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

by Mark Douglas

You can do this by being willing to think from the market’s perspective.

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.

your potential to experience emotional pain comes from the way you define and interpret the information you’re exposed to.

Unknown means “not something your rational thinking process can take into consideration in advance of the flip,” except to fully accept that you don’t know. As a result, there is little, if any, potential to experience the kind of emotional pain that wells up when you feel betrayed.

you can be right in each instance. You just can’t expect to be right.

And if you are right, you can’t expect that whatever you did that worked the last time will work again the next time, even though the situation may look, sound, or feel exactly the same. Anything that you are perceiving “now” in the market will never be exactly the same as some previous experience that exists in your mental environment.

favor. If you approach trading from the perspective that you don’t know what will happen next, you will circumvent your mind’s natural inclination to make the “now moment” identical to some earlier experience.

can’t let some previous experience (either negative or extremely positive) dictate your state of mind. If you do, it will be very difficult, if not impossible, to perceive what the market is communicating from its perspective.

When I put on a trade, all I expect is that somet...

Regardless of how good I think my edge is, I expect nothing more than for the market to move or t...

I know that based on the market’s past behavior, the odds of it moving in the direction of my trade are good or acceptable, at least in relationship to how much ...

I also know before getting into a trade how much I am willing to let the market m...

There is always a point at which the odds of success are greatly diminished in relation to the profit potential. At that point, it’s not worth spending any more mon...

If the market reaches that point, I know without any doubt, hesitation, or internal conflict ...

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.

The best traders are in the “now moment” because there’s no stress.

There’s no stress because there’s nothing at risk other than the amount of money they are willing to spend on a trade.

If and when the market tells them that their edges aren’t working or that it’s time to take profits, their minds do nothing to block this information.

They completely accept what the market is offering them, and they wait for the next edge.

Any particular pattern defined as an edge is simply an indication that there is a higher probability that the market will move in one direction over the other.

there is a major mental paradox here because a pattern implies consistency, or, at least, a consistent outcome.

But the reality is each pattern is a uniq...

Our minds have an inherent design characteristic (the association mechanism) that can make this paradox difficult to deal with.

Our beliefs working in conjunction with the association and pain-avoidance mechanisms act as a force on our five senses, causing us to perceive, define, and interpret market information in a way that is consistent with what we expect.

Expectations are beliefs projected into some future moment.

It’s our state of mind that makes the truth of whatever we’re perceiving outside of us (in the market) seem indisputable and beyond question.

Our state of mind is always the absolute truth.

As traders, we can’t afford to indulge ourselves in any form of “I know what to expect from the market.”

We can “know” exactly what an edge looks, sounds, or feels like, and we can “know” exactly how much we need to risk to find out if that edge is going to work.

We can “know” that we have a specific plan as to how we are going to take profits if a t...

And all that’s required to put us into a negatively charged, “I know what to expect from the market” state of mind is for any belief, memory, or attitude to cause us to interpret the up and down tics or any market information as anything but an opportunity to do something on our own behalf.

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...

To remove the sense of threat, you have to accept the risk completely. When you have accepted the risk, you will be at peace with any outcome.

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.

What Does it Mean to Make Yourself Available? Making yourself available means trading from the perspective that you have nothing to prove.

you come to the market with no agenda other than to let it unfold in any way that it chooses and to be in the best state of mind to recognize and take advantage of the opportunities it makes available to you.

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.

1. Anything can happen.

Because there are always unknown forces operating in every market at every moment, it takes only one trader somewhere in the world to negate the positive outcome of your edge.

2. You don’t need to know what is going to happen next in order to make money.

there is a random distribution between wins and losses for any given set of variables that define an edge.

This truth makes trading a probability or numbers game.

When you really believe that trading is simply a probability game, concepts like right and wrong or win and lose no longer have the same significance.

Market information is only threatening if you are expecting the market to do something for you.

if you believe that all you need to know is: 1. the odds are in your favor before you put on a trade; 2. how much it’s going to cost to find out if the trade is going to work; 3. you don’t need to know what’s going to happen next to make money on that trade; and 4. anything can happen;

If your edge puts the odds in your favor, then every loss puts you that much closer to a win. When you really believe this, your response to a losing trade will no longer take on a negative emotional quality.

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.