Book Club - Trading in the Zone June 2022

[Kath 10]

My school is back in session (I'm a teacher) so I've been alittle behind but I got ch. 4 read and am happy to post today. Won't be able to join the meet until next week though.

 

W  " Winning and consistency are states of mind the same way that happiness, having fun, and satisfaction are states of mind. If you depend on outside conditions and circumstances to make you happy (so you are always enjoying yourself), then it is extremely unlikely you will experience happiness on a consistent basis. 

A Mark points out that our "state of mind" can ultimately control our day to day happiness ; it doesn't have to be the external or outside conditions of life that create joy. We all know someone who walks through their day with a smile on their face and a joyful attitude no matter what life seems to throw their way. This is a skill and they have learned to maintain that attitude throughout the challenging days. He also says this "state of mind" is how traders can experience "winning and consistency."

A I understand the "happiness state of mind" concept well and work on it myself, even trying to teach my 24 year old to accept the concept. At this point, as a new trader I am not sure how to experience the "winning and consistency" state of mind yet. As a teacher, I have used reflection often to develop better teaching strategies over the years. I learn best with practical instruction. I am hopeful that the book gives more instruction as to how to get to that "state of mind."

[Susan 111]

Great quote!  I’m sure the book will be insightful. I take it at a level - believing you are consistent and believing you are a winner. If P&L says different that just means you’re in the learning stage (not that you/we are losers). It’s super easy to get down on ourselves, but think of a pro athlete or any professional at the top of their game… if they lose a contract, miss a shot, etc - they don’t go into a bunch of self doubt and tell everyone how bad they suck… they’re still winners that made a little mistake or “can’t win them all” kinda thing. I’ve seen some of my trading friends get really down when they lose even if they followed process - I believe this to be counterproductive …. If we followed strategy/rules in a game of probabilities and it didn’t work out - just gets us closer to being on the right side of probability. I know easier said then done, but we have to start saying it, thinking it & believing it so we can live it!!!! We’ll miss you today. Hope you enjoy your new semester!!

[JOSECALCAS 11]

Chapter 4

 

W. Accepting the risk means accepting the consequences of your trades without emotional discomfort or fear.

 

This means that you must learn how to think about trading and your relationship with the markets in such a way that the possibility of being wrong, losing, missing out, or leaving money on the table doesn't cause your mental defense mechanisms to kick in and take you out of the opportunity flow.

 

A. Mark points out that accepting risk is when we truly accept the consequences of our trades without it affecting us emotionally.

 

A.      It is difficult not to feel happy when the trade flows in our favor and even more so if it shoots in our favor. Even worse if it does not flow in our favor then fears, anxieties can block us and we stop acting objectively.

 

A.      I have experimented these days in accepting the risk and taking the loss objectively even before my stop. Waiting for it to flow in the expected direction has given me a new opportunity or I have even been able to find it in another stock. In the end I was able to finish with a favorable result because there will always be opportunities.

  This is just now, and I must keep generating the practice and the habit. It is still recent in the past, when I did not accept a loss, I withdrew the stop and it became a giant loss that made me go back several days, weeks or a month.

 In July it did not happen, and I had an excellent month, although one day I lost 2, 3 times the day after that day I won what I lost, because if the losses are according to our risk we will always have the opportunity to improve on the day or the next day.

[Kath 10]

3 hours ago, Susan said:

Great quote!  I’m sure the book will be insightful. I take it at a level - believing you are consistent and believing you are a winner. If P&L says different that just means you’re in the learning stage (not that you/we are losers). It’s super easy to get down on ourselves, but think of a pro athlete or any professional at the top of their game… if they lose a contract, miss a shot, etc - they don’t go into a bunch of self doubt and tell everyone how bad they suck… they’re still winners that made a little mistake or “can’t win them all” kinda thing. I’ve seen some of my trading friends get really down when they lose even if they followed process - I believe this to be counterproductive …. If we followed strategy/rules in a game of probabilities and it didn’t work out - just gets us closer to being on the right side of probability. I know easier said then done, but we have to start saying it, thinking it & believing it so we can live it!!!! We’ll miss you today. Hope you enjoy your new semester!!

Susan...thank you soooo much!!! I love your response "it didn't work out - just gets us closer to being on the right side of probability." That thought definitely can help one to maintain a positive attitude. 

[Susan 111]

Chapter 4.5 - portion on Risk!!

***Please remember we are taking this week off as Ed & I are both on vaca. We will resume 8/18 to discuss the remainder of chapter 4. Stay safe, manage risk and work to get into your carefree, trading mindset zone🥰💪

 

W- Your fears will act on your perception of information & behavior in a way that will cause you to create the very experience that you fear the most. 
 

W- Being aware of something doesn’t automatically make it a functional part of who you are. Awareness is not necessarily a belief. You can’t assume that learning about something new and agreeing with it is the same as believing it at a level where you can act on it. 
 

A- what we fear most will show up

Being aware of something and believing something at a deep level is totally different. 
 

A- this reminds me of “the law of attraction” what we think about, worry about, focus on (whether positively or negatively) we bring about. Our minds are so strong. If you constantly think about losing and you’re fearful of losing and losing keeps you up at night and you talk about losing with your friends and losing, losing, losing. Your mind is focused on losing and you’re not crazy, right? So you now have to bring losing into your life. Your body will find a way to bring in losing - it has to so that your mind and what you are focusing on all the time is true. Now change “losing” for “winning or process or happiness” even if you don’t feel these things now & there’s a million reasons they aren’t true right now; who cares —- you’re a consistently profitable trader. Say it out loud multiple times everyday, believe it at a very deep level, feel how it feels and your mind will find a way to make it true - it has to!!! (I am going to try this🥰)

A - everyone says trading takes a long time and to me this sentence explains much of “why”…. We have to go through a mental & strategic process. We have to 1st learn a strategy & a new mindset. Then we have to actually live a disciplined trading life with this new strategy & mindset. Understanding our strategy & the trading mindset is not nearly enough… we have to put our understanding to practical work (in bull & bear markets all day everyday). A medical student understands a ton about surgery and how a surgeon should think/act… by no means does this mean I want them cutting my head open!!! Once you learn something; yes you must practice it millions of times but you have to also believe it at your core. Learning how to think in probabilities and thinking like this each day are 2 different things … I find myself somewhere in the middle right now. My understanding of a traders mindset and my trading strategies have been learned; I’m still practicing them and they’re taking root as beliefs. I’ve had to get rid of some of the old beliefs and rearrange some of them around to make room for my new beliefs. It’s been a great ride and I can’t wait to see how it all continues to unfold☺️

[Dan F 73]

Chapter 5

W- Fear is something that is very dynamic and what you do to overcome it needs to be revisited often. To bring yourself to a sense of calm curiosity in your trading, you need to think and see what would be an ideal circumstance that you can recreate time and time again.  

A- When you experience something you can go two ways: curiosity or confusion. You cannot learn something without experiencing it.

A- The best way that I can see to apply this to my trading is to focus more on reversals. I feel when I am in a reversal trade that I’m less shocked with what the outcome may be. I hope that by putting myself into trades that trigger curiosity it will help to condition myself to being curious. I also hope that by conditioning myself to being curious that I will be able to apply the feeling to more difficult trading patterns.

[Miguel Angel 65]

33 minutes ago, Dan F said:

Chapter 5

 

W- Fear is something that is very dynamic and what you do to overcome it needs to be revisited often. To bring yourself to a sense of calm curiosity in your trading, you need to think and see what would be an ideal circumstance that you can recreate time and time again.  

 

A- When you experience something you can go two ways: curiosity or confusion. You cannot learn something without experiencing it.

 

A- The best way that I can see to apply this to my trading is to focus more on reversals. I feel when I am in a reversal trade that I’m less shocked with what the outcome may be. I hope that by putting myself into trades that trigger curiosity it will help to condition myself to being curious. I also hope that by conditioning myself to being curious that I will be able to apply the feeling to more difficult trading patterns.

 

I really liked how you applied this chapter to your trading. This is something that I am also experiencing in my trading, that of being a curious calm trader. Thanks for sharing that!

[Marco 22]

W - When the internal struggle ends, everything will becomes easy. At this point, you can take full advantage of all your skills.

A- Mark wants to say that if you are under fear at every trade you maybe cannot trade according to your trade book. You will cut your looses to late or maybe to early (if not they maybe turned into winner) And you cut your winners to earyl. If you are under fear you maybe dont enter a trade because you just had a loosing one. Than you becomes fomo and enters the next trade too fast with not so much confirmations. So with fear in your trading you can not trade as good as you are. Fear is like driving a car under alcohol. You car is able to drive fast and precise, but when your brain is not clear as it could be because of the alcohol (=fear) Then your car(=tradingsystem) will never show the best out of itself.

A- I have to work on my tradebook. And be more spezific when to enter a trade an when not. Sometimes I do not enter because I am not sure if it fits to my tradebook or not. And more rules will help me to shut down the fear because I can work like a machine. As Aiman told us: If, then, else... and so on and on. And when your stats are ok and your risk per trade is not too much so that you feel comfortable with it, you should can avoid the fear. Why you should have fear? Losing is part of the game. Be happy with your losers, because after a loser the next winner will come for sure.

[Susan 111]

Chapter 5 - The Dynamics of Perception

W - In the Flow - perceiving an endless stream of opportunity,  To trade like professionals you must be able to see the market from an objective perspective, without distortion.  You must be able to act without resistance or hesitation, but with the appropriate amount of positive restraint to counteract the negative effects of overconfidence or euphoria.  In essence we need a unique state of mind; a traders mentality.  

If the memories, distinctions, and beliefs we've acquired as a result of our encounters with the external environment represent what we've learned about that environment represent what we've learned about the environment and how it works; & if these memories, distinctions & beliefs exist in our mental environment as energy; and if energy doesn't take up any space; then it could be said that we have an unlimited capacity to learn.  Anything that is energy has the potential to act as a force expressing its form, and that is exactly what our memories, distinctions & beliefs do.  

"People see what they want".....Put into Mark's words - People see what they have learned to see, & everything else is invisible until they learn how to counteract the energy that blocks awareness.  

Our minds associate & link anything that exists in the external environment that is similar in quality, characteristics, properties, or traits to anything that already exists in our "mental environment" as a memory or distinction.

Developing & maintaining a state of mind that perceives opportunity flow, without the threat of pain or the problems caused by overconfidence, will require that you take conscious control of the association process.

A - Perception is reality.  The dog biting example is classic and we all have experiences & examples like this we can think about... this type of animal or person hurt me; that means this type of animal or person is dangerous & can hurt me again.  If memories, distinctions, & beliefs are energy that take up "no space" we can endlessly learn new ways of being and elevate ourselves to new levels.  Beliefs are what happened to you before and how your mind processed that info.  They could even be formed from things you have heard; not even experienced....I keep seeing this type of animal/person causing danger on TV and now I don't want to be near this type of person/animal because I "perceive/believe" them to be a threat and a "High Risk".  

On a side note; protect your mind....what you watch, read, look at, who you talk to - it is all forming your future thoughts, beliefs, actions, words.... deal with good things, people, shows, etc....keep the garbage out!

"Developing & maintaining a state of mind that perceives opportunity flow, without the threat of pain or the problems caused by overconfidence, will require that you take conscious control of the association process". - This is the last sentence in the chapter... We have to learn to make new connections similar to what Rande Howell talks about in his classes.  Our brain is hardwired to connect fear/pain/loss and processes it in a certain way to protect us.  We touched a hot stove, it hurt, we cannot touch it again.....In trading we lose, we feel pain, we should not do that again.... what we have to do is disassociate the pain from "losing" in trading.  I like to think in terms of "wrong side of probability" vs loss.  Loss means a lot of things for people (death, etc).... wrong side of probability to me feels like "oh well maybe next time it will work...

 

A - How I interpret all of this.... if what I perceive will be my conscious awareness and I need to process a trading loss as unpainful; what can I do to speed up this process?  Practice and screen time are an absolute necessity.  Learning and being able to 100% execute is a necessity.  Once this is accomplished; the proper mindset is a necessity.  A "loss" as defined by society cannot be the same thing we assimilate to trading.  A trading loss is nothing - part of the game...the price to play.  You have to be able to shake it off/park it/later learn from it.....Speeding this up; I would fall back to all the psych tools BBT constantly teaches us - meditation, visualization, mental imagery...these are all great tools.  You may have some deeper psych things to initially deal with (most of us do).  Revisit in your mind when it became so terrible to lose at anything and what that means for you (as an example)... maybe you believe "Losing means I am a failure and in my family failures are not shown love"  maybe you believe "All rich people are assholes or money doesnt grow on trees or You do not deserve to be rich or you will never be successful because deep down you think you are not worth or are a loser"....maybe you believe something else that is "blocking you" from learning and reaching the next level that Mark speaks to in his book.  This will be personal and independent for everyone.  Take a deep dive and be open and honest with yourself about what you believe and dig deep to figure out when, where, why you believe this and who told you to believe it.  Let yourself know it is really ok to let this belief go.  This may take a few internal conversations as your brain starts to work it out, but it is worth it.  Let go of those old beliefs, hurts, etc so you can make room for new ones that enable you to reach the goals and future you desire.  Psych is as much (if not more) work than the technical side of trading, but you have to do it if you really want to build new beliefs and habits and attain the flow state.  I haven't read ahead so maybe Mark will give us additional suggestions on how to get there...For me personally; I spent the past year dealing with a lot of old stuff and now I am building the new mental system while I improve on my technical game.  Sorry so many words this week.  I am nothing if not long winded.  Enjoy your evening:)!

PS - if you take this verse above and start digging into your psyche; if you find something very painful or aren't sure what to do/where to go - talk to a trained pro...that is why psychologists are out there & in high demand.  There's zero shame in trying to make yourself better, stronger and capable of living your best life.  WE ALL have stuff to deal with and the way one processes will be totally different from anyone else in the world.  It takes a stronger person to look it square in the face and take it's power away... You can do it; I believe in you & if you need help I am here, but I recommend someone like Crede, Dr Reid or Rande - they have the proper tools and like my surgeon example today - they have cut into a lot of heads...lol. 

 

[Norma 33]

Chapter 5

W: “…I want you to ask yourself whether, at the moment you hesitated, were you perceiving what the market was making available, or perceiving what was in your mind reflected back to you? The market gave you a signal. But you didn’t perceive the signal from an objective or positive perspective. You didn’t see it as an opportunity to experience the positive feeling you would get from winning or making money, but that’s exactly what the market was making available to you”.

A: tells us the market is neutral, the market just produces information that we, the traders, are the ones who interpret that information according to our personal perceptions or mental state such as threats, fears. Our internal and mental conflicts are the ones leading our decision and the way we processed that information.

A: It’s a constant conflict between our mental state and the information from the market. This conflict is what prevents us from properly executing our trades; makes us to miss opportunities given by the market. We need to be aware at all times and have a neutral and unbiased perception. Building the proper mindset will help to properly execute each trade.

[WearyBear 12]

This chapter was, to date, the most impactful for me. It gave me some specific "tools" to start disconnecting my mind and my emotions from the turbulent journey through trading I have had so far. I believe I am starting to act differently. I feel more calm and at ease at the market open. -The fact that I trade a strategy where I don't jump in right away certainly helps, too.

[Susan 111]

@WearyBear - that is awesome & I am glad you enjoyed it and are seeing some progress!

[kendal 10]

Chapter 5 

W: “Most of us have no concept of the extent to which we are continually surrounded by the invisible opportunities inherent in the information we are exposed to. More often than not, we never learn about these opportunities and, as a result, they remain invisible.” 

“People see what they’ve learned to see, and everything else is invisible until they learn how to counteract the energy that blocks their awareness of whatever is unlearned and waiting to be discovered.” 

A: I love that Mark introduces this concept that we are almost blind to infinite opportunities, based on our own mental framework and past experiences. We all sort of know this to an extent, that our thoughts and beliefs are formed from our experiences. But to realize that it is our own mind that is causing countless opportunities to remain invisible is pretty eye opening. In my own trading I feel like I am definitely in the pattern of more hesitation after numerous losing trades and overconfidence and risky after several winning trades. I didn’t realize I was limiting myself by allowing the win/loss excitement/fear to dictate my next trade. Learning to take conscious control of the by mind’s association process and learning how to circumvent its natural propensity to associate is now something I am aware of and can work on. 

[Miguel Angel 65]

Chapter 5 Entry:

W - "The tug of war inside your mind intensifies. You don't want to miss out, but you don't want to get whipsawed either. In the end, you do nothing, because you are paralyzed by the conflict. You justify your state of immobility by telling yourself that it's just too risky to chase the market, while you agonize over every tic the market moves in the direction of what would have been a nice winning trade" -Mark Douglas

A - Here Mark is again emphasizing the outcome of perceiving market information based on previous memories of past trades and which causes analysis paralysis instead of perceiving the market as neutral and unbiased in this game of probabilities with no certain outcomes.

A -  This was my $ZM trade on 08/23/22. I was stopped out on this trade (1-minute chart), but I knew my indicators were correct for a reentry at the break of VWAP, daily level and confirmation on multiple time frames. But exactly as Mark said, I had a tug of war going inside my head about the information the market was presenting me based on my previous trade and I hesitated. I need to consciously work on resolving this conflict which is easy to think about outside of the trade, but very difficult when inside of an active trade. 🙏

[Susan 111]

Chapter 6

As always; Mark doesn't disappoint....this book makes me think and it is so so good.  I think for the rest of my forseeable trading career I will reread this once per year (minimum)!  I am finding new things & interpreting much differently than 1st time around....I love books like that and "trading bible" is really an appropriate nickname in my humble opinion

W - Mark talks about 2 things we must master... "The 1st is to learn to keep your mind focused on the "now moment opportunity flow".  The 2nd hurdle has to do with the division of labor between your left & right brain.  Your left brain specializes in rational thought, based on prior knowledge.  Your right brain specializes in creative thought.  It can tap into inspiration, intuition, hunches or sense of knowing that cannot be explained rationally. Ultimate success as a trader cannot be realized until you develop a resolute, unshakeable belief in uncertainty.  When we believe in something we operate out of that belief naturally, without struggle or effort.

A - Mark is telling us 2 very deep psychological changes we have to make to become successful traders.  He literally says this is why so many fail; lack of wanting to psychologically adapt.  He states that to focus on the "NOW OPPRTUNITY FLOW" we need to fully believe and embrace uncertainty.  That needs to be a part of our core belief system where other beliefs stem from...

A - I do believe "anything can happen", but there is work I can do to even further strengthen that belief....I am going to do what I know & further research this and discuss in my chat time in the next week or 2.... I feel like I am fairly decent at acting on my creative thoughts & I easily believe in things I do not see....I believe we can create a lot of our reality and that perception is reality....we can have 2 people in the same room having a completely different experience (one could be enjoying the smells/ambiance/music while the other could be uncomfortable with all of those things....the way we are perceiving the info (in this example smells, visually, etc) based upon our past experiences in life will dictate the state of mind & emotions we elicit about the room or anything else....all these principles can be applied to trading/charts/anything.

Lastly - "If anything is possible; there is nothing to avoid"!!!

Talk soon!!