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Trading in the zone - Mark douglas - Coggle Diagram
Trading in the zone - Mark douglas
Key Takeaway #1 – There’s a BIG difference between predicting & executing trades
Predicting what a market could do is easy – executing trades is more complex
It takes confidence, humility, and discipline to properly execute a trade
Hindsight is always 20/20
Trading is all about thinking like a chess player – anticipating all the possibilities and probabilities
Key Takeaway #2 – Great traders manage fear
Great traders execute trades without hesitation, and quickly admit when a trade isn’t working
Fear can overtake rationality
Need to truly accept risk to trade without fear or discomfort
Fear causes errors:
Get in to trades too soon or late
Turn small losses into big losses
Get out too early on winners
Turn winners into losers
Stop out to see it turn into a win
Take responsibility for everything that happens:
Know that the market will do whatever it wants
Your only two jobs are: trade selection and trade management
Key Takeaway #3 – Forget results and focus on the process
Stop system hopping, chasing the holy grail
Instead, define your edge and follow the process of skill development and execution
3 Steps for disciplined trading:
Predefine your risk before taking a trade
Cut your losses without hesitation
Use a systematic money management plan
Key Takeaway #4 – The 7 Principles of Consistency
I objectively identify my edges
I predefine the risk of every trade
I completely accept the risk or I am willing to let go of the trade
I act on my edges without reservation or hesitation
I pay myself as the market makes money available to me
I continually monitor my susceptibility for making errors
I understand the absolute necessity of these principles of consistent success and therefore never violate them.
Final Thoughts
View trading for what it really is – a process of possibilities and probabilities
Focus on skill development and trading plan execution
Find a trading style that fits your personality and risk tolerance
Five fundamental truths
Anything can happen.
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.
An edge is nothing more than an indication of a higher probability of one thing happening over another.
Every moment in the market is unique.
My own take aways
YOU DO NOT HAVE TO KNOW WHAT HAPPENS NEXT IN ORDER TO MAKE MONEY
Beliefs and truths are a big big difference.
Have an objective view when analyzing the markets. See things as they are and don't try to force anything into there that you do not see but what you want to see.
Your beleifs have gotta be in symfony with what works from the environments perspective.
Trading in sample sizes (ideally 20) helps with analyzing results. It gives you a valid view of how the system works.
Trading is all about probabilities. You must find your edge in the market and develop a system around it. Then you have to be able to flawlessly execute the trades according to the rules, and trust the probabilities. Any set of variables can have any number of wins or losses. Knowing this can help you get a care-free state of mind.
Pre-determinging risk is a must. It is also necessary to truly accept the risk you are taking.
Have realistic expectations of your trading results and think about the long run. Not one single opportunity in any given situation should determine whether you lose all your money or make it twice as much.
Consistency is for the biggest part a state of mind. This state of mind that you want for trading is called: trading in the zone.
Biggest problems for new traders: The unwillingness to create a set of rules (and follow them). Taking responsibility and not blaiming anything (like the market) or anybody else (someone that gave u a signal) for any bad trades. The addiction to random rewards, in the long run this will not pay off but it may be exciting for the short term.