Today's Quote: “There is no more miserable human being than one in whom nothing is habitual but indecision” - William James.

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 #5: MAKE THE CHART AND THE CROWD WILL FOLLOW

It is estimated that the typical person experiences over 60,000 thoughts per day. Unfortunately, 95 percent of us have the very same thoughts today that we had yesterday, making us nothing more than bundles of conditioned responses. However, if one truly desires to excel as a trader, one must learn to think independently of others, to think completely "out of the box," if you will. As traders, there exists a dire need at times to be proactive versus reactive. The master traders create market reaction at times, they don't merely respond to it. In other words, they single handedly move markets when they can, not merely react to them. Those players who are using a trading approach that hinges largely on the constant movement and actions of others are really followers, not master traders. Acting confidently, independently, and with great certainty is a must in the high-stakes game of trading, but this only becomes possible if one is acting on one's own knowledge and conviction. Now don't get us wrong. To a certain extent, we do follow the lead of what we term "smart money.” That's what charting is all about. But I experience far too many instances when a trader of mine has decided to do one thing and never does because he or she has received no confirmation from others. But once independent traders decide what their action will be, they should need no confirmation from others before leaping into action. Let's say a trader decides to buy XYZ above $40. The breakout comes. And instead of acting instantly as planned, the trader now thinks things like, "Well, XYX is now at $4034. Maybe I'll wait to see if the volume picks up." "Let's see if it can move up one more ~ before I commit.” "Let's see if the market makers start to lift, or the size on the offer gets smaller." "I'll wait until Goldman Sachs (GSCO) leaves the offer." These are nothing but excuses not to act based on the need for others to confirm a decision. True master traders become the volume others are looking for. They help create that extra 31 with their own buy orders and they are not willing to let GSCO or the size of the offer weaken their resolve. They know what they want to do, and believe in it enough to leap into action whenever their sound approach gives them the OK. This is being independent. This is being a master, and it is key to not only being happy, but being profitable.

MASTER TRADING TIP

We teach our traders to be the creators of those market events that others are waiting for. "If the crowd is waiting for a stock to trade above $40 before they buy," we say, "then get the stock up to $4031.” In other words, "make the chart!" This is true mastery and often requires many years of experience before it can be done, but we thought it would be beneficial for you to know how the professionals are playing the crowd. The idea is to ignite the action of your desire by getting to the crowd to take your lead. It can't always be done, but our master traders pull it off more often than some might think.