Trading in the Zone - Master the Market with Confidence, Discipline and a Winning Attitude

Mark Douglas

Prentice Hall Press

2001

240 páginas

8h 0m

ISBN-13: 9780735201446

Douglas uncovers the underlying reasons for lack of consistency and helps traders overcome the ingrained mental habits that cost them money. He takes on the myths of the market and exposes them one by one teaching traders to look beyond random outcomes, to understand the true realities of risk, and to be comfortable with the "probabilities" of market movement that governs all market speculation.

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Preface
Those traders who have confidence in their own trades, who trust themselves to do what needs to be done without hesitation, are the ones who became successful.
Chapter 1
On any given day, week or month, the markets make avaible vast amounts of money to anyone who has the capacity to put on a trade.
Admiting we are wrong and lonsing money to boot can be extremely painful, and certainly something to avoid. Yet as traders, we are confronted with these two possibilities virtually every moment we are in a trade.
The best traders aren’t afraid. They aren’t afraid because they have developed attitudes that give them the greatest degree of mental flexibility to flow in and out of trades based on what the market is telling them about the possibilities from it’s perspective.

Chapter 2
Trading is an activity that offers the individual unlimited freedom of creative expression, a freedom of expression that has been denied most of us for most of our lives.
To operate effectively in the trading environment, we need rules and boundaries to guide our behavior.
In trading, prices are in constant motion, nothing begins until you decide it should, it lasts as long as you want, and it doesn't end until you want it to be over.
This is a classic example of how we become susceptible to unstructured, random trading—because we want to avoid responsibility.

Chapter 3
The tools you will use to create this new version of yourself are your willingness and desire to learn, fueled by your passion to be successful.
However, eliminating fear is only half the equation. The other half is the need to develop restraint.
This lack of fear translates into a carefree state of mind, similar to the state of mind many great athletes describe as a "zone."
The first major step in this learning process is taking complete and absolute responsibility.
Euphoria and self-sabotage are two powerful psychological forces that will have an extremely negative effect on your bottom line.
Probably one of the hardest concepts for traders to effectively assimilate is that the market doesn't
create your attitude or state of mind; it simply acts as a mirror reflecting what's inside back to you.

Chapter 4
What separates the best traders from everyone else is not what they do or when they do it, but rather how they think about what they do and how they're thinking when they do it.
If you depend on outside conditions and circumstances to make you happy (so that you always are enjoying yourself), then it is extremely unlikely that you will experience happiness on a consistent basis.
Learn to accept the risk.
Accepting the risk means accepting the consequences of your trades without emotional discomfort or fear.
It doesn't do you any good to take the risk of putting on a trade if you are afraid of the consequences, because your fears will act on your perception of information and your behavior in a way that will cause you to create the very experience you fear the most, the one you are trying to avoid.

Chapter 5
The market doesn't generate happy or painful information.
In essence, your objective is to be able to create a unique state of mind, a traders mentality.
The process of trading starts with perceiving an opportunity. Without the perception of an opportunity, we wouldn't have a reason to trade.
Using the same logic, a top trader would say that your fear is irrational because this "now moment" opportunity has absolutely nothing to do with your last trade.
If what you perceive at any given moment causes you to feel fear, ask yourself this question: Is the information inherently threatening, or are you simply experiencing the effect of your own state of mind reflected back to you?
Think about this for a moment: If I change the scenario so that your last two or three trades were
winners instead of losers, would you have perceived the signal any differently?

Chapter 6
The best traders, on the other hand, are not impacted (either negatively or too positively) by the outcomes of their last or even their last several trades.
If there is such a thing as a secret to the nature of trading, this is it: At the very core of one's ability 1) to trade without fear or overconfidence, 2) perceive what the market is offering from its perspective, 3) stay completely focused in the "now moment opportunity flow," and 4) spontaneously enter the "zone"
What we haven't learned yet is invisible to us, and remains invisible until our minds are open to an
exchange of energy.
The first step on the road toward getting your mind and the market in sync is to understand and completely accept the psychological realities of trading.
And if every trade truly has an uncertain outcome, then how could he ever justify or talk himself into not predefining his risk, cutting his losses, or having some systematic way to take profits? Given the circumstances, not adhering to these three fundamental principles is the equivalent of committing financial and emotional suicide.

Chapter 7
Since all trades have an uncertain outcome, then like gambling, each trade has to be statistically independent of the next trade, the last trade, or any trades in the future, even though the trader may use the same set of known variables to identify his edge for each trade.
When you've trained your mind to think in probabilities, it means you have fully accepted all the possibilities (with no internal resistance or conflict) and you always do something to take the unknown forces into account.
As a result, they don't perceive the risks of trading in the same way the typical trader does.
In other words, where exactly does the threat of pain come from? If it's not coming from the market, then it has to be coming from the way we define and interpret the available information.
We have to be rigid in our rules and flexible in our expectations.
To eliminate the emotional risk of trading, you have to neutralize your expectations about what the market will or will not do at any given moment or in any given situation.
A probabilistic mind-set pertaining to trading consists of five fundamental truths.
1. Anything can happen.
2. You don't need to know what is going to happen next in order to make money.
3. There is a random distribution between wins and losses for any given set of variables that define an edge.
4. An edge is nothing more than an indication of a higher probability of one thing happening over
another.
5. Every moment in the market is unique.
To me, losses are simply the cost of doing business or the amount of money I need to spend to make myself available for the winning trades.

Chapter 8
Our state of mind is always the absolute truth. If I feel confident, then I am confident. If I feel afraid, then I am afraid.
What Are the Skills? Consistency is the result of a carefree, objective state of mind, where we are
making ourselves available to perceive and act upon whatever the market is offering us (from its
perspective) in any given "now moment."
What Is a Carefree State of Mind? Carefree means confident, but not euphoric.
Otherwise, if you don't expect the market to make you right, you have no reason to be afraid of being wrong. If you don't expect the market to make you a winner, you have no reason to be afraid of losing. If you don't expect the market to keep going in your direction indefinitely, there is no reason to leave money on the table.
When you completely accept the psychological realities of the market, you will correspondingly accept the risks of trading.

Chapter 9
The beliefs themselves are different and the effect that each has on the quality of the holder's life will be vastly different, but both beliefs will function in exactly the same manner.
That truth, whatever it is, will determine:
1. the possibilities we perceive in relation to what is available from the environment's perspective,
2. how we interpret what we perceive,
3. the decisions we make,
4. our expectations of the outcome,
5. the action we take, and
6. how we feel about the results of our efforts.

Chapter 10
What characteristics of our beliefs make us intolerant of divergent beliefs?
There are three basic characteristics you need to understand in order to effectively install the five
fundamental truths about trading at a functional level in your mental environment:
1. Beliefs seem to take on a life of their own and, therefore, resist any force that would alter their
present form.
2. All active beliefs demand expression.
3. Beliefs keep on working regardless of whether or not we are consciously aware of their existence in our mental environment.
The easiest and most effective way to work with our beliefs is to gently render them inactive or nonfunctional by drawing the energy out of them. I call this process de-activation.

Chapter 11
If you asked me to distill trading down to its simplest form, I would say that it is a pattern recognition numbers game.
In fact, trading is probably the hardest thing you'll ever attempt to be successful at. That's not because it requires intellect; quite the contrary! But because the more you think you know, the less successful you'll be.
The first stage is the mechanical stage. In this stage, you:
1. Build the self-trust necessary to operate in an unlimited environment.
2. Learn to flawlessly execute a trading system.
3. Train your mind to think in probabilities (the five fundamental truths).
4. Create a strong, unshakeable belief in your consistency as a trader.
Once you have completed this first stage, you can then advance to the subjective stage of trading. In this stage, you use anything you have ever learned about the nature of market movement to do
whatever it is you want to do.
The third stage is the intuitive stage. Trading intuitively is the most advanced stage of development. It is the trading equivalent of earning a black belt in the martial arts.
If producing consistent results is your primary objective as a trader, then creating a belief (a conscious, energized concept that resists change and demands expression) that "I am a consistently successful trader" will act as a primary source of energy that will manage your perceptions, interpretations, expectations, and actions in ways that satisfy the belief and, consequently, the objective.
The first step in the process of creating consistency is to start noticing what you're thinking, saying, and doing.
You have to be able to monitor yourself to some degree, and that will be difficult to do if you have the potential to experience emotional pain if and when you find yourself in the process of making an error.
If this potential exists, you have two choices:
1. You can work on acquiring a new set of positively charged beliefs about what it means to make a mistake, along with de-activating any negatively charged beliefs that would argue otherwise or cause you to think less of yourself for making a mistake.
2. If you find this first choice undesirable, you can compensate for the potential to make errors by the way you set up your trading regime.
Once the principles become "who you are," you will no longer need self-discipline, because the process of "being consistent" will become effortless.