Book Club - The Disciplined Trader

[DenHei1 13]

I know this is Chapter 1 based - but it is something I am coming to a deeper understanding of daily.  And reminding myself of it helps me be patient with my process.  I've had those gloriously transcendent, aka non emotional, moments where I've crossed into Quote 2.  But both of these are a work in progress. 

Quote 1:  The few traders who pass through this phase to accumulate wealth are those who eventually confront and work through some very difficult psychological issues about what it means to be a trader, and this process of realization and change normally takes several years, even for the best of them. 

Quote 2:  (which echos quote 1) At some point, they probably realized that something about themselves had changed because the normal kind of market activity that once had a very  negative emotional impact on them, like anger, stress, anxiety, and fear, just didn't have the same effect any longer.  

A;  What Mark is telling us - well which is his message - that you will need to go through massive changes to become the trader you want.  ALthough some might be there already.

 

A:  For me this is profoundly true. 

Edited December 8, 2022 by DenHei1

[Marco 22]

Chapter 2 - Why a New Thinking Methodology?

W:  The Irony is, of course, that, on the surface, trading looks so simple, when in fact most people will find it to be the most difficult endeavour they ever undertake. Success will always seem so close, and yet always so elusive.

A: He would like to tell us, that we may not underestimate trading. It looks like so eays. But it isn't. And when we don't achive our goals we are looking for new strategies. But the solution is not in new strategies. It is in changing our believs.

A: I have to work on many things. But not on the strategy side. I will work on psychology, limiting beliefs, lack of self diszipline and so on. 

[Miguel Angel 65]

Chapter 2 - Why a New Thinking Methodology?

W - "Many traders will try to circumvent confronting these limiting beliefs by becoming an expert market analyst. It doesn't matter how good a market analyst you become; if you don't release yourself from the effects of these beliefs, you won't be successful to the extent these limiting beliefs have power over your mental system." -Mark Douglas

A - What Mark is telling us is that some of our beliefs that have been ingrained since birth are so strong that they have devastating effects on our psychology and by extension, our trading. Instead of confronting those limiting beliefs we choose to spend enormous amount of time and mental effort to learn a skill believing that skill will reduce or eliminate those limiting beliefs. But as we know as traders that is not the case.

A - Many times when I share my trades online, I always have individuals who suggest that I should learn a different trading style, revise my stop distance, or provide some other trading recommendations. Even though I am appreciative for the feedback, the issue with my bad trades was most exclusively related to trading psychology. I choose to keep my trading strategy simple, revising when necessary, and focusing on reducing the effects of limiting beliefs on my trading by journaling and reflecting on my trades every day without fail.

[Dan F 73]

7 hours ago, Norma said:

Chapter 2 – Why a New Thinking Methodology

W: “Learning how to execute your trades immediately upon your perception of an opportunity”

A: Mark is telling us to take the trade every time our set up is triggered without overthinking.

A: I’m still working on my execution. More often than not I’m late in entering my trades.

 

I'm dealing with the same thing. I'm hope that making my trading theorys sound more defined that I'll have more confidence is pulling the trigger.

[Marco 22]

wish you all a nice meeting. I am sorry, I can not attend today.
 

Chapter 3, 4 and 5 - Prices Are in Perpetual Motion with No Defined Beginning or Ending?

W - The less meaning the money has, the less potential there is for your personal "how much is enough" issues to contamine your perception of market movement.
A - The author says that if you feel greed or fear this will contaminate your decisions on market movement. But as the market is always moving and changing, also your decisions have to change with the market. 
You may not stay in a trade because of greed (How much is enough) - you have to decide if the market movement is over so you have to exit the trade.
A - I trade with really low wager. So even if I lose or win it does not bothers me. And so I hope that I make the decisions up on the market and not on my feelings.

Edited December 15, 2022 by Marco

[Dan F 73]

Chapter 3-5

What I found to write about was in chapter 5.

W- There are moves that you can see and some that you want to see.  Both must be dealt with when you exit your trade.

A- Mark talks about how our mind can actively tell you that if we stay in longer, we will be on the right side of the trade. He also talks about how it is easy to convince yourself that there is an infinite number of combinations that can come up within 10-ticks.

A- How I’m hoping that these thoughts help me to narrow down why I am in a trade and not taking profit. I’m hoping telling myself to be more logical then optimistic before entering a trade might help.

[DenHei1 13]

Chapters 3-5

There is so much in these short chapters - I really had to force myself to choose just one quote - as opposed to literally retyping them.

W - Considering the unlimited potential for profit, entering the market will be much easier for most trader than will be getting out.  This is because exiting the trade will require that you confront your beliefs about greed, loss, and failure in relationship to the constant temptation of the possibility for unlimited profits."  

A - Mark Douglas was undeniably a genius in his deep and profound understanding of the intricacies of how the market is really a mirror of  our minds and emotions.   He is also making clear the deep hidden challenges in the seemingly simple task of exiting a trade.  

A - I read his book a long while ago - but in this reading I'm finding that I've moved from intellectually understanding what he is saying to recognizing my experiences in his writings.  And now as I read this it validates my experiences and also helps me to release the harsh self-judgement and unrealistic expectations I've set for myself.  I'm sitting here shaking my head up and down feeling like Mark wrote this for me.  LOL.  But on a practical note, this passage has further affirmed the importance of having clear exit triggers.

[Miguel Angel 65]

Chapter 3 - The Market is Always Right

W - “The market is never wrong in what it does; it just is.”

A - Mark further down the paragraph explains that we are trading in an environment where the trader can only be wrong, not the other way around. The market only presents information from the active market participants, and we should not assign any negative or positive attributions to the market.

A - This is a supremely important notion that I struggled to understand when I first started trading and it caused me a lot of emotional pain because I felt somebody was doing something to me when my trades failed. But once I understood that the market is neutral and accepted the naked truth that I was the problem, not the other way around, I was able to make progress in my trading journey.

Chapter 4 - There is Unlimited Potential For Profit and Loss

W - “From a psychological perspective this characteristic will allow you to indulge yourself in the illusion that each trade has the potential of fulfilling your wildest dream of financial independence.”

A - The idea that the market has unlimited potential (mostly on the profit side because I think most traders don’t want to think of unlimited loss) though true can create a dangerous mindset of unrealistic expectations if boundaries and rules are not set by the trader.

A - I had set up some truly unrealistic expectations and goals of being a consistently profitable trader by the second half of this year when I started PCT in January. What a joke! I was soon hit with the cold hard reality that this would be a lifetime process of refinement and that the best I could hope for is to gradually improve on this journey towards profitability. Once I accepted this fact and removed any time frames for daily, weekly, monthly profits, I was able to focus on the process and improve my trading without fear or anxiety.

Chapter 5 - Prices Are In Perpetual Motion with No Defined Beginning or Ending

W - “Your last trade obviously has nothing to do with the potential that exists in the market at any given moment. When you feel compelled to get back, it puts you in an adversary relationship with the market. The market becomes your opponent, it is you against it, instead of being in harmony with it. The market can’t take anything away from you that you don’t allow; if you lost money or lost more than you intended to risk, you gave your money to other traders. Ultimately, however, revenge creates an adversary relationship with yourself.”

A - Simply put, when you fight with the market you lose.

A - This past Tuesday I had one of the worst trading days from a performance perspective. I broke many of my rules and I started to fight with the market by overtrading in an act of revenge. It wasn’t a big red day from a P&L perspective, I’ve had bigger red days, but when the closing bell rang, I felt defeated as if I went into a boxing match and got my ass thoroughly beat. It was emotionally and mentally painful to have to sit for several hours journaling, reflecting, and creating an action plan to deal with the lack of focus and discipline I showed that day. But the time I spent in reflection helped me to reset and today I had a much better trading day from a performance perspective, even though it ended in a red day.

[DenHei1 13]

Miguel

I can relate to each and every one of your quotes and how they relate to your trading.  What I appreciate about Mark's book is that I thought for a long time that my experiences of struggle were unique - but he clearly reminds me that this is the process that most, if not all, successful traders must go through, in varying degrees, in order to become successful.  And I really relate to how he says that the struggle with the market becomes a struggle with yourself - so true.  

[Susan 111]

Merry Christmas, Happy Holidays & New Year Traders!  Here is a calendar for the remainder of our book!

Resume meeting 1/5 - review any additional comments from chapter 3 to 5 and chapter 6

1/12 - any additional comments from chapter 6 & chapter 7

1/19 - chapter 8

1/26 - share your best/worst trades

2/2 - chapter 9

2/9 - chapter 10

2/16 - chapter 11

2/23 - share your favorite pro trader's tips, how it affected your trading 

3/2 - chapter 12

3/9 - chapter 13

3/16 - share your best/worst trades

3/23 - OFF THIS WEEK

3/30 - chapter 14

4/6 - chapter 15

4/13 - chapter 16 & 17

4/20 - share your best/worst trades and/or any new fav pro trading tips

4/27 - discuss what you have learned and how you will implement into your trading.  Share new datasets, new journaling, new trading plans, etc

 

 

[Susan 111]

Chapter 5 (catch up) 

W- The market environment is a deadly combination of the market forcing you to confront difficult personal issues to survive, an event that produces information in a wide variety of forms that can be used to support an illusion, distortion, or expectation, therefore making it easy to avoid confronting these potentially painful issues. Furthermore, the event continues until you come to terms with whatever is inside of you to end. 

A- I believe Mark is telling us we have to 1st identify the issue and then work through to actually resolve it.

A- Breaks are good, but if they’re only allowing you to cool off and not resolve whatever the true issue is at hand; you’ll circle back to that place at some point because you haven’t really “dealt with the demon”. It’s kind of like fighting with a spouse over something… you can walk away, breathe and return home later calmly. If you don’t ever talk to them about their action, how it made you feel and work through how to resolve the conflict; all you really did was cool off - not actually resolve the conflict. We spoke a bit about this Thursday… I think it’s super important to ID the issue in your trading - know what it is and on a deeper level why it’s happening. Then you’ll have to decide what “prescription” to try - maybe it is a deep dive into the heart of this issue to work through it, maybe it’s solid new habits that don’t allow room for anything else, maybe it’s creating a new/calmer mindset through meditation/affirmations/etc. Maybe it’s a combo of everything… you’re worth the effort; we all are… so keep seeking & trying to resolve 1 issue at a time. 

Edited December 17, 2022 by Susan

[Susan 111]

Chapter 6

w- The markets can’t do anything to any trader who completely trusts himself to act appropriately, in his best interests, under all market conditions. 
 

A - Mark goes to great lengths to explain how we need to become self aware and create a structured environment for ourselves since the market offers us zero structure and unlimited potential for gains & losses. 
 

A - This sentence actually makes me happy; like if I reread it I can sigh a breath of relief. The markets can’t do anything to me if I trust myself. This makes total sense. In my mind I know it to be true. I do trust myself in the surface, but I’m definitely still working through some innate fear & need to protect myself in the market. I think with more time in the market and patience with all these new & deep mental concepts I will believe this in such a deep level that the fear 1 faced year 1 with dissipate. As the years and experience go on; it will also become easier to fully trust myself because I will just know more and continue to develop deeper market intuition (kind of earning my own trust at a deep level day by day). I trusted myself in my career. I knew if you threw me on the spot in front of any CEO or high level executive; I could talk and get the job done. I of course usually prepared for such meetings, but again with so many years of experience you just know your stuff, your strengths/weaknesses and you learn to read customer cues the way we are now learning to read market cues. Our brains are constantly trying to connect patterns & dots so my brain is trying to assimilate my last career with trading which is fine. I’m well aware the market can humble me or anyone at any moment of weakness or over confidence, but I’m also confident that day by day I will become stronger, smarter, faster & a better trader

[Dan F 73]

Chapter 6 The market is and unstructured environment

W- There are many people that you can try to emulate so you can feel like you’re on the right path in your trading journey. Anybody that has tried shortly figures out that it is difficult to trade like anyone besides yourself.

A- As Mark points out understanding yourself is synonymous with understanding the market.

A- I’m going to further apply this is to trade off of patterns with using fewer shares. It feels wrong to arbitrarily, in the middle of a consolidation, to exit a trade.

[DollarBill 21]

Chapter 6

W - To be successful, the market forces you, as a trader, to be responsible in completely new ways. For example, you can't put on a trade and then release your responsibility to the market to do something for you, like give you money. The market is a fluid, ever-changing event, where at any moment some other trader may decide to jump in with enough force to change the expectations of other traders participating to the point where they reverse their positions and as a result completely negate the potential you believed existed a moment ago, when you put on your trade.

The Disciplined Trader™: Developing Winning Attitudes (p. 84). 

A - This paragraph could almost be broken up into two.  One is individual responsible and you are not entitled for the market to pay you.  From previous paragraphs, you must have a clear trading plan or rules you must follow and trade by.  There is always a chance someone with large size effect, market data drop,  that will effect the perception of the market.  These things happen but at least you can recognize the situation and not be in fear or become superstitious.  

A - This is one of the few tradable information in this book.  A large position, market information drop, causing shock & awe aka trapped positions (above or below, creating a large control bar) the losers become reliable volume as those traders are exiting to stop their pain.

[Susan 111]

Chapter 7 - The Market Environment, Reasons are Irrelevant

W - Most traders dont know why they did what they did because most traders dont plan their trades, thus eliminating any connection between & the results.  Most traders act spontaneously & impulsively & then ascribe the rationale for their behavior after the fact.  After the fact reasons are either justifications or excuses for what the trader did or didnt do.

A - I believe Mark is saying we need to plan our trades so they are based on rational and sound judgements/plans.  Then we perform/execute.  We leave the emotions and decision making out of the equation during performance!

A- I love this and am working to do this...I look in AM and if this happens; I will do this... if this happens; I will do that....all those thoughts that come up during trading I try to quiet them; I know my plan and if none of those things happen - I do nothing....I think this is a good overall plan...what do you think?!!