Quite often, people think about trading for a living, but they hesitate to make the first move. The trading industry is different from other businesses. It requires dedication and a unique edge so you can decrease the risk of incurring losses and maximize your profits. Many traders are unable to catch up with the competition as they can't understand the market.

Understanding the market requires experience, but initially, you need to handle things on your own. To adopt trading as a living, you need to follow the advice of trading experts. To help beginners, Dr. Alexander Elder wrote the book "Trading for Living." This book is great support for numerous professional traders since 1993. For many new traders venturing into the field for the first time, this publication is a holy grail as it helps them adapting their lives to trading. Below, we will discuss its key takeaways.

Tips about Trading for Living

When we go through the book, we can extract three main lessons that Mr. Elder wanted to share with the readers. 

1. Choose a Broker Wisely

When you are new to trading, you make numerous mistakes. You unconsciously put a cap on your progress if you do not consider your mistakes as a learning curve. For instance, when you trade, an amount from each trade directly goes to your broker. So if you fail to choose the right trading agent, you can end up losing a fortune.

You will not realize how much you are paying a broker if you only consider one or two trades. In this case, it's important to see the bigger picture. For a normal trade, paying 10 dollars to a broker as a commission is not a big deal. But suppose you are making four trades every week and invest around $10,000. Then, you will be paying around $40 for each week.

However, if we calculate the same amount for a year, which means 50 weeks, you pay them a total commission of about $2,000. This is a lot when you are just starting out as a trader. Remember, most traders start with a minimum budget because they cannot afford such a huge amount in their initial year.

You can control your budget by choosing a broker with affordable charges. That is good enough for a start. Paying a high commission discourages a lot of traders because it decreases the rate of success, for starters. Hence, if you want to trade for a living, you need to choose a good broker and cut on commissions.

2. Get Rid of your Emotions

When you are trading, you need to prevent your emotions from manipulating your decisions. This can happen when you are trading just to earn money. Avoid any personal attachments with your commodities, and strategize your moves sensibly. When you make emotional decisions, you will feel bound.

Trading is all about exploring new techniques and strategies. Taking risks will lead to massive returns sometimes. When you are emotional with your money, you will be afraid to take even the most calculated risks. This will affect your flexibility, and you will feel helpless without anywhere to turn.

3. Rules to Reduce Risk

Trading does not completely rely on your luck. You need to understand the conditions and act upon them. All your strategies and plans will include risks of losing at some point, but you can take various actions to reduce those risks.

In this book by Mr. Elder, we can find two important rules to reduce risks and increase your chances of winning the trade. These rules are

• 2% Rule

According to the 2% rule, you need to limit your total trading capital to 2% on each trade. For instance, if you are buying a stock with $100 as value, you need to limit your loss to $98.

• 6% Rule

The second rule is just an addition to the first rule. This rule indicates that your total loss and open risk should not exceed 6% of what you are investing in a month. For instance, if your loss is about $2,000 in a month, now you need to open to four moves trade only. Every trade may include $1000, summing up to $6,000. This condition indicates that you no longer have to take any more risk till next month.

Conclusion

These tips in Mr. Elder's book helped numerous traders adopt their new lifestyle and trade for a living. Of course, these guidelines will be difficult to get the hang of, but over time, they reduce your stress by limiting and cutting additional loss and risks.