Five Golden Rules of Trading From Alexander Elder
- Mentality, method and Money.
- Mentality: the psychology of the trader, market and its participants.
- Method: market analysis methods and decision paths.
- Money: Money Management and Risk Management.
- Three screens rule.
- Two percent rule.
While selecting a schedule for analysis using the triple screen system, Elder recommends using a factor of five, whereby each successive time frame is younger than the previous one. This way, if you work with a daily chart (and if it is your main chart), then you can set up a triple screen system by combining, in this case, the daily, weekly and intraday (e.g. 4-hour) charts. This system should be applied as follows:Trade FOREX with zero spread with Gerchik & Co Open an account
- First , on the weekly chart, trace the history of the asset: by how much the trading tool is undervalued or overvalued, what the dynamics of its movements is and whether there are sufficient grounds for opening a trade based on it;
- Second, use the daily chart for the execution of strategic decisions that have been taken on the weekly chart (where to put Stop Loss);
- Third, use the 4-hour chart to accurately determine the time of opening a position.
In each of your trades, you should not put at risk more than 2% of your deposit. At the beginning, it is necessary to identify the price of position opening and the level of Stop Loss. By defining these values for your trade, you will have easier time calculating the lot size, risk level and how many pips in the trade interest you.4. The 6% Rule To fully control your trading account Elder advises that you stick with the 6% rule, whereby you avoid risking more than 6% of your trading account. For instance, if the deposit is 100 thousand dollars, and the risk for each transaction is no more than a thousand, you are entitled to keep open no more than 6 trades. Thus, in the case of 2 losing trades, if you lose two percent out of the 6 allowed, then this month you can afford no more than 4 open positions. This rule does not limit your ability to build up positions in the event of successful trading but rather is designed to protect your capital in the case of a string of losses.
In order to follow the 6% rule, you need to stay disciplined and focused. Before you start trading, you need to determine the risk margin on your account and only then estimate and control your risks under the 2% rule. 5. The «5 Bullets in a Clip» Rule In choosing technical analysis tools, Elder recommends choosing five indicators at most. Elder explains this by the fact that the calculation of all the indicators is based on the opening/closing price, trading volume, as well as the max and min prices. This says that if you use the above rules correctly and use a serious approach to the issue of trading in general, you will not have to use more than five indicators. This rule derives its name from the size of a rifle clip. The five bullets used by Elder himself are 2 exponential moving averages, the MACD lines and histogram, envelope and the strength index.A secret ranking of managing traders Sneak a peek
Торговец, действующий по собственной инициативе и стремящийся извлечь прибыль непосредственно из процесса торговли. Обычно подразумевается торговля ценными бумагами (акциями, облигациями, фьючерсами, опционами) на фондовой бирже. Трейдерами также называют торговцев на валютном (форекс) и товарном рынках (например, «зернотрейдер»). Торговля осуществляется трейдером как на биржевом, так и на внебиржевом рынках.