I’ve learned a new mantra last Sunday, “buy at new lows and short new highs.” This is what Dr. Elder told us on his whole day seminar last Feb. 12 at NTUC Auditorium, One Marina Boulevard here in Singapore.
It’s a very interesting seminar, so interesting that it didn’t make me sleepy! (which usually happens during seminars 
) Though I’m not really a fan of Dr. Elder’s methods, what I like about him is his risk management principles. The auditorium was jam packed with professional and amateur traders from Singapore and from other SouthEast Asian countries.
You may want to ask, who Dr. Elder is?? Dr. Alexander Elder is a world renowned trader, a best selling author and a psychiatrist. His books include “Come into my Trading Room” and “Trading for a Living.”
A few good points that I noted down are the following:
On Technical Analysis
-”if MACD histogram makes a new high, prices tend to move higher, if it makes a new low, prices tend to go lower.” – I’m not really using MACD indicator anymore since it has many false signals, it doesn’t hurt if I use it sometimes, especially on bullish or bearish divergence.
-”Don’t buy on a manic territory” – Buy only on the “value zone” which is inside the 26 day EMA and 13 day EMA. The manic territory is the price at the upper channel/envelope, while the depressive territory is the price on the lower channel/envelope.
-his favourite tools are; bar chart, moving averages, envelopes, MACD and Force Index.
-In reading charts, first study the Weekly chart for strategic planning. This shows you the long term or history of the stock price and its behaviour. Then use the Daily chart, for tactical planning. This is where you look for the entry price to buy or to sell short. Your price target will depend on the weekly chart’s support or resistance.
-Don’t trade low volume stocks, eg. 1 Million shares below. A stock which trades with more volume can’t be manipulated easily.
On Risk Control and Money Management
-The 2% rule: “The 2% rule prohibits you from risking more than 2% of your account on any single trade.” Let’s say you have P100,000 in your account, your maximum permitted risk on any trade is P2,000.
-The 6% rule: “Stop trading for the rest of the month once your cumulative loss for that month reaches 6% of your total account.” It means that if your 100,000 portfolio lost P6,000 on the first week, you should stop trading for the rest of the month!
You can actually modify these numbers, in my opinion, it will always depend on the risk apetite of the person, if he wants to make it higher or lower risk. The point here is survability. Anyone can win in the stock market, no doubt about that, but the real question is, how long can you survive?
I purchased one of his book, (and had his autograph 
) “How to Take Profits, Cut Losses, and Benefit from Price Declines.” The book teaches us how to sell and how to sell short. “Stocks go down much faster than they rise, and knowing how to short doubles your opportunities.”
Although we can’t short sell Philippine stocks and only Contracts for Difference (CFDs) are only allowed in Singapore to short sell, it’s best to learn how to “short” in a bear market so you’d still be profitable. His joke was, if you want to short a stock, find a company that you really hate, and use small amount from your account to short it, this is how you practice haha!
If you want to learn more about Dr. Elder’s trading methods, you can go to
Elder.com and Spiketrade.com
