Trading in the zone pt1

Trading in the zone by Mark Douglas has been such a wonderful book that I'm going through it the second time. The principals I learn from the book has profound effects in my life and as I revise through them, I'll blog about it here for you.

However these principals are not listed in the order of the book.

Trading down to its simplest form is pattern recognation. Setups/Systems are simply that - patterns. These patterns form because of mass psychology - repeatable, repetitive and predictable - patterns. To consistently capitalize on these patterns, the trading skills we need are:

• trust and confidence with our edge/setups/systems
• thinking in probabilities

Whatever our system is, we need to have trust and confidence about it. We trust that the system will in all probability create a profit for us in the long run.

These skills are psychological.

Therefore to solve the puzzle to become a consistently successful trader we have to tackle the problem - our pschology. And at the root of that is our core believes. (I will write more about the believes which the book has outline.) And when it comes to personal transformation, the most important ingredients are our willingness ot change, the clarity of your intent and the strength of our desire.

The final destination is to become consistently successfuly. Now to become consistent is to make 'consistent' become part of who we are. The good book says, "Be holy as He is holy...." it doesn't say "do holy..." Similiarly, we have to "Be consistent" and not "do consitently..". And how do we get about there? The way to get there is to change our believe.

Our believe is our mind's underlying programming. Whatever we do, it reflects on our belief. In fact, it is difficult to act AGAINST our belief.

This book deals with some of the common wrong believes trader have which hinders us from being consistent. I will be written more about them in the weeks to come.

Jan. 14. 2009

Quick guide to the GU:

Weekly: S.A. but candle is red.
Daily: S.A. although slightly bearish
4H: Bullish, indis and price. But T5's is just above as abit of resistance.
1H: Bullish, with mixed indis. but in OsMa territory and its bullish

DP has been holding as strong resistance. But is in the process of breaking above.

The worst scenario.

During the holidays, I have been spending my time and effort to learn how to be more consistent. To that objective, I read the book 'Trading in the zone' by Mark Douglas. I highly recommend that book to anyone who's trying to be more consistent in their trading.

I have benefit greatly from it and it has changed the way I look at trading and in many ways my own life. I will probably write a summary of that book later in this blog so that I can refer to it myself, so keep a look out.

On being consistent, I asked myself an interesting some time ago: what's the worst possible outcome?

My first answer was of course "a bad analysis which lead to a trade and hit my stop loss... or keep going without hitting my stop loss"

But after some thought I think what is worst in the long run is "a bad analysis which lead to a winning trade". Because now not only you're rewarded for not sticking to your system, your inner programing thinks it can now bend the rules...etc It is a recipe for inconsistentcy. And inconsistentcy just leads to many emotional pain which usually leads to loss.

So stick to your analysis (or your system or your edge) whether the analysis leads to a win or loss, because in the long run if you stick to rigid rules you'll win.