Elder’s Trading Framework: Market Psychology, Indicators, and Risk
Summary
These notes summarize Alexander Elder’s approach to trading as a discipline built on market analysis, money management, and adherence to a plan. They describe how crowd behavior shapes prices, why traders should keep a journal to identify recurring mistakes, and how support, resistance, trends, volume, and gaps can inform decisions. The notes also outline trend-following indicators, oscillators, breadth and sentiment measures, and divergence signals, including Elder’s bull and bear power calculations.
The main system is the Triple Screen: identify the broad weekly trend, use daily countertrend moves to find entries, then use intraday stop orders to trigger trades in the trend’s direction. Risk guidance includes setting an exit when entering and moving it only to reduce risk or protect gains. The document presents trading rules and indicator interpretations, but offers no systematic performance tests or evidence that the signals are profitable. It cautions, implicitly, that indicators can produce false signals and emphasizes limiting losses and managing position risk.
Key ideas
- A trading journal can help reveal repeated behavioral patterns behind successful and unsuccessful trades.
- Market prices reflect the actions and changing psychology of buyers, sellers, and observers.
- Volume, open interest, breadth, and sentiment indicators can help assess the strength of a price trend.
- The Triple Screen system combines a weekly trend filter, daily countertrend signals, and intraday stop entries.
- Exit points and disciplined money management are central to limiting losses and protecting gains.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.