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

by Mark Douglas

it all boils down to learning to believe that: (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.

The defining characteristic that separates the consistent winners from everyone else is this: 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. As a result, they are no longer susceptible to the common fears and trading errors that plague everyone else.

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.

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

Learning how to redefine your trading activities in a way that allows you to completely accept the risk is the key to thinking like a successful trader. Learning to accept the risk is a trading skill—the most important skill you can learn.

When you learn the trading skill of risk acceptance, the market will not be able to generate information that you define or interpret as painful. If the information the market generates doesn’t have the potential to cause you emotional pain, there’s nothing to avoid. 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.

If you’re afraid of being wrong, your fear will act upon your perception of market information in a way that will cause you to do something that ends up making you wrong.

that no matter how much you learn about the market’s behavior, no matter how brilliant an analyst you become, you will never learn enough to anticipate every possible way that the market can make you wrong or cause you to lose money.

Unless you learn to completely accept the possibility of an uncertain outcome, you will try either consciously or unconsciously to avoid any possibility you define as painful. In the process, you will subject yourself to any number of self-generated, costly errors.

In other words, our needs and desires are generated in our mental environment, and they are fulfilled in the exterior environment

If these two environments are in correspondence with one another, we’re in a state of inner balance and we feel a sense of satisfaction or happiness.

If these environments are not in correspondence, we experience dissatisfaction, anger, and frustration, or what is commo...

What’s important for us to understand about these unreconciled, denied impulses (that exist in all of us) is how they affect our ability to stay focused and take a disciplined, consistent approach to our trading.

To prevent the possibility of exposing ourselves to damage, we need to create an internal structure in the form of specialized mental discipline and a perspective that guides our behavior so that we always act in our own best interests.

This structure has to exist within each of us, because unlike society, the market doesn’t provide it.

In trading, no one (except yourself) is going to force you to decide in advance what your risk is. In fact, what we have is a limitless environment, where virtually anything can happen at any moment and only the consistent winners define their risk in advance of putting on a trade.

the very reason we are attracted to trading in the first place—the unlimited freedom of creative expression—is the same reason we feel a natural resistance to creating the kinds of rules and boundaries that can appropriately guide 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.

When we act on our own ideas, we put our creative abilities on the line and we get instant feedback on how well our ideas worked.

It’s very difficult to rationalize away any unsatisfactory results.

On the other hand, when we enter an unplanned, random trade, it’s much easier to shift the responsibility by blaming the frien...

we can control our perception and interpretation of market information, as well as our own behavior. Instead of controlling our surroundings so they conform to our idea of the way things should be, we can learn to control ourselves.

Then we can perceive information from the most objective perspective possible, and structure our mental environment so that we always behave in a manner that is in our own best interest.

the consistently successful trader that you want to become doesn’t exist yet. You must create a new version of yourself, just as a sculptor creates a likeness of a model.

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.

your primary goal has to be to learn how to think like a consistently successful trader.

the best traders think in a number of unique ways.

They have acquired a mental structure that allows them to trade without fear and, at the same time, keeps them from becoming reckl...

eliminating fear is only half the equation. The other half is the need to develop restraint.

Excellent traders have learned that it is essential to have internal discipline or a mental mechanism to counteract the negative effects of euphoria or the overconfidence that comes from a string of winning trades.

Attitude produces better overall results than analysis or technique.

Even though you cannot force or will yourself into a zone, you can set up the kind of mental conditions that are most conducive to experiencing “the zone,” by developing a positive winning attitude.

a positive winning attitude as expecting a positive result from 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.

Even though most people who trade consider themselves responsible adults, only the very best traders have reached a point where they can and do accept complete responsibility for the outcome of any particular trade.

Taking responsibility means acknowledging and accepting, at the deepest part of your identity, that you—not the market—are completely responsible for your success or failure as a trader.

Taking responsibility means believing that all of your outcomes are self-generated; that your results are based on your interpretations of market information, the decisions you make and the actions you take as a result.

Taking anything less than complete responsibility sets up two major psychological obstacles that will block your success.

First, you will establish an adversarial relationship with the market that takes you out of the co...

Second, you will mislead yourself into believing that your trading problems and lack of success can be rec...

If you perceive the endless stream of opportunities to enter and exit trades without self-criticism and regret, then you will be in the best frame of mind to act in your own best interest and learn from your experiences.

against. If you want to start sensing the flow of the market, your mind has to be relatively free of fear, anger, regret, betrayal, despair, and disappointment.

You won’t have a reason to experience these negative emotions when you assume absolute responsibility.

It’s absolutely essential to your development that you understand these negative effects and learn how to take conscious control in a way that helps you fulfill your goals.

Our minds have a number of ways to shield us from information that we have learned to perceive as painful. For example, at a conscious level, we can rationalize, justify, or make a case for staying in a losing trade.

It’s when you’re winning that you are most susceptible to making a mistake, overtrading, putting on too large a position, violating your rules, or generally operating as if no prudent boundaries on your behavior are necessary.

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.

If you are confident, it’s not because the market is making you feel that way; it is because your beliefs and attitudes are aligned in a way that allows you to step forward into an experience, take responsibility for the outcome, and extract the insight that’s been made available.

You maintain your confident state of mind simply because you are ...