Trading in the Zone Review – Who is Mark Douglas?
Mark Douglas is one of the most well-respected trading educators and authors of all time. Throughout his life, he provided consulting services through seminars, workshops, and personal training for some of the top trading institutions and investment banks in the financial space: Chicago Board of Trade, New York Board of Trade, Citibank, Deutsche Bank, and many more. He is also the author of two great books covering the topics of trading psychology called The Disciplined Trader and Trading in the Zone.
While these books don’t cover much in regard to specific trading strategies, Mark does however share valuable insights into the mental aspects of trading that are all-encompassing. All traders, no matter what they trade or where they trade it, have much to learn from Mark’s works. Oftentimes, people attempt to become better traders by learning more about the markets, constantly switching strategies, and spending as much time in front of their computers as possible. But the reality is that they should be focusing more attention within themselves on their own mindset. Because without the proper mental skills, even the best high-probability strategies are susceptible to failure due to a lack of discipline and poor execution.
The 4 Primary Trading Fears That Cause Emotional Wreckage:
According to Mark Douglas, there are 4 primary fears that drive the emotions and behaviors of all traders. Let’s discuss them below.
1.) The Fear of Being Wrong
Most prospective traders think that there’s some magical system out there that will allow them to profit on every single trade, but that simply doesn’t exist. Losing trades can’t be completely avoided, which is why it’s critical to predefine risk on each trade and cut losses at a reasonable level, if necessary. Many traders let small losses (paper cuts) turn into huge losses (gashes) over-and-over again because of their refusal to accept the initial small losses and be considered “wrong”. As a result, their accounts will eventually dwindle down to $0 (or close to it). The best traders realize that it’s not about being “right” on every single trade. It’s about trading your edge right with patience, discipline, and a probabilistic mindset. And when you trade right, there will undoubtedly be some losing trades along the way, but the profits typically take care of themselves over time. The small losses are merely the “cost of doing business”.
2.) The Fear of Losing Money
This is an obvious one and probably the most prevalent. Nobody wants to lose money, yet so many traders do. Trading with too much fear of losing money causes you to take profits too early and sometimes even cut losses too quickly before ever giving your trades a real chance. There has to be a healthy balance between giving your trades some breathing room and cutting losses at a reasonable level. And if you’re up on trades, you have to have enough patience to let them run to a certain degree. Immediately taking profits as soon as you see green won’t get you very far. This is why planning trades ahead of time and being prepared no matter which direction it goes is so helpful. You have your ideal entries and exits laid out in advance – all you have to do is stick to those plans you prepared. Sometimes scaling in and out of trades can help ease the fear of entering and exiting at the wrong times.
3.) The Fear of Missing Out
FOMO is another thing that can take you on emotional roller coaster rides. Most traders want to be involved in every single opportunity that presents itself in the markets, but it’s simply impossible to do so. Every little tick can make you feel like you’re missing out on potential profits. But those urges to jump into all sorts of trades leads to strategy-hopping, over-trading, and overall poor results. It’s like the old saying goes “The man who chases two rabbits catches none”. As a beginner, it’s best to focus on just one particular strategy and give it your complete focus for a material length of time. If you’re constantly worrying about decisions to enter multiple trades using multiple strategies, you will always be surrendering precious mental capacity and time weighing, doubting, and judging. To be a great trader, you have to Cultivate the Proper Mental Clarity to stay focused on your specific setups while blocking everything else out.
4.) The Fear of Leaving Money on the Table
This is where the psychological aspect of trading gets really interesting. Of course it can be upsetting to take a loss on a trade. But sometimes the feeling can be even worse after you take profit on a trade and that particular stock, option, or whatever it may be just keeps on running in the direction of your trade. You feel like you could’ve captured much more of the move, sometimes even double or triple what you actually did. Instead of being happy with the profits you secured, you’re discouraged by the thought that it could’ve been much more. But traders have to realize that this is something that will happen frequently. You have to accept the fact that you’ll rarely be able to capture the bottom and top of every move. In fact, pinpointing perfect entries and exits will almost never happen. If the trade goes according to plan, it’s all about taking “the meat of the move”.
Consistent Profitability For Only 10% of Traders – Will You Be One of Them?
Very few people make consistent money as traders. That’s the cold, hard truth. The exact number varies depending on the source, but most estimates suggest that roughly 90% of traders lose money. It has to make you wonder – why exactly is the failure rate so high?
|#1 Reason 90% of Traders Fail and How You Can Avoid Being One of Them|
The simple answer – Mindset. Trading success starts with mental control. But the problem is that most individuals just don’t have it. The typical trader automatically acts on impulses and emotions. The typical trader seeks thrill and excitement even if it correlates with poor results. As a result, the typical trader’s compulsive and destructive patterns of the mind eventually dismantle their portfolio.
Take Complete Accountability For Your Own Trading Results:
It’s so Easy to Blame Outside Sources or other people for your current position in life or your personal portfolio results, but the only thing holding you back is you. As soon as traders accept this reality, the sooner they clean up their approach, implement discipline, and change their situations for the better.
A large amount of newcomers to the markets are susceptible to unstructured, random trading in order to avoid responsibility. They may not even realize what they’re doing, but they don’t want to take accountability for their losing trades. And if they win on trades, they feel great because they didn’t put much time and effort into it. All they did was click a few buttons and blindly enter some trade. In essence, they got something for nothing. But this sort of detached approach isn’t a sustainable strategy. The road to consistent profitability starts with Complete Accountability and Ownership of mindset, trade execution, and results.
Common Misconceptions About the Characteristics of Good Traders:
Most people think successful traders are financial experts or people who implement complex systems, but that’s not necessarily the case. Being a good financial analyst is not synonymous with being a good trader. In fact, most of them are terrible traders. That’s because the most critical aspect of trading isn’t about calculating financial ratios or generating price targets. It’s about being proficient at placing and managing trades according to your system with discipline.
Many people think that highly educated professionals like doctors and lawyers automatically make great traders as well, but that’s not necessarily the case either. In fact, they oftentimes have a hard time achieving trading success until they come to terms with how the entire thing operates. They tend to focus too much on trying to outsmart the markets while completely overlooking the Psychological Aspects. As a result, their trading approach typically has an excess of confidence and arrogance, but lacks the proper discipline and risk management.
Overall, operating effectively in an environment that has qualities and characteristics we’re not used to requires major adjustments. The sooner we realize this, the better. Oftentimes, it takes years of pain and suffering at the hands of the markets until we realize and accept this fact. With the correct mindset shift, however, trading can go from a frustrating and afflictive experience to an enjoyable and effortless one. That’s the ultimate goal.
The Wrap Up – Stop Getting in the Way of Your Own Trading Success:
To summarize some of the best points explained by Mark Douglas throughout Trading in the Zone, the determining factor for your trading success is mindset. Without the proper mindset and discipline as your foundation, even the best strategies can be compromised. To achieve consistency, you need rules, and it’s crucial to Stick to Those Rules. Most traders are constantly looking outward for consistency when they should be looking inward. The consistency they seek is within their own minds.
What success in the markets ultimately comes down to is a complete mindset shift from thinking in certainties to thinking in probabilities. You have to accept the fact that you have no control over the outcome of any single trade. When you accept the random nature of any individual outcome, you can release the expectation of winning. When you release expectations, you’re no longer emotionally attached. You can then focus on the flawless execution of your strategy. With a high-probably strategy/edge, you can rely on it to work over a large series of trades. So it’s not about any one trade (short-term thinking), it’s about a series of trades over time (long-term thinking). Overall, the proper mindset allows us to control our behavior in the face of constant temptation from the markets.
Written by Matt Thomas (@MattThomasEST)
Related Pages:
- #1 Reason 90% of Traders Fail and How You Can Avoid Being One of Them
- Why is it So Difficult to Become a Consistently Profitable Trader?
- Top 10 List of Trading Rules to Protect & Grow Your Portfolio
- Top 3 New Trader Mistakes – Clean Up Your Approach and Start Profiting
- Trading Composure Review – Learn the Importance of Mindfulness in Trading
This review is really amazing because lately almost everybody is going into forex trade and a lot of people lose money due to their lack of experience, and naiveness. Mark Douglas is really an icon in trading and reading his book would be something any trader should do so that he or she can excel in that field too.
WOW! This is literally like a gift from God for me. I have been trying to find some reliable resources to learn more about trading and what goes along with it. Not only has your website provided that for me with this book, it has also proved itself as a reliable source if information for future comings and questions from me. Thank you so much for this
It is nice to be able to read through the reviews of this book and get a synopsis with information about the writer. I really think the contents are gonna be very helpful.
Mark Douglas is a well-respected trading author and tutor. I also believe in the power of exploring mindset in business, trading, or any other way of life, and this influences how successful one can be when it comes to running a portfolio. As far as trading is concerned, it’s normal to prepare for losses.
This book is chocked full with lots of information. Truth is trading is very difficult, but with practice, discipline and proper risk management; One could make consistent profits. The information provided in this book offers great tools to excel better at trading.
I have dabbled a bit in the stock market myself and so far I have come up pretty well. Granted I have not risked large sums of money, and I wish I had a winning trading strategy so that I could really make some gains! I believe I suffer from a little bit of each of the fears that most traders have, especially fear of missing out, LOL! Every time I see a stock I’ve been watching goes through the roof I get so upset that I did not invest any money in it but of course hindsight is always 20/20! I will Consider purchasing this book and seeing what Mark Douglas has to say about conquering these common fears.
I think the biggest problem is the one you mentioned, it’s that people don’t want to lose money. That really is the biggest fear when it comes to trading. And I’m no saint, I was always struck by fear of losing all my money. It wasn’t until I found discipline and implemented my own strategies was when I finally found good results. You’re doing a great thing here helping newcomers find their way in the market.
Hi Brandon – I really appreciate you sharing your thoughts. What I’m trying my best to help new traders realize is that the difference between success and failure in the markets is typically mindset-related. You can have the greatest strategy or edge there is, but without the proper focus and mental control, it doesn’t matter. It’s truly incredible how many great trading strategies are compromised by emotions and irrational behavior. Finding discipline and having the ability to follow your trading rules is what produces the most consistent results over time.
Trading is just like any other undertaking or business, and life in general. Is it not our mental attitude, the way we approach something, our personal mind-set, goals and objectives, that rule our success? I can’t tell you how many different ventures I’ve tried over the years, and in each the most valuable lesson I ever learned in my various trainings was mind-set and outlook! This appears to be no different.
I love that the book focuses a lot on fear. Is that not, truly, the biggest component in failure? The fear? Whatever it might be. When I was a child, I would get a zero in class when the teacher asked me a question because I was afraid I would answer it incorrectly in front of my friends. The fear of being wrong was something I have literally struggled with my entire life, and I’ve read a lot of motivational books and attended a lot of seminars on overcoming my fears.
I think this would be a great book for me as mindset is a main focus, and that is usually where I need the most assistance.
Hi Babsie – you’re exactly right. Most people (if not everybody) have very limiting beliefs and irrational fears that leave them paralyzed when it comes to achieving their goals. Sometimes, even when people know exactly what they want and how to get there, they freeze up and fail to take action. This is why mindset is such a powerful thing. A lot of our failures are a direct result of how we perceive ourselves. Overall, cultivating the proper mindset is critical in trading, business, or any other aspect of life.
I have heard about Mark Douglas before as a great trading tutor and author. I really love the way you outlined the main points of his book ‘Trading in the Zone’. I cannot help but agree with everything that you had written. This wonderful review is really extensive and has triggered my willingness to have the book on hand. Can’t wait to read through the book itself.
I’ve recently started FX trading so everything with regards to your mindset is transferable. I picked up lots of tips and info. My favourite bit of your article was this: When you accept the random nature of any individual outcome, you can release the expectation of winning. When you release expectations, you’re no longer emotionally attached. You can then focus on the flawless execution of your strategy. So crucial but so very hard to do!!
Hi great article. I have read trading in the zone many years back and having been a trader myself, I can confirm that this is a great read and something every new trader should have. Especially if you are trading the forex markets, as having a clear disciplined approach to trading is key as there are so many swings up and down in fx markets.
I enjoyed reading your book review of Trading in the Zone by Mark Douglas. The 4 primary trading fears obviously apply to traders, but these fears can actually apply to anyone. Having the proper mindset is really important in order to be successful in any type of job or life situation. I always thought that good traders were financial experts, and was surprised to learn that it is a common misconception. This book would be a good read for anyone who wants to become a successful trader.
Hi Jenny – the reason that financial experts aren’t necessarily good traders is because it’s not all about predicting the future, which is what they tend to do. They get too attached to their expectations, their desires to be right, and ultimately their ego is their downfall. In order to preserve capital and have sustainable, long-term success in the markets, you have to accept “being wrong” quite a bit. There is no foolproof system out there where losses are nonexistent. A trade going against you is always a possibility. Bad traders don’t plan for trades going against them or have enough discipline to stick to that plan. Good traders cut their losses according to their rules and look for the next setup that aligns with their edge. Overall, what makes a good trader is simply their ability to manage trades with as little errors as possible.
Trading in the Zone sounds like a great book.
It took me a long time and a lot of losses to realize that I needed to stop buying and selling based on emotion and I had to step back and study technical analysis and come up with my own rules and strategy.
My first trading experience was highly stressful and I spent hours online praying that my trade would work.
One of the problems of most traders is that they trade expecting to win. But what would happen if you don’t? Can you take the loss?
Once I found a strategy that worked, I kept to it and made some really great money.
I have stopped trading for the present as I am focusing on other platforms, but it is something that I will probably return to.
I did learn 2 things:
1) If you follow the mass you will probably lose money
2) If you buy based on price, you will probably lose money!
Thanks for bringing this book to my attention.
Tim
Hi Tim – thanks for sharing your thoughts and experiences. Most new traders jump into the markets and start making trades focused solely on how much they can make, never considering the potential losses. As a result, these traders usually end up losing money sooner or later. Veteran traders, however, know that more of the focus should be on how much they can potentially lose, the importance of identifying their risk level, and exiting with discipline if that level is met. In other words, the top priority is capital preservation above all else. That helps them avoid the devastating losses that new traders are so prone to having. There’s no plan or consistency in the new trader’s methods, and the market ends up humbling him or her as a result. Overall, it’s about finding an edge and executing on that edge with discipline. Over a large enough series of trades, that edge will produce profits. Letting your emotions control entries/exits on a trade-by-trade basis will only compromise the effectiveness of that edge.
This book was one of my trading mentors required reading and I am definitely looking forward to it. I’ve read parts of it already and one thing that sticks out to me is staying in on a losing trade. A lot of people don’t realize that the losing trade their staying in on could have been a winning trade if they just exited, took their loss, and go in the same direction that the market is going in. It’s crazy that emotions really hinder your ability to think. Things are much clearer when emotions aren’t involved.
I really enjoy learning about personal finance and am looking to begin setting up my first trading portfolio in the upcoming year. I absolutely love Mark Douglas’s point on mindset being the underlying characteristic of successful traders rather than “proper market timing”. As you mentioned no one is going to get it right all the time so really the mindset we should have is on the long-term slow but steady growth of our portfolio. I loved your summary of the 4 fears that cause trading failure. I will be adding Mark Douglas’s books to my “to-read” list. Thank you for sharing!