trading for a Living.

This new book did not add significantly to the content contained in the previous book hence I have given the book 2 stars. Minimal value added.

The essence of the book is to trade with the trend but to find value points within the trend. But as another reviewer has indicated, the example trades given in the diary section do not do this. Invariably these trades are of the bottom-picking variety, albeit with the technical rationale laid out pretty transparently. One is left with a feeling of confusion with respect to whether the author trades in accordance with the main part of the book, or in accordance with the example trades given in the trading diary.

The book is broadly split into 3 areas. Mind, Method and Money Management.

The section on trading psychology (Mind) is coherent, but for a more useful insight into this aspect of trading, I would strongly recommend Mark Douglas' books, for example Trading in the Zone or The Discipline Trader.

The section on trading methods (Method) is hardly revolutionary. As I have already alluded to, if you understand what a trend is and can identify pullbacks within it, this is all that you will gain from the book. The author does however have an interesting segment on multiple timeframe analysis (what he terms the Triple Screen).

The section on risk management (Money Management) is very weak and potentially dangerous in my view. The author recommends the "traditional" per trade risk of 2% of account size. Even a rudimentary Monte Carlo analysis would lead one to the conclusion that such an approach would result in an extremely volatile equity curve. As another reviewer may have indicated, a more prudent to risk management can be found amongst the works of Van K. Tharp, for example in Trade Your Way to Financial Freedom.

Sometimes the better path to a rounded knowledge is to gain it from several sources, rather than to attempt to squeeze it all into one book.

I have read both of Dr Elder's books. Come Into My Trading Room is an excellent book. I have developed a system based on MACD-Hist, ADX, Impulse Buy/Sell, and a 6 month exponential moving average. I have back-tested the system from 1975-2004. Based on 30 years of back-testing I had only one losing year -12%. The winning years had profits greater than 100% of a few occasions. However, most of the time the profits ranged from 30-40%. I will take those kind of numbers any day. The trades were executed on the following commidity markets... C, S, SM, BO, CL, HO, HU, NG, SP, TY, and US.

I also used the money management system that he talked about in the book... 2% stop loss per trade and a max loss of 6% for the month. The system that I developed didn't trigger a bunch of trades. For all 30 years I never executed more than 75 trades in a single year.

The trading style that Dr. Elder recommends in his book is not going to make you rich overnight; however, it will provide you with consistent steady returns year after year. By bankrolling profits from year to year one can become a millionaire in due time.

I am currently going to paper trade my system for the entire year of 2005 to verify that it is as profitable in real time as in back testing. I will send out another review in 2006 detailing my results.

My copy of "Come Into My Trading Room" arrived the day before I left for two weeks in Hawaii. I was thrilled to have something to read during the long flights over and back. Well, not only did I read this excellent book on the way over to Hawaii, but I was reading during nearly every spare minute while I was there, and finished up on the plane flight home! After I work through the study guide I'm going to re-read the book.

"Come Into My Trading Room" has completely changed me as a Trader. I discovered that I'd been focusing only on entry/exit points and support/resistance levels while ignoring the overall trend. By combining the first screen of Triple Screen (using a 26-bar weekly EMA) with the Price Channels as described I passed on placing two long trades this week that have since fallen by an additional 15%! Based on my previous trading system (that, in retrospect, was pretty 'hit and miss') I would be in both of those trades trying to figure out what happened to me. The drawdown I just avoided saved me 50 times the price of the book. Now THAT'S what I call a good investment!

Dr. Elder shares his own, successful, trading strategy in a clear, concise, and easy to understand format. Most trading books talk about how somebody else did it, "Come Into My Trading Room" gave me an education in how I could do it.

It's just what the Doctor ordered!

Dr. Elders first book, "Trading for a Living" made a significant impact one me. I must have 10 "throw away" trading books for each of the 10-12 key books that have had most influence on me and that I keep close. Trading for a Living is one of those books I keep close. So, it was with great expectation that I dove into my early release copy. I must say that I came away somewhat disappointed.

A lot of the material in this book was presented in Trading for a Living. Price-MACD histogram divergences are still one of the strongest signals. The triple screen trading method was discussed (but now uses a moving average instead of weekly-histogram.) Force Index is still used to define entry points. So, there was a lot of ground covered that appeared in Trading for a Living.

Having said that, I must also say that some new things are introduced. The Chandelier method of stops has already replaced my ATR stop method. He introduces a new way to enter a trade, the "Impulse Method." (Appears to trade a lot so one might be better of with a discount broker using this one.) And he does expand his discussion on money management from the first book --which is good.

Am I glad I bought this book? Yes. I was like revisiting an old friend. Glad to see him again and know that they are still alive. For those who have not yet read anything from Dr. Elder, I would suggest you get Trading for a Living and its workbook. Ton of stuff there and will teach you how to trade using multiple time frames, -- something few authors discuss. After that, use some of your profits and buy this book to thank Dr. Elder for writing the first one.

I have always regarded Dr Alex Elder's first book `Trading for a Living' as the trader's bible. It explained in graphic detail everything novice and experienced traders needed to understand about trading and if a novice trader had explicitly followed Dr Elder's guidelines when the book was released in 1993 I'm sure she or he would now be making a very comfortable living.

With the release of Dr Elder's latest book I guess I now have to change my description to something resembling the Old Testament while his second offering becomes the New Testament. I don't mean to be flippant to either the Bible or to Dr Elder's books. All are beautifully written masterpieces.

Come Into My Trading Room took three years to write and essentially takes over from where Trading For a Living ended. Dr Elder uses research from many sources and feedback from his very popular Trader's Camps to research this book. He has the rare insight to really understand why traders lose money and what they need to do to start taking money out of the world's financial markets.

Dr Elder has identified three requirements that are paramount to successful trading¯Mind, Method, and Money¯the 3 M's. Mind means `developing psychological rules that will keep you calm amidst the noise of the markets', Method `is a system of analyzing prices and developing a decision-making tree', and lastly, `Money refers to money management, which means risking only a small part of your trading capital on any trade'.

After explaining these and many more concepts Dr Elder succinctly describes to the reader how to become a master trader. Yes, he gives instructions and explanations in how to use indicators; how to manage your money; build a trading plan; document trades and build a money management system. But be aware. This is no novel, it will test your intellect and you will have to read it over and over again. This is a book you will read once and then seriously study for many months¯even years if you purchase the accompanying study guide. A must for any serious trader or investor.