Book Club - Trading in the Zone June 2022

[Miguel Angel 65]

Chapter 2 Entry:

W - "The hard reality of trading is that, if you want to create consistency, you have to start from the premise that no matter what the outcome, you are completely responsible." - Mark Douglas

A - Mark lays out the ultimate truth of trading and of life in general: we are fully responsible for our actions and the results of those actions. Not someone else or something outside of us.

A - I am building the practice of always asking, "What did I do right or wrong with my trading" or "What could I have done better or the same for next time".  For example, if my power goes out and I'm in the middle of a trade, I should not sit around and blame Comed for my woes, but go purchase and install a UPS battery backup to keep my computer on during power outages. Another example: if my trade fails I should not think that the market worked against me, but accept the loss and explore how I can enter a better trade next time. I am truly in charge and when things go right or wrong, I did that. 🙏

[Susan 111]

That’s great, Miguel. It’s so easy to blame others, the market, etc. Learning to take full responsibility for our actions is an important lesson in trading & life. Look forward to chatting soon!

[kendal 10]

W: “Randomness is unstructured freedom without responsibility. When we trade without well-defined plans and with an unlimited set of variables, it’s very easy to take credit for the trades that turn out to our liking (because there was “some” method present). At the same time, it’s very easy to avoid taking responsibility for the trades that didn’t turn out the way we wanted (because there’s always some variable we didn’t know about and therefore couldn’t take into consideration beforehand).” 

A: Mark recognizes our inclination to do what we want and be free from rules and structure, rather than doing what is hard and sticking to a well-defined plan. 

A: As a newer trader in sim, I can fully appreciate Mark's advice that we must have well defined plans.  Everything feels very random to me because I am resisting the need to stick to a well-defined plan. I find that I am switching up my plans/variables and allowing way too many to creep in before I allow myself to perfect the ones I am currently working on.  I think it stems from feeling like maybe there is a "better" set of plans and variables to try out.   Stick to the damn plan is my new morning motto! 

[Kath 10]

Chapter 2

 

W: "However, I am implying that you can't take for granted how much effort and focus you may have to put into building the kind of mental structure that compensates for the negative effect denied impulses can have on your ability to establish the skills that will assure your success as a trader."

 

A: The irony of this chapter is how much Mark Douglas addresses the "unlimited freedom" that trading allows but to my understanding as a new trader,  the success can only be acquired if a trader creates a set of rules (and a strong mental structure) and then adheres to them absolute! Pure irony!

 

A:  I look forward to the "how" Mark Douglas promises to show us.

[mmichael766 0]

Thank you, Susan, for hosting today's discussion.  I apologize, I have not read that particular book. Will be next on my list. I look forward to next week's chapter three.

Mark

[Susan 111]

CHAPTER 3 ENTRY:

W - The consistency you seek is in your mind, not in the markets.  It's ATTITUDES & BELIEFS about being wrong, losing money, and the tendency to become reckless, when you're feeling good, that cause most losses - not technique or market knowledge.

A - We have to develop a Traders Mindset with proper attitudes & beliefs to become consistently profitable traders.

A - For me this resonated very early on...what had always worked didn't work here and I felt bad about it.  Hence; my dive into Trading Psych:)

 

W - A psychological zone is not a condition you can will yourself into, the way you can will yourself into a feat of endurance.  It is a state of mind you find yourself in that is inherently creative, and usually if you start thinking about your actions at a rational or conscious level, you pop right out.  Even though you cannot force yourself into a zone, you can set up a kind of mental conditions that are most conducive to experiencing "the zone" by developing a positive attitude as expecting a positive result from your efforts, with an acceptance that whatever results you get are a perfect reflection of your level of development and what you need to learn to do better.

A - It is not like trying to win a game or a prize - we cannot "will" ourselves into the "mental zone." The outcome just points to positives and areas we need to improve in our performance - it is not about winning/losing.

A - If we can fully accept risk and the outcome with a positive attitude as a mirror or ourselves and where we are in our trading and humbly take the constructive criticism without being emotionally upset/stunted by the experience; we can continue to learn and grow and not feel so much pain from trades that did not work out.  As counter intuitive as it sounds; all losses are merely opportunities to learn and grow in trading.

[WearyBear 12]

17 hours ago, Susan said:

CHAPTER 3 ENTRY:

W - The consistency you seek is in your mind, not in the markets.  It's ATTITUDES & BELIEFS about being wrong, losing money, and the tendency to become reckless, when you're feeling good, that cause most losses - not technique or market knowledge.

A - We have to develop a Traders Mindset with proper attitudes & beliefs to become consistently profitable traders.

A - For me this resonated very early on...what had always worked didn't work here and I felt bad about it.  Hence; my dive into Trading Psych:)

 

W - A psychological zone is not a condition you can will yourself into, the way you can will yourself into a feat of endurance.  It is a state of mind you find yourself in that is inherently creative, and usually if you start thinking about your actions at a rational or conscious level, you pop right out.  Even though you cannot force yourself into a zone, you can set up a kind of mental conditions that are most conducive to experiencing "the zone" by developing a positive attitude as expecting a positive result from your efforts, with an acceptance that whatever results you get are a perfect reflection of your level of development and what you need to learn to do better.

A - It is not like trying to win a game or a prize - we cannot "will" ourselves into the "mental zone." The outcome just points to positives and areas we need to improve in our performance - it is not about winning/losing.

A - If we can fully accept risk and the outcome with a positive attitude as a mirror or ourselves and where we are in our trading and humbly take the constructive criticism without being emotionally upset/stunted by the experience; we can continue to learn and grow and not feel so much pain from trades that did not work out.  As counter intuitive as it sounds; all losses are merely opportunities to learn and grow in trading.

"The consistency you seek is in your mind, not in the markets"

This really hits the nail on the head for me. In hindsight, this week was a good example. I had a good start to the week and traded well. I was unable to NOT have high expectations heading into yesterday's trading session and I think my market analysis suffered as a result. Yesterday became a max loss day for me. Today, yesterday's max loss is very much on my mind and I feel much more cautious.

[Marco 22]

I want to be honest... I still can not believe that your mind has such a great impact on your trading. Of course you have to avoid hulk days and such things. But is this really so hard to avoid them? Even if you have one, you can look, if your strategy will be positiv without this day. And if so, you should be motivated again that you still have a consistent strategy. I never has a hulk day. But my performance is not green. So what's my problem? The lack of market knowledge or the lack of attitude? I am looking forward to become the mindest, that the psychology is more important than the knowledge of the markets.

Following my Chapter 3 analysis:

W - Did you ever wonder why leaving money on the table  is often more painful than taking loss?

A - Mark wanted to explain that when we lose we can blame the market and not accept responsibility. If we had a bad Trade management this does not work. So sometimes this feels more painful.

A - When I think over the past I remeber that sometimes when I got stopped out, I thought: Damn. Again a big player sold his position exactly when I am in the trade. Why now? Why me... So I dont take the repsonsibility. But I can't avoid this, because its the fault of this big bad player... So it dont hurts so much. Bud when the stock made a big move, and I get out of the trade too early, I am thinking a long time about this. How much Rs I missed, This could be the winner of the week. and so on.. I can not blame the market, because the  market did run in my direction. So I can only blame myself. And this hurts much more than the loss caused from this big bad marketplayer..

[Susan 111]

@WearyBear   - I am sorry you hit max loss on Friday.  That is tough.  Maybe look at the things in the book you have already highlighted as some may help you mentally prepare for next week.  I would recommend also relaxing this weekend...exercise is the body's natural way to get stress out, being outside, meditating - all of this helps:).  See you Thursday:)

 

Edited July 23, 2022 by Susan

[Susan 111]

@Marco  I am glad you have never had a hulk day and maybe you are lucky that your natural personality may not lead to them.  I can only speak for myself in that when I have lost control and had a "hulk" day; the emotional wreckage after is far worse on me than the financial damage.  While I do not like the financial damage, I caused on myself; it is not a sum of money that is so great it will affect my life (due to the small risk I am currently trading).  It is my emotions of "revenge/getting it back/etc" that COMPLETLY took over (Dr Reid refers to this as our monkey mind).  I have children and sometimes I have lost my temper on them & yell at them.  This is also a loss of emotional control on my part (even if they deserved it).  I feel badly about that too after, but not as badly as I feel when I have hulked out.  The children provoked me and I do not harm them emotionally; I just get a little too fired up.  The days I have hulked; it is like my mind has lost all reason and rationale.  I am provoked because (like Mark says) I had expectations & those expectations weren't met - that is a mistake.  I actually find it rather embarrassing, but I share this openly in hopes it could help others.  My last example and I am not sure it is a good one, but I did think it after the 1st time I LOST control - it was like drinking too much & the next day your friends tell you about something you said/did...maybe you cannot even recall, but all you feel is embarrassed and terrible you said/did this thing that in your right mind you would not have done...hulkng out feels a little like that to me (or it did at the time).

I understand that feeling of "leaving money on the table"... that is actually more my issue than the hulking out (although I have experienced hulking out and it is not fun).  I hope to never again experience hulk & am working to further develop the right mindset and strategic game to be able to better hold my winners.  Without knowing more, I am not sure if your issues are technical or psychological.  I can speak again for myself in that I had to grow in both areas and while I have made improvements in both areas in the past year; I still have road ahead to grow in both areas.  I think if you asked a lot of people, they would say the same thing.  Thank you for sharing and I am glad you are in book club to grow in your psych trading game:)

[WearyBear 12]

@Susan  Thank you.

The good news is that I recently tightened my daily max loss A LOT, so Friday's loss is not a problem in any way from a pure $$$ point of view. -Tightening max loss, BTW, was something I did based on a conversation on that topic on an earlier book club call 🙂

I do feel like I am pretty good at retrospection, at asking "How did I get HERE, when I wanted to be THERE?", so that's what I have been working on since that day. I went back and reviewed this month's trades and found some repetitive mistakes I was making. I then simulated all this month's trades using the things I learned during my review, and the results are now significantly better. Out of 15 simulated trades, 12 were green, 2 red and one became a "No trade" since my entry criteria were never met.

I have created a simple and easy to read check list which I will review *every* day before market open. I think of it as a "takeoff check list". I credit this list with a lot of the improvement I have seen in my trading since the max loss day.

 

Edited July 23, 2022 by WearyBear

[Susan 111]

W - As soon as he made the assumption that knowing something about the market can prevent him from experiencing pain, he sealed his fate to become a loser.

W - If you have to win, if you have to be right, if you can't be wrong, you will cause yourself to define and perceive categories of market information as painful.  You will view as painful any information the market generates that is in opposition to what will make you happy.

W - (paraphrased)When our trader 1st started, he was having fun; he was in a carefree state of mind; he had no personal agenda.  He made a dramatic shift in his perspective from carefree to preventing pain by avoiding losses.  Pain cannot be prevented by avoiding losses.  There is no possible way to avoid losing or being wrong.  When he went from a carefree state of mind to a prevent and avoid mode of thinking, he shifted from a positive to a negative attitude.  He's no longer focused on winning, but on how he can avoid pain.  The market doesnt create your attitude or state of mind; it simply acts as a mirror reflecting what's inside back to you.  The worst consequence of not taking responsibility is that it keeps you in a cycle of pain and dissatisfaction.  

W - Developing a WINNING ATTITUDE is the key to your success.  If you want to become consistent; the 1st step is to take responsibility & stop expecting the market to give you anything.  If you resolve from this point to do it all yourself, the market can no longer be your opponent.  If you stop fighting the market, which in effect means you stop fighting yourself, you'll be amazed at how quickly you will recognize exactly what you need to learn, and how quickly you will learn.  Taking responsibility is the cornerstone of a winning attitude.

Analyze - More market knowledge will not automatically make you a winner in trading.  The market is generating order info; not causing you emotional pain.  Being on the wrong side of probability at times is unavoidable; stop trying to avoid it and focus on your trading process that is tested and proven to win over time.  Positive mindset is key to consistent profitability.  The market is a mirror reflecting your attitude & beliefs to you.  A winning attitude must be established and taking full responsibility is step 1.  There is no enemy to fight.

Apply - The things you need to work on are right there in your trading charts & equity curve.  Take a deeper look at them; they are speaking... Let go of the need to win and play your strategy.  Let winning and losing happen as they probabilistically are supposed to and trust that it will all make sense.  Trust your process, trust yourself & stop worrying about short term results.  I have an overall positive attitude, but I have tried not to lose and it is reflective in my trading.  I am hyper aware of this trait.  Trying not to lose hinders my ability to win.  I am out of the "boom & bust" cycle, but I need to 100% let go of fighting losing.  I need to 100% accept the game of probabilities for winning & losing days and trust the winners will outweigh the losers:).  I am getting there...slightly closer each day:)

[Norma 33]

Chapter 3

W: “On the other hand, if what you perceive in market information is painful in some way, then you will naturally try to avoid that pain by either consciously or subconsciously blocking that information, you’ll systematically cut yourself off from any number of opportunities to enrich yourself. In other words, you cut yourself off from the opportunity flow”.

A: Our fear of pain prevents us from seeing the opportunities the market presents us. Fear makes us (1)hesitate the execution of the trades (2)entering the trades too late or not at all; (3)exiting the trades too early.

A: It’s one the issues we all traders goes through, especially as a new trader. Fear is something we need to be constantly aware of and embrace it.

[Susan 111]

1 hour ago, Norma said:

Chapter 3

W: “On the other hand, if what you perceive in market information is painful in some way, then you will naturally try to avoid that pain by either consciously or subconsciously blocking that information, you’ll systematically cut yourself off from any number of opportunities to enrich yourself. In other words, you cut yourself off from the opportunity flow”.

A: Our fear of pain prevents us from seeing the opportunities the market presents us. Fear makes us (1)hesitate the execution of the trades (2)entering the trades too late or not at all; (3)exiting the trades too early.

A: It’s one the issues we all traders goes through, especially as a new trader. Fear is something we need to be constantly aware of and embrace it.

Hi @Norma  indeed Fear is a big one. I have experienced some greed, but fear seems to be the one I have to conquer too. I find it interesting how it effects us all a little different - fear of missing out, fear of losing, fear of entering, fear we will never make it to consistency, fear (for some) of becoming successful (this one is a paradox, but if old, negative beliefs are in there - they can cause self sabotage)… indeed fear is a tough one most feel & express differently.  Sleep well & best to all this week☺️

[Dan F 73]

On 7/21/2022 at 3:02 PM, Susan said:

CHAPTER 3 ENTRY:

W - The consistency you seek is in your mind, not in the markets.  It's ATTITUDES & BELIEFS about being wrong, losing money, and the tendency to become reckless, when you're feeling good, that cause most losses - not technique or market knowledge.

A - We have to develop a Traders Mindset with proper attitudes & beliefs to become consistently profitable traders.

A - For me this resonated very early on...what had always worked didn't work here and I felt bad about it.  Hence; my dive into Trading Psych:)

 

W - A psychological zone is not a condition you can will yourself into, the way you can will yourself into a feat of endurance.  It is a state of mind you find yourself in that is inherently creative, and usually if you start thinking about your actions at a rational or conscious level, you pop right out.  Even though you cannot force yourself into a zone, you can set up a kind of mental conditions that are most conducive to experiencing "the zone" by developing a positive attitude as expecting a positive result from your efforts, with an acceptance that whatever results you get are a perfect reflection of your level of development and what you need to learn to do better.

A - It is not like trying to win a game or a prize - we cannot "will" ourselves into the "mental zone." The outcome just points to positives and areas we need to improve in our performance - it is not about winning/losing.

A - If we can fully accept risk and the outcome with a positive attitude as a mirror or ourselves and where we are in our trading and humbly take the constructive criticism without being emotionally upset/stunted by the experience; we can continue to learn and grow and not feel so much pain from trades that did not work out.  As counter intuitive as it sounds; all losses are merely opportunities to learn and grow in trading.

It really hit me the second time around listening to this book that a trader can almost start "in the zone". Its up to the traders inevitable slump to get out of equilibrium.