Key Take Away: from the Book "Trading in Zone" by Mark Douglas

Shivaraj

Key Notes:

1. We don't have to know anything about What Markets are going to do Next in order to make Money...

2. Market is the Paradox of Thousands of People's thoughts, contradictions to each other.

3. We need to learn how to redefine our trading activities in such a way that we truly accept the Risk, and we're no longer afraid.

4. We need to remain Disciplined, Focused and above all, Confident in spite of the Adverse conditions. 

                  

Bhushan Unnarkar

Technical Analysis has been in practice since beginning but people started getting aware of it gradually with time. Though Fundamental Analysis tries to analyses the valuations of a company through various models which rely on historical data, it doesn’t consider traders as a variable (important aspect of demand and supply). These traders don’t actually take decisions rationally all the time as it is not necessary that they understand the fundamental aspects that affect the prices. Hence a fundamental analyst may find it difficult to stay in trade especially when volatility is high.

THE SHIFT TO TECHNICAL ANALYSIS

Several traders participate in market daily and with time they develop a behaviour pattern that keeps on repeating. Technical Analysis helps us to identify such patterns. Technical analysis thus develops opportunities in market which a trader can reap benefit of.

THE SHIFT TO MENTAL ANALYSIS

Through Technical analysis many traders predict the trend of the market. But there is difference between predicting and actually getting in and out of the trades successfully.

There are many traders in market at a given time but very few people are accurate for most number of times. These people think differently. Learning how to identify an opportunity to buy or sell doesn’t mean that one has learned how to think like a trader. Successful traders have altogether a different mindset, they are more focused and disciplined above all they are confident even in adverse conditions. This makes them resistant to fears, panic and trading errors. 

Traders know that they are risk takers as outcome of each and every trade is unpredictable but they fail to accept the possible consequences of the concerned risk. It’s natural that no one wants to make a loss or accept defeat but successful traders understand when a trade is not working and it doesn’t affect them emotionally. If you're afraid of being wrong, your fear will act upon your perception of market information in a way that will cause you to do something that ends up making you wrong. As a matter of fact, because every person who trades is a market variable, it can be said that any single trader can cause virtually anything to happen. This means that no matter how much you learn about the behavior of the market, no matter how brilliant an analyst you become, you will never learn enough to anticipate every possible way that the market can make you wrong or cause you to lose money. So if you are afraid of being wrong or losing money, it means you will never learn enough to compensate for the negative effects these fears will have on your ability to be objective and your ability to act without hesitation. In other words, you won't be confident in the face of constant uncertainty.

As long as you are prone to errors that are the result of rationalizing, justifying, hesitating you will not be able to trust yourself. If you can't trust yourself to be objective and to always act in your own best interests, achieving consistent results will be next to impossible. Trying to do something that looks so simple may well be the most exasperating thing you will ever attempt to do. The irony is that, when you have the appropriate attitude, when you have acquired a "trader’s mind-set" and can remain confident in the face of constant uncertainty, trading will be as easy and simple as you probably thought it was when you first started out. The solution is to develop attitude and beliefs about trading in such a way that makes you fearless but also doesn’t allow you to be reckless.

Kiran Chandrashekar

In the beginning: fundamental analysis

1) Fundamental analysis isn't the only real or proper way to make trading decisions, technical analysis is also one.

2) Many traders usually don't have the slightest concept of the fundamental supply and demand factors that are supposed to affect prices.

3) At any given moment much of the trading activity is prompted by a response to emotional factors that are completely outside the parameters of the fundamental model.

The shift to technical analysis:

1) In technical analysis, individuals develop behaviour patterns and a group of individuals, interacting with one another on a consistent basis, form patterns are observable and quantifiable and they repeat themselves with statistical reliability.

2) For projecting future price movement, technical analysis has turned out to be far superior to a purely fundamental approach.

The shift to mental analysis:

1) Right mindset is required to encash the opportunity using either technical or fundamental analysis.

2) With right mindset for trading, the gap between the possibilities available and their bottom-line performance can be closed.

3) The best traders think differently from the rest.

4) Risk is inevitable, it's the most important trading skill to be learnt.

5) Most traders experience emotional pain and financial disaster without discipline, right attitude, calculated risk and belief.

6) Source of our trading difficulties is internal, derived from our state of mind.

Sandhya Godavarthy

The risk inherent in a trade should not effect our decision in the subsequent trades...this is called accepting the risk in the true sense.

To achieve a consistency in our wins we need a technique.

Market can always throw a variable at you which you did  not think of or consider in your analysis.

Accepting the inherent risk in your trade is the steeping stone to build your confidence, this helps in clearing the filter which makes you interpret any market information with  a negative connotation and forcing you to derive losses from you trades.

Savio Dourado

Fundamental analysis (FA) was earlier considered the only real or proper way to make trading decisions. Though FA considered various variables through their mathematical models, they rarely factored in other traders ( who have the ability to move prices) as variables.

Though Technical analysis (TA)existed earlier, it was not widely used, but now ( along with the info FA gives)has turned out to be a far superior to a purely Fundamental approach.

However to get the best of both worlds( TA & FA) and to master the art of trading (closing the gap between the possibilities available and the bottom line performance) and to become consistent winners we need to have discipline and the right mental attitude.

We are not consistent winners because we start our trading careers with a fundamental lack of understanding of what it means to be a trader, skills involved and the depth to which the skills need to be developed. Most of us (traders)  have no concept what it means to be risk takers.

Consistent winners remain disciplined, focused and confident in the face of consistent uncertainty. They have developed a skill that defines their trading activity in a way that allows them to completely accept the risk. This skill allows them to think objectively and analyse the market information of what are the possibilities available.

The best traders have developed attitudes that gives them the mental flexibility to flow in and out of trades based on the information the market provides. They have an attitude of not becoming reckless.

We need to learn how to adjust our attitudes and beliefs about trading in such a way that we can trade without the slightest bit of fear, but at the same time keep a framework in place that does not allow us to become reckless.

The book promises to teach us these skills in the chapters ahead.

Hanuram Lal

This chapter describes about the road to success: Fundamental, Technical or Mental Analysis.

Person whoever puts into trade becomes a trader but are you a master in trade? can you become a successful trader?

You can't think like a trader until you attain a mindset that allows you to remain disciplined, focused and confident in spite of adverse conditions.

Mastering in trading is possible who have closed the gap between the possibilities available and their bottom-line performance.

The successful traders think differently from the rest of the traders. The best traders aren't afraid, because they have developed attitudes that give them the greatest degree of mental flexibility to flow in and out of trades based on what the market is telling them about the possibilities from its perspective. At the same time, the best traders have developed attitudes that prevent them from getting reckless.

Most of the traders gets emotional pain and financial disastrous as we started trading career with out proper guidance. Trading environment is different than normal environment, most of the perspectives, attitudes and principles which works well in our daily life's may not work in trading environment.

Trading is inherently risky. there is no guaranteed outcome so losing money is always possible.but the best traders will take the risk, learned to accept the risk. They trade with out any hesitation. so if you will learn to accept the risk, you will be a successful trader.

The successful trader that you want to become is a future projection of yourself that you have to grow into. Growth implies expansion, learning, and creating a new way of expressing yourself.

Shivaraj

This book provides an insight of factors that affect Traders mindset. It is important to remember that Market is Unique at any given point of time. 

We need to understand our Risk(Stop Loss) and Target before entering into any trade. Only disciplined approach in trading can lead to success.

Most importantly we need to accept/recognize our mistakes and try to overcome in the subsequent trades.

The book is really awesome. Below are the lines I noted and will read very frequently.

I. “Taking responsibility is the cornerstone of a winning attitude”.

II. Our state of mind makes whatever we perceive outside of us seem indisputable. Our state of mind is always the absolute truth. If you feel confident you are confident. If you feel afraid, then you are afraid. You can’t dispute the quality of energy that is flowing through your mind and body at any given moment. Since you know as an undisputable fact how you feel you can conclude that you can know the truth of what you are perceiving outside of yourself in the same moment. The problem is that how we feel is always absolute truth, however, the beliefs that triggered the state of mind or feeling may or may not be true relative to the possibilities that exist in the market at any given moment.

III. We can “know” what our edge looks like, and we can “know” exactly how much we will risk to find out if that edge is going to work. We can “know” that we have “rules of engagement” to manage the trade and take profits. That is all we can know.

IV.

A probabilistic mindset pertaining to trading consists of five fundamental truths.

1. Anything can happen.

2. You don’t need to know what is going to happen next in order to make money.

3. There is a random distribution between wins and losses for any given set of variables that define an edge.

4. An edge is nothing more than an indication of a higher probability of one thing happening over another.

5. Every moment in the market is unique.

V.

 I am a consistent winner because:

1. I objectively identify my edges.

2. I predefine the risk of every trade.

3. I completely accept the risk or I am willing to let go of the trade.

4. I act on my edges without reservation or hesitation

5. I pay myself as the market makes money available to me.

6. I continually monitor my susceptibility for making errors.

7. I understand the absolute necessity of these principles of consistent success and, therefore, I never violate them.

Prashant Patel

According to me, this book is wonderful in designing the mind set of a Trader.  The author has very well explained that how the mind set of trader help him trading and gives him proper judgement about taking his trades.  If a trader follow rules, he will be always in right side of the trade. The trader has to develop a positive mind set and build the self trust which will lead him to achieve his goals. The trade has to keep in mind many aspects of trading like having proper knowledge of the stocks, technical, fundamental and the most - his self confidence.  Trader should not end up saying that market is always giving him losses. Trader has to treat stock market as his business and should learn and earn on his own by risking small affordable capital.