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Other titles in the Wiley Trading series:
Sell and Sell Short (Wiley Trading)
Synopses & Reviews
Sell and Sell Short
Selling is the hard part of trading. If the stock we buy rises, when do we take profits? If our stock falls, when do we bite the bullet and exit the trade? If our stock stagnates, when do we say enough is enough and move on to another opportunity? Every serious trader must make these decisions.
Beginners and amateurs invest the bulk of their time in looking for new trades. Many become pre-occupied with finding some magic combination of indicators that will always identify good stocks. They assume that if they get the entry right, the trade will take care of itself. Professionals, on the contrary, understand that monitoring the reward-to-risk ratio of an open position and exiting at the right price and time is absolutely fundamental to their success.
If perfection is possible anywhere, it is certainly not in trading. No one can consistently pick the absolute tops and bottoms. Good trading means taking reasonable profits and limiting losses. Reaching for extremes is not a viable long-term strategy. Leaving some money on the table is a normal and even positive thing. When it comes to profits in trading, the power word is "enough." A mature trader knows when to exit.
In Sell and Sell Short, Dr. Alexander Elder explains how to set profit targets and stop-loss orders prior to entering any trade. He shares real-world examples that show how to manage your position by adjusting your exit points as the trade unfolds. Specifics include:
Stocks go down as well as up, but most market participants only go long—effectively throwing out half of their profit opportunities. Dr. Elder shows that stocks tend to fall twice as fast as they rise. This provides great opportunities for faster profits in selling short, but calls for different strategies than when trading from the long side.
Shorting—profiting from market declines—is one of the favorite games of market professionals, and they account for the bulk of shorting in most markets. Whenever you see a situation in which the mass of amateurs is crowding one side of an issue, while the more experienced and better capitalized professionals are on the opposite side, ask yourself—which side is more likely to win? That is the side of the market which you want to be on.
It pays to run your trading account like a hedge fund, with some long and some short positions at any given time, shifting their balance as your view of the market changes. Being comfortable with selling short allows you to wrestle with the market while standing on both feet. This is a much more comfortable position for a battle than standing on only one foot—only going long.
In Sell and Sell Short, Dr. Alexander Elder examines one of the most overlooked aspects of trading and reveals how you can protect and profit from your trades by exiting them the right way. Throughout the book, he explains how to set profit targets and stop-loss orders prior to entering any trade. He also shares real-world examples that show how to manage your position by adjusting your exit points as a trade unfolds. Along the way, Elder also addresses short selling.
The vast majority of books and instruction material on trading and investing focus on buying the right stocks. There is a massive and glaring gap at the other end of the process – when and how to sell. However, selling is just as important as buying. If a stock trade is profitable, it is just a number on paper until the stock is sold. If a trade is a loser, it can bleed an investor’s account unless it is sold. Sell and Sell Shortwill address the selling process from a variety of angles: technical, fundamental, and psychological. It will explain how to maximize winnings in a profitable trade and how to minimize losses when a trade doesn’t go as planned. It will then discuss how to profit in falling market by shorting stocks, futures, and options.
About the Author
Dr. Elderasserts that all traders should learn to short. He shows what to look for at market tops and how to jump onto a downtrend. He explains how to use important indicators of short selling activity, such as the short-interest ratio. A special chapter is dedicated to shorting non-equity instruments, such as futures, options, and forex.
Many beginners approach selling in a vague and indecisive manner. Sell and Sell Short offers traders the essential lessons, rules, and instructions all traders need. This book will help you make the right choices in the markets and put you on the road to trading success.
Dr. Alexander Elder is a trader and a teacher of traders. He is the author of Trading for a Living(a bestseller translated into a dozen languages), Come Into My Trading Room(2002 Barron's Book of the Year), and Entries & Exits(2007 SFO Magazine Book of the Year). Dr. Elder lectures for leading financial institutions worldwide and runs annual Traders' Camps. Many of his own trades are featured in this book.
Table of Contents
PART ONE HOW TO BUY, MANAGE RISK, & KEEP RECORDS.
THE GAP BETWEEN PRICE AND VALUE.
Chapter 1 How to Buy.
THE THREE GREAT DIVIDES.
TECHNICAL VS. FUNDAMENTAL ANALYSIS.
TREND VS. COUNTER-TREND TRADING.
DISCRETIONARY VS. SYSTEMATIC TRADING.
ONE TRADER'S TOOLBOX.
THE NEW HIGH–NEW LOW INDEX.
Chapter 2 Trading Psychology and Risk Management.
YOUR MIND AS A TRADING TOOL.
ON BEING DISCIPLINED.
ON BEING KIND TO YOURSELF.
THE 2% SOLUTION--PROTECTION FROM SHARKS.
THE 6% RULE--PROTECTION FROM PIRANHAS.
Chapter 3 On Keeping Records.
GOOD RECORDS LEAD TO GOOD TRADING.
TRADER'S SPREADSHEET--BASIC ACCOUNTABILITY.
TRADING DIARY--YOUR KEY TO LASTING SUCCESS.
HOW TO DOCUMENT YOUR TRADING PLAN.
MARGRET'S METHOD--PUT IT ON THE WALL.
FRED'S METHOD--A CHIHUAHUA TRADE.
HOW TO GRADE YOUR PERFORMANCE.
HOW TO GRADE YOUR ENTRIES AND EXITS.
HOW TO GRADE YOUR TRADES.
TWO TYPES OF BUYING.
PART TWO HOW TO SELL.
THE THREE TYPES OF SELLING.
Chapter 4 Selling at a Target.
SELLING AT A MOVING AVERAGE.
SELLING AT ENVELOPES OR CHANNELS.
SELLING AT RESISTANCE LEVELS.
Chapter 5 Selling on a Stop.
THE IRON TRIANGLE.
MARKET OR LIMIT ORDERS.
HARD AND SOFT STOPS.
A BAD PLACE.
REDUCING SLIPPAGE--TIGHTER BY A PENNY.
NIC'S STOP--TIGHTER BY A DAY.
WHEN TO USE WIDER STOPS.
A SAFEZONE STOP.
VOLATILITY-DROP TRAILING STOPS.
Chapter 6 Selling "Engine Noise".
AN "ENGINE NOISE"EXIT FROM A SHORT-TERM TRADE.
A DISCRETIONARY EXIT FROM A LONG-TERM TRADE.
SELLING BEFORE EARNINGS REPORTS.
THE MARKET RINGS A BELL.
TRADING WITH THE NEW HIGH–NEW LOW INDEX.
THE DECISION TREE FOR SELLING.
PART THREE HOW TO SELL SHORT.
Chapter 7 Shorting Stocks.
YOUR FIRST SHORTS.
THE ASYMMETRY OF TOPS AND BOTTOMS.
FINDING STOCKS TO SHORT.
Chapter 8 Shorting Non-Equity Instruments.
HANDLING PROFITS--THE PERSONAL DIVIDEND.
About the Author.
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