I recently ordered from Barnes and Noble, the Book entitled Trading in the Zone by Mark Douglas. It is written with one objective in mind – to help you conquer the markets mentally. He doesn’t go into fundamental analysis or technical analysis, instead he tackles what he terms Mental Analysis (Love that term!) I’ve read the first few chapters and so far I have been very impressed. There are a lot of things in that book that I have already benefited from, and I know you can too (Disclaimer: I’m not profiting off of this mini-review nor do I have some link set up to where I will profit if you choose to buy this book – I’m just trying to point out some good reading material for you to benefit from). 

Undoubtedly, the mental aspect is probably the most important part of trading, and it is usually the most constantly overlooked aspect. When I tell my family and friends that if they are going to trade or invest in the stock market, that they better equip themselves mentally before doing so, they give me this strange look as if I’m crazy and they go on to tell me how smart they are or what type of degrees they’ve earned. Trading is not easy and it can easily affect your moods, relationships and your life in general. Frankly, it doesn’t matter what your I.Q. is or what degree you have attained, the market will beat you down in the same manner as it will a garbage man or custodian. So the better you equip yourself mentally, the better you will be at trading and thus the more consistently profitable that you will become.

So here are a few quick takes from the first chapter of Mark’s book (which I highly recommend – so far):

  • The best traders can put on a trade without the slightest bit of hesitation or conflict, and just as freely and without hesitation or conflict, admit it isn’t working. They can get out of the trade – even with a loss – and doing so doesn’t resonate the slightest bit of emotional discomfort. In other words, the risks inherent in trading do not cause the best traders to lose their discipline, focus, or sense of confidence.
  • Learning how to redefine your trading activities in a way that allows you to completely accept the risk is the key to thinking like a successful trader. Learning to accept the risk is a trading skill – the most important skill you can learn.
  • Ninety-five percent of the trading errors you are likely to make – causing the money to just evaporate before your eyes – will stem from your attitudes about being wrong, losing money, missing out, and leaving money on the table.
  • So if you are afraid of being wrong or losing money, it means you will never learn enough to compensate for the negative effects these fears will have on your ability to be objective and your ability to act without hesitation. In other words, you won’t be confident in the face of constant uncertainty.

I actually think these are pretty good truths that can be applied to life in general whether it be work, athletics, or in taking any kind of risk in life. Much of our success isn’t as much dependant on our book knowledge as it is on our mental state of mind.