Trading in the Zone
Winning traders have a winning psychology.
The traders who have confidence in their own trades and trust themselves to do what has to be done without hesitation are the ones who become successful.
Fundamentals and price models don’t make prices move, people, their emotions, and their expectations about the future make prices move.
There is a difference between taking risks and accepting risks without serious emotional discomfort.
The best traders aren’t afraid and avoid faulty behaviors/trading errors because fear isn’t motivating their decisions.
You don’t need to trust the markets, you need to trust yourself.
If you want to create consistency, you have to take responsibility for your trading outcomes no matter what they are.
The market is a psychological wilderness where every man and woman is truly left to fend for themselves.
Attitude produces better overall results than analysis or technique.
The best way to get into a flow state and not view the market as an adversary is to let go of any fear, regret, or disappointment you might feel throughout the process.
The more you let your biases influence your perspective, the more you’ll block out relevant information and opportunities favoring opposing viewpoints.
It’s when you are winning that you are most susceptible to making mistakes.
What separates the best traders from everyone else is not what they do or when they do it, it’s how they think about what they do and how they think when they are doing it.
Your best trades will be easy and effortless because you are in the flow.
If you properly manage your risk, the market isn’t threatening and there is nothing to fear.
The four steps to becoming a successful trader:
- Trade without fear.
- Perceive what the market is offering from its perspective.
- Stay completely focused on the present moment and opportunity.
- Spontaneously enter the zone (a flow state).
The fear of admitting we are wrong causes us to place an inordinate amount of significance on information that tells us we’re right.
Acting appropriately on anything requires belief and clarity of intent.
Prices aren’t governed by support and resistance, they’re governed by people. Any single trader can buy or sell at any time to move the market. Anything can always happen.
Setting a stop-loss doesn’t mean you’re mentally prepared to take a loss.
The only reason not to prepare for and plan your hypothetical loss for each trade is if you know what is going to happen next, but you never know what is going to happen next. Always define your risk because no trade is riskless.
Any information that has the potential to be threatening also has the potential to be blocked, distorted, or diminished in significance by our pain avoidance mechanisms.
You need to be rigid with your rules but flexible with your expectations.
View trades from the market’s perspective, not your own.
If you don’t expect the market to make you a winner, you have no reason to be afraid of losing.
All you need to know about your trade is:
- The odds are in your favor before you take the trade.
- How much it’s going to cost to find out if you are right about the trade.
- You don’t have to know what’s going to happen to make money on that trade.
- Anything can happen.
If the market is offering you a legitimate edge, determine the risk and take the trade.
Every moment in the market is unique. It has never happened before and it will never happen again.
The mechanical stages of being a trader:
- Build the self-trust necessary to operate in an unlimited environment.
- Learn to flawlessly execute a trading system.
- Train your mind to think in probabilities.
- Create a strong unshakable belief in your consistency as a trader.
The seven principles for building consistency:
- Objectively identify your edges.
- Predefine the risks for every trade.
- Completely accept the risk of each trade.
- Act on your edges without hesitation or reservation.
- Pay yourself as the market makes money available to you.
- Continually monitor your susceptibility to making errors.
- You understand the absolute necessity of these principles for achieving success and, therefore, never violate them.
The 5 Fundamental Truths of Trading:
1. Anything can happen.
2. You don’t need to know what is going to happen next 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