ZF Capital

The more sophisticated you become as a trader, the more you will realize that trading is completely mental. It isn’t you against the markets, it’s just you. All the other traders participating to make the market provide you with an opportunity to make money from their divergent beliefs about the future. If people didn’t disagree about the future value of any particular commodity or stock, then there would be nothing to compel them to either bid a price higher or offer it lower, and the opportunity to profit from these changes would cease to exist. So the markets just offer the individual trader opportunity.

– Mark Douglas, The Disciplined Trader

The markets don’t owe you anything (regardless of how hard you work to be successful) because every other trader participating is doing so to take your money away. You and you alone are completely responsible for whatever you end up with. The sooner you accept that responsibility (if you haven’t already), the easier it will be to identify what skills you need to learn to interact with the markets more successfully. Even if you can’t identify the mental components responsible for what you ended up with, at least by assuming that you are responsible, you will be opening yourself up to find out.

– Mark Douglas, The Disciplined Trader

Certainly one could argue that some traders lose because they don’t understand enough about the markets and therefore they usually pick the wrong trades. As reasonable as this may sound, it has been my experience that traders with losing attitudes pick the wrong trades regardless of how much they know about the markets. In any case, the result is the same– they lose. On the other hand, traders with winning attitudes who know virtually nothing about the markets can pick winners; and if they know a lot about the markets, they can pick even more winners.

– Mark Douglas, Trading in the Zone

All of us are in a position of having to pick and choose environmental information because we can’t be aware of everything at once. If you pick and choose market information on the basis of having to justify your beliefs, you are putting yourself at an extreme disadvantage. You will be excluding from your awareness information that may be more indicative of the consistency of the market and its potential to move in any given direction.

– Mark Douglas, The Disciplined Trader

The market is never wrong in what it does; it just is. Therefore, you as an individual trader interacting with the market — first as an observer to perceive opportunity, then as a participant executing a trade, contributing to the overall market behavior — have to confront an environment where only you can be wrong, and it’s never the other way around. As a trader, you have to decide what is more important — being right or making money — because the two are not always compatible or consistent with one another.

– Mark Douglas, The Disciplined Trader

As traders, we cannot afford the luxury of wishing and hoping because it puts us in a passive relationship with the markets. When we wish and hope, we are shifting responsibility on to the markets for making something happen instead of confronting the conditions and doing something about it ourselves. If we find ourselves wishing and hoping, it is an excellent indication that we don’t know what is going on and as a result need to get out of the markets until we do.

– Mark Douglas, The Disciplined Trader

Think about the number of times you’ve looked at a proice chart and said to yourself, ‘Hmmm, it looks like the market is going up (or down, as the case may be),’ and what you thought was going to happen actually happened. But you did nothing except watch the market move while you anguished over all the money you could have made.

There’s a big difference between predicting that something will happen in the market (and thinking about all the money you could have made) and the reality of actually getting into and out of trades. I call this difference, and others like it, a ‘psychological gap’ that can make trading one of the most difficult endeavors you could choose to undertake and certainly one of the most mysterious to master.

– Mark Douglas, Trading in the Zone