These are my ‘notes/thoughts’ on the book and I thought I’d share them with you guys…
CHAPTER 1: THE ROAD TO SUCCESS: FUNDAMENTAL, TECHNICAL, OR MENTAL ANALYSIS?
The first chapter closes with a message for readers to keep in mind as they move ahead with the book, “The successful trader that you want to become is a future projection of yourself that you have to grow into.” And this means that you must learn to think, act, believe and accept trading outcomes like a successful trader one inspires to be.
This chapter emphasizes that being a consistently successful trader is not something that a trader encounters by chance but has consciously or unconsciously (as it might be in most cases) worked towards. And by working towards I mean a trader has gone through his great deal of emotional pain, financial loss, dealt with his innate beliefs that might conflict with the nature of trading, and of course has spent enough screen time to learn and understand both the nature of the market and his nature as a trader, among many others.
CHAPTER 2: THE LURE (AND THE DANGERS) OF TRADING
Why people get into trading? Mark answers by saying “Trading is an activity that offers the individual unlimited freedom of creative expression, a freedom of expression that has been denied most of us for most of our lives.” Simply put, people get into trading for freedom. Freedom in various ways like the lifestyle trading offers, freedom of expression in a way that you can create your own set of “trading” rules and build yourself in a unique way as a trader, and freedom of knowing that there lie virtually unlimited opportunities to enrich one in the world of trading.
And also, summaries the paradox of trading by saying, “the very reason we are attracted to trading in the first place—the unlimited freedom of creative expression—is the same reason we feel a natural resistance to creating the kinds of rules and boundaries that can appropriately guide our behaviour.” The nature of the markets and the nature of a trader’s psychology needs to be in harmony for the consistent success to be realized, traders need rules to both thrive in trading and control themselves with the freedom available in the markets.
The writer is not biased in the manner that favours only what traders stand to benefit but also dwells into what is required for the freedom to be attained in and through trading. He says, “To operate effectively in the trading environment, we need rules and boundaries to guide our behaviour.” Which by virtue contradicts what seems to attract people into trading. Freedom comes at a cost, and discipline is the price to pay to have freedom in trading. More specifically, the discipline to adhere to the rules and boundaries of trading. Mark says, “The unlimited characteristics of the trading environment require that we act with some degree of restraint and self-control, at least if we want to create some measure of consistent success.”
CHAPTER 3: TAKING RESPONSIBILITY
“Taking responsibility means acknowledging and accepting, at the deepest part of your identity, that you—not the market—are completely responsible for your success or failure as a trader.” Taking responsibility simply means being conscious of your conflicting beliefs about trading and working on overcoming them, as well as striving to attain the right mindset for the success one desires in the markets. We all know that psychology plays a huge role in trading yet for some reason this is not the aspect traders pay attention to until later on after they’ve suffered both emotionally and financially, why is that?
Mark answers by saying “The consistency you seek is in your mind, not in the markets.” Traders have a tendency of subjecting themselves to market knowledge hoping to find that thing that will compensate for the pain they’ve been through as they believe it was caused by the market only to find out that the reason for all their suffering in the first place was their own fears, beliefs, and expectations that subjected them to the pain not the market. The market is neutral, it is all up to each and every one of us to decide how we perceive the neutral information provided by the market.
“If you want to change your experience of the markets from fearful to confident, if you want to change your results from an erratic equity curve to a steadily rising one, the first step is to embrace the responsibility and stop expecting the market to give you anything or do anything for you.”
“Attitude produces better overall results than analysis or technique.” With the right attitude trading will be both easy and fun as these attitudes will inherently equip a trader with the necessary characteristics to excel in this endeavour. The right attitude will inspire a trader to play out his edge to its best level as he’ll be in a carefree mode, and by “carefree” I mean he won’t be vulnerable to the fears and other psychological attributes that tend to get the better of everyone else. Isn’t this why we decided to read Trading in The Zone in the first place, to be inspired to Master the Market with Confidence, Discipline and A winning Attitude.
CHAPTER 4: CONSISTENCY: A STATE OF MIND
This is my favourite closing in this book, last part of chapter four and it says, “There are easier, infinitely more satisfying ways of getting what you want from the market, but first you have to be willing to get your mind right." This chapter had me thinking really hard about where I am now as a trader and where I envision myself to be in the future. My trading goals, it had me thinking about why I got into trading in the first place, and why I decided to stick with it even though I haven’t seen the results I aspire to see yet, let me share an experience of mine.
There was a time last year somewhere in the middle of the year where I was in need of money and that affected both my psychology and trading a lot, so what happened was I decided to open a live account with my last money and subscribe to a well know signal provider. At first everything was okay as I managed to close the first week with more than 25% return (amazing isn’t it), but everything started going south after I’ve lost all the profit within two days of the second week because of greed and poor money management, I was determined on closing the second week with a higher % return than the first week but the opposite happened. That’s when I contacted my signal prover to ask for risk management tips but the only thing I wanted to hear was “how can I get my lost profit back make more money fast”. Long story short, it took about three weeks for me to blow my account and lose all my money, I won’t blame the signal provider for my recklessness even though their Risk to Reward was nonsense (risking 50 pips for averagely 20 – 30 pips), they have a high win – rate so that compensates for any losses that will be realized, as long as one is smart with their risk and money management.
“If you can learn to create a state of mind that is not affected by the market’s behaviour, the struggle will cease to exist.”
CHAPTER 5: THE DYNAMICS OF PERCEPTION
Is it possible though, to perceive every new experience (information) with a positive perspective irrespective of what has happened in the past?
By irrespective of what has happened in the past I mean it doesn’t matter what the outcome of the previous experiences were (painful or pleasant) and the reason for that (subjective or external). Is it possible to perceive new information (experiences) with a positive perspective irrespective of what has happened in the past?
Well obviously, it is possible if the experience is totally new, as there won’t be any like – experiences already known by the mental environment to try to categorise it as either painful or pleasant. But the opposite is also true in most cases, that if there are already like – experiences known by the mental environment (painful or pleasant) it’ll be hard (if not impossible) to perceive new experience (information) with a positive perspective as it’ll already be known by the mental to either be painful or pleasant, and what is already known by the mental environment or recognisable will inadvertently affect how new information (experience) is perceived.
Now back to traders, of course it’ll be easy to perceive new information generated by the market with a positive perspective and get into the next trade with no hesitation, fear or worry if the outcome of the previous trade(s) was positive. But if the previous trades were losers, and even though you know that every trade (win or loss) is independent regardless of the outcome of the previous trade(s), the mental environment will put on some defensive mechanisms to beware, hesitate, worry and be afraid of the outcome of this new (independent) trade. Mark argues that this is not how it should be, this is not how the professional traders think, they know that the outcome of every trade is independent of the previous trade results, and they don’t hesitate, worry or fear of the outcome of this new trade being the same or affected by the previous trade(s) like the opposite group do.
CHAPTER 6: THE MARKET’S PERSPECTIVE
In the last part of chapter six Mark says, “In essence, he will be making himself available (opening his mind) to perceive more of the possibilities that exist from the market’s perspective. Most important, by establishing a belief that anything can happen, he will be training his mind to think in probabilities.”
Belief that anything can happen. Belief in uncertainty. I can recall on my state of mind and attitude towards the market before taking some of my best trades (even though I didn’t know they’re going to be my best trades), I can recall what was going through my mind, what I was telling myself, how I kept my emotions in check. There were times where I would diligently follow my plan and after, consider variables that could invalidate my trades, and not be bothered by them cause I did the right thing by following my plan. But still, even though I followed my plan I knew deep down that my trade ideas could be invalidated at any moment by the market, and I was okay with that. I had belief in the law of uncertainty that even though anything can happen, I did the right thing by following my plan.
That state of mind and attitude I had/have at such times, that’s the kind of attitude and mindset I want to develop. Those are the kind of traits I want to have at my core being as a trader.
“The essence of what it means to be in “the zone” is that your mind and the market are in sync.”
CHAPTER 7: THE TRADER’S EDGE: THINKING IN PROBABILITIES
“Traders who have learned to think in probabilities are confident of their overall success, because they commit themselves to taking every trade that conforms to their definition of an edge.” Financial markets are inherently uncertain and volatile, no one can predict with certainty the direction of a market or the outcome of a trade. That’s why thinking in probabilities is important because that way traders can assess the potential risks and rewards of a trade and make informed decisions based on the likelihood of different outcomes, set realistic expectations, and adjust their strategies as market conditions change. This will in turn help traders make more objective decisions and reduces the impact of emotions and biases on their trading decisions.
“When you achieve complete acceptance of the uncertainty of each edge and the uniqueness of each moment, your frustration with trading will end.” But how can one achieve this? What are the necessary steps to take to achieve this? What’s the price to pay for this achievement to be realised?
“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.”
CHAPTER 8: WORKING WITH YOUR BELIEFS
I’ve experienced it first-hand that your beliefs can either work with you or against you, and this is what I want to work on; converting my beliefs and expectations to a manner that serves my best interests.
My fear (risk) sometimes tends to get the better of me and overwhelms me in a way that even when I look at my potential gain, I would still be hesitant. Now I know that you might think it’s because my risk (position size) is too big for both my account and risk tolerance, but I assure you this is not the case. My maximum risk per trade is 1% of my account and I’ve never went above it. I also thought that it might be because of my confidence on that trade, but then again, I wouldn’t take a trade that I’m not confident in or doesn’t meet my entry criteria. So, what am asking myself is where does this negative overwhelming feeling come from when I’m obviously within my risk tolerance and fairly confident on my trade idea?
Going through my journal I found that this feeling tends to creep up on me (subconsciously) on a few pairs that I have an overall % loss that’s bigger than my % profit. It’s like my subconscious mind knows that I’ve lost more money than I’ve made on these pairs and reminds me of this every time I trade them, and without my awareness I invite fear and hesitation to come overwhelm me.
I guess this must be why because on the pairs that I have an overall % profit that’s bigger than % loss (made more money than I’ve lost) I’m not overwhelmed by such emotions, nor do they exist. I flow when I trade these pairs and I trade them with the same risk tolerance and confident.
So, this is what I want to work on; changing my mindset and attitude on the pairs that bring about negative emotions to be in harmony with the pairs that I flow on.
In this chapter Mark says, “What separates the best traders from all the rest is that they have trained their minds to believe in the uniqueness of each moment.” I know that for a fact that I’m yet to grow and get better at trading, I know that I can change my current outcome/results on the pairs that I’ve lost more money than I’ve made, and this is where it’ll start now that I’m now consciously aware of this.
CHAPTER 9: THE NATURE OF BELIEFS
A belief is a mental attitude or conviction about the truth or existence of something. It can be shaped by personal experiences, cultural and societal influences, and individual reasoning. Beliefs can also change over time based on new information or experiences. The nature of beliefs is subjective and personal and may not always align with objective reality.
CHAPTER 10: THE IMPACT OF BELIEFS ON TRADING
Beliefs can have a significant impact on trading and investment decisions. Beliefs are deeply held convictions and ideas that shape how traders perceive the world and make decisions. It is important for traders to be aware of their beliefs and how they impact their decision-making, and to work on developing beliefs that are in harmony with the nature of the market. Traders must continuously assess their beliefs and be proactive in managing conflicting beliefs and emotions that can impact decision-making.
CHAPTER 11: THINKING LIKE A TRADER
Thinking like a trader means adopting a mindset that is focused on maximizing returns while managing risk. To do this effectively, they must think critically and make decisions based on market conditions, data analysis, and their own intuition.
Overall, the writer challenges the psychology of traders in this book as he addresses issues like lack of discipline, lack of confidence, fear of missing out, fear of failure and losing money, the misconception about trading, risk – taking and the acceptance of risk, compares the thinking patterns and characteristics of the consistently successful traders with the not so successful traders and says, “The winners have attained a mind-set—a unique set of attitudes—that allows them to remain disciplined, focused, and, above all, confident in spite of the adverse conditions.” And that sets them apart from the rest.