| Trading in the Zone by Mark Douglas - Summary by Brian | 29 Pages | 131 KB |
On the learning curve, we have started group book reading. Here is what our group read and learnt from first ever joint reading.
Nayan started the conversation:
1. Create your won your trading rules: Every successful traders has their won set of trading rules and they adhere to that rules. It doesn't mean that create your won trading rules always gives you profit but it will maximize your profit with minimum loss.
2. Understand the risk: It is important to not only understand but also accept that trades come with certain risk.
3. Alligning Mental Environment
A probabilistic mindset pertaining to trading consists of following fundamental truth
a. Anything can happen.
b. You don't need to know what is going to happened next order to make money.
c. Every moments market is unique.
4. Think Like a Traders
a. Build the self trust necessary to operate in unlimited environment.
b. Learn the flawlessly execute trading system.
c. Train the mind to think about the probability.
d. Create a strong belief yourself.
5. Creating a Belief in consistency
a. I objectively identify my edges.
b. I predefined the risk of every trade I do.
c. I completely accept the risk or I am willing to go of the trade.
d. I continually monitor my susceptibility for making errors.
e. I understand the absolute necessity of these principles of consistent success and there fore I never violate them.
Yogini adds: Every trader has a number of common stages in his trading life, some money-making and most loss making. While most of the enthusiasts give up trading after making losses in the earlier stages, very few really analyze their experience, and try to improve things.
It is easier for a novice to think that losses are caused because of lack of knowledge about market. But it’s untrue. Many people forget that apart from market behavior, fundamental know-how and technical analysis, there is one more very crucial factor in trading. The book discusses in detail about this factor – probably the most important one – trader’s thought process. In fact, in trader’s life the only consistent and therefore reliable thing that works in his favor is his own mindset.
Emotions like fear, greed, anxiety and others are attached to financial losses. Each of these emotions drives decision making capacity of a person. Once you are able to control your emotions, any ups and downs of the market do not affect your mental stability and your profitability, too. The book guides well on how to shift your focus from being reactive to being proactive with your emotions. While there are lot of sources available to learn techniques of trading, this book talks about mastering your mind - which decides how to use the such sources.
To me - this book is much an answer as to why the same trading environment makes some people win and some people lose their money.
Savio continues: The Summary of “Trading in the zone “by Mark Douglas very beautifully clears our fundas of what we should know, do and expect as a trader.
I have personally picked up the following as a novice trader
- We start trading without being in the learning mode and honing our skills. We are so dependent of tips we receive.
- We do not understand the conceot of Risk taking.
- We do not have our rules and risks predefined.
- We do not take the trouble to learn and master the various terminologies, concepts, variables (that very often confuse us) and trading skills so that we in the long run can be successful traders by mitigating the risk involved
- We tend to blame others instead of shouldering the responsibility.We must learn from our mistakes and discipline ourselves not to repeat
- We tend to be greedy and reinvest all we earn (to make more) instead of paying ourselves when we profit from a trade
Rahul says: The most important aspect of trading is emotional quotient, and it depends upon number of factors such as the amount of risk taken, leverage, stop loss etc. we as a trader have to objectively place ourselves in the right direction equipped with various known variables related to your trade. When you completely aware of your risk, potential profit etc half of your trading stress comes down and you trade with much ease unlike like novice traders whose heartbeat fluctuates with the fluctuation of stock prices.
Kiran adds: The author focus mainly on physiological mind shift a trader needs to have. The attitude and belief a trader has to have on taking risk and responsibilities is inevitable. There are many repeated statements made on the psychological mindset a trader has to have, which is considered as a need to be stressed on. The impact of psychological effect is greater than the market risk. He says it by justifying a trader with right mindset will have right attitude and belief and knows how to react to the market changes . I do agree with the author, trading well is mainly having right mindset with right attitude, belief, taking calculated risk, taking responsibilities, thinking like a trader (3 stages , they are mechanical stage (trading skills), creating a belief in consistency (calculated risk, tracking, monitoring, etc) and the last stage is exercise (accepting the risk, trading in sample sizes (micro level)). It's essential to start working on psychological mindset which a good trader needs to possess before one starts trading.
Govardhan continues: I think it’s a superb book for new Traders. This book has showered some light on the Psychological aspects of trading. I will now take full responsibility and risk for losing a trade and I don’t bombard myself with excess knowledge about indicators and other stuff. Thank you Deepa and Puneeth for your outstanding efforts. Thanks for the good book.
Kumaraguru asserted: Excellent book...Recommend every fresher like me to read it. Key highlights are the seven steps of consistency and five fundamental truths. I have faced most of the issues mentioned in the book. I was trying to find the root cause of my failed trades and this book clearly explains it. I will practice the steps mentioned in book for achieving consistency as a trader...
Hanuram Responded as: This book tells about the mindset of all kind of traders. Traders should remain focused, disciplined, confident in the face of constant uncertainty. Learn the skill of risk acceptance.
Traders need to develop rules and boundaries which should be created by an internal structure to prevent the possibility of exposing in to damaging trades
To be successful trader you must deactivate limiting beliefs, create new empowering beliefs and work on your mental and emotional attitude.
Most of trading errors (four fears) are being wrong, losing money, missing out and leaving money on the table
Sandhya Summarized: This book should be one of the initial books a person should read while entering into stock markets. The way a person is checked for a cultural fit into the organization, the belief system of the person trading or investing in stock markets should be judged in the same manner.
The belief system a person carries with him or has created with him over the years as a result of his experiences plays a major role in the way he perceives market information and the way he acts on it.
The associations that we create for a positive or negative incident in our mind prejudice our decisions in the market.
Risk acceptance is one such attribute of people which is heavily influenced by our past experiences and complete understanding of this trait of a person is the key to his success in markets. Risk acceptance is not equivalent to the setting of stop loss in trades but being nonchalant to the result of the trade. Not letting the result of a trade (irrespective of whether it is positive or negative) affect your other decisions of trade. This can be practiced by developing an edge (probability of an event) which is not affected by market behavior.
Markets behave uniquely every moment and it is our need that defines a particular point of time as profit or loss, at any point of time market will behave in accordance with its various variables which are difficult to time.
It's only when you are at peace with this uncertainty that you can resolve your internal conflict which will let you be in harmony with the uniqueness of the market and only then can you consider yourself to have accepted the risk.
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