Book Summary: Trading In The Zone By Mark Douglas

26 Nov 2016

 

 

 

Main Theme

 

 

  • How does a trader stay confident and disciplined in the face of uncertainty?

  • Mental framework for successful trading

  • Challenges (psychological & technical) traders face

 
Key Takeaway #1 – There’s a BIG difference between predicting & executing trades
  • Predicting what a market could do is easy – executing trades is more complex

  • It takes confidence, humility, and discipline to properly execute a trade

  • Hindsight is always 20/20

  • Trading is all about thinking like a chess player – anticipating all the possibilities and probabilities

 
Key Takeaway #2 – Great traders manage fear
  • Great traders execute trades without hesitation, and quickly admit when a trade isn’t working

  • Fear can overtake rationality

  • Need to truly accept risk to trade without fear or discomfort

 

Fear causes errors:

  • Get in to trades too soon or late

  • Turn small losses into big losses

  • Get out too early on winners

  • Turn winners into losers

  • Stop out to see it turn into a win

 

Take responsibility for everything that happens:

  • Know that the market will do whatever it wants

  • Your only two jobs are: trade selection and trade management

 
Key Takeaway #3 – Forget results and focus on the process
  • Stop system hopping, chasing the holy grail

  • Instead, define your edge and follow the process of skill development and execution

 

3 Steps for disciplined trading:

  1. Predefine your risk before taking a trade

  2. Cut your losses without hesitation

  3. Use a systematic money management plan

 
Key Takeaway #4 – The 7 Principles of Consistency
  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 never violate them.

 
Final Thoughts
  • View trading for what it really is – a process of possibilities and probabilities

  • Focus on skill development and trading plan execution

  • Find a trading style that fits your personality and risk tolerance

 

 

Source: https://chrisdunn.com/trading-in-the-zone/

 

 

 

 

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