Thought of the Week 13th September 2023

In Trading in the Zone by Mark Douglas, he discusses the 5 Fundamental Truths of Trading/Investing.


One of these is, “Anything Can Happen”

What’s your interpretation of this?

How might a new member use this particular truth when getting started? :thinking:

We see a chart with a pattern eg breakout and we think it is telling us that price WILL go up. Our expectations are not in tune with how the market works. The breakout is telling us there is a probability of price continuing to go up. We need other traders eg large institutional investors to come in and bid the price up. Since I don’t know what they will do- they could have a large order to sell from a client or when they will do it I am just making a bet, hence anything can happen.

Thanks Stephen…Much appreciated :clap:

The idea of “Anything Can Happen” is to create a carefree state of mind that completely accepts the fact that there are always unknown forces (variables) operating in the market…just like in the example you provided.

As we learn to accept and believe that “Anything Can Happen” our mind starts to automatically defend any idea or assertion that we think we know what will happen next.

Members…What are some ways then to help create that “carefree state of mind”?

For me, it is to keep the time spent analysing the trades/signals during the week to a minimum - just run the scan or get the signals on the app, review whether any are relevant for my portfolio, set up any trades on my trading platform, and then WALK AWAY. I then only check the trades at midday on the next day to ensure they have been filled, take any action required if not, and then save the documentation when it arrives on my email. I only analyse my results monthly (or even less frequently). I find that if I spend any more time than this, I go down the rabbit hole of trying to outsmart the system, which is far from a “carefree state of mind”. Mind you, most of my trades have been losses, and I’ve been in up to 9% drawdown ever since I started, so the current market is testing my carefreeness :-). In some ways being “carefree” means I don’t dwell on the results as much, and am just learning how to be mechanical in my trading.

Great Post Sally.

You’re on the way to transforming the way you think…becoming a “consistent winner”.

How so?

  1. You’ve identified your Edge

  2. You’ve predefined the risk on every trade

  3. You’ve accepted the risk

  4. You’ve acted on your Edge without reservation or hesitation (This is starting to become a Habit and there will be challenges along the way, but you’re making great progress)

  5. You pay yourself as the market makes money available to you.

  6. You continually monitor yourself for susceptibility for making errors. (Did someone say “25 Trades Exercise”? It really shouldn’t stop at 25…just keep going :grinning:

And finally No. 7. You understand the absolute necessity of these principles of consistent success and therefore you never violate them.

Moving towards these is how we create the belief that “I am a consistent winner”.

Keep your expectations neutral and focus in the now moment.