Dr. Alexander Elder is one of the foremost educators for traders and investors. Today I review his most recent book, Come Into My Trading Room.

Alexander Elder gained well-deserved prominence for his first book, Trading For a Living.  Out of this classic came such new indicators as the Force Index, which is one of the indicators I use regularly in my BigTrends Charts package.  I read Elder's follow-up, Come Into My Trading Room, in hopes of learning additional insights of the Force Index.  While I found some new information here, I was even more impressed by the following lessons Elder shared:

1) "Some of the best trading opportunities occur after false breakouts" - I'm finding this more and more these days, which is why I actively use my Momentum Divergence indicators to separate the fakeouts from the real breakouts. Elder does a great job showing numerous charts throughout his book, laying the groundwork for the divergence examples he explains in great depth when you step into his trading room in the final chapter with many actual trading examples.  You need to understand the concept of divergence to trade today's markets more profitably, and this book will be a great help in showing you how to trade divergence setups.

2) Triple Screen - Elder explains the important of using multiple timeframes, though he advocates two to no more than three time frames.  The key concept is that whatever timeframe you use, you need to go up to the next longer timeframe to get confirmation.  This provides the bigger picture trend to define the nature of your trades, and then you can return to the shorter timeframe and make more tactical decisions with this broader trend in mind as well.

3) Grade Your Performance - Elder actually quantifies trading effectiveness by defining the width of the channel for a stock, and what percentage of the move the trader actually captured to determine his grade. Regardless of how a trader measures his performance, it must be tracked in order to make improvements and experience constant improvement.

4) The SafeZone Stop - While I have not tested this indicator in my systems yet, Elder's SafeZone Stop looks like a more effective way to place a trailing stop than standard moving averages.  The SafeZone Stop appear to adjust more rapidly to trending versus flat periods for a stock, compared to moving averages. This new technique should easily be worth many times the price of this book by itself.

5) Chapter 9: Trading for a Living - This chapter was my most highlighted chapter, as Elder covers the stages of growth from beginning to professional trader, covering a wide range of topics on trading discipline, time management, organization and developing a viable trading plan, to name a few. 

All in all, Come Into My Trading Room is an excellent follow-up to Trading for a Living, and I think you'll also find it a quick and thought-provoking read.

Price Headley is the founder and chief analyst of BigTrends.com.