One classic book for traders is “Trading in the Zone “by Mark Douglas. It teaches us important lessons regarding trading psychology, which will help us with the mental game of trading and investing.
I came across some interesting perspectives and summaries of Douglas’s work, which I want to share with you. Let us explore what Douglas wrote.
The first secret from Douglas’s book is “Consistent Winners Think Differently”. He believes successful trading is a completely different game than doing well in any other fields of expertise, such as business.
Why do most people who are successful in business and other occupations, fail miserably as traders?
According to Douglas, the skills we are taught when we were young and in school and that carry us through life, turn out to be completely inappropriate for trading. The trading process differs and thus traders have to surrender all of the skills they acquired to achieve success in about all other areas of life to become successful and consistent traders. He comes to the conclusion that the determining factor for being successful in trading is psychological – consistent winners think differently from investors and traders who are taking on losses or are not making consistent profits.
Luckily for us, Mark elaborates how they think differently, and that being a successful trader with consistent profits is a skill that can be mastered.
Lets dive in…
According to Mark, many traders don’t believe that their trading problems are the result of the way they think about trading or, more specifically, how they are thinking while they are trading. That makes sense, because it is easy to blame the system, your mentor, the strategy, the market, other traders, or anything else. Mark says these factors however are most likely not the reason for your results. Good fundamental analysis of the market conditions can help, but it is not the differentiating factor. The key factor is a ‘mental state’ or the ‘zone’ in which the successful trader is while trading that makes her a winner.
Mark tells us the objectives he had in mind for writing the book was:
- To prove to the trader that a more complete or better market analysis is not the solution to trading difficulties or lack of consistent results (over-analysis problem);
- To convince the trader that it’s his attitude and “state of mind” that determines his results;
- To explain why traders with the proper mindset win over traders that are best in market analysis;
- To provide the trader with the tools needed to build a winner’s mindset;
- To address the many conflicts, paradoxes and contradictions in the thinking of traders that cause them to think they are already thinking the right way while they are not.
The first time I was reading this, I was thinking “wow”. “Is that it?”
I am not sure I want to accept these facts that my success boils down to my mindset. Let me explain.
When I started studying investing and trading, I saw there were so many things I could study. And I have been studying a lot. That has given me more success in the financial world than before I started treating this professionally. However, I know I can perform better. Douglas seems to have the answer.
I’ve lost several trades as I’ve been learning the strategy, tools and techniques for trading. That has been challenging in terms of keeping the momentum. What I have been reminding myself of is that with proper risk management, one successful trade will compensate for all losses. Most importantly, the process of going through the trades, whether it is a loss or a win, will give you what you want if you can keep your emotions under control.
Luckily for you, you don’t have to study as much. You can get the simple way by piggybacking on the solution and framework created by someone else. Use a system, a solution and framework created by someone else, because then you can focus on your mindset.
Let me know if you want to set yourself up for success so you can get from where you are now, to where you want to be.