Today's Quote: “Wisdom is ofttimes nearer when we stoop Than when we soar.” William Wordsworth.

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…

“FINAL WORDS OF WISDOM FROM A TRUE MASTER” –

EIGHT ELEMENTARY LESSONS FOR LIFE AND TRADING—BY MOTHER (Part One of Two)

As an intent observer with an insatiable thirst for knowledge, I consider myself to be a very astute student of life. As a result, I've managed to learn some very valuable lessons in my life. But after recently contemplating this subject, I realized that everything I needed to know about trading I learned from my mother before I was 10. Here are just a few things she taught me as a small child.

Lesson 1: It is OK to fall, as long as you learn from the process of getting up. To this very day, I preach and practice the art of learning from my trading errors. Each of my trading losses serves as a springboard to a higher level of trading mastery.

Lesson 2: Always recognize what others are feeling. […]. Pain for other traders can mean opportunity for you. Why? Because successful trading is nothing more then buying stock cheaply from those in pain, and selling it expensively to those who are greedy. To be really astute at the game of trading, you must know what other traders in the market are feeling (pain or greed). Gaining that ability can make you rich. Thanks Mom.

Lesson 3: No matter how bad things are today, tomorrow will present another opportunity to get it right. As a trader, you cannot bring the baggage of yesterday into the possibilities of today. The residue left from a prior losing trade must be wiped clean before you take the next. Otherwise, you are doomed.

Lesson 4: Know why you are making every action you make. Never make an action (buy or sell) from the emotional state of fear or greed. It is imperative that we, particularly as traders, understand that intelligence lies between these two emotions. In other words, there is a gap between fear and greed, and that is where all our actions must spring from. To this very day, I will never sell a stock if I'm feeling fear. At times I lose more money as a result of this, but more often than not, I fare better by making sure I wait for a moment of intelligence to emerge. (Continued tomorrow).