Reaching the level of success theydesire as traders will require them to make at least some, if not many,changes in the ways they perceive market action. This is where you need to learn how to gain the kind of mentalflexibility that allows you to shift your perspective to be aware of otheralternatives and possibilities. However, beyond the sheer mechanics of the activitywhich just aboutanyone can masterlies a particular thinking methodology or strategy thatleads to excellence. Trading systemslimit the scope of market behavior, and therefore make this activity a littleeasier for our minds to manage. And what if it is simple, easy, and only takes minutes per day? Current price is $51.99, Original price is $60. Now, there are several major problems that result when fear becomes amotivation to do or not do something. There is a direct correlation between your ability to let the market tell you whatit is likely to do next and the degree to which you have released yourself from thenegative effects of any beliefs about losing, being wrong, and revenge on themarkets. 48 I eventually accepted the inevitability of doing what I believed wasthe ultimate act of failure and filed for bankruptcy. Planning for a move or feeling one building, but then finding yourself immobilized to hit the bid or offer, and therefore denying yourself the opportunity to profit. The difference is that the traders who canmake money consistently on a weekly, monthly, and yearly basis approachtrading from the perspective of a mental discipline. How can you begin to assess that potential accurately if youplace a greater significance specifically on the information that confirms what you 46 The degree to which you do assumeresponsibility is the same degree to which you can't shift it to the market 49. To make sure you have all the basics about journaling in place, weve got one of the best experts in journaling on the planet to help youAl Abaroa. These individual psychological issues are completely independent ofobjective market action. The good news is now you can get the unstoppable mental and emotional edge that professional traders have; and I can show you how. What are the odds they never gobelow? Many traders suffer considerably when they knowexactly what they want to do but, when the moment to execute arrives, find 11 Mark Douglas is the author of The Disciplined Trader: Developing Winning Attitudes, published in 1990 and considered an industry classic and one of the first books to introduce the investment industry to the concept of trading psychology. It was only the lack of trust I had inmyself to do what needed to be done that I was really afraid of. The Disciplined Trader PDF is a book by Mark Douglas that was first published in 1990. As a reward, we would be given thefreedom to express ourselves in some desired manner. This may sound absurd, but I wouldn't take profits of such 19 It often doesn'toccur to us that some environments may require very differentpsychological resources to achieve success. I am defining \"psychological damage\" as anymental framework that has potential for generating fear. Also in this module, notice the interview I conduct with the great Ray Barros. PART II The Nature of theTrading Environmentfrom a Psychological Perspective 37 With any gambling game youwill always know exactly how much you can win or lose each time you play.You decide exactly how much you want to wager, you know exactly howmuch you can win as well as lose, and you may even know the mathematicalodds of either possibility. 3 A quick hint: the intensity of your emotional discomfortand pain you experience as a trader is an excellent indication of how muchyou will have to change to trade without fear and be consistentlysuccessful. . Not a problem. If you don't takeresponsibility for what you lost, then who or what can you blamethemarkets, of course. 9. Mark began coaching traders in 1982, and has continued to develop seminar and training programs on trading psychology for the investment industry, as well as . First off, youll receive my 106 page master report,97 Real World Journaling Examples.. . The best way toillustrate this concept is to compare the markets with any form ofgambling games. CULTURALLY LEARNED BEHAVIOR THAT RESULTS IN AN UNSUCCESSFUL TRADING EXPERIENCEIn an emotionally charged situation that requires split-second decisionmaking (which could lead to failure of some kind), there's little time tocompare the present event with previous market experiences. For example, if I perceived the market as a threat, afraid of what it mighttake away from me, it wasn't because the outside conditions were actuallythreatening me in some way. . It is an environment where the individualhas the freedom to create his own results, unimpeded by many of theconstraints that exist in everyday social life. To the extent that these issues exist as a component of your mentalenvironment, they will determine the effect they have on your perception ofmarket activity, the decisions you make, and your ability to act on what youdecide. Whydeal with anything if the next trade can make you rich? PART IIntroduction 14 As long asthere are traders who, for whatever reasons, are willing to buy higher thanthe last price and, as a result, bid the price up, or traders willing to sell forless than the last price and offer the marker lower, prices will remain inperpetual motion. Well, this difficulty can result from a number of factors: fear, ego, greed, and more. As a result, I sincerely feel that success in trading is 80 percent psychologicaland 20 percent one's methodology, be it fundamental or technical. Its a little more risky than the previous trades, but you love the profit potential. In fact, many peoplebecause of their childhood conditioning and religious training believe theydon't deserve any money they didn't work for. Furthermore, I discovered that my mental framework was structured toavoid losses at all costs and in my desperate attempts to do so, I actually 21 Identifying the amount of risk you are comfortable with - your \"risk comfort level\"-and then learn how to expand it in a way that is consistent with your ability to maintain an objective perspective of market activity. Right now I want to give you an example to illustrate these first twopoints. Wisdom from Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money--That the Poor and the Middle Class Do Not! " Your fear will systematically exclude from yourawareness market information that would indicate the existence of otheralternatives and opportunities. This devastated me, but I alsobecame completely hooked on trading and even more determined to besuccessful. For prices to follow through and continue to go lower would indicatethat there are more traders willing to act on their belief that prices are highand as a result sell than there are traders who are willing to buy at thoseprices (all-time lows). Whether you trade stocks, options, commodities, or Forex, theres never been a better time for making money trading the financial markets. measure of consistency in accumulating wealth from trading until theylearned self-discipline, emotional control, and the ability to change theirminds to flow with the markets. Youve done your homework. 4. TIMOTHY SLATER President CompuTrac Software, Inc. 7 . Before anyone can become successful in an environment with theunstructured character of the trading environment, one needs to develop asupreme sense of self-confidence and self-trust. Suppose, for example, that you arbitrarily tried to apply a certain thoughtsystem of success to trading futures or stocks without first investigating theusefulness or validity of that system in relationship to the actual conditionsas they exist in the markets. The markets are just too big for oneperson or even a group of individuals to prevail for long. In this module, youll also find an interview I did with former floor trader and current owner of INO.com, Adam Hewison. imagine it coming back in your favor, instead of confronting the possibilityof the market continuing against your position. In the fourth and final session of our Basics Series, youll learn about framing what you do as a trader. Someone attempting to operate in the trading environment in allthe familiar ways that would assure getting what they want will likely findthemselves in a constant state of frustration, anxiety, and fear, wondering what iswrong or thinking something must be wrong with them. I hope you enjoy the book as much as I do. They confirm what you believeand the up ticks don't Yet each in relationship to one another can tell yousomething about the consistency of the market and its potential to move in anygiven direction. My own education cost me a lot \"thehard way.\" I can read myself into the pages - that's me, that's me! For many reasons, which will be explored in greater depth in Part II, itrarely, if ever, occurs to the beginning trader that the markets confront himwith an environment that is categorically different from anything he isaccustomed to or trained to deal with effectively by society. Enabling JavaScript in your browser will allow you to experience all the features of our site. Unless Imade it big as a trader, it would be very hard to reconcile some of thedecisions I made to put myself in that kind of a situation. Here are 97 examples, taken straight from the journal pages of some of our top students and trading friends. But I still held onto the belief that I could trade out of these difficulties. From a psychological perspective, the possibility for unlimited profits,happiness, power, and so on, whatever it means to you when you imaginemaking all the money you ever wanted to make, can be extremelydangerous. Like all traders, you have probably read repeatedly what it takes to besuccessful at trading: \"Trade with the trend,\" \"Cut your losses and let yourprofits run,\" \"Money management is the key,\" and so on. Because of this experience my clientgrew up believing he would also die of a heart attack, if he exercised toostrenuously. created them. In any case, by the time those who figure it out do so, theyhave usually subjected themselves to so much psychological damage that it addsa much more difficult dimension to the process of becoming successful. Youll have the basics of building and running your trading plan under your belt by now. Here comes your first trade signal. tease a trader with the very real possibility of fulfilling his grandest dreamsof financial independence and at the same time stand ready and willing totake away everything he ownsand more. Whether you're aware of it or not, most if notall of us grow up with highly structured belief systems about theconditions under which we deserve to receive money. 37 39 Part II The Nature of the Trading Environment 41 from a Psychological Perspective 43 49 3 The Market Is Always Right 56 4 There Is Unlimited Potential for Profit 61 and Loss 72 5 Prices Are in Perpetual Motion with No 76 Defined Beginning or Ending 6 The Market Is an Unstructured Environment 7 In the Market Environment, Reasons Are Irrelevant 8 The Three Stages to Becoming a Successful Trader Part III Building a Framework for Understanding Ourselves 9 Understanding the Nature of the Mental Environment 4 These approaches might be better described as mental techniques,even skills of thought application. The problem is, price movement is fluid, always in motion, quiteunlike the highly structured events that most of us are accustomed to. Now we begin the first of Six Core Modules, and we call these Core Modules because at the heart of these modules are the subconscious and conscious trainings you will do on a daily basis. Then sometime in August 1982 I thought ofwriting a book or at the very least developing a seminar to explain to othertraders what I had discovered for myself.