Sunday, May 15, 2016

Trading in the zone

excerpt from : "Trading in the Zone" by Mark Douglas

Trading is full of paradoxes and contradictions in thinking, thus making it extremely difficult to learn how to be consistently successful.

TEH : If there is anyone out there telling you that trading is easy or simple, they are promoters, sales-person ...

Financial and emotional disaster is common among traders because many of the perspectives, beliefs, attitudes and principles that we have learned and adopted in our daily lives have the opposite effect in the trading environment. Not realizing this most traders start their careers with a fundamental lack of understanding of what it means to be a trader, the skills that are required and the depth to which those skills need to be developed.

TEH : We cannot follow the herd ... the majority. That itself will make us uncomfortable.

Trading is inherently risky; no trade has a guaranteed outcome. Most traders would agree with this statement. If you engage in an activity that is inherently risky then you must be risk takers, and in fact many traders take pride in the fact that they are risk takers.

Of course any trader is taking a risk by putting on a trade but that does not mean that they are correspondingly accepting the risk. All trades are risky because the outcomes are probable not guaranteed. But do most traders really believe they are taking a risk when putting on a trade? Have they really accepted that the trade has a non-guaranteed probably outcome, have they fully accepted the consequences?

The answer is no. Most traders have no concept of what it means to be a risk-taker in the way the successful traders think about risk. The best traders not only accept the risk they have learned to embrace it. There is a huge psychological gap between assuming you’re a risk taker because you put on trades and fully embracing the risks inherent in each trade. When you fully accept the risk, it will have profound implications on your bottom line performance.

TEH : We all knew that trading is RISKY ... and extremely difficult. And to accept the RISK ... embrace it ... that won't be easy. We have to accept mistakes we have done instead of trying to pin-point our fingers to someone else. Taking responsibilities is one of the traits to be good trader.

The best traders can put on a trade without the slightest hesitation or conflict, and just as freely and without hesitation or conflict admit it is not working. They can get out of the trade even if it is a loss and it doesn’t create the slightest bit of emotional discomfort. In other words the risks inherent in trading do not cause the best traders to lose their discipline, focus, or sense of confidence. On the other hand if you are not able to put on a trade without the least bit of emotional discomfort (specifically, fear), then you have not learned how to accept the risks inherent in trading. This creates a major paradox because to whatever degree you have not accepted the risk is the same degree to which you will avoid risk. Trying to avoid something that is unavoidable will have disastrous effects on your ability to trade successfully.

TEH : This is most difficult skill to learn ... EMOTIONLESS.

Trading presents a fundamental paradox: How do we remain focused, disciplined, and confident in the face of constant uncertainty? Learning how to redefine your trading activities is such a way that allows you to completely accept the risk is the key to thinking like a successful trader.

When you have learned the skill of risk acceptance, the market will not be able to generate information that you define or interpret as painful. Learning to accept risk is a trading skill, the most important skill you can learn.

TEH : Learn to accept RISK ... accept mistakes.

Expecting KLCI and many more diving lower tmr morning ... as DOW dived 185points lower. The "sell in May" ... ringing louder now.

Have a nice sleep ... and we shall check again tmr.



No comments: