"Trading in the Zone" by Mark Douglas is a must read. It is a 10 Star book to me. I believe that having the right mindset is key to being a consistent trader and he goes in-depth on this subject. These are the quotes from Marks book that made an impact on me.

Markets provide structure in the form of behavior patterns that indicate when an opportunity to buy or sell exist and that is where the structure ends- with a simple indication. 

An objective perspective- one that is not skewed or distorted by what you are afraid is going to happen or not happen.

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.

Learning to accept the risk without fear is trading skill- this is the most important skill you can learn.

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

 Any degree of struggle, trying, or fear associated with trading will take you out of the moment and flow and, therefore, diminish your results

 

Contradictory beliefs and non-functional awareness represent flawed mental software code;

1. code that destroys your ability to stay focused and accomplish your goals.
2. code that makes it seem as if you spontaneously have one foot on the accelerator and the other on the brake.
3. code that gives learning how to trade a mysterious quality that will be challenging in a fun way at first, but usually turns into pure unadulterated exasperation.

 

One of our basic objectives as a trader is to perceive the opportunities available, not the threat of pain.

 

4 Secrets of the nature of trading:

1. To trade without fear or overconfidence
2. Perceive what the market is offering from its perspective
3. Stay completely focused on the now moment opportunity flow
4. Spontaneously enter the zone. It is a strong, virtually unshakable belief and an uncertain outcome with an edge in your favor.

 

“Making yourself available as a perspective from which you understand that the framework from which you are perceiving information is limited relative to what’s being offered. A perspective from which you make yourself available, takes into consideration, both the known and the unknown. For example, you have built a mental framework that allows you to recognize a set of variables in the markets behavior that indicates when an opportunity to buy or sell is present. This is your edge and something you know. However, what you don’t know is exactly how the pattern your variables identified with unfold. With this perspective of making yourself available, you know that your edge places the odds of success in your favor, but, at the same time, you completely accept the fact that you don’t know the outcome of any particular trade. By making yourself available, you consciously open yourself up to find out what will happen next; instead of giving way to an automatic mental process that causes you to think you already know. Adopting this perspective leaves your mind free of intentional resistance that can prevent you from perceiving what ever opportunity the market is making available from its perspective (it’s truth). Your mind is open for an exchange of energy. Not only can you learn something about the market that you previously did not know, but you also set up the mental condition most conductive to entering “the zone.”

 

The essential of what it means to be in “the zone” is that your mind and the market are in sync.

 

You need to believe without a shredded doubt while your ultimate success as a trader cannot be realized until you develop a resolute, unshakable belief in uncertainty.

 

The market can express itself in an almost infinite combination of ways.

 

Three most important rules in trading to be a consistent:

1. Have a predefined risk before you enter a trade.
2. Cut losses quickly.
3. Systematically take profits.

 

The paradox of trading random outcomes but consistent results.

 

What factors will determine whether the market unfolds in the direction of your edge or against it? The answer: the behavior of other traders!

 

To think and probabilities, you have to create a mental framework or mindset that is consistent with the underlying principles of the probabilistic environment. A probabilistic mindset pertaining to trading consist 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. The 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.

 

The best traders are in the “now moment” because there’s no stress there’s no stress because there’s nothing at risk other than the amount of money. They are willing to spend on a trade. They are not trying to be right or trying to avoid being wrong ; neither are they trying to prove anything if and when the market tells them that their edges aren’t working or that it’s time to take profits their minds do nothing to block this information They completely accept what the market is offering them and they wait for the next edge.

 

Consistency is the result of a carefree objective state of mind where we are making ourselves available to perceive and act upon whether the market is offering us (from its perspective) in any given “now moment.”

 

Carefree state of mind means you are confident, but not euphoric. When you are in a carefree state of mind you won’t feel any fear, hesitation or compulsion to do anything because you’ve effectively eliminated the potential to define and interpret market information as threatening. You have completely accepted the risk and you are going to be at peace with any outcome.

 

Trading in the “now moment” means that there is no potential to associate an opportunity to get into, get out of, add to, or detract from a trade with a past experience that already exist in your mental environment .

 

4 Things you need to know when putting on a trade:

1. The odds are in your favor before you put on the trade
2. How much it’s going to cost to find out if the trade is going to work
3. You don’t need to know what’s going to happen next to make money on that trade
4. Anything can happen

 

Memories, distinctions, and beliefs exist in the form of energy— specifically, structured energy. To illustrate:

1. Memories, distinctions, and beliefs, do not exist in physical matter
2. The cause-and-effect relationship that exists between ourselves and the external environment brings these components into existence.
3. The cause-and-effect relationship reverses so that we can perceive in the external environment what we have learned about.

 

How beliefs shape our lives:

1. They manage our perception and interpretation of environmental information in a way that is consistent with what we believe.
2. They create our expectations. Keep in mind that an expectation is a belief projected into some future moment. Since we cannot expect something we don’t know about, we could also say that an expectation is what we know projected into some future moment.
3. Anything we decide to do or any outward expression of behavior will be consistent with what we believe.
4. Finally, our belief shape how we feel about the results of our actions.

 

“What is the truth?” The answer is, whatever works. That truth, whatever it is, will determine:

1. The possibilities we perceive in relation to what is available from the environment perspective.
2. How we interpret what we perceive.
3. The decisions we make.
4. Our expectations of the outcome.
5. The action we take.
6. How we feel about the results of our efforts.

 

Three basic characteristics, you need to understand in order to effectively install the five fundamental truths about trading at a functional level in your mental environment:

1. Beliefs seem to take on a life of their own, and therefore resist any force that would alter their present form.
2. All active beliefs demand expression.
3. Beliefs keep on working regardless of whether or not we are consciously aware of their existence in our mental environment.

 

Beliefs fall into two basic categories, active and inactive.

 

What is the source of our potential to interpret market information as threatening?Our expectations! What is the underlying source of our expectations? Our beliefs!

 

We have to create new beliefs and deactivate the conflicting ones. This is the secret to achieving consistent success as a trader.

 

To operate in a state of not having to know, you have to properly manage your expectations to properly manager your expectations. You must realign your mental environment so that you believe without a shadow of a doubt in the five fundamental truths.

 

Three stages of development in becoming a consistent trader:

1. Mechanical stage
• Build the self trust necessary to operate in an unlimited environment
• Learn to flawlessly execute a trading system
• Train your mind to think probabilities to five fundamental truths
• Create a strong, unshakable belief in your consistency as a trader.
• “I am a consistently successful trader!!!”
2. Subjective stage
• Use anything you have learned about the nature of market movement to do whatever it is that you want to do.
• A lot of freedom in this stage
• You will learn how to monitor your susceptibility to make the kind of trading errors that are the result of any unresolved self evaluation issues.
3. Intuitive stage
• Most advanced stage of development
• The difference is that you can’t try to be intuitive because intuition is spontaneous. It doesn’t come from what we know at a rational level.
• You have to set up a state of mind, most conductive to receiving an acting on your intuitive impulses.

 

My primary objective as a trader is to create a belief, a conscious energize concept that resist change and demands expression, that “I am a consistently successful trader”, and this will act as a primary source of energy that will manage my perceptions, interpretations, expectations and actions in a way that satisfy the belief and consequently the objective.

 

Self discipline is a mental technique to redirect our focus of attention to the object of our goal or desire, when that goal or desire conflicts with some other component (our beliefs) of our mental environment.

 

Creating a belief that “I am a consistent winner.”

I am a consistent winner because:

1. I objectively identify my edges
2. I predefined 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.

 

Probability perspective:

1. I have an edge that generally puts the odds of success in my favor
2. I can think about trading in the appropriate manner the five fundamental truths
3. I can do everything I need to do over a series of trades