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Mark Douglas’s Five Fundamental Truths

  
  Education
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1.       Anything can happen.  Translated – you have no control over the market.

2.       You don’t need to know what’s going to happen next in order to make money.  You don’t need to be psychic, or try to predict the market.  This is not to say that you cannot predict what the market will do next and be correct, only that you don’t have to, and that by trying to predict you shackle yourself to ‘the need to be right’ and the associated ball and chain.

3.       Wins and losses are random – You will never know when a trade will be a winner in advance, only that the conditions that define your edge are present.

4.       Your edge is nothing more than a higher probability of one thing happening over another.  Your edge is no guarantee of a winning trade, just of winning over time.

5.       Every moment in the market is unique.  Just because a similar trade won last time does not mean it will this time, and by treating each trade as totally unique you can see the truth of the trade without relating it to ‘what happened last time’.

These beauty in these theories is that they take the emphasis off any one trade, and turn your trading into a big picture endeavour.

6 Random Thoughts

  
  Education
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1) Everyone needs a “mental break” from trading once in a while. The best time to take one is during corrective markets. It helps you protect capital and confidence.

2) If you have a -50% loss, it takes a +100% gain to get it back. In other words, CUT YOUR LOSSES!

3)  If you have trouble with discipline and staying away from the market, turn off your computer and get out of your chair. If you sit in the barbershop long enough, you’ll eventually get a haircut.

4) The “fear of missing out” is the downfall of most traders.

5) Whoever said that money doesn’t buy happiness clearly didn’t know where to shop.

6) “There is nothing new on Wall Street. What has happened in the past will happen again and again and again. This is because human nature does not change, and it is human emotion that always gets in the way of human intelligence. Of this I am sure.” — Jesse Livermore

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