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Study Guide for The New Trading for a Living by Dr. Alexander Elder

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ONE

Individual Psychology

 

  1. Answer 1-1: D

    Trading is inherently risky because we deal with the uncertainty of the future. If there were no risk of loss, there could be no reward. Amateurs have emotional reactions—fear, elation, anger. A professional trader measures each risk in advance and trades only when the odds are clearly in his favor.

  2. Answer 1-2: A

    You must strive to achieve your personal best, to become the best trader you can. Focusing on money, buying toys, or trying to impress others will only divert your attention from the top goal—reaching your personal best. A good surgeon doesn't count money at the operating table—and neither does an intelligent trader while he is in a trade.

  3. Answer 1-3: C

    Treat your mistakes as learning opportunities: find the causes of your losses, and correct those mistakes going forward. This is an emotionally hard task, but it needs to be done in order to win. Without such analysis, trying to trade your way out of a hole, even with a new guru, is doomed to failure. You need to figure out exactly what got you into a hole in the first place. We'll return to this topic in the chapter on keeping a trading diary.

  4. Answer 1-4: A

    A large account allows you to diversify, trade multiple positions, and spend proportionately less on services. Beginners often discard these advantages by blowing money simply because it exists in their accounts. We'll return to the rules on managing trade size in the chapter on money management.

  5. Answer 1-5: ...

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