Your primary goal has to be to learn how to think like a consistently successful trader.
Remember, the best traders think in a number of unique ways. They have aquired a mental
structure that allows them to trade without fear and, at the same time, keeps them from
becoming reckless and committing fear-based errors.
– Mark Douglas
The consistency you seek is in your mind, not in the markets.
– Mark Douglas
If you can learn to create a state of mind that is not affected by the market’s behaviour, the
struggle will cease to exist.
– Mark Douglas
When the internal struggle ends, everything becomes easy.
– Mark Douglas
For those who have learned how to be consistent, or have broken through what I call the
“threshold of consistency,” the money is not only within their grasp; they can virtually take it
at will. I’m sure that some will find this statement shocking or difficult to believe, but it is
true.
– Mark Douglas
If someone or something is against you and causes you pain, how are you likely to respond?
You’ll feel compelled to fight, but what exactly are you fighting? The market is certainly not
fighting you. Yes, the market wants your money, but it also provides you with the
opportunity to take as much as you can.
– Mark Douglas
Five fundamental truths:
1. Anything can happen.
2. You don’t 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.
– Mark Douglas
When you really believe that trading is simply a probability game, concepts like right or wrong
or win or lose no longer have the same significance.
– Mark Douglas
Putting on a winning trade or even a series of winning trades requires absolutely no skill. On
the other hand, creating consistent results and being able to keep what we’ve created does
require skill. Making money consistently is a by-product of aquiring and mastering mental skills.
– Mark Douglas
When you genuinely accept the risks, you will be at peace with any outcome.
– Mark Douglas
It’s the ability to believe in the unpredictability of the game at the micro level and
simultaneously believe in the predictability of the game at the macro level that makes the
casino and the professional gambler effective and successful at what they do.
– Mark Douglas
The hard, cold reality of trading is that every trade has an uncertain outcome.
– Mark Douglas
When you achieve complete acceptance of the uncertainty of each edge and the uniqueness
of each moment, your frustation with trading will end.
– Mark Douglas
One of the many contradictions of trading is that it offers a gift and a curse at the same
time. The gift is that, perhaps for the first time in our lives, we’re in complete control of
everything we do. The curse is that there are no external rules or boundaries to guide our
structure, our behaviour… The very reason we are attracted to trading in the first place –
the unlimited freedom of creative expression – is the same reason we feel a natural resistance
to creating the kinds of rules and boundaries that can appropriately guide our behaviour. It’s
as if we have found a Utopia in which there is complete freedom, and then someone taps us
on the shoulder and says, “Hey, you have to create rules, and not only that, you also have
to have the discipline to abide by them.”
– Mark Douglas
Trading is not about being right or wrong. It’s a probability game.
– Mark Douglas
Trading rule 1: Predefine what a loss is in every potential trade.
Trading rule 2: Execute your losing trades immediately upon pereception that they exist.
By predefining and cutting your losses short, you are making yourself available to learn the
best possible way to let your profits grow.
– Mark Douglas
What makes trading so fascinating and, at the same time, difficult to learn is that you really
don’t need lots of skills; you just need a winning attitude.
– Mark Douglas
One of the principal reasons so many successful people have failed miserably at trading is
that their success is partly attributable to their superior ability to manipulate and control the
social environment, to respond to what they want. To some degree, all of us have learned or
developed techniques to make the external environment conform to our mental (interior)
environment. The problem is that none of these techniques work with the market.
– Mark Douglas
The proper execution of your trades is one of the most fundamental components of becoming
a successful trader and probably the most difficult to learn.
– Mark Douglas
The typical trader doesn’t predefine his risk, cut his losses, or systematically take profits
because the typical trader doesn’t believe it’s necessary. The only reason why he would
believe it isn’t necessary is that he believes he already knows what’s going to happen next,
based on what he perceives is happening in any given “now moment.”
– Mark Douglas
The goal of any trader is to turn profits on a regular basis, yet so few people ever really make
consistent money as traders. What accounts for the small percentage of traders who are
consistently successful? To me, the determining factor is psychological – the consistent
winners think differently from everyone else.
– Mark Douglas
When I put on a trade, all I expect is that something will happen.
– Mark Douglas
It’s when you’re winning that you are most susceptible to making a mistake, overtrading,
putting on too large a position, violating your rules, or generally operating as if no prudent
boundaries on your behaviour are necessary.
– Mark Douglas
What you want to do is become an expert at just one particular type of behaviour pattern
that repeats itself with some degree of frequency. To become an expert, choose one simple
trading system that identifies a pattern, preferably one that is mechanical, instead of
mathematical, so that you will be working with a visual representation of market behaviour.
– Mark Douglas
Do the best you can to pay yourself at reasonable profit levels when the market makes the
money available.
– Mark Douglas
Learning more and more about the markets only to avoid pain will compound his problems
because the more he learns, the more he will naturally expect from the markets, making it all
the more painful when the markets don’t do their part.
– Mark Douglas
The market generates behaviour patterns and the patterns repeat themselves, but not every
time.
– Mark Douglas
When you trade from a carefree state of mind, everything about your trading changes.
Remember, that the primary skill that we are talking about here is simply trading without fear.
This is a trading skill. It is the primary trading skill that you will have to aquire to create
consistency – to trade without fear.
– Mark Douglas
If your goal is to trade like a professional and be a consistent winner, then you must start
from the premise that the solutions are in your mind and not in the market.
– Mark Douglas
Ideally, your risk-to-reward ratio should be at least 3:1, which means you are only risking one
dollar for every three dollars of profit potential.
– Mark Douglas
Your last trade has nothing to do with the potential that exists in the market at any given
moment. When you feel compelled to get back, it puts you in an adversary relationship with
the market. The market becomes your opponent, it is you against it, instead of being in
harmony with it.
– Mark Douglas
Why do casinos make consistent money on an event that has a random outcome? Because
they know that over a series of events, the odds are in their favor. They also know that to
realize the benefits of the favorable odds, they have to participate in every event.
– Mark Douglas
Winning and consistency are states of mind in the same way that happiness, having fun, and
satisfaction are states of mind.
– Mark Douglas
Rarely will the typical trader stay with his system beyond two or three losses in a row, and
taking two or three losses in a row is a very common occurence for most trading systems.
– Mark Douglas
Most people know that the outcome of a coin toss is random. If you believ the outcome is
random, then you naturally expect a random outcome. Randomness implies at least some
degree of uncertainty… When we acept in advance of an event that we don’t know how it
will turn out, that acceptance has the effect of keeping our expectations neutral and
open-minded… If you really believed in a random distribution between wins and losses, could
you ever feel betrayed by the market?
– Mark Douglas
For the most part, a typical trader’s perception of the risk in any given trading situation is a
function of the outcome of his most recent two or three trades (depending on the individual).
The best traders, on the other hand, are not impacted (either negatively or too positively) by
the outcomes of their last or even their last several trades.
– Mark Douglas
What separates the “consistently great” athletes and performers from everyone else is their
distinct lack of fear of making a mistake.
– Mark Douglas
Good market analysis can certainly contribute to and play a supporting role in one’s success,
but it doesn’t deserve the attention and importance most traders mistakenly attach to it.
– Mark Douglas
If you asked me to distill trading down to its simplest form, I would say that it is a pattern
recognition numbers game. We use market analysis to identify patterns, define the risk, and
determine when to take profits. The trade either works or it doesn’t.
– Mark Douglas
Once you have aquired the discipline necessary to interact with the trading environment
effectively, you can start using your reasoning skills and intuitive power to determine what
the market is likely to do next.
– Mark Douglas
Learning to accept the risk is a trading skill – the most important skill you can learn… When
you learn the trading skill of risk acceptance, the market will not be able to generate
information that you define or interpret as painful.
– Mark Douglas