What is the most important part of your trading? The chart? Managing the risk? Finding the Holy Grail of trading that can’t lose? (I have bad news for you about the Holy Grail).
I am convinced how a trader emotionally reacts to the markets while trading will determine their success more than anything else.
Mark Douglas is a trader and author of Trading in the Zone and The Disciplined Trader two great trading books for traders at all levels that deal primarily with how to develop the correct mindset to be a successful trader.
My favorite Mark Douglas quotes.
“There is a random distribution between wins and losses for any given set of variables that define an edge. In other words, based on the past performance of your edge, you may know that out of the next 20 trades, 12 will be winners and 8 will be losers. what you don’t know is the sequence of wins and losses or how much money the market is going to make available on the winning trades. This truth makes trading a probability or numbers game. when you really believe that trading is simply a probability game, concepts like ‘right’ and ‘wrong’ or ‘win’ and ‘lose’ no longer have the same significance. As a result, your expectations will be in harmony with the possibilities.” –Mark Douglas
“The less I cared about whether or not I was wrong, the clearer things became, making it much easier to move in and out of positions, cutting my losses short to make myself mentally available to take the next opportunity.” –Mark Douglas
“You need to ‘change your thinking’. The goal is to reach a ‘care-free state of mind’. When a pattern presents itself, don’t think. There’s nothing to think about. Take the trade because you have an edge. Then odds, probability and your risk control mechanisms will take care of everything. In the end, the key is to learn more about yourself. The most important lesson though is the importance of viewing every single trade as being part of a series of trades.” –Mark Douglas
Mark Douglas’ 5 fundamental truths:
- Anything can happen
- You can make money without knowing what is going to happen next
- There is a random distribution of wins and losses that define an edge
- An edge is just the greater probability of one thing happening over another
Every moment in the market is unique