Trading In The Zone By Mark Douglas (Book Review & Summary)

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 Main Theme

  • How does a trader stay confident and disciplined in the face of uncertainty?
  • Mental framework for successful trading
  • Challenges (psychological & technical) traders face

Key Takeaway #1 – There’s a BIG difference between predicting & executing trades

  • Predicting what a market could do is easy – executing trades is more complex
  • It takes confidence, humility, and discipline to properly execute a trade
  • Hindsight is always 20/20
  • Trading is all about thinking like a chess player – anticipating all the possibilities and probabilities

Key Takeaway #2 – Great traders manage fear

  • Great traders execute trades without hesitation, and quickly admit when a trade isn’t working
  • Fear can overtake rationality
  • Need to truly accept risk to trade without fear or discomfort

Fear causes errors:

  • Get in to trades too soon or late
  • Turn small losses into big losses
  • Get out too early on winners
  • Turn winners into losers
  • Stop out to see it turn into a win

 Take responsibility for everything that happens:

  • Know that the market will do whatever it wants
  • Your only two jobs are: trade selection and trade management

Key Takeaway #3 – Forget results and focus on the process

  • Stop system hopping, chasing the holy grail
  • Instead, define your edge and follow the process of skill development and execution

3 Steps for disciplined trading:

  1. Predefine your risk before taking a trade
  2. Cut your losses without hesitation
  3. Use a systematic money management plan

Key Takeaway #4 – The 7 Principles of Consistency

  1. I objectively identify my edges
  2. I predefine the risk of every trade
  3. I completely accept the risk or I am willing to let go of the trade
  4. I act on my edges without reservation or hesitation
  5. I pay myself as the market makes money available to me
  6. I continually monitor my susceptibility for making errors
  7. I understand the absolute necessity of these principles of consistent success and therefore never violate them.

Final Thoughts

  • View trading for what it really is – a process of possibilities and probabilities
  • Focus on skill development and trading plan execution
  • Find a trading style that fits your personality and risk tolerance

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About The Author

Chris Dunn is the founder of Skill Incubator. He is an active investor and entrepreneur with the mission of helping people learn Skills to thrive in today's economy. Chris spends his time testing and building multiple streams of income and investing the profits. Read more here.