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

by Mark Douglas

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.

Taking responsibility in your trading and learning the appropriate principles of success are inextricably connected.

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.

To realize more and more of that potential, to make it more and more of a reality in your life, your primary goal has to be to learn how to think like a consistently successful trader.

successful traders have virtually eliminated the effects of fear and recklessness from their trading. These two fundamental characteristics allow them to achieve consistent results.

The other half is the need to develop restraint.

Attitude produces better overall results than analysis or technique.

This lack of fear translates into a carefree state of mind, similar to the state of mind many great athletes describe as a “zone.”

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.

I define 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.

Expectations are our mental representations of how some future moment in the environment is going to look, sound, feel, smell, or taste.

The bottom line is that, as adults when we get into a trading mode, we don’t realize how natural it is to associate the instantaneous shift from joy to pain that we experienced so often as children with the same instantaneous shift from joy to pain that occurs when we trade. 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.

a point where they can and do accept complete responsibility for the outcome of any particular trade.

Any degree of blaming means you have not accepted the reality that the market owes you nothing, regardless of what you want or think or how much effort you put into your trading.

if you ever find yourself blaming the market and feeling betrayed, that is essentially what you are doing. You are expecting the collective actions of everyone participating in the market to make the market act in a way that gives you what you want. You have to learn for yourself how to get what you want out of the markets. The first major step in this learning process is taking complete and absolute responsibility.

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 constant flow of opportunities. Second, you will mislead yourself into believing that yo...

Otherwise, each moment, each bid, and each offer gives you the opportunity to do something.

From the market’s perspective, each moment is neutral; to you, the observer, every moment and price change can have meaning.

The meanings are based on what you’ve learned, and exist inside your mind, not in the market.

The market doesn’t know whether you perceive it as an endless stream of opportunities to enter and exit trades for both profits and losses at each and every moment, or whether you perceive it as a greedy monster ready and willing in any given moment to devour your money.

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.

The market is certainly not fighting you. Yes, the market wants your money, but it also provides you with the opportunity to take as much as you can.

The market does have a flow. It is often erratic, especially in the shorter time frames, but it does display symmetrical patterns that repeat themselves over and over again.

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

But we were blinded to this opportunity while we were in the trade, because at that time the information indicating it was an opportunity was defined as painful, so we blocked it from our awareness.

Instead of assuming that the cause of his pain was his erroneous expectation about what the market was supposed to do or not do, he blamed the market, and resolved that by gaining market knowledge, he could prevent such experiences from recurring.

What he doesn’t realize is that, in spite of his enthusiasm, when he went from a carefree state of mind to a prevent-and-avoid mode of thinking, he shifted from a positive to a negative attitude.

One of the primary characteristics of euphoria is that it creates a sense of supreme confidence where the possibility of anything going wrong is virtually inconceivable.

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.

In a state of overconfidence or euphoria, you can’t perceive any risk because euphoria makes you believe that absolutely nothing can go wrong. If nothing can go wrong, there’s no need for rules or boundaries to govern your behavior. So putting on a larger than usual position is not only appealing, it’s compelling.

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.

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.

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.

Developing a winning attitude is the key to your success.

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 your goal is to trade like a professional and be a consistent winner, then you must start from the premise that the solutions are in your mind and not in the market.

Consistency is a state of mind that has at its core certain fundamental thinking strategies ...

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

Your state of mind is a by-product of your beliefs and attitudes.

You can’t rely on the market to make you consistently successful, any more than you can rely on the outside world to make you consistently happy. People who are truly happy don’t have to do anything in order to be happy. They are happy people who do things.

Traders who are consistently successful are consistent as a natural expression of who they are. They don’t have to try to be consistent; they are consistent.

Being consistent is not something you can try to be, because the very act of trying will negate your intent by mentally taking you out of the opportunity flow, making it less likely that you will win and more likely you will lose.

Your very best trades were easy and effortless. You didn’t have to try to make them easy; they were easy. There was no struggle. You saw exactly what you needed to see, and you acted on what you saw. You were in the moment, a part of the opportunity flow. When you’re in the flow, you don’t have to try, because everything you know about the market is available to you. Nothing is being blocked or hidden from your awareness, and your actions seem effortless because there’s no struggle or resistance.

However, in the process of trying to maintain a pain-free state of mind, you also take yourself out of the opportunity flow and enter the realm of the “could have,” the “should have,” the “would have,” and the “if only.” Everything that you could have, should have, or would have recognized in the moment appeared invisible, then all becomes painfully evident after the fact, after the opportunity is long gone.

To be consistent, you have to learn to think about trading in such a way that you’re no longer susceptible to conscious or subconscious mental processes that cause you to obscure, block, or pick and choose information on the basis of what will make you happy, give you what you want, or avoid pain.

The threat of pain generates fear, and fear is the source of 95 percent of the error...

Now, you may be asking yourself, how can I think about trading in such a way that I’m no longer afraid and, therefore, no longer susceptible to the mental processes that cause me to block, obscure, or pick and choose information? The answer is: Learn to accept the risk.