What Traders Can Learn from Mark Douglas?

Mark Douglas, one of the greatest authors of trading psychology tried to stress to traders in order to help them achieve consistent profitability. He wrote the book which is famous among the trading community “Trading in the Zone”. We can all learn something from Mark – he has dedicated his life to helping people mentally and emotionally with their trading.

The best traders, according to Mark Douglas, think differently than others because they know that what is most important is “how they think about what they do and how they’re thinking when they do it.”

Mark-Douglas TRADEx

One of his famous saying about Market Edge,

“There is a random distribution between wins and losses for any given set of variables that define an edge. In other words, based on the past performance of your edge, you may know that out of the next 20 trades, 12 will be winners and 8 will be losers. what you don’t know is the sequence of wins and losses or how much money the market is going to make available on the winning trades. This truth makes trading a probability or numbers game. when you really believe that trading is simply a probability game, concepts like ‘right’ and ‘wrong’ or ‘win’ and ‘lose’ no longer have the same significance. As a result, your expectations will be in harmony with the possibilities.”

I just had this golden words in front of my trading desk. That brings me greater confidence in my trading and leads to superior results in my trading performance. One of the most admirable person and true legend when comes to trading psychology!


Overseeing emotions can lead to more considered trading

  Many investors, particularly the individuals who often trade, understand the significance of remaining over market trends and precisely checking their risks.

However, a considerable lot of these same investors make trading decisions based on instincts or emotions, rather than careful analysis or reasoning.

When markets are unstable, emotions like concern and fear can sometimes lead to decisions they would not regularly make.

Understanding these deterrents and having a methodology in place to help overcome them can lead to more considered trading.

Defeating emotional reactions

At the point when a stock is down or there’s terrible news in the market, traders can get nervous about their positions. This can prompt an eruption or an absence of activity, resulting in a negative outcome. Emotion may be crowding out rational thought.

In these situations, identify what you see as a risk, then plan a methodology to address it. This can include putting in place defensive strategies, such as hedging.

It’s normal for traders to need to hold onto winning positions. In any case, in this quest for benefit they may not be aware of market signals that indicate it might be an ideal opportunity to sell. Have a trading strategy in place that will enable you to leave positions before market sentiment shifts.

Building discipline and confidence

While trading experience is very much critical to building your trading discipline, there are strategies and tools that can help you build your discipline too.

Numerous financial investors buy and sell with targets, and stick to them regardless of emotions. Others set targets for the amount they are prepared to gain or lose over their whole portfolio over a specific time period, and make trading strategies designed to accomplish these targets.

One of the best ways to avoid emotions and build trading confidence is through market research or the guidance of a market specialist. Many investors study market charts, read organization reports and announcements, converse with or learn about management teams, and analyse economic and industry trends.

By setting up strategies that can enable you to oversee emotions, you can build discipline and confidence, and remain on track to meet to your investment goals.

How ego kills winning traders?

Many successful Traders are taking trading decisions by doing lots of analysis, building strategies, back testing scenarios and study various behavioral patterns of the market, but still failed many times, Why?

It is because of their EGO, stopping them to follow trading discipline.

Ego in Trading, How?

A successful Trader does a lot of analysis and spending a lot of times to take trading decisions and after finding out he/she made up his/her mind saying that this strategy will definitely win in the market.

But if the market behaves in an unexpected way, they failed to convince their EGO to accept the reality and trust that the market will go in their expected direction even though they have methods to address it, resulting in a negative outcome.

I’ve said it before, and I’m going to say it again, because it cannot be overemphasized: the most important change in my trading career occurred when I learned to DIVORCE MY EGO FROM THE TRADE. Trading is a psychological game. Most people think that they’re playing against the market, but the market doesn’t care. You’re really playing against yourself. You have to stop trying to will things to happen in order to prove that you’re right. Listen only to what the market is telling you now. Forget what you thought it was telling you five minutes ago. The sole objective of trading is not to prove you’re right, but to hear the cash register ring.
–Marty Schwartz,Pit Bull​

Some typical symptoms of egotizing trading would be the following:

· Not putting in stops. The ego doesn’t want to be proven wrong.
· Hesitating before putting on a trade. The ego wants reassurance before it begins.
· Overtrading. The ego wants to prove itself big time.
· Getting stuck in a trade. The ego has intertwined itself with a trade and is holding on for dear life. It cannot cut out. The ego doesn’t want to be wrong.
· Adding to a losing trade. The ego digs its hole deeper in a massive effort to crawl out.
· Grabbing a profit too soon. The ego wants a pat on the back.

–by Ruth Barrons Roosevelt in his Article: Trading Without Ego

How do we separate our ego from our trading?

One way to separate your ego from your trading is to build healthy boundaries between yourself and your trading.

Who is a real successful Trader?

A successful trader is the ability to control ones’ psychology and emotions at the most vital decision-making moments.