This week’s Book of the Week is Come Into My Trading Room by Dr. Alexander Elder. I believe I originally heard of this book from the recommended reading list in Trade Like An O’Neil Disciple, but what really pushed me to read it was when I saw it was in Steve Burns‘ top ten trading books of all time. I wish this was one of the first books I read on trading. It would have really done a lot to further my understanding of the psychology of trading early in my career. This book is broken into three major sections: a very basic introduction to trading, a detailed discussion of Elder’s three M’s, and a discussion of what it takes to trade for a living.
Introduction to Trading
Elder spends a good portion of this section preparing the reader to decide what kind of trader he wants to become. He discusses various styles of trading and various markets that can be traded. The area where he talks about “Eternal Barriers to Success” particularly stands out. He details the obstacles to success such as commissions, slippage and educational expenses.
The Three M’s of Successful Trading
I found the middle of this book to be very interesting. Elder breaks the necessary skills to trade into three categories: Mind, Method, and Money Management. Anyone who has been trading for any length of time knows how critical these areas are, but as I read I found myself reliving my early trading days. I could have avoided many bad trades if I had known that Mind and Money Management were as important as method.
One famous section of the chapter on the Mind of a Trader compares losing traders to alcoholics and suggests that they should hold “Losers Anonymous” meetings with themselves in the mirror every day. While I found this comparison interesting, I really liked the section he followed it with were he described “The Mature Trader.”
Come Into My Trading Room
In this section of the book, Elder describes systems for tracking your trade history and your equity curve. He also details the lifestyle of a professional trader and asks the reader questions about lifestyle and commitment. He also talks about the difference between part time, semi pro, and professional traders. While I already had a spreadsheet to track my trading history, I did start tracking my monthly equity curve after reading this section.
In my opinion, the thing that sells this book is Elder’s writing style. He is witty and humorous while still remaining serious. I found myself laughing hysterically one sentence and taking intense notes the next. If nothing else, the Mind of a Trader section is a must read.