Dr. Alexander Elder – The New Trading for a Living: Book Review & Audio Summary

Book Info

• Book name: The New Trading for a Living
• Author: Dr. Alexander Elder
• Genre: Business & Economics
• Pages: 544
• Published Year: 1993
• Publisher: John Wiley & Sons
• Language: English

Audio Summary

Synopsis

The New Trading for a Living offers a comprehensive roadmap for anyone looking to succeed in the financial markets. Dr. Alexander Elder, a psychiatrist-turned-trader with over 30 years of experience, combines psychological insights with practical trading strategies to help readers avoid costly mistakes. This updated classic covers everything from controlling emotions and avoiding gambling behavior to managing commissions, understanding market psychology, and developing disciplined trading systems. Elder’s unique background allows him to address the mental and emotional challenges that separate successful traders from those who lose their capital. Whether you’re a complete beginner or looking to refine your approach, this book provides the essential foundation for long-term trading success.

Key Takeaways

• Control costs ruthlessly by comparing broker commissions and using limit orders instead of market orders to prevent overpaying for stocks
• Recognize the difference between trading and gambling—professional traders don’t get emotional about individual trades and can step away when needed
• Think independently rather than following the crowd, as herd mentality often leads to disastrous decisions like historical market bubbles
• Take full responsibility for your trading decisions and their consequences, avoiding self-sabotage through careless mistakes
• Develop a systematic approach that emphasizes discipline, risk management, and emotional control over quick profits

My Summary

Why I Picked Up This Book

I’ll be honest—I’ve always been fascinated by the financial markets but intimidated by them at the same time. When I stumbled across The New Trading for a Living by Dr. Alexander Elder, what caught my attention was the author’s unusual background. A psychiatrist who became a professional trader? That’s not your typical Wall Street story. I figured someone who understands human psychology might have some unique insights into why so many people lose money trading while a select few seem to print cash.

After finishing this 544-page deep dive into trading, I can say it’s one of the most practical and psychologically grounded books on the subject I’ve encountered. Elder doesn’t promise you’ll become the next Warren Buffett overnight. Instead, he methodically walks you through the mental traps, technical knowledge, and disciplined systems you need to avoid becoming another statistic in the “90% of traders lose money” club.

The Real Cost of Trading: What Nobody Tells Beginners

One of the first eye-opening sections deals with something most beginners completely overlook: the hidden costs that silently drain your trading capital. I remember thinking about my own investing journey and realizing how much I’d paid in fees without really noticing.

Elder breaks down how commissions can devastate your returns. Let’s say you’re an active trader making two trades a day, four days a week, and paying $10 per trade. That’s $80 per week. Over 50 weeks, you’ve spent $4,000 just on commissions. If you started with $20,000, that’s 20% of your capital gone before you even consider whether your trades were profitable.

This hit home for me because I’ve seen friends jump into day trading without doing this basic math. They focus entirely on picking winning stocks while their broker quietly takes a cut of every transaction. Elder’s advice is straightforward: shop around for brokers, compare their fee structures carefully, and don’t assume they’re all the same.

The Slippage Problem

Then there’s slippage, which I’d never really thought about before reading this book. Slippage happens when you end up paying more for a stock than you intended because of how you placed your order.

Elder explains two types of orders: market orders and limit orders. A market order essentially says, “Give me this stock right now at whatever the current price is.” You’re guaranteed to get the stock, but you might pay $53 when you expected to pay $50. That extra $3 is slippage, and it adds up fast when you’re making multiple trades.

A limit order, on the other hand, says, “I’ll buy this stock, but only if I can get it for $50 or less.” You might not get the stock if nobody’s selling at your price, but you won’t overpay. Elder strongly advocates for limit orders, and after reading his explanation, I can’t imagine why anyone would use market orders unless they absolutely had to.

This practical advice alone could save new traders thousands of dollars. It’s the kind of nuts-and-bolts guidance that doesn’t sound sexy but makes a massive difference in your actual returns.

Trading Versus Gambling: Knowing the Difference

Here’s where Elder’s psychology background really shines. He dedicates significant attention to explaining how trading differs from gambling—and how easy it is to slip from one into the other without realizing it.

Most people think trading is just legalized gambling. And honestly? If you trade poorly, it basically is. But Elder argues that professional trading is fundamentally different because it involves careful risk management, systematic decision-making, and emotional discipline.

Warning Signs You’re Gambling

Elder provides several red flags that indicate you’ve crossed the line into gambling territory. The first is the inability to resist the urge to trade. If you feel like you need to have a position open, or you can’t stop checking your portfolio and making trades, you’re not trading—you’re feeding an addiction.

I’ve definitely felt this pull myself, especially during volatile market periods when it seems like everyone’s making money. That FOMO (fear of missing out) can be incredibly powerful. Elder’s recommendation? Take a one-month break from trading to reset your psychology. If you can’t do that, you’ve got a gambling problem, not a trading strategy.

The second warning sign is emotional attachment to individual trades. If a winning trade makes you feel powerful and euphoric, while a losing trade ruins your day and makes you feel worthless, you’re gambling. Professional traders, Elder explains, view trades as business transactions. They don’t tie their self-worth to whether a particular stock went up or down.

This resonated with me because I’ve experienced both extremes. There’s something intoxicating about picking a winner—you feel like a genius. But the flip side is brutal. When you’re wrong, it’s not just your account balance that takes a hit; your ego does too. Elder’s point is that this emotional rollercoaster is a sign you’re approaching trading the wrong way.

The Self-Sabotage Trap

One of the most memorable examples in the book involves a friend of Elder’s—a pharmacist, broker, and trader who was genuinely successful. But despite his knowledge and experience, he made a catastrophic mistake. At the peak of his trading career, he went on a trip to Asia and left a massive position open with no stop-loss protection or risk management.

When he returned, the position had moved against him, and his entire capital was wiped out. This wasn’t about lack of knowledge or skill. It was self-sabotage, plain and simple. Elder argues that traders often unconsciously undermine themselves, especially when they’re doing well.

The solution? Take complete responsibility for your decisions. Don’t blame the market, the news, your broker, or bad luck. Every trade is your choice, and every consequence is your responsibility. This might sound harsh, but Elder believes it’s the only mindset that leads to long-term success.

Don’t Follow the Crowd

Another major theme in The New Trading for a Living is the danger of herd mentality. Elder challenges the common perception of “the market” as some kind of rational, scientific entity. Instead, he describes it as simply a mass of people following trends and reacting to each other.

For beginning traders, the temptation to follow the crowd is almost irresistible. When everyone’s buying tech stocks, or cryptocurrency, or whatever the hot investment is, it feels safe to join in. Our evolutionary psychology reinforces this. As Elder points out, a Stone Age hunter was more likely to survive if he stuck with the group. Going off alone meant becoming saber-toothed tiger food.

But in trading, following the crowd is often a recipe for disaster. By the time everyone knows about a hot stock, it’s usually too late to profit from it. In fact, you’re often buying at the peak, right before the smart money starts selling.

The Tulip Mania Example

Elder illustrates this with the famous tulip mania of 1634 in Holland. Tulip prices kept rising, and everyone wanted in on the action. People mortgaged their homes to buy tulip bulbs, convinced that prices would keep climbing forever. Of course, they didn’t. The bubble burst, and countless people lost everything.

This pattern repeats throughout history—the dot-com bubble, the housing crisis, various cryptocurrency booms and busts. The specific asset changes, but the psychology remains the same. People see others getting rich and assume they can too, even when prices have become completely detached from any rational valuation.

Elder’s advice is to cultivate independent thinking. Do your own research, develop your own systems, and don’t trade just because everyone else is. This is easier said than done, especially when you’re watching friends and colleagues make money while you sit on the sidelines. But as Elder emphasizes, protecting your capital is more important than catching every trend.

Building a Systematic Approach

What I appreciate most about Elder’s approach is that he doesn’t just tell you what not to do—he provides a framework for what you should do instead. The book covers trading systems, technical analysis, risk control, and trade management in considerable detail.

Elder advocates for developing a systematic approach to trading rather than making impulsive decisions based on tips, news, or gut feelings. This means having clear criteria for entering trades, predetermined exit points for both profits and losses, and consistent position sizing based on your risk tolerance.

The Importance of Risk Management

One concept that Elder hammers home is that risk management is more important than picking winners. You can be right only 40% of the time and still make money if you manage your risk properly. Conversely, you can pick winners 60% of the time and still lose money if you let your losses run too large.

This challenges the popular perception that trading is all about finding the next big winner. In reality, it’s more about controlling losses and letting winners run. Elder suggests never risking more than 2% of your capital on any single trade. This way, even a string of losses won’t wipe you out.

I’ve found this principle applies beyond trading too. In any endeavor with uncertain outcomes—whether it’s starting a business, writing a book, or making career decisions—managing downside risk is often more important than maximizing upside potential.

Applying These Lessons to Everyday Life

While The New Trading for a Living is specifically about financial markets, many of Elder’s insights have broader applications. Here are a few ways I’ve thought about applying these concepts beyond trading:

Watch the hidden costs in everything. Just as commissions and slippage eat away at trading profits, small recurring expenses drain your finances in everyday life. That $10 monthly subscription you forgot about, the convenience fees you don’t notice, the slightly more expensive option you choose without comparing—they all add up. Elder’s emphasis on minimizing costs has made me more conscious of these financial leaks.

Recognize when you’re gambling versus investing. This applies to career decisions, business ventures, and even relationships. Are you making calculated decisions with clear risk management, or are you chasing emotional highs and hoping for the best? The distinction matters.

Resist herd mentality in all areas. Whether it’s career paths, lifestyle choices, or investment decisions, following the crowd because it feels safe often leads to mediocre outcomes. Developing independent thinking takes courage, but it’s essential for making decisions that actually align with your goals and values.

Take responsibility for your outcomes. It’s easy to blame external factors when things go wrong—the economy, your boss, bad timing, other people. But as Elder emphasizes, taking complete responsibility for your decisions is empowering. It means you have control over your future rather than being a victim of circumstances.

Build systems instead of relying on willpower. Elder’s emphasis on systematic trading rather than impulsive decisions applies to any goal. Want to exercise more? Build a system that makes it automatic. Want to write a book? Create a daily writing habit. Systems beat motivation every time.

What This Book Gets Right

The New Trading for a Living excels in several areas. First, Elder’s psychological perspective is genuinely unique in trading literature. Most trading books focus purely on technical analysis or fundamental analysis, treating traders as rational actors. Elder understands that emotions, biases, and unconscious patterns drive most trading decisions, often to disastrous effect.

Second, the book is remarkably comprehensive without being overwhelming. At 544 pages, it’s substantial, but Elder organizes the material logically and builds concepts progressively. You don’t need an economics degree or prior trading experience to understand it.

Third, Elder’s writing is clear and practical. He uses real examples, including his own mistakes and those of traders he’s known. This makes the lessons concrete rather than abstract. When he tells you not to leave positions unprotected while traveling, you remember the story of his pharmacist friend who lost everything.

Finally, Elder’s emphasis on discipline and long-term success over quick profits is refreshing. In a field full of get-rich-quick schemes and promises of easy money, his realistic, methodical approach stands out.

Where the Book Falls Short

That said, The New Trading for a Living isn’t perfect. Some readers have noted that Elder relies heavily on his personal experiences and anecdotes, which may not apply to everyone’s situation. What worked for him in his trading career might not work for someone trading in today’s market with different tools and conditions.

The book can also be quite technical in places, especially when discussing specific trading systems and indicators. If you’re a complete beginner, some sections might require multiple readings to fully grasp. Elder assumes a certain baseline of financial knowledge that not everyone has.

Additionally, while the psychological insights are valuable, some readers might find them repetitive. Elder returns to the same themes—discipline, emotional control, avoiding gambling behavior—throughout the book. If you’re already convinced of these principles, the repetition might feel unnecessary.

How This Compares to Other Trading Books

Having read several books on trading and investing, I’d say The New Trading for a Living occupies a unique middle ground. It’s more psychologically focused than purely technical books like those by John Murphy or Martin Pring, but more systematic and technical than purely psychological books like Mark Douglas’s “Trading in the Zone.”

Compared to classics like Benjamin Graham’s “The Intelligent Investor,” Elder’s book is more actionable for active traders. Graham’s value investing approach is brilliant but requires patience and a long-term perspective. Elder addresses traders who are actively buying and selling, not just buying and holding.

If you’re looking for a comprehensive foundation that covers both the psychological and technical aspects of trading, The New Trading for a Living is hard to beat. It’s not the flashiest book, and it won’t promise you overnight riches, but it will give you the tools to avoid the most common and costly mistakes.

Questions Worth Considering

After finishing this book, I found myself reflecting on several questions that Elder raises either directly or indirectly:

How much of success in trading—or any field—comes down to managing your psychology versus technical skill? Elder clearly believes psychology is primary, with technical skills being secondary. Is this true in your own experience?

What other areas of life involve the same tension between following the crowd for safety versus thinking independently for better outcomes? And how do you know when to do which?

Final Thoughts from Books4Soul

The New Trading for a Living is one of those books that delivers exactly what it promises. Dr. Alexander Elder doesn’t hype up trading as a path to easy money, and he doesn’t sugarcoat the challenges. Instead, he provides a realistic, psychologically informed roadmap for anyone serious about succeeding in the markets.

What I appreciate most is Elder’s honesty about the emotional and mental challenges of trading. It’s not just about learning technical analysis or finding the right indicators. It’s about managing your own psychology, controlling your impulses, and building disciplined systems that protect you from yourself.

Whether you’re thinking about getting into trading or you’ve been at it for a while and want to improve your approach, this book offers valuable insights. Just remember Elder’s core message: trading is a marathon, not a sprint. Success comes from discipline, risk management, and continuous learning—not from chasing quick profits or following the crowd.

Have you read The New Trading for a Living? What trading lessons have you learned the hard way? I’d love to hear your experiences in the comments below. And if you’re new to trading, what aspects of it intimidate you most? Let’s keep the conversation going here at Books4Soul.com.