Today's Quote: “Do the thing you fear to do and keep on doing it... that is the quickest and surest way ever yet discovered to conquer fear.” Dale Carnegie

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…

A LITTLE PARANOIA IS GOOD FOR THE SOUL

It is my belief that a certain amount of paranoia is an essential ingredient of success. I find this to be true in almost any endeavor. In the trader's formative years, I believe it is actually a prerequisite of success. Far too many novice traders looking for fast riches and an easy escape from their mundane 9 to 5 prisons fearlessly jump into the market without respecting its power to destroy. Being frightened, in the beginning at least, is a sign of intelligence. Being a wee-bit paranoid is how a trader honors the market's power. History clearly shows us that the bully and the brute, holding no respect for their opponents, eventually meet with annihilation. Underestimating what the market can do to you, especially in the formative years of your development, leads to financial ruin and perhaps destitution. Most former traders can only now fully appreciate that the market is a giant humbling mechanism.

Fear is born of ignorance, but the beginner who fears not is too ignorant to know he is ignorant.

Oliver L. Velez

During the trader's developmental stages, it is all too easy to fall victim to the countless traps and snares that await those who lack the knowledge and the proper tools. This is why a certain amount of fear can be beneficial and a little bit of paranoia can save us. But when experience leads to more knowledge, and knowledge leads to more power, fear and paranoia give way to a profound sense of strength. And ever so gradually, quietly even, the market, once an ugly foe, becomes a loyal friend. And then, all is well. If you learn to respect the market, it will eventually respect you back.

Fear is a primal instinct that has the ability to serve us very well. There are countless books on the market that are focused on the elimination of fear, which in my view is wrong. Fear is not something that should be annihilated. In its proper place, it is a friend, not an enemy. Like any other tool, it simply must be understood and used properly. When we face danger, fear helps us to run with greater speed or fight more ferociously. When it heightens our awareness and maximizes our capabilities, it is serving its legitimate purpose. Fear becomes particularly valuable to beginning market players trying to find their way. It will help them remain alert, careful, and forever on their toes. When it is time to take flight, it will quicken their speed and increase their awareness of the dangers. In short, it will help keep them out of trouble. But above all, it is fear that will prevent beginning traders from committing one of the gravest errors of all: disrespecting the market's power to destroy. If there is anyone who needs to fully recognize this power it is the novice trader. The number of traders who have been taken out of the market forever because they had no respect for this power is incalculable. We would much rather deal with a novice trader who has too much fear than have to deal with one who has no fear at all. The former has a chance for survival. The latter is a statistic waiting to happen.