Awesome video interview with Mark Douglas. It is about 60 minutes long and it is not suited for those with short attention spans. Then again this video covers the essence of what it takes to be a great trader and what you need to do in order to acquire the set of mental skills to take your trading to the next level and consistently make money trading. So, do yourself a favour and watch the video. It offers exceptional educational value.
As Mark Douglas says: 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. Something that he talks about extensively in his book ‘Trading in the Zone':
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: ‘Trading in the Zone’
“Mind over Market Part “. Enjoy!
Here’s a few more quotes from Mark Douglas:
I know it may sound strange to many readers, but there is an inverse relationship between analysis and trading results. More analysis or being able to make distinctions in the market’s behavior will not produce better trading results. There are many traders who find themselves caught in this exasperating loop, thinking that more or better analysis is going to give them the confidence they need to do what needs to be done to achieve success. It’s what I call a trading paradox that most traders find difficult, if not impossible to reconcile, until they realize you can’t use analysis to overcome fear of being wrong or losing money. It just doesn’t work!” – Mark Douglas
If you really believe in an uncertain outcome, then you also have to expect that virtually anything can happen. Otherwise, the moment you let your mind hold onto the notion that you know, you stop taking all of the unknown variables into consideration. Your mind won’t let you have it both ways. If you believe you know something, the moment is no longer unique. – Mark Douglas
To whatever degree you haven’t accepted the risk, is the same degree to which you will avoid the risk. Trying to avoid something that is unavoidable will have disastrous effects on your ability to trade successfully. – Mark Douglas
And last but not least 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
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