Trading in the Zone
Page 23
If you believe in the five fundamental truths and you believe that trading is just a probability game, not much different from pulling the handle of a slot machine, then you’ll find that this exercise will be effortless—effortless because your desire to follow through with your commitment to take every trade in your sample size and your belief in the probabilistic nature of trading will be in complete harmony. As a result, there will be no fear, resistance, or distracting thoughts. What could stop you from doing exactly what you need to do, when you need to do it, without reservation or hesitation? Nothing!
On the other hand, if it hasn’t already occurred to you, this exercise is going to create a head-on collision between your desire to think objectively in probabilities and all the forces inside you that are in conflict with this desire. The amount of difficulty you have in doing this exercise will be in direct proportion to the degree to which these conflicts exist. To one degree or another, you will experience the exact opposite of what I described in the previous paragraph. Don’t be surprised if you find your first couple of attempts at doing this exercise virtually impossible.
How should you handle these conflicts? Monitor yourself and use the technique of self-discipline to refocus on your objective. Write down the five fundamental truths and the seven principles of consistency, and keep them in front of you at all times when you are trading. Repeat them to yourself frequently, with conviction. Every time you notice that you are thinking, saying, or doing something that is inconsistent with these truths or principles, acknowledge the conflict. Don’t try to deny the existence of conflicting forces. They are simply parts of your psyche that are (understandably) arguing for their versions of the truth.
When this happens, refocus on exactly what you are trying to accomplish. If your purpose is to think objectively, disrupt the association process (so you can stay in the “now moment opportunity flow”); step through your fears of being wrong, losing money, missing out, and leaving money on the table (so you can stop making errors and start trusting yourself), then you’ll know exactly what you need to do. Follow the rules of your trading regime as best you can. Doing exactly what your rules call for while focused on the five fundamental truths will eventually resolve all your conflicts about the true nature of trading.
Every time you actually do something that confirms one of the five fundamental truths, you will be drawing energy out of the conflicting beliefs and adding energy to a belief in probabilities and in your ability to produce consistent results. Eventually, your new beliefs will become so powerful that it will take no conscious effort on your part to think and act in a way that is consistent with your objectives.
You will know for sure that thinking in probabilities is a functioning part of your identity when you will be able to go through one sample size of at least 20 or more trades without any difficulty, resistance, or conflicting thoughts distracting you from doing exactly what your mechanical system calls for. Then, and only then, will you be ready to move into the more advanced subjective or intuitive stages of trading.
A FINAL NOTE
Try not to prejudge how long it will take before you can get through at least one sample size of trades, following your plan without deviation, distracting thoughts, or hesitation to act. It will take as long as it takes. If you wanted to be a professional golfer, it wouldn’t be unusual to dedicate yourself to hitting 10,000 or more golf balls until the precise combination of movements in your swing were so ingrained in your muscle memory that you no longer had to think about it consciously.
When you’re out there hitting those golf balls, you aren’t playing an actual game against someone or winning the big tournament. You do it because you believe that skill acquisition and practice will help you win. Learning to be a consistent winner as a trader isn’t any different.
I wish you great prosperity, and would say “good luck,” but you really won’t need luck if you work at acquiring the appropriate skills.
ATTITUDE SURVEY
INDEX
A
Active contradiction
Association, power of
Attitude:
consistent(see also Consistency)
essential to consistent winning
loss, reacting to
responsibility as cornerstone of winning attitude
Attitude Survey
Attitudes, faulty
Auditrack.com
Availability
Awareness:
energy with
nonfunctional
B
Behavioral effects of beliefs regardless of conscious awareness
Beliefs, trading, impact of
awareness, energy with
characteristics, three primary
active contradiction
affecting behavior regardless of conscious awareness
creative experience
expression, beliefs’ demand for
process deactivation
resistant to any force that would alter present form
negative
self-evaluation and trading
negative zone
self-sabotaging beliefs
Beliefs, nature of
caution
conflicting
impact of on our lives
origins
cause-and-effect relationship
Beliefs, nature of, (Cont.) structured energy
vs. truth
Beliefs, working with
problem, defining
terms, defining
availability
carefree state of mind
“now moment,”
objectives
objectivity
skills
truths, fundamental, relating to skills
“zone,” moving towards
Black hole of analysis
Blaming markets for losses
“Boom and bust cycle
C
Carefree state of mind
Casinos, random outcomes of
Characteristics, three primary of beliefs(see also Beliefs)
Classifications of traders, three
Confidence
Conflicting beliefs
Conflicting forces
Consistency, creating belief in
principles, seven
Consistency as state of mind
fear, role of
mental environment, aligning
awareness, nonfunctional
contradictory beliefs
risk, understanding
solutions in mind, not in market
thinking about trading
Contradictory beliefs
Creative experience
Creative thinking
vs. rational thinking
Curiosity, nature of
D
Dangers of trading
attraction
freedom
dangers, particular
denied impulses
mental vacuums
problems
external vs. internal control
random rewards, addiction to
randomness
responsibility, failure to take
rules, unwillingness to create
safeguards
rules, absence of
structure, creating
curiosity, nature of
Deactivation
Denied impulses
Desire as force
The Disciplined Trader
Drummond, Charles
E
Emotional pain of unfulfilled expectations
Emotional risks, eliminating
(see also Trader’s edge)
Errors in trading
Euphoria, dangers of
Exercise: learning to trade edge like a casino(see also Thinking like a trader)
Expectations, managing
unfulfilled, pain of
Expression, demand of active beliefs for
External vs. internal control
F
/>
Fear, role of
lack of as key to success
Flexibility in expectations
Freedom as dangerous attraction
Fundamental analysis
problems with
reality gap
Futures magazine
G
Gaming corporations, random outcomes of
Growth
I
Illusion
Information, interpreting
Internal vs. external control
Intuitive stage of trader development
L
Learning, perception and
Learning for wrong reasons
Loss, reacting to(see also Responsibility)
Lure of trading(see also Dangers)
M
Market analysis and trading, relationship between
Market’s perspective(see also Truth from market’s perspective)
Mechanical stage of trader development
self-observation
Mental environment, shaping aligning
Mental frameworks, uniqueness of
Mind-set of successful traders
Mind state, carefree
N
Negative zone
“Now moment opportunity flow,”
O
Objective thinking critical
Objectives
Objectivity
Opportunity, perceiving
P
Pain-avoidance process
Paradoxes
Perception, dynamics of
association, power of projection
debugging mental software
energy structures
forces, collection of
opportunity, perceiving
structured energy
and learning
objectivity critical
and risk
Point and line method
Predefining risk
Probabilistic mind set, five fundamental truths of
skills, relating to
Probabilities, thinking in (see also Trader’s edge)
difficulties of trading in
Process deactivation
Profit taking
Projection
Psychological gap
R
Random rewards, addiction to
Randomness
Rational thinking vs. creative thinking
Recklessness, eliminating
Responsibility, taking
attitude
consistency as ultimate goal
failure to take
loss, reacting to
blaming markets for losses
learning for wrong reasons
market responsibility
opportunity flow
revenge
social values, nonrelevance of
winners, losers, boomers and busters
classification of traders, three
roller-coaster cycle
winning and susceptibility to mistakes
mental environment, shaping
mind-set
“zone,” reaching
Revenge, trader’s feelings of
Risk:
perception and
understanding
“Risk-free opportunity,”
Risk-taking
Risk-to-reward ratio
Roller-coaster cycle
Rules:
absence of
unwillingness to create
s
Self-discipline, role of
Self-evaluation, trading and
Self-sabotage, dangers of
Self-sabotaging beliefs
Skills
Social value, nonrelevance of in markets
Solutions in mind, not in market
Structured energy
Subjective stage of trader development
Success, road to
attitudes, faulty
black hole of analysis
confidence
fear, role of
fundamental analysis(see also Fundamental analysis)
growth
mental analysis
paradoxes
risk-taking
technical analysis
traders, differences between groups of
thinking differently, importance of
T
Technical analysis problem with
Thinking differently, importance of
Thinking like a trader
consistency, creating belief in
desire as force
illusion
principles, seven
exercise: learning to trade edge like a casino
accepting risk
Auditrack.com
conflicts, handling
object
picking market
profit taking
“risk-free opportunity,”
risk-to-reward ratio
rules for
sample sizes, trading in
setting up
stop-loss exit
testing
time frame
trade entry
“the trend is your friend” axiom
trending market
variables, choosing set that defines edge
final note
non-intellect-related
pattern recognition numbers game
self-discipline, role of
stages of development, three
intuitive
mechanical (see also Mechanical)
subjective
Thinking strategy
Trader’s edge: thinking in probabilities
emotional risk, eliminating
probabilistic mind set, five truths of
expectations, managing
flexibility in
information, interpreting
mental framework, uniqueness of
pain-avoidance process
gaming casinos
paradox; random outcomes, consistent results
collective behavior patterns
macro and micro levels
trading in the moment
predefining risk
probabilities, difficulty of trading in
randomness, acceptance of
uniqueness of moment, learning to deal with
Trading and market analysis, relationship between
“The trend is your friend” axiom
Trending market
Truth, beliefs and
Truth from market’s perspective
characteristic of market, most fundamental
predefining risk
trading errors
why people trade
“now moment opportunity flow,”
point and line method
uncertainty principle creative vs. rational thinking
fear, role of
zone
U
Uncertainty principle
Uniqueness of moment, learning to deal with
V
Variables, constant(see also Truth)
W
Why people trade
Z
“Zone,”
moving toward
negative
reaching
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