Today's Quote: “The rung of a ladder was never meant to rest upon, but only to hold a man's foot long enough to enable him to put the other somewhat higher” Thomas Henry Huxley

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…

THE TWO LIVES OF A MASTER TRADER

If only one could have two lives: the first in which to make one's mistakes, which seem as if they have to be made; and the second in which to profit by them.

This wise statement, made by D. H. Lawrence, is surely food for thought, particularly for traders. But Mr. Lawrence seems to question if it is possible to live the two lives of which he speaks. Well, I will go so far as to say if you don't live these two lives, you will never be a success in anything, much less trading. You see, the very first phase of a trader's development always involves being a loser. Over the past 13 years, I have met and personally taught hundreds of traders, and I can honestly say, I've yet to meet a successful trader who has not first experienced being a loser. Of course, only those who profit from the first phase of their trading life earn the right to move into the second phase, which is the one that involves winning. No matter how you slice it or dice it, the truth of the matter is that we, as traders, must first learn how to deal with loss, before we can ever hope to be able to deal with success. In fact, success or winning is actually determined by how well we handle our losses. The sad part is that most aspiring traders never even get close to experiencing the joys of the second life of winning, mainly because they are not learning the lessons being offered by their first life of losing. What's even more unfortunate is that most are not even aware of the mistakes they are making to learn from them…

Every individual, in a sense, lives two lives, one as a developing child or adolescent, the other as a developing adult. Every trader has a childhood as well, but very few end up enduring long enough to graduate to adulthood. Adulthood, as a trader, requires that all the lessons of childhood be learned, digested, and properly put into practice. If this maturing process does not occur, the trader stays trapped into the lower depths of childhood, struggling for maturity and seasoning. The very best way to ensure that you are maximizing the learning process during your childhood is to keep a trading journal. Not only should you track and make comments on each play you make, but your thoughts about trading should be written down, ideas should be maintained, and realizations kept. Each lesson learned should be immortalized by giving it a special place in your trading journal. This journal will act as a mirror that reflects who you are, and also serve as road map of where you should be going. By developing the habit of jotting down each experience, each emotion, each thought, you ensure the continual process of growth that will eventually lead to that much desired state of adulthood. It is in that second life of adulthood that all the hard work and struggle endured during the first will manifest itself in your trading experiences each day.