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

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ONE

Individual Psychology

Your greatest danger in trading comes from the person holding this book—you. Our emotions often tip the scale between winning and losing. If you can stay cool and make rational decisions, trading profits will follow.

A professional trader is calm and collected. He knows what he'll do if the market goes up, down, or sideways. On days when he is not sure, he stays out, patiently monitoring the market from the sidelines. A pro feels in control.

If you feel giddy with joy when the market goes your way but freeze in fear when it swings against you, your actions will be emotional and your account will suffer. When the mind becomes clouded by greed or fear, even the best trading systems fly out the window. The questions that follow are designed to help you focus on trading psychology.

Questions Trial 1 Trial 2 Trial 3 Trial 4 Trial 5
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Correct answers

 

Question 1-1

  1. A successful trader's attitude toward risk is usually one of

    1. avoiding risk.
    2. thriving on risk.
    3. enjoying risky situations, even though losses hurt.
    4. measuring each risk.

Question 1-2

  1. The goal of a successful trader is to

    1. become the best trader he can.
    2. make more money than other traders.
    3. buy things that will set him above other traders.
    4. win respect of family and friends.

Question 1-3

  1. A trader on a losing streak has ...

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