Important Points that I learned from Come Into My Trading Room by Alexander Elder - Part 1

1. I - Important Points that I learned from the book – Come Into My Trading Room by Alexander Elder
   
   
   
   
   1)      People are more likely to be rational when alone, and grow more impulsive when they join crowds.
   2)      A stop order becomes a market order when the market touches that level. Suppose you buy 100 shares of Guinea Pig Factory at $4.25, expect it to rise to $7, but protect your position with a stop at $3.75. If the price slides to $3.75, your stop becomes a market order, executed as soon as possible. You’ll get out, but expect to suffer slippage in a fast-moving market.
   3)      Daily charts alone aren’t enough, and you need weekly charts with at least two years worth of history.
   
   
   MIND—THE DISCIPLINED TRADER
   1)      It is OK to make mistakes but not OK to repeat them. When you make a mistake for the first time, it shows that you are alive, searching, experimenting. Repeating a mistake is a neurotic symptom.
   2)      Money management rules draw a straight line between a business-man’s risk and a loss.
   3)      Healthy trading boils down to two questions you need to ask in every trade: “What is my profit target?” and “How will I protect my capital?”
   4)      Becoming a good trader means taking several courses—psychology, technical analysis, and money management. Each course requires its own set of records. You’ll have to score high on all three in order to graduate.
   5)      Whenever you enter a trade, print out the charts that prompted you to buy or sell.
   6)      What will you do if your stock jumps five points in your favor? Five points against you? What if your future goes limit up? Limit down? If you have to stop and think while you’re in a trade, you’re dead. You need to spend time preparing trading plans and deciding in advance what you will do when the market does any imaginable thing. Play those scenarios in your head, use your computer, and get yourself to the point where you do not have to ruminate about what to do if the market jumps.