Why Every trader should own a copy of Trading in the Zone?
Nowadays, on the internet, you will stumble upon many great books on trading and investing worth your attention. This new article presents the summary of a book that every new or professional trader should own and read during their trading journey. It’s Trading in the Zone by Mark Douglas.
In this great book, Mark Douglas teaches traders how to gain a winning attitude to master the market and spot the true realities of risks with a particular focus on trading psychology. Douglas uncovers myths of the market and exposes traders to many trading examples to make them understand the actual realities of the financial markets.
Trading in the Zone summary
- According to Mark Douglas’s Trading in the Zone book, the best traders think differently than others.
- Traders who manage to go beyond their regularity threshold generally go through difficult times (emotional and financial) before acquiring the type of attitude that will allow them to be effective in the market.
- Trading is full of paradoxical and contradictory thoughts, which makes it extremely difficult to teach the principles that lead to success.
- The best traders don’t just take risks. They have also learned to embrace that risk.
- There’s a huge psychological disconnect between assuming you’re taking risks because you’re trading and fully accepting the risk inherent in every trade. Learning to accept risk is an essential skill for this activity. It is the most important to acquire.
- The market is neutral, it oscillates, but it always gives information and the possibility of finding opportunities. 95% of the errors you will experience are due to your attitude towards mistakes, fears of missed opportunities, and misused money. That’s what we can call the four main trader fears.
- The technique is necessary to achieve consistent results, but it would seem that the behavior of the market is the cause of our irregularity. Therefore, the best way to avoid losses is to gain consistency and learn more about the markets.
- The market presents many often contradictory variables. It is up to you to select the ones that suit you! Either way, no matter how much you know about the market and technical analysis, you never know enough to anticipate all possible market moves.
- Technical analysis has proven significantly superior to pure fundamental analysis in predicting price action. Technical analysis is powerful, but many traders are interested in their own psychology regarding trading.
- There is an important distinction between two groups of traders, those who have learned to make profits and those who have not consistently. Intelligence and good market analysis can undoubtedly contribute to success, but they are not the determining factors that distinguish successful and regular traders from others.
Trading in the Zone Book: The Important Lessons on Trading Mindset
Mark lays out a significant revelation of the human brain’s potential. This book benefits all those traders who read it with an understanding of the core principles of being open to discovery and opportunity. Here are some principal lessons Douglas offers in his book.
Trading in the Zone: Master the Markets with These Trading Mindset Tips
Everything is possible. Total freedom is part of it. However, this requires deep and permanent questioning. You have to create a mental structure. The important thing is also to be curious and literally eager to learn.
Our desires come from our mental environment; they are satisfied by the external environment. If these two environments match, we are in an inner balance. If we are denied the right to satisfy this need or desire for balance, we feel a lack and work to fill this void with action.
Otherwise, it is important to understand how denied, or unfulfilled cravings impact our ability to stay focused in trading.
To be effective in trading, we need rules, and since the market does not give them, unlike society, we must possess and reinforce such a structure for ourselves.
On the one hand, we accept the rules, but on the other hand, we have no real intention of doing what they suggest. We all have our moments of weakness! Significant amounts of effort and focus will be required to build up the mental structure and offset the negative effects of our denied cravings to ensure our success.
Our education has prepared us to evolve in a given social environment.
However, the market has no higher authority that sets limits and responds to what is important to us. A trader’s success comes from his ability to manipulate and control his environment.
Trading in the Zone: how to become a successful trader
Step into the zone and take responsibility
Shape your mindset: The first goal should be to learn and think like a successful and consistent trader, then adopt a winning attitude, not fearing mistakes, and controlling your euphoria when the trader makes a straight of winning trades.
React to losses: Being a responsible trader means recognizing and accepting deep down that you and not the market are completely responsible for your successes and failures.
Your mind must free itself from fear, anger, regret, feelings of betrayal, despair, and disappointment.
If you are confident, it is not because the market has given you that confidence. It is good because your attitude and your certainties are in phase and allow you to move forward. You remain confident simply because you are constantly learning.
Perception and learning: Our ability to learn is not unlimited.
The energy you possess will allow you to recognize a tech analysis graph. It acts as a force in your eyes and allows you to identify the different events that you have gone through and from which you have learned real lessons.
The mind tends to make an association of situations when they are similar. As a trader, one of your fundamental goals is to perceive available opportunities without them being interpreted positively or negatively. This is an unconscious and natural mental function. What happens next is a projection.
The most fundamental characteristic of the market is that it can do virtually anything at any time.
Expectations are mental representations of what the future will look like. This allows us as a protective measure to protect ourselves from potentially painful information in the future. Without particular expectations or mental limits, you place no limits on how the market can express itself. Stay flexible in your expectations, and keep your objectivity.
Eliminate emotional risk
To eliminate emotional risk, you need to neutralize your expectations of what the markets will or won’t do. You absolutely must understand this click to move to another level.
Here are five guidelines:
- You don’t need to know exactly what’s going to happen to make money.
- There is a random distribution between wins and losses. This is true for any set of variables that define an advantage.
- A benefit is nothing more than an indication of a greater likelihood of one event occurring than another.
- Every moment in the market is unique.
Think like a pro trader
If we had to reduce trading to its simplest form, we would say that it is a game of chance in which we recognize patterns.
Here are the stages in the development of a trader according to Trading in the Zone Mike Douglas book
- You build the confidence that is necessary to operate in an environment of limitless possibilities.
- You learn how to execute a trading system perfectly
- You practice thinking in terms of probability
- You create a strong and unshakable faith in your regularity which is expressed in success rate and not in success rate on the last 2 or 3 trades.
Steadily grow your capital.
Specifically designed to establish the type of skills (trust, assertiveness, probabilistic approach), this results in a steadily growing capital curve with some minor setbacks that are the natural consequence of the advantages for which “a little something” was missing.
Steady growth will depend on your ability to systematically eliminate all your predispositions to make mistakes based on fear and euphoria.
You have to learn the skills which are all psychological in nature. If your main objective is to have regular results, then it is also essential to convince yourself that “you are a regularly successful trader.”
The role of self-discipline
It is a mental technique to redirect our attention to the object of our goal when the supposed desire has other components in your paradigm, your “mental context.”
Seven principles according to Trading in the Zone book:
- objectively identify your advantages
- predefine the risk of each operation
- completely accept the risk and be ready to give up having an operation
- act on your benefits without reservation or hesitation
- get paid according to what the market offers you
- continually control your propensity to make mistakes
- understand the absolute necessity of these principles of regular success and never violate them.
Trading in the Zone – Wrap Up
In trading in the Zone book, Douglas reveals the most common reasons for lack of consistency, helping investors and traders overcome the mental habits that cost them a lot of money. Douglas exposes myths of the market one by one, teaching traders to think out of the box, to understand the actual realities of taking risks, and to feel comfortable with the probabilities of market movement that govern market speculations. That’s why every trader should own a copy of Trading in the Zone and get back to it once in a while.
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