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

by Mark Douglas

To me, the determining factor is psychological—the consistent winners think differently from everyone else.

(1) you don’t need to know what’s going to happen next to make money; (2) anything can happen; and (3) every moment is unique, meaning every edge and outcome is truly a unique experience.

People, expressing their beliefs and expectations about the future, make prices move—not models.

The best traders not only take the risk, they have also learned to accept and embrace that risk.

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 its perspective. At the same time, the best traders have developed attitudes that prevent them from getting reckless.

Ninety-five percent of the trading errors you are likely to make—causing the money to just evaporate before your eyes—will stem from your attitudes about being wrong, losing money, missing out, and leaving money on the table. What I call the four primary trading fears.

So if you are afraid of being wrong or losing money, it means you will never learn enough to compensate for the negative effects these fears will have on your ability to be objective and your ability to act without hesitation. In other words, you won’t be confident in the face of constant uncertainty.

Suck the air out of a bottle and your tongue and lips will stick to the mouth of the bottle, because you have created an imbalance (a vacuum), which now must be filled.

The implications are that if we haven’t learned to accept the inherent risks of trading and don’t know how to guard against making these natural connections between our past and the present, we will end up blaming the market for our results instead of taking responsibility for them.

The way to take maximum advantage of a situation where you are being offered unlimited opportunities to do something for yourself is to get into the flow.

Remember our definition of a winning attitude: a positive expectation of your efforts with an acceptance that whatever results you get are a perfect reflection of your level of development and what you need to learn to do better.

Winning and consistency are states of mind in the same way that happiness, having fun, and satisfaction are states of mind.

The best traders stay in the flow because they don’t try to get anything from the market; they simply make themselves available so they can take advantage of whatever the market is offering at any given moment.

Accepting the risk means accepting the consequences of your trades without emotional discomfort or fear.

If your goal is to be able to trade like the professionals, you must be able to see the market from an objective perspective, without distortion.

To learn about something, we have to be able to experience it in some way. So what we have here is a closed loop that prevents us from learning.

One of your basic objectives as a trader is to perceive the opportunities available, not the threat of pain.

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,” it is a strong virtually unshakeable belief in an uncertain outcome with an edge in your favor.

It isn’t difficult, therefore, to understand why so few people make it as traders. They simply don’t do the mental work necessary to reconcile the many conflicts that exist between what they’ve already learned and believe, and how that learning contradicts and acts as a source of resistance to implementing the various principles of successful trading.

They stay relaxed because they are committed and willing to let the probabilities (their edges) play themselves out, all the while knowing that if their edges are good enough and the sample sizes are big enough, they will come out net winners.

It takes only one trader, somewhere in the world, with a different belief about the future to change the outcome of any particular market pattern and negate the edge that pattern represents.

When you achieve complete acceptance of the uncertainty of each edge and the uniqueness of each moment, your frustration with trading will end.

We have to be rigid in our rules and flexible in our expectations. We need to be rigid in our rules so that we gain a sense of self-trust that can, and will always, protect us in an environment that has few, if any, boundaries. We need to be flexible in our expectations so we can perceive, with the greatest degree of clarity and objectivity, what the market is communicating to us from its perspective.

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.

What prevents us from perceiving each “now moment” as an opportunity to do something for ourselves or to act appropriately even when we do? Our fears!

Each moment from the market’s perspective is unique; but if the information being generated by the market is similar in quality, properties, or characteristic to something that is already in our minds, the two sets of information (outside and inside) automatically become linked.

I think you said this already

Making money consistently is a by-product of acquiring and mastering certain mental 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.”

Objectivity is a state of mind where you have conscious access to everything you have learned about the nature of market movement. In other words, nothing is being blocked or altered by your pain-avoidance mechanisms.

Making yourself available means trading from the perspective that you have nothing to prove.

Trading in the “now moment” means that there is no potential to associate an opportunity to get into, get out of, add too, or detract from a trade with a past experience that already exists in your mental environment.

When you truly believe that each moment is unique, then by definition there isn’t anything in your mind for the association mechanism to link that moment to.

To illustrate the point, let’s return to the example of the boy and dog.

Again?

He tried as hard as he could to stay focused on what he was trying to accomplish and, little by little, he de-activated the conflicting belief and strengthened the belief that was consistent with his desire.

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

A 3:1 risk-to-reward ratio is ideal.