Today's Quote: “There is much to be said for failure. It is much more interesting than success.” Max Beerbohm

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…

MAKE YOUR LOSSES WORK FOR YOU

The path that leads to trading mastery is a journey often fraught with countless perils. The danger, the loss, the trials and tribulations that an aspiring trader must endure are enough to break the backs and crater the souls of most individuals who dare to trek its course. It is a shame that we are so quick to assume that individuals who have perfected their skills and command the markets with incredible dexterity have accidentally stumbled upon their gift by some innate tendency or natural endowment. This is far from true. Pain. Loss. Frustration. Confusion. Uncertainty. Inconsistency. These are the teachers that provide the education necessary to reach the desired heights of greatness. Each trader who enjoys a certain level of success today is guaranteed to have suffered through the pain and agony of being a loser yesterday. We, as human beings, simply do not learn very much from our successes. It is only our failures that seem to light the path and show us the way. We know that fire should not be touched because, at one time in our young lives, we got burned by it. So it is with trading. We learn how to win only after we learn all the ways to lose. This was the method used by Thomas Edison when trying to come up with the light bulb. So my question to you is this. What are you doing with your market failures? Are they wasted and for naught? Or are they serving as valuable examples of what not to do? Remember that we leap forward by great distances only after first stepping backward.

Understandably, we spend a great deal of energy and effort trying to avoid the loss and the pain that goes with it. But have we ever stopped to contemplate the grand purpose that loss serves? Isn't it only through frequent loss that we can be sure our actions need correcting? In its purest state, the pain of loss serves as a personal messenger of change. Each time we violate a law, it tells us, in no uncertain terms, that our actions warrant dramatic change. This is why we grow through loss and excel by way of pain. The discomfort gets us to act, to get off our backsides and do something. Without the agony of defeat and the pain that rises from that, we doubt if our traders would ever grow. Learn to respect loss, because in a weird way, it is precisely what will lead the way to the future you want.