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

by Mark Douglas

When it comes to trading, however, it turns out that the skills we learn to earn high marks in school, advance our careers, and create relationships with other people, the skills we are taught that should carry us through life, turn out to be inappropriate for trading.

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 become successful.

(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.

you wait for the next edge to appear and go through the process again and again.

The edge means there is a higher probability of one outcome than another.

so that actually doing it becomes as easy, simple, and stress-free as when you’re just watching the market and thinking about doing it.

In contrast, technical analysis not only closes this reality gap, but also makes available to the trader a virtually unlimited number of possibilities to take advantage of.

In other words, technical analysis turns the market into an endless stream of opportunities to enrich oneself.

there can also be a huge gap between what you understand about the markets, and your ability to transform that knowledge into consistent profits or a steadily rising equity curve.

There’s a big difference between predicting that something will happen in the market (and thinking about all the money you could have made) and the reality of actually getting into and out of trades.

The winners have attained a mind-set—a unique set of attitudes—that allows them to remain disciplined, focused, and, above all, confident in spite of the adverse conditions.

Most traders have absolutely no concept of what it means to be a risk-taker in the way a successful trader thinks about risk.

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

Like it was mentioned in this book. Knowing the risk is totally different from accepting the risk.

The best traders can put on a trade without the slightest bit of hesitation or conflict, and just as freely and without hesitation or conflict, admit it isn’t working. They can get out of the trade—even with a loss—and doing so doesn’t resonate the slightest bit of emotional discomfort.

the risks inherent in trading do not cause the best traders to lose their discipline, focus, or sense of confidence.

Trying to avoid something that is unavoidable will have disastrous effects on your ability to trade successfully.

Learning to accept the risk is a trading skill—the most important skill you can learn.

It is just information, telling you what the possibilities are. This is called an objective perspective—one that is not skewed or distorted by what you are afraid is going to happen or not happen.

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.

The hard, cold reality of trading is that every trade has an uncertain outcome.

It will feel like you can’t trust the markets; but the reality is, you can’t trust yourself.

such a way that you can trade without the slightest bit of fear, but at the same time keep a framework in place that does not allow you to become reckless.

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.

A very loose rule of thumb is: Whatever we believe we were deprived of as children can easily become addictions in adulthood.

Regardless of what you may have planned or wanted to do, any number of psychological factors can come into play, causing you to become distracted, change your mind, become scared or overconfident: in other words, causing you to behave in ways that are erratic and unintended.

One of the many contradictions of trading is that it offers a gift and a curse at the same time. The gift is that, perhaps for the first time in our lives, we’re in complete control of everything we do. The curse is that there are no external rules or boundaries to guide or structure our behavior.

The hard reality of trading is that, if you want to create consistency, you have to start from the premise that no matter what the outcome, you are completely responsible. This is a level of responsibility few people have aspired to before they decide to become traders.

Instead of controlling our surroundings so they conform to our idea of the way things should be, we can learn to control ourselves.

For a trader, winning is extremely dangerous if you haven’t learned how to monitor and control yourself.

Attitude produces better overall results than analysis or technique.

That’s what the great athletes have: a winning attitude that allows them to easily move beyond their mistakes and keep going. Others get bogged down in negative self-criticism, regret, and self-pity.

What makes trading so fascinating and, at the same time, difficult to learn is that you really don’t need lots of skills; you just need a genuine winning attitude.

He won’t be able to trade effectively if he is trying to prove something or anything for that matter. If you have to win, if you have to be right, if you can’t lose or can’t be wrong,

Consider the experience of being in a losing trade when the market is making consistently higher highs and higher lows or lower highs and lower lows against your position, while you refuse to acknowledge you are in a losing trade because you have focused all your attention on the tics that go in your favor. On the average, you are only getting one out of four or five tics in your direction; but it doesn’t matter because every time you get one, you are convinced the market has reversed and is coming back.

The first reaction that traders universally have when looking back at such a trade is, “Why didn’t I just take my loss and reverse?”

The opportunity to put on a trade in the opposite direction was easily recognized once there was nothing at stake. But we were blinded to this opportunity while we were in the trade,

Our trader won’t sense these trading realities, because he is being driven forward by two compelling forces: (1) he desperately wants that winning feeling back, and (2) he is extremely enthusiastic about all of the market knowledge he is acquiring.

he shifted from a positive to a negative attitude.

He’s no longer focused on just winning, but rather on how he can avoid pain by preventing the market from hurting him again.

This kind of negative perspective isn’t any different from the tennis player or golfer who is focused on trying not to make a mistake, the more he tries not to...

root cause of his trading problems is his perspective, not his lack of market knowledge.

facetiously,

how to create a healthy balance between confidence and restraint,

Did you ever wonder why leaving money on the table is often more painful than taking a loss? When we lose, there are any number of ways in which we can shift the blame to the market and not accept responsibility. But when we leave money on the table, we can’t blame the market. The market didn’t do anything but give us exactly what we wanted, but for whatever reason, we weren’t capable of acting on the opportunity appropriately. In other words, there’s no way to rationalize the pain away.

You are not responsible for what the market does or doesn’t do, but you are responsible for everything else that results from your trading activities.

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

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.

having to try indicates that there is some degree of resistance or struggle.

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.