This is Tom, and for as long as any of his friends can remember, Tom has been overweight. Furthermore, he's been buying diet programs every now and then. When eating out with other people, he appears quite serious about what he consumes, but well, a visit to his kitchen shows a different story. He has always insist that he is going to lose weight, except that he is still as fat as ever. To Tom, the short term pleasure of binging on potato chips every once in a while is stronger than the delayed gratification of being healthy and full of energy. Now why did I tell you this? Well, because Tom is very similar to how many traders behave when they trade in the market. They insist that they want to become rich and successful through trading, but yet, their actions are contrary to what they say they want. They keep ruining it for themselves by seeking short term action through impulsive trading and other self sabotaging activities such as over trading or revenge trading. This video is my top five takeaway from one of the popular trading books, trading for a living by Dr. Alex Elder. It will teach you about analyzing the markets and how to become a better trader. By the way, we would really appreciate if you could take three seconds to like this video and subscribe to our YouTube channel. We also have a free day trading guide which you can download via the link in the description below. Take away number one, trading consists of three pillars, psychology, trading system and money management. Think of them like a chair with three legs. If you were to remove any one of them, you will hurt yourself. Or in this case, I'm referring to losing money and hurting your trading account. There are no trading systems in the world that can help you in becoming a successful trader. It's the trader behind a trading system that makes it successful. Just like a diet doesn't work if you are not able to stick with it, you will never be profitable when it comes to trading if you can't stick to your own trading system and apply proper money management. But money management on its own also isn't useful unless you have a trading system that has a positive expectancy. Try applying proper risk management at a casino where the odds are rigged against you. You will find that the house will always get the better of you. Finally, there's no trading system out there that can make up for poor money management. No trading system can win 100% of the time and any short string of losses without proper money management will destroy your trading account. This is why you need all pillars, psychology, trading system and money management. Take away number two, learn how to keep your emotions in check. In trading for a living, Alex provide a lot of helpful advice on making sure that your emotions are under control. It is normal to become emotional when trading so it is important to keep it in check. One of my favorite quotes by him is that you should spend as much time anal seeing yourself as analyzing the markets. Here are five other advice from Alex Elder. Number one, be realistic. If you currently have $1,000 and are thinking about quitting your job and becoming a full-time trader, that is certainly not realistic. You need a decent-size capital in order to become a full-time trader. Number two, keep a diary of your trades. Whenever you enter a trade, write down your reasons for doing so and take a screenshot of how the charts look. This is essential for learning from your past mistakes so that you won't repeat them again. Number three, have a set of predefined rules before entering. Always know your own personal game plan before taking a trade. How does your trading setup look like? Under what circumstances are you getting out? What do you do if price trades against you? Number four, stop trading. It is important to stop trading if you feel that you're trading too much and your trading results are poor. Spend some time away from the markets and take a step back to analyze yourself and your trading strategy. If you find yourself translating your paper profits or losses into things that you could have bought with that money, it is a sign that you should exit the trade at once and take some time off. Number five, practice good money management. Good money management will keep you in the game and help you keep your cool. The surest way to get emotional is to risk a big portion of your account on a single trade. More on this in takeaway number five where we talk about money management and greater detail. Take away number three, using a combination of indicators. When analyzing different instruments, you will need to use different kinds of indicators to help you in your analysis. There are trend following indicators such as moving averages and MACD which is useful for identifying and catching trends. There are oscillators which includes stochastics and relative strength index which is useful to identifying turning points. The main point here is that there is no one indicator that works all the time and is perfect for every single scenario. Different indicators are used for different purposes and in different situations. It pays to understand how they work and combine them effectively. We have previously recorded a video on how to combine trading indicators effectively so feel free to check out that video on our channel if you wish how to do this. Alex Elder also provides three guidelines when it comes to using indicators. Exponential options are better than normal averages. Let's consider the moving average since it is probably the most common indicator of them all. It expresses the average price of the last X number of candles. Alex Elder recommends using the exponential option for this indicator. Instead of weighing all past days equally, essentially the simple option, the exponential option attaches more weight to the recent days. Watch related markets. An indicator will be more reliable if it's also confirmed by a similar indicator in a related market. If the exponential moving average of euro dollar is up and you see that the exponential moving average of pound dollar is also up, it is a sign of strength. If you want to catch bigger price movements, learn to watch multiple timeframes. Signals in longer time frame generally leads to greater price movements. Weekly charts Trump's daily charts and daily charts Trump's hourly charts. Start out with a couple of indicators. It could be trend following ones or oscillators, learn to interpret them correctly. Take away number four, using multiple time frame analysis. Traders often say things such as, the trend is your friend, let your profits run by low sell high. But why sell if the trend is up? And how high is high anyways? An issue of following indicators is that they often contradict each other. For example, a moving average might disagree with an MACD about whether there is a trend or not in the market. A moving average can also contradict itself, showing an uptrend in the daily chart and yet showing a downtrend in the hourly chart even though it's the same indicator with the same setting. The solution? Using multiple time frame analysis to piece together everything. Alex Elder calls it the triple screen trading system. Under his system, he applies three separate tests to each trade. The first screen involves looking at the market tide where you are trying to identify the long-term trend by analyzing the slope of a weekly MACD. Other trend following indicators could be used here but in his book, this is what Alex Elder used in his original system. This gives you the direction or your trading bias. The second screen involves identifying waves that go against the tide. This is where you will attempt to time your entry. You always want to be timing your entry well even when trading with the trend, otherwise, you will risk getting stopped out of your trade. Use an oscillator such as the MACD to identify a good trading opportunity. You are looking for lows in your oscillator for buying opportunities and highs for shorting opportunities. The third screen identifies movement in the direction as the market tide. When screen 1 and 2 aligns, place a buy stop order one pip or tick above the high of the previous day. Buy only if the price goes to that point or higher. Place a stop at the low of the previous day. The opposite is true for a sell trade. When you are building a system or adopting the triple screen trading system taught by Alex Elder, remember that most traders take a good system and destroy it when they try to turn it into a perfect one. There is no perfect trading system and each system has its upside and downside. Take away number 5. Money Management 101. When it comes to implementing a money management strategy, Alex Elder advocates to focus on three things. Survival. Study Returns. And lastly high returns. He emphasizes that survival always come first. You can ensure that you will survival regardless of market conditions if you stick to the simple rule of never risking more than 2% of your equity in a single trade. Make sure to set a stop loss so that your losses doesn't get out of hand. Move and tighten your stop loss as the market moves in your favor. This means that if you're long, you should only move your stop loss upwards and if you're short, you should only move your stop loss downwards. Never widen your stop loss. Let's say that you found a good trading setup for Eurodollar to go long at 1.40. You determine that the stop loss should be set at 1.39, a 100-pip stop loss. You size your position according to 2% of your equity and end of the trade. The trade moves as what you predicted and price is now at 1.41. In this case, you should tighten your stop loss to shift your stop loss to break even. Now what if your Eurodollar drops to 1.392? Are you allowed to further widen your stop loss to 1.38? No, never. Remember that you're only allowed to move stops in the direction of a trade, which, in this case, is upwards. And that's the five takeaways from Alex Elder's book trading for a living. Here's a summary of my summary in less than 40 seconds. Successful trading has three pillars, psychology, trading system and money management. You have to devote as much time inelzean yourself as a trader as you spend analyzing the markets. There is no single indicator that works for every situation and you need to learn how to combine them effectively. The triple screen trading system is an excellent starting point for you to reference. Lastly, survival always comes first in trading. Without money management, you're gambling, not trading and that's how you blow your trading account. I hope you enjoyed this video. We would really appreciate if you could like this video and hit the subscribe button. Do make sure to download our free day trading guide in the description below.