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

by Mark Douglas

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

I am offering you a specific thinking strategy composed of a set of beliefs that will keep you focused, in the moment, and in the flow. With this perspective, you will not be trying to get anything from the market or to avoid anything. Rather, you will let the market unfold and you will make yourself available to take advantage of whatever situations you define as opportunities.

When you make yourself available to take advantage of an opportunity, you don’t impose any limitations or expectations on the market’s behavior. You are perfectly satisfied to let the market do whatever it’s going to do.

However, in the process of doing something, the market will create certain conditions you define and perceive as opportunities. You act on those opportunities to the best of your ability, but your state of mind is...

If you can learn to create a state of mind that is not affected by the market’s behavior, the struggle will cease to exist. When the internal struggle ends, everything becomes easy. At that point, you can take full advantage of all your skills, analyti...

Here’s the challenge! How do you accept the risks of trading without emotional discomfort and fear, when at the moment you perceive the risk, you simultaneously feel discomfort and fear? In other words, how do you remain confident and pain-free when you are absolutely certain you can be proved wrong, lose money, miss out, or leave money on the table? As you can see, your fear and feeling of discomfort are completely justified...

When you accept the risk the way the pros do, you won’t perceive anything that the market can do as threatening.

If nothing is threatening, there’s nothing to fear. If you’re not afraid, you don’t need courage. If you’re not stressed, why would you need nerves of steel? And if you’re not afraid of your potential to get reckless, because you have the appropriate monitoring mechanisms in place, then you have no need for self-control.

We start out carefree, then become scared, and our fears continually diminish our potential.

When the threat of pain is gone, the fear will correspondingly disappear, as will the fear-based errors you are susceptible to. You will be left with a mind that is free to see what is available and to act on what you see.

The market doesn’t generate happy or painful information. From the market’s perspective, it’s all simply information.

They’re in the flow, because they’re perceiving an endless stream of opportunities, and when they’re not in the flow, the very best of the best can recognize that fact and then compensate by either scaling back or not trading at all.

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.

In essence, your objective is to be able to create a unique state of mind, a trader’s mentality. When you’ve accomplished this, everything else about your success as a trader will fall into place.

The process of trading starts with perceiving an opportunity.

Everything that exists outside of our bodies—all plants and all categories of life; all planetary phenomena in the form of weather conditions, earthquakes, and volcanic eruptions; all active and inert physical matter; and all noncorporeal phenomena such as light, sound waves, microwaves, and radiation—generates information about the nature of its existence. That information has the potential to act as a force on one of our five physical senses.

When we encounter anything in the environment that expresses its properties and characteristics, an exchange of energy takes place. Energy from the outside, in the form of whatever is expressing itself, gets transformed by our nervous system into electrical impulses and then gets stored in our inner, mental environment. To be more specific, whatever we are seeing, hearing, tasting, smelling, or feeling through our senses gets transformed into electrical impulses of energy and stored in our mental environment as a memory and/or distinction about the nature of the way things exist.

Thoughts are energy.

At the most fundamental level, what are dreams? I am not asking you what dreams mean or what you think their purpose is, but rather, what are they? What are their properties? If we assume that dreams take place within the confines of our skulls, then they can’t be composed of atoms and molecules, because there wouldn’t be enough space for all of the things that exist and take place in our dreams. Dream experiences seem to have the same proportions and dimensions as the things we perceive when we are awake and experiencing life through our five senses. The only way this could be possible is if dreams were a form of structured energy, because energy can take on any size or dimension, but, in doing so, doesn’t actually take up any space.

we have an unlimited capacity for learning.

a top trader would say that your fear is irrational because this “now moment” opportunity has absolutely nothing to do with your last trade.

Each trade is simply an edge with a probable outcome, and statistically independent of every other trade.

Risk is relative, but to the person who perceives it in the moment, it seems absolute and beyond question.

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

To learn how to stay focused on the opportunities, you need to know and understand in no uncertain terms the source of the threat. It’s not the market. The market generates information about its potential to move from a neutral perspective. At the same time, it provides you (the observer) with an unending stream of opportunities to do something on your own behalf.

I want you to ask yourself whether, at the moment you hesitated, were you perceiving what the market was making available, or perceiving what was in your mind reflected back to you?

Every trader I’ve worked with over the last 18 years has had to learn how to train his mind to stay properly focused in the “now moment opportunity flow.”

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.

The best traders have evolved to the point where they believe, without a shred of doubt or internal conflict, that “anything can happen.”

Their belief in uncertainty is so powerful that it actually prevents their minds from associating the “now moment” situation and circumstance with the outcomes of their most recent trades. By preventing this association, they are able to keep their minds free of unrea...

they have learned to “make themselves available” to take advantage of whatever opportunities the market may offer in any given moment.

“Making yourself available” is a perspective from which you understand that the framework from which you are perceiving information is limited relative to what’s being offered.

What we haven’t learned yet is invisible to us, and remains invisible until our minds are open to an exchange of energy.

A perspective from which you make yourself available takes into consideration both the known and the unknown: For example, you’ve built a mental framework that allows you to recognize a set of variables in the market’s behavior that indicates when an opportunity to buy or sell is present. This is your edge and something you know. However, what you don’t know is exactly how the pattern your variables identify will unfold.

With the perspective of making yourself available, you know that your edge places the odds of success in your favor, but, at the same time, you completely accept the fact that you don’t know the outcome of any particular trade. By making yourself available, you consciously open yourself up to find out what will happen next; instead of giving way to an automatic mental process that causes you to think you already know. Adopting this perspective leaves your mind free of internal resistance that can prevent you from perceiving whatever opportunity the market is making available from its perspective (its truth). Your mind is open for an exchange of en...

The essence of what it means to be in “the zone” is that your mind and the market are in sync. As a result, you sense what the market is about to do as if there is no separation between yourself and the collective consciousness of everyone else participating in the market. The zone is a mental space where you are doing ...

The first is the focus of this chapter: learning how to keep your mind focused in the “now moment opportunity flow.” In order to experience synchronicity, your mind has to be open to the market’s truth, from its perspective.

By definition, true creativity brings forth something that didn’t previously exist.

Acting appropriately on anything requires belief and clarity of intent, which keeps our minds and senses focused on the purpose at hand.

you will understand without a shred of doubt why your ultimate success as a trader cannot be realized until you develop a resolute, unshakeable belief in uncertainty.

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.

The market can do virtually anything at any time.

The fact is that if traders really believed that anything could happen at any time, there would be considerably fewer losers and more consistent winners.

The most fundamental component of any market is its traders.

everyone is looking for the same outcome: Profits.

And there are only two ways to create those profits: Either buy low and sell high, or sell high and buy low.

If we look at the market’s behavior as a function of price movement, and if price movement is a function of traders who are willing to bid prices up or offer them lower, then we can say that all price movement (market behavior) is a function of what traders believe about the future. To be more specific, all price movement is a function of what individual traders believe about what is high and what is low.

Only three primary forces exist in any market: traders who believe the price is low, traders who believe the price is high, and traders who are watching and waiting to make up their minds about whether the price is low or high. Technically, the third group constitutes a potential force. The reasons that support any given trader’s belief that something is high or low are usually irrelevant, because most people who trade act in an undisciplined, unorganized, haphazard, and random manner. So, their reasons wouldn’t necessarily help anyone gain a better understanding of what is going on.

remember that all price movement or lack of movement is a function of the relative balance or imbalance between two primary forces: traders who believe the price is going up, and traders who believe the price is going down. If there’s balance between the two groups, prices will stagnate, because each side will absorb the force of the other side’s actions. If there is an imbalance, prices will move in the direction of the greater force, or the traders who have the stronger convictions in their beliefs about in what direction the price is going.

So the range of the market’s behavior in its collective form is limited only by the most extreme beliefs about what is high and what is low held by any given individual participating in that market. I think the implications are self-evident: There can be an extreme diversity of beliefs present in any given market in any given moment, making virtually anything possible.