Trading in the Zone by Mark Douglas is in my opinion, one of the BEST books ever written on trading psychology.
It teaches you how to think.
I believe that this book is the ultimate starting point for your mind before you step into the trading arena.
Please, please, please read this before you start trading, it will help you more than you can imagine.
This is one book I read many, many years after I started trading and upon finishing the first chapter, wished I had read it years earlier.
Who Was Mark Douglas?
Mark Douglas was an award-winning author, trader & trading coach to many highly successful traders. He coached forex, stocks, commodities & options traders for over 25 years all over the world.
Sadly, Mark passed away on 9/10/15. I hope his trading wisdom impacts you as positively as it has me.
Mark’s psychology principles co-creator Paula T. Webb works with traders all around the world sharing their knowledge & helps them to apply field-tested research. More info can be found here.
Trading In The Zone – What Does It Mean?
“The Zone” is a great place to be, the best place to be, especially when you’re trading. Mark was one of the first to talk about it in relation to trading in the markets.
The Zone is a term often used in relation to elite athletes, actors & musicians. Being at an elite level at anything really requires you to get into a flow state aka ”The Zone”
What Does It Feel Like To Be Trading In The Zone?
Bliss. When you start Trading in The Zone, you will get it. Being in The Zone of any activity is similarly the same feeling.
I’ve felt it in trading, meditation, tennis & competitive water polo. It is a state that cannot be forced, especially when it comes to trading.
For me there are 5 key attributes of Trading In The Zone:
- You have an intense focus, without even trying.
- Buying, selling and your analysis becomes effortless.
- There is no ego, you are not better than anyone, you are comfortable with yourself.
- Your sense of time is nonexistent, there is no time, just now.
- Trading in The Zone Feels great!
How Can You Start Trading In The Zone?
I’m hoping this article inspires you to read Trading in The Zone and also get’s you passionately underlining and bookmarking as I did 🙂 (see below).
But, for those of you time-poor traders, apart from meditating, keep on reading and I will share with you some of my favorite parts of the book.
Now, let’s break down some key lessons throughout the book to get you Trading In The Zone before you know it!
Chapter 1: The Road to Success: Fundamental, Technical or Mental Analysis?
The challenge with this book is trying to limit my key takeaways for each chapter. I think I could write more than ten! Anyway, here we go.
My key takeaways:
- 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.
- The best traders not only take the risk, they have also learned to accept and embrace it. There is a huge psychological gap between assuming you are a risk-taker because you put on trades and fully accepting the risks of each & every trade.
- The hard, cold reality of trading is that every single trade has an uncertain outcome. Unless you learn to completely accept the possibility of an uncertain outcome, you will find yourself trying to avoid it, consciously or unconsciously.
Chapter 2: The Lure (And The Dangers) Of Trading
My key takeaways:
- Trading offers you a gift and a curse at the same time. The gift is that we are, for the first time in our lives, completely in control of everything we do. The curse is that there is no external rules or boundaries to help guide or structure our behavior.
The structure you need to guide your behavior needs to originate in your mind.
- The harsh reality of trading is that, if you want to create consistency, you have to start from the premise that no matter what the outcome, YOU are completely responsible. (sit on this for a while).
- One of the main reasons, that so many successful people (in other fields) fail at trading is generally due to their prior ability to manipulate and control. The market does not respond to manipulation or control (unless you’re a central bank, and even then it isn’t guaranteed).
You are a drop of water in a huge and expensive ocean.
Chapter 3: Taking Responsibility
It sounds so simple, but it isn’t.
- Truly successful traders have learned how to think. They’ve created a mindset that allows them to eliminate fear and recklessness. They have accepted that there is no possible way to avoid losses, they are part of trading.
- Attitude, mindset produces better overall results than analysis or technique. If you start with a winning trade you will briefly experience the feeling the care-free state of mind of a winning trader.
- Taking complete responsibility for your results means that you accept that you and only you are responsible for the outcomes based on your interpretation of the market.
Ok, I am adding another point for this chapter!
- If you want to start sensing the flow of the market, you need to be free of fear, anger, regret, betrayal, despair, and any type of disappointment.
There is no need for you to feel these negative emotions when you’ve truly accepted responsibilities for your outcome.
Chapter 4: Consistency – A State Of Mind
My key takeaways:
- What separates the best traders from the rest always comes back to how they think. Winning & consistency are ways of thinking, they are mindsets.
- Truly accepting the risk means accepting the consequences of your trades without emotional discomfort or fear.
- The traders who make it to becoming consistent and Trading In The Zone are the ones that learn to stop avoiding, and start embracing risk and the factual truth that nobody actually knows the outcome of a trade.
This song by Raul Midon sums it up well 🙂
Chapter 5: The Dynamics of Perception
My key takeaways:
- 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 the unlearned.
- It’s your own mental framework that determines how you perceive the information on the chart, how you feel, and whether you are able to enter the “flow” and take advantage of the market.
- We have two types of mental energy, positive & negative. Learning how to become consciously aware of our energy states is essential to success.
Creating and maintaining a state of mind that perceives the flow of the mark without the threat of pain, requires you to take conscious control of your thoughts.
Chapter 6: The Market’s Perspective
My key takeaways:
- The best traders in the world have reached a state where they fundamentally believe that anything can happen. They wholeheartedly believe that each individual trade, each now moment is completely unique. They are Trading In The Zone.
- When you minimize association and know that each trade is totally unique, you limit negative association and put yourself in the best state to trade successfully.
- Only the best traders completely pre-define their risk, cut their losses, are organized and systematic in their management. These trades believe in uncertainty.
Chapter 7: The Trader’s Edge – Thinking In Probabilities
This chapter was an absolute game-changer for me.:
- Events that have probable outcomes can produce consistent results….. If you get the odds in your favor and have a large enough sample size. Trading should be treated as a numbers game, an edge over a period of time will produce results. Exactly like a casino.
- You need to believe in the unpredictability of trading at a micro-level and at the same time believe in your edge at a macro level.
- When you’ve trained your mind to think in probabilities, it means you have truly accepted all the possibilities, win, loss, or breakeven. Each moment is completely unique, thinking otherwise is a recipe for disaster.
Chapter 8: Working With Your Beliefs
This chapter offers five core beliefs essential to Trading In The Zone. These are referred to as “The Fundamental Truths”. These are the backbone of the Trading In The Zone teachings.
- Anything can happen.
- You don’t need to know what is going to happen next to make money.
- There is a random distribution between wins and losses for any given set of variables that define an edge.
- An edge is nothing more than an indication of a higher probability of one thing happening over another.
- Every moment is unique.
I highly suggest buying the book and reading into these points further, they are brilliant.
Chapter 9: The Nature Of Beliefs
Again, this is an intense chapter and the below points only scrape the surface of the knowledge Mark shares.
- Do not take for granted the effort needed to internally believe these beliefs. Understanding a concept is only the first step of integrating a belief at a functional level.
- A belief is a concept about the nature of the way the external environment expresses itself. Beliefs shape the way we experience our lives and the markets we trade.
- If beliefs shape our environment, what is the truth?… The truth is a function of whatever works in relation to what we are trying to do in any given moment.
Chapter 10: The Impact Of Beliefs On Trading
There are three basic characteristics you need to understand in order to effectively understand & mentally use the fundament truths of Trading In The Zone:
- Beliefs seem to take on a life of their own and resist any force that would alter their present.
- All active beliefs demand expression.
- Beliefs keep on working regardless of whether or not we are consciously aware of their existence in our mental environment.
You must be aware of the beliefs you have, what are the patterns, what are the common thoughts. I find using a trading diary is essential in tracking your thoughts and looking for positive and negative patterns.
Chapter 11: Thinking Like A Trader
It all sounds so simple, it actually is, but implementing it is not.
- What is trading? In its most basic form, trading is a pattern recognition numbers game (I love this description).
- We use market analysis to identify the patterns, define the risk, and determine when to take profits. The trade either works or it doesn’t, in any case, we go onto the next trade. Boom! Next!
- Follow your trading plan without deviation, distracting thoughts, or hesitation to act.
Trading In The Zone offers a powerful way to look at yourself, your thoughts & the markets.
At the end of the day, it doesn’t matter how well you know technical analysis or the financial figures of a company, if you first do not know yourself.
I give this book 10/10 and highly recommend it to everyone that is thinking about getting into trading & to all those currently trading.
I hope you enjoy Trading In The Zone as much as I did.
Until next time….
P.S Interested in becoming a Forex Trader? You must read THIS