ZF Capital

Once you learn to identify patterns and read the market, you find there are limitless opportunities to make money. But, as I’m sure you already know, there can also be a huge gap between what you understand about the markets, and your ability to transform that knowledge into consistent profits or a steadily rising equity curve.

Think about the number of times you’ve looked at a price 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

Statistics and society may predict, but you alone determine whether you will succeed or fail. You alone are in control; take responsibility for your performance and your life. There are always tremendous opportunities in the markets. It is not what happens; it is what you do with what happens that makes the difference between profit and loss.

– Mark Douglas, The Disciplined Trader: Developing Winning Attitudes

The first step on the road toward getting your mind and the market in sync is to understand and completely accept the psychological realities of trading. This step is where most of the frustrations, disappointments, and mysteriousness associated with trading begin. Very few people who decide to trade ever take the time or expend the effort to think about what it means to be a trader. Most people who go into trading think that being a trader is synonymous with being a good market analyst.

As I have mentioned, this couldn’t be further from the truth. Good market analysis can certainly contribute to and play a supporting role in one’s success, but it doesn’t deserve the attention and importance most traders mistakenly attach to it.

– Mark Douglas, Trading in the Zone

What you believe about value and your reasons for believing it may be of highest quality, but if the market doesn’t share your belief, it doesn’t really matter how “right” you are based on your superior reasoning process or what you believe to be the quality of your information, because prices are going to go in the direction of the greatest force.

The point here is that right and wrong as you may traditionally think of them don’t exist in the market environment. Academic credentials, degrees, reputations, even a high I.Q. don’t make you right in this environment as they would in society. Traders, acting on their belief in the future by putting on a trade, are the only force that can act on prices to make them move. Movement creates opportunity to make money, and making money is what trading is all about.

– Mark Douglas, The Disciplined Trader

Market information is only threatening if you are expecting the market to do something for you. Otherwise, if you don’t expect the market to make you right, you have no reason to be afraid of being wrong. If you don’t expect the market to keep going in your direction indefinitely, there is no reason to leave money on the table. Finally, if you don’t to expect to be able to take advantage of every opportunity just because you perceived it and it presented itself, you have no reason to be afraid of missing out.

– Mark Douglas, Trading in the Zone

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.

If you want to change your experience of the markets from fearful to confident, if you want to change your results from an erratic equity curve to a steadily rising one, the first step is to embrace the responsibility and stop expecting the market to give you anything or do anything for you. If you resolve from this point forward to do it all yourself, the market can no longer be your opponent. If you stop fighting the market, which in effect means you stop fighting yourself, you’ll be amazed at how quickly you will recognize exactly what you need to learn, and how quickly you will learn it. Taking responsibility is the cornerstone of a winning attitude.

– Mark Douglas, Trading in the Zone

The typical trader will do most anything to avoid creating definition and rules because he does not want to take responsibility for the results of his trading. If he knows exactly what he is going to do and under what conditions, then he would have something by which to measure his performance, thus making himself accountable to himself. This is exactly what most traders don’t want to do, preferring instead to keep their relationship with the market somewhat mysterious.

This creates a real psychological paradox for traders, because the only way to learn how to trade effectively is to make oneself accountable by creating structure: but, with accountability comes responsibility.

– Mark Douglas, The Disciplined Trader: Developing Winning Attitudes