The Disciplined Trader

chessman · Aug 13, 2003

I know ET has many Mark Douglas fans. His two books are probably the best books I have ever read on the subject of trader psychology.

I recently came across this excellent QA by him.

(please click on System Trading -- > articles and publications)

http://www.angusjackson.com/

Interesting he says trading should be fun and easy, rather than a battle which most traders imagine trading to be, you against them etc...

-EntropyTrader · Aug 13, 2003

Yes, but
Fun+Easy+Rewarding = BORING to a lot of risk-seeking people who seek the exhilaration of losing.
They are Risk-Averse when presented with rewarding choices/experiences.
They are Risk-Seeking when presented with losing choices/experiences.

gotta_trade · Aug 13, 2003

Quote from chessman:

I know ET has many Mark Douglas fans. His two books are probably the best books I have ever read on the subject of trader psychology.

I recently came across this excellent QA by him.

(please click on System Trading -- > articles and publications)

http://www.angusjackson.com/

Interesting he says trading should be fun and easy, rather than a battle which most traders imagine trading to be, you against them etc...
More...

Thanks

-EntropyTrader · Aug 13, 2003

Mark Douglas Speaks Frankly

Mark Douglas is an author, lecturer and a coach for trading the market mindset. Mr. Douglas' interviews have been featured in publications such as The Wall Street Journal, Fortune, Stocks & Commodities, and Futures, among other. For more information on Mark Douglas go to our Links page to visit his website.

The following is an informal interview of Mr. Douglas' cerebral and practical approach to trading.

1. My question of Mark would be "How do you keep yourself psychologically fresh for this battle day in and day out?

Answer:
First of all, if trading is a battle and you don't want it to be, then you've got some work to do. Ultimately, to get to the point where you can make money on a consistent basis your trading will have to evolve to the level of being easy and fun. Getting ready for a battle implies there's going to be a struggle of some sort. On the other hand, when something is fun you wouldn't need to prepare yourself for a struggle.

When I say you've got work to do, I mean there are several "psychological" trading skills that have to acquire before anyone's trading gets to the point where it is consistently easy and fun. All of these skills and how to acquire them are explained in detail in both of my books "The Disciplined Trader" and Trading In The Zone."

Besides reading my books, you also might want to explore your true motivation for trading, because I've found that many people love the battle and all of the drama that goes with it. And even though they tire of it from time to time they have no intention of giving it up.

I would also ask to you consider if it's really the market you are struggling against. I look at the market as a steady, never ending stream of opportunities to enrich oneself. Each up or down tic gives each of us as traders the opportunity to get into, add too, detract from or exist a position for a profit or to cut a loss. "The Market" has no control over how we perceive these up or down tics, the decisions we make or the actions we take. So who or what are you actually getting ready to struggle against?

I have a suggestion that could have a very positive impact on your trading results. Consider "not trading" on the days that it's a struggle. There's no rule that says that you have to trade everyday. Except, of course, the one that may be in your mind. One of the most important principles of success I teach traders is if they're not in the best "state of mind" to trade, then not trading is the same a putting money in the bank.

2. The Disciplined Trader is probably my favorite trading book. A question for him, if you think it's appropriate: What specific advise would you give a trader who's trying to overcome a negative mind set?

Answer:
Read "Trading In The Zone" very carefully or as many times as it takes until you find yourself thinking differently about the nature of trading. Also the exercise at the end of he book is specifically designed to neutralized the four most common trading fears ? the fear of losing money, being wrong, leaving money on the table and missing out.

3. My problem is taking impulsive trades. It can lead to days of over-trading. It seems that my subliminal messages are of fears missing the stock, so I jump in before establishing the buy trigger, stop, etc. What would you recommend as the best way to change this?

Answer:
When you are contemplating changing anything in your mental environment (i.e., your sense of identity, or creating a new expression of yourself) you first have to be very clear about exactly what you are trying to do. What are you trying to accomplish from your trading activities? What is your true underlying motivation or agenda?

I have found that very few people who trade do so to create consistent results, even though that's what they would claim they want. Consistently over trading and jumping the gun are two very common trading errors that are usually (but not always) symptoms of other issues. However, regardless of the source of this compelling behavior, if you do want to create consistent results, you'll have to either neutralize these internal forces or compensate for them in some way.

Which means at the very least you are going to have to decide on a trading regime that is that is consistent with your objective of consistency. In my second book "Trading In The Zone" I list and explain in detail the seven principles of consistency and how to integrate them as core beliefs. If you do the work that is necessary to make these principles core beliefs your compellingness to over?trade and jump the gun will eventually dissipate. By the way, don't underestimate how much work there may be or how long it may take to get to the point where the compellingness doesn't exist any longer. And certainly don't beat yourself up if you find the process very difficult in the beginning.

4. There's been a discussion going on lately about intuition and a person's ego and the relationship these aspects have with trading. How strong a role do you believe these aspects have with trading and what methods have you found for yourself and others to be the most beneficial to handle the ego during a trade and allow the intuition to develop and be trusted during this trade?

Answer:
This is a really good question, but unfortunately far too broad for me to answer in this context. The problem is I could probably write another book about the nature of intuition and the role it can play in ones trading. In fact, the organizational framework of my two and a half day workshops is taking the participants through the three stages of development of a trader ? mechanical, subjective and intuitive.

Anything beyond what I have just said can run into major difficulties unless I build the appropriate foundation to make sure we share the same meanings for what intuition is, where it comes from, why we experience it, why we don't, the conflicts and difficulties it can create if you don't have certain other mental skills in place, and how to develop it.

5. What is the best way to get rid of the fear of losing money? I find that I trade more rationally when using very small shares or when on simulator.

Answer:
Keep on trading small and increase your size little by little in a systematic fashion. I've heard it said that "life begins at the edge of our comfort zones." In other words, challenge yourself, there's a point where you are actually stepping into what you fear, but not enough to cause an inordinate amount of discomfort, immobilization or the possibility of making a trading error. Find that spot, step into it and continually expand yourself, little by little.

6. Do you have any specific mental "tricks" for morning preparation that get you ready for each trading day that you may have not shared in either of your printed materials? Often I'm confused and hesitant in the first half hour of trading day because of a feeling of lack of focus.

Answer:
If I found that I consistently couldn't focus in the first half hour of trading, I wouldn't use any technique to try and force myself to be focused, I just wouldn't trade the first half hour. Now, if you happened to be someone who is driven by a fear of missing something, then what I've just said probably won't seem very useful to you. However, when I decide not to trade (for whatever reason) I just don't think about what I "potentially" missed or care. I really do believe, as I indicated in my answer to question number 3 that the market is this never ending stream of opportunities to do something on our own behalf.

I have learned that once certain prerequisite skills are in place the ability to create consistent results is a function the quality of my focus and the ability to act appropriately on what I perceive and "NOT" a function of the amount of time I expose myself to market activity. I go for quality not quantity. If I'm not in the best state of mind to be trading, in all likelihood I will do something that will cause me to lose. So when I'm not trading, as far as I'm concerned I'm not missing anything. Therefore, it's easy for me to make the kind of decision not to trade the first half hour if I found it was difficult to maintain my focus.
More...

patrickpope · Aug 14, 2003

Saw this thread and just had to comment.

Just back from holiday, where 'The Disciplined Trader' was, once again, my constant companion. My wife simply cannot believe how I can read one book so many times.

When I read it the first time over a year ago, I raced through it. Took me just over two days, and left me dumbstruck. Two weeks later I read it again, marking it up in the margins & highlighting everything that I really wanted to take on board. Then I left it a month or so, but inevitably I dipped in and out on numerous occassions. And now having just finished it a third time I still feel it is in a league of it's own in terms of really dealing with the unique spirit of the trading universe and its associated psychological implications. The fact that it happens to be so beautifully written is a real bonus.

If anyone could share any further Mark Douglas articles or other material, I for one would be very grateful.

Cheers.

dbphoenix · Aug 14, 2003

I agree. There are certain books that open windows, but they have to come at the right time. I suspect that many traders who read Douglas too soon might think yeah, yeah. It's only after stumbling and falling a number of times as well as being frozen by fear and anxiety that these books really have their impact.

Log in or Sign up

The Disciplined Trader

chessman Guest

-EntropyTrader

gotta_trade

-EntropyTrader

patrickpope

dbphoenix