Today's Quote: “The quality of our expectations determines the quality of our actions.” Andre Godin.

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…

SECRET #15: KNOWING WHAT'S NEXT CAN MAKE YOU RICH

Many short-term traders erroneously assume that the macro view of the market (intermediate to long term) has little relevance to, or impact on, the short-term trader's world. While the macro view is certainly not as important to the trader as it is to the investor, to think it has no importance is a mistake. We must not forget that a top-down approach to the market (macro to micro) can help us devise our short-term strategies with a greater degree of intelligence. For instance, let's say our view is that the market, once cooled off a bit, is likely to regain a big portion of its lost luster. Let's further assume that we used this view to come up with specific sectors that will likely respond very favorably if we happen to be right. The short-term trader would then want to apply a great deal of focus to the leading stocks in those groups, with the idea of building a list of potential plays to take when the environment does turn. You see, a big part of winning at the game of trading lies in the ability to capitalize on what is happening now. But the greatest rewards will always go to the players who can build a strategy based on what lies beyond the now. Knowing how to profit from current occurrences is a must, no doubt. But traders who can use their macro views to prepare for what will come next will never have a problem making big money in the market. The very best traders are constantly asking two questions:

1. How do I profit from what is happening in the present?

2. How do I prepare myself for the opportunities that will likely happen in the near future?

The first question (the micro part) provides for decent day-to-day gains in the market. But the big money is always made with the second question (the macro part). Why? Because the correct answer to question is what provides for being early. And as you all know, it's the early bird who catches the worm. Of course, our challenge is to be the bird and not the worm.

MASTER TRADING TIP

We have always taught a dual approach to trading, one that looks to earn a healthy living, the other that looks to build wealth. Position trades and swing trades are designed to build wealth, while day trades and scalp help a trader earn a day-to-day living. The trader who becomes a master at both styles of market play will never have many financial worries.