Realizing that I had the wrong reaction to losses. Most amateurs have no plan, and for them, getting a plan is indeed the most important thing. But if you have a plan, the most important thing is between your ears.
Trading in the Zone & The Daily Trading Coach I've read both books and got a lot out of each. My expectation of content on most trading books is, if I can take something/anything from the book and improve my trading "I did well". âUnlike a traditional book , the idea is not to read it from front to back in a few sittings. Rather, you take one lesson at a time and apply it to guide your development as a trader.â Brett Steenbarger 101 lessons to improve 101 possible "troubling areas" in a traders development. Some lessons a trader may never read, except out of curiosity. Basically it's his blog http://traderfeed.blogspot.com/ in hard cover, although more precise and organized. I like the book it's one I'll keep (but I'll buy you one . This is what I took from Trading in the Zone (and more); A probabilistic mind-set pertaining to trading consists of five fundamental truths. 1 Anything can happen 2 You donât need to know what is going to happen next in order to make money. 3 There is a random distribution between wins and losses for any given set of variables that define an edge. 4 An edge is nothing more than an indication of a higher probability of one thing happening over another. 5 Every moment in the market is unique. I'm keeping this one too (buy your own)! <*)))><
WF, I believe you are perhaps interpreting Douglas' book literally. Once you have more screen time under your belt and learn the nuances of the market's unique language, you'll have a more accurate interpretation of the Five Fundamental Truths: 1 Anything can happen...to you. 2 The level of conviction with which you believe you know what is going to happen next is directly proportional to the amount of money you will lose. 3 There is a random distribution between wins and losses for any given set of variables that make it all but impossible to define an edge. 4 An edge is nothing more than that part of the falling knife you're trying to catch which causes your account to bleed profusely. 5 Every moment in the market is uniquely irrational. Happy Full Moon!
ND: What you said was quite funny. But I have the impression that WF is a very seasoned trader as well. And here is my alteration of Mark Douglas' five truths: 1 Anything can happen - But how likely will it happen? You trade the probability, but guard the possibility. (William Ng) 2 You donât need to know what is going to happen next in order to make money. - You don't need to know what is going to happen the next day... but you need to know what is likely to happen in the next 10 minutes to make money. (Or scale up your time-frames.) 3 There is a random distribution between wins and losses for any given set of variables that define an edge. - The time sequence of the wins and losses is most likely random. But the relative frequencies better be more wins than losses. 4 An edge is nothing more than an indication of a higher probability of one thing happening over another. (This I accept) 5 Every moment in the market is unique. - But many times you will see the same thing happened over and over again.
I feel obliged to point out that a few of the suggested interpretations go to the contrary of the sprit of the book: I think this is totally wrong. You don't need to know what is likely to happen next all the time. In fact, most of the time you may have no clue regarding what is going to happen. It's enough that on a few rare occasions (call it trade set-up) a trader knows that market move in one direction (or with larger a magnitude) is more likely than in another direction. Also the keyword is "likely". Assuming you actually do know what is going to happen leads to all kinds of irrational behavior like unreasonably extending stop-loss, doubling down without a good reason etc. Except you can never assume that because you have seen the same thing happening you know how the price action will unfold. See 1 Anything can happen
Definitely, the spirit of the book is exactly what those points say and there really is no other interpretation (though I had some good fun with WF there). Personally, my biggest losses were the result of seeing something "always" happen and refusing to see that it was not happening this time, and putting in irrational disaster stops as a result, which invariably brings into play Murphy's Law of Disaster Stops in which price moves just a wee bit through your extended disaster stop and then makes the great big move in the direction price was "supposed" to go when you first put on the trade.