ZF Capital

Keeping good records is the single most important contribution to your success. If you maintain scrupulous records, review them, and learn from them, your performance will improve. If your money management is in place to ensure survival during the learning process, you’re sure to become a success.

Records are more important to your success than any indicator, system, or technical tool. Even the best system is bound to have some holes, but good records will allow you to find them and plug them up. A person who keeps detailed records makes a huge leap in his development as a trader.

Show me a trader with good records, and I’ll show you a good trader.

– Alexander Elder, Come Into My Trading Room

Imagine that a stranger walks into your driveway and tries to sell you an automatic system for driving your car. Just pay a few hundred dollars for a computer chip, install it in your car, and stop wasting energy on driving, he says. You can take a nap in the driver’s seat while the “Easy Swing System” whisks you to work. You would probably laugh the salesman out of your driveway. But would you laugh if he tried to sell you an automatic trading system?

Traders who believe in the autopilot myth think that the pursuit of wealth can be automated. Some try to develop an automatic trading system while others buy one from the experts. Men [and presumably women] who have spent years honing their skills as lawyers, doctors, or businessmen plunk down thousands of dollars for canned competence. They are driven by greed, laziness, and mathematical illiteracy.

– Alexander Elder, Trading For A Living

Some people turn to gurus in search of a strong leader. They look for a parent-like omniscient provider. As a friend once said, “The walk with their umbilical cords in hand, looking for a place to plug them in.” A smart promoter provides such a receptacle, for a fee.

The public wants gurus, and new gurus will come. As an intelligent trader, you must realize that in the long run, no guru is going to make you rich. You have to work on that yourself.

– Alexander Elder, Trading for a Living

Now you have a system, you’ve learned money management rules, you know the psychological rules for cutting losses. Now you must trade. Can you?Traders try to weasel out of making this decision. They papertrade for years, buy automatic trading systems, and so on. Several traders have even asked me to hypnotize them. These games must end. It is time to make an effort of will!

– Alexander Elder, Trading for a Living

Traders come to the markets with great expectations, but few make profits and most wash out. The industry hides good statistics from the public, while promoting its Big Lie that money lost by losers goes to winners. In fact, winners collect only a fraction of the money lost by losers. The bulk of losses goes to the trading industry as the cost of doing business– commissions, slippage, and expenses– by both winners and losers. A successful trader must hop over several high hurdles– and keep hopping. Being better than average is not good enough– you have to be head and shoulders above the crowd. You can win only if you have both knowledge and discipline.

– Alexander Elder, Come Into My Trading Room

The market is a loosely organized crowd whose members bet that prices will rise or fall. Since each price represents the consensus of the crowd at the moment of the transaction, all traders are in effect betting on the future mood of the crowd. That crowd keeps swinging from indifference to optimism or pessmism and from hope to fear. Most people do not follow their own trading plans because they let the crowd influence their feelings, thoughts, and actions.

Bulls and bears battle in the market, and the value of your investment sinks or soars, depending on the actions of total strangers. You cannot control the markets. You can only decide whether and when to enter or exit trades.

– Alexander Elder, Trading For A Living

Brokers, exchanges, and advisors run marketing campaigns to attract more losers to the markets. Some mention that futures trading is a zero-sum game. They count on the fact that most people feel smarter than average and expect to win in a zero-sum game.

Winners in a zero-sum game make as much as losers lose. If you and I bet $10 on the direction of the next 100-point move in the Dow, one of us will collect $10 and the other will lose $10. The person who is smarter should win this game over a period of time.

People buy the trading industry’s propaganda about the zero-sum game, take the bait and open trading accounts. They do not realize that trading is a minus-sum game. Winners receive less than what losers lose because the industry drains money from the market.

– Alexander Elder, Trading For A Living