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The New Sell and Sell Short: How to Take Profits, Cut Losses, and Benefit from Price Declines

by Alexander Elder (2011)

Quick summary -- an in-depth PhD-level extended summary (10-30 pages) for this book is coming soon.

The New Sell and Sell Short: How to Take Profits, Cut Losses, and Benefit from Price Declines (2nd Edition)

by Alexander Elder

Overview

Published by John Wiley & Sons in the Wiley Trading series, this second edition by Alexander Elder -- psychiatrist, professional trader, and author of the classic Trading for a Living -- focuses on the neglected art of selling. Most trading education emphasizes buying; Elder argues that selling decisions are equally important and often more psychologically challenging.

Part One: Psychology, Risk Management, and Record-Keeping

  • Trading Psychology: Your mind as a trading tool; managing the internal conflict between analytical thinking and emotional reactivity.
  • Risk Control: The 2% Rule (never risk more than 2% of trading capital on a single trade) and the 6% Rule (stop trading when monthly losses reach 6%).
  • Record-Keeping: Detailed trade diaries, spreadsheets, and the practice of grading every buy and sell decision to identify patterns of strength and weakness.

Part Two: Selling Strategies

The book presents specific technical setups for when to sell profitable positions (taking profits at target resistance levels, using trailing stops, recognizing trend exhaustion signals) and when to cut losses (initial stop placement, time-based stops, signal invalidation).

Part Three: Short Selling

Elder covers the mechanics and psychology of short selling, including identifying short candidates, timing entries during confirmed downtrends, managing the unique risks of short positions (unlimited theoretical loss), and using options as alternatives to outright short sales.

Teaching Methodology

The book uses detailed chart examples with specific annotations showing exact entry, exit, and stop-loss levels. A comprehensive Q&A section allows readers to test their understanding and internalize the principles through active engagement rather than passive reading.