Saturday, August 11, 2012

Review of 'Trading In The Zone' by Mark Douglas

Review of Trading In The Zone by Mark Douglas

Don't get confused between making a winning trade and being a consistently successful  trader. It takes no skill to make a winning trade. It takes no skill to make 2 successful trades. Every trader knows that being a consistently successful trader, being profitable of the period of a year is a completely different animal.

Trading is difficult to master. A consistently profitable trader is someone who is putting himself in a game that pits his or her skills with the brightest and talented people out there. There is a reason why they say that only 5% of traders are consistently profitable. Yes, because its is difficult. Depending on where you start out, you will be learning how to swim with the sharks and not be eaten. Every time you put on a trade, to be successful someone on the other side has to be a loser. A winning trade is simply the movement of money from someone else's account into yours. If you asked the most successful traders in History what is the difference between success and failure, 9 times out of 10 they will answer your mindset and your psychology. The truly successful traders that have mastered trading, have also mastered their minds, their mindset, and their psychology.

Mark Douglas has written the Bible of trading psychology and is a must read if you are considering to enter the world of trading the markets.

Trading In The Zone will give you all the information you need to master the art of trading psychology. He has also created some fundamental values that summarize the understandings needed in order to become a successful trader. Learn them, read the daily. But firstly read Mark's book, as it will give you all the deeper understandings that underpin these core beliefs.

In order to get a deeper understanding of the markets and the world that you are entering you will need to master these 5 truths..

The Five Fundamental Truths of Trading

1.   Anything can happen
      Although the market can generate times when patterns emerge, essentially every moment in time is actually a brand new moment, where totally different factors, attitudes, circumstances and energies are being played out. Every moment in the market is unique, never has been before, and will never happen again. Therefore anything can happen. So expect that anything can happen, and prepare for this certainty.
2.   You don't need to know what is happening next in order to make money
Your job is not to predict the market. That sounds crazy! but its true. You are not trying to predict what will happen next, you are only taking advantage of an edge. You know that over a series of trades you have a certain win percentage. How that win percentage materializes isn't important.
3.   There is a random distribution between wins and losses for any given set of variables that define an edge
      You have no idea whether this next trade will be a winner or loser. Don't believe anyone who says they can predict the future, many brilliant men have tried and failed. If you are trading with a defined set of rules, then you can predict a percentage over a number of trades, but not the next trade. You can only be certain that based on past history a certain percentage of trades were wins. Like flicking a coin in the air, who can tell if it will be heads or tails, only that over time with enough flicks it will be 50%.
4.   An edge is nothing more than an indication of a higher probability of one thing happening over another
      If you know based on a set or rules and criterion that you follow religiously, that your strategy has a higher win percentage that losing percentage. Or that you have more losses than wins, but your wins are twice as big as your losses. Then you know you have an edge. The probability is set in your favor.
5.   Every moment in the market is unique
      Every moment in time is completely unique. From one moment to the next the world and the universe is completely different. Our minds have the ability to create the illusion of consistency so that we can operate with a degree of certainty. Otherwise we would go nuts! This understanding is the core principle of a profitable trader. Because it leads to the attitude that if I follow my rules, I don't need to know whether the next trade will be a winner, and I don't need the next trade to be a winner. I need to have absolute belief in my strategy, my edge and my ability to consistently produce results over time through the application of my trading rules.

Mark goes on to describe seven principles that form the core of a successful traders mindset. Read these 7 affirmations every day for 1 month, or until you have absorbed them fully into your trading belief system and mindset. Read them as part of your trading day setup, in preparation before you start trading.


1.  I AM A CONSISTENT WINNER BECAUSE...   I objectively identify my edges
2.   I AM A CONSISTENT WINNER BECAUSE...I predefined the risk of every trade
3.  I AM A CONSISTENT WINNER BECAUSE...I completely accept risk or I am willing to let go of the trade
4.   I AM A CONSISTENT WINNER BECAUSE...I act on my edges without reservation or hesitation
5.   I AM A CONSISTENT WINNER BECAUSE...I pay myself as the market makes money available to me
6.  I AM A CONSISTENT WINNER BECAUSE...I continually monitor my susceptibility for making errors
7.   I AM A CONSISTENT WINNER BECAUSE...I understand the absolute necessity of these principles of consistent success and therefore I never violate them.

Find out more about Mark Douglas and trading psychology at his website

Or purchase a copy of his book - Trading in the Zone

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