Today's Quote: “Once the last trace of emotion has been eradicated, nothing remains of thought but absolute tautology.” Theodor Wiesengrund Adorno

There are several good books out there about trading that should be on every trader’s must read list. If you were forced to choose one and only one, the only possible pick would be “Tools and Tactics for the Master Day Trader”. We are going to run a series of excerpts from the best selling book for the next series of lessons. Now in the words of the master trader himself, Oliver L. Velez…

BREAKING THE CYCLE OF PAIN AND PLEASURE?

Like all traders, in the delicate years of my trading youth, I perpetually vacillated between the extremes of pain and pleasure. Whenever I won, or experienced a string of profitable trades, a tremendous sense of accomplishment would well up in my chest, and the height of that sensation, called pleasure, would embrace my whole being. It was during these times that I, drunk with my success, would feel like a trading god. But whenever I experienced the pain of loss, my heart would sink. My body would ache, and a sense of profound despair would descend on my entire world. These were the treacherous times when all would go black, and the beauty of life that my prior wins delivered would instantly fade into the darkness. Then, suddenly, a few winning trades would bring back a glimmering of faith and, once again, the beacon of hope would shine bright. In other words, the cycle would begin anew. I spent years as a captive slave to these two masters, pain and pleasure. Sometimes I'd spend more time with one than the other, but I always found myself frequently visiting them both. But eventually, ever so slowly, these two extremes began to loosen their grip on me. At first, I found this strange, but each time I lost, I realized that the pain was not as acute anymore, no longer unbearably sharp. I curiously watched as my despair gave way to a feeling of ambivalence. So, too, did I begin to feel less pleasure from my trading wins. A careful observation revealed that the mental and psychological rise that at one time accompanied each success gradually turned quiet and serene. Shortly afterward, I found my personal trading catapulting to a brand new level, a much higher level. This experience taught me a very valuable lesson. You see, it is important that traders not be affected by their results. Many of us fail to realize that the outcome of any one trade shouldn't influence the way we feel or think. True traders, the ones who have been matured by countless market experiences, emerge out of each trade untouched, unperturbed, calm, and of course, serene. These fully developed traders know that the result is not nearly as important as the process. They recognize that winning or losing is simply a by-product of their choices. When we focus on the individual components of each trade, instead of applying our attention to what may happen at the end of each trade, we suddenly free ourselves from this vicious cycle of pain and pleasure. And only if that happens can we hope to rise to the level of trading mastery.