Trading Psychology:
So what's the best trading psychology book there are many great books out there trading in the zone Dr. Steinberger many many have written books but I think trading in the zone is very high up there may be the number one at least in the top three I would say and today I have picked a few quotes and tips from the book um and we will cover we go through them and you can just get the book we don't end any commission just get the book it's really great so the first quote is
The consistency you seek is in your mind not in the markets.
People's Mind:
So people when I ask them what do you want they want consistent results they want consistent winning trades as a trader obviously that makes sense but then when you dig deeper and when you look at how they approach that trading. I often say if you want to have consistent results you need to have consistent actions but mark Douglas goes one step even beyond that or even prior to that and he said the consistency starts in your mind and that's very true obviously because how you think about trading and how you or how you're dealing with your mindset that is determining how you then approach your trading and that is going to determine your results in in the market so it all starts in your mind.
Main Mantra:
It's about how you manage losing streaks how you deal with losses in general can you pick yourself up after a set of losing trades do you get overconfident after a string of winning trades all of those things obviously will influence the way you you trade and then those will influence your your results so consistent thinking consistent mindset consistent actions consistent results that's usually how it goes and I've picked another quote which we will find later on which where or where we will talk about more about the mindset and losses in general but the next one that I've picked are mark Douglas's five fundamental truth so anything can happen that's the first one very very important and it it goes hand in hand with the second one so the second one is you your job as a trader as we will see in point four here actually is to just execute your rules execute your trading plan as consistently which brings us back to the previous slide as possible and you don't need to know what is going to happen before it happens absolutely not necessary obviously.
It's also not possible other than and that's the one exception if you have a crystal ball then obviously you will know what is going to happen next but if you don't have a crystal ball you are not going to know about what will happen in the future so the more important thing then is that you learn to cut your losses and let your winning trades run this is way way more important than actually knowing what is going to happen next because it is more actionable obviously so instead of worrying about what is going to happen next which you obviously will never know just focus on executing your rules execute your system as religiously as consistently as you can and when you're in a winning trade.
Triumph and Disasters in Trading:
Let it run to your target and when you're on a losing trade get out don't let it get out of hand number three there's a random distribution between wins and losses for any given set of variables that define an edge all right what does it mean in plain English it means that if you have three losing trades in a row is it more likely to have another loss or is it more likely to have a winning trade many people will probably say one or the other in reality you don't know and it's you don't you cannot know um this is exactly where random distribution come in even if you have six or even if you have 60 losing trades in a row.
It doesn't mean that another losing trade is not as likely as having a winning trade and many people always believe that oh wow I've had five losses in a row the next trade must be a winning trade I'm much much overdue and what will happen you will just risk way too much money on your trade because you falsely believe that now you're overdue now the statistics are in your favor and it's the same that is true for I read the study that people believe that if they choose their lottery numbers themselves instead of going for the random number picking thing ai tool they have a higher chance of finding winning trying the winning um the winning combination and humans, in general, are very bad.
Statistical Trade:
When it comes to statistics and I really would recommend anyone to just learn a little bit of basic statistical knowledge it will really help you not only in trading but also in your general life to make better decisions so this is very important number three number four an edge is nothing more than an indication of a higher probability of one thing happening over another what does this mean even so an edge is obviously something that everybody wants to know or wants to have an edge pretty much means that whatever your set of trading rules if you have an edge it will shift the probabilities in your favor and the way you create an edge is in trading stacking confluence factors on top of each other.
So let's assume we are having a multi-timeframe approach which I do and let's assume we are starting with a higher time frame and we look for a specific trending pattern and let's assume we are looking for a candlestick so let's assume we have a pullback and then we have an engulfing candle in the pullback which is great and it means that maybe more than 50 percent.
Market Analysing Trade Method:
Let's assume 51 or 52 percent of the time you're gonna have a move that is gonna increase or that is going to go in line with the pullback so it's in your favor 50 let's just say 51 of the time and that is great because it's higher than 49 um and it's more likely to happen versus not to happen so then we go to a lower time frame where we then look for example for a moving average crossover or just a moving average in general and a trend change may be a divergence where the downtrend is going into an uptrend into the direction of the higher time frame pullback and if you find all of those things maybe then the chances will go from 51 to 60 percent or 55 percent.
This is great because it improves your edge because it's uh you are more likely to find one thing that has a higher probability of happening versus another thing which is it's not going to happen so what does it mean is that you just have different tools in your trading strategy that you stack on top of each other and then you can follow them and it will help you put the odds a little bit more in your favor every moment in the market is unique which is pretty much um yeah very similar to point one or even point three I didn't get what uh the specific point about this is maybe if you are more enlightened than I let me know in the comments below but for now.
Forex Trading Option:
Let's move on there are more interesting ones coming as well and the next code that I picked is forex trading requires learning the types of skills that people just aren't simply used to learning mental skills and obviously I wouldn't have picked it if this isn't very true so this is very true and what it means is that think about it how are we being brought up when you are in high school or even in elementary school the teachers tell you what to learn so that you get good grades so that you can pass into the next grade then the same thing happens in high school then the same thing happens in college you are being told what to learn and if you do that you will do great and you will go on to the next stage the same thing happens in your job.
Then you're being told what to do by your boss and if you do that you get your monthly salary and maybe even a promotion after 20 years and in trading obviously nothing like this will ever happen because nobody's gonna tell you what to do nobody gives them about what you're doing if you're doing your work how you do your work if you have rules if you follow your rules and this is just one simple difference so in training you need to be very disciplined and you need to be able to motivate yourself and you need to be able to just put in the time without everybody anyone standing behind you so this is just one difference of how uh trading is different.
When it comes to the mindset obviously there are many things that are also needed um one of the more important or interesting things it's the concept of delayed gratification which means that you do the hard work now and you reap the benefits later so it's the complete opposite from for example you have the cake and you just eat it and then obviously the reward is that it makes it tastes amazing but the downside is you will get fat and you won't feel great after a few years if you eat cakes every day the concept of delayed gratification would be that you don't eat the cake you go to the gym which is not fun for the most part and then in a few months in maybe two years you will have a much healthier body maybe look better this is the concept of delayed gratification you put in the time now to put in the work now and then later down the road somewhere maybe not even at any point in time.
You will get the rewards and the same is true in trading you have to show up every single day you have to do the hard work and then maybe one day you will see an improvement in your trading and obviously there are many many different ways how the trading mindset differs maybe that's a video topic for another time and the last one which I find very interesting um it's called the primary the four primary trading fears and the quote says 95 of the trading errors you are likely to make causing the money to just evaporate before your eyes will stem from your attitudes about being wrong losing money missing out and leaving money on the table and he calls that mark Douglas the four primary trading fears so again.
Long-Term Trading:
What are the four fears being wrong losing money missing out and leaving money on the table being wrong obviously nobody likes to do that and nobody likes to be proven wrong because often we also get our ego attached especially if you are maybe trading in a group maybe even you share your trades openly so you're even more attached and also some traders derive all of their sales self-worth from trading.
If you don't have anything else going on in your life you drive your whole self worth from trading so being wrong losing money are obviously not nice things and nobody likes to lose money nobody that's the whole cold hard truth but it's one thing that traders just have to overcome because you're gonna lose money every single day every single week because this is just the job as a trade and nothing works 100 of the time sometimes the trades will work out sometimes they won't work out and how you deal with losing money is going to define your long-term chances of being profitable.
If you can't lose money if you every time you lose the money you completely uh lose it you go very on tilt you go to range mode rage mode you go to revenge trading obviously then you have no chance of ever becoming profitable missing out on the number three is also something that sucks and many traders when we mentor them we help them understand and we just recently had a discussion in our mentoring group with Moritz and me because this topic came up missing traits is not good because it can lead to a whole cascade of other things happening or not happening so if you miss a trade for example that you should have taken and you see it would have worked out then obviously this is not great because you just missed making money and what does it create it creates a sense of urgency.
The next time maybe you get more impatient maybe it leads to making bad decisions maybe you just take the next trade that you know you shouldn't have taken but you're just still emotional about the last trade so it's very important that um you are aware of that first of all and then also if you see that missing trades is something that happens over and over again you have to understand why is this actually happening why am I missing trade trades because I just they just happened during my night and there's no way.
Conclusion about Trade:
I can catch them that's one very important realization am I missing trades because my process is not on point and maybe I'm watching Netflix at the site playing video games being in a chat room all day and I'm just very very distracted and then fix that and the last point about missing or why you may miss trades is maybe of issues with confidence and you just don't trust yourself set up in your system then it's time to get back to your drawing board write trading plans create a checklist do some backtesting to just create uh more confidence maybe even scale back your position size and obviously missing out and leaving money on the table go hand in hand but also leaving money under a man leaving money.
On the table, I can also mean that you exit your winning trades too early which could also be the case that you're maybe not trusting your system well enough and you are just yeah you just lack confidence and trust in the system which comes with experience which also can be related to maybe positions that are too big for your trading account so check that out and understand.
Why you're having those issues it's always there's always something behind those actions you're not just missing trades because you missed trades there's always a reason why do you miss trades why do you leave money on the table and if you have identified the why then you can come up with a how-to-fix it to improve your processes or just look at other ways and that's it those are the trading tips from trading in the zone by Mark Douglas obviously there are so many other important things mentioned in the book that I'm not going to discuss here because it would just completely uh blow out the time to get the book read it it's one of the best trading psychology books and if you enjoyed this article blog. let me also know in the comments.
