Latest read: Alex Elder

Equities continue to be a bit ‘meh’; oil and the rest of the commodity complex are keeping me busy.  Now that I’ve sorted back-adjustments for daily futures, it’s on to intraday…

Onto the next problem... Source: Google Images.

Onto the next problem… Source: Google Images.

What else am I doing?  The latest trading book for me is Trading for a Living by Alex Elder, an oldie but goodie.  It’s basically a practical overview of technical indicators, along with notes on money management and psychology.  His ‘Triple Screen’ system is quite popular, and easy to understand: it implements several notions that successful traders use (I’m guessing?):

  • Examine multiple time frames.  Dr Elder uses weekly/daily/hourly as the example for his Triple Screen, but mentions this can be scaled down proportionally for intraday trading (e.g. hourly/10min/2min).
  • Use multiple indicators.  In particular, use trend-following indicators to give the allowed direction of trades (e.g. if the long-term trend is up, only buy to enter), then use oscillators to give the entry criterion (e.g. stochastics/MACD hist).  He’s trying to maximise the value of both types of indicators, while admitting that each has drawbacks.
  • Use tight stops.  Money management is pretty conservative.  Someone using the system will likely need to be OK with being stopped out a lot.

Anyway, seems like a logical, mechanical system.  I’ll try a bit this week to see how it gets on.

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