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5 Incredible Quotes on the Psychology of Trading

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Wise words from the seminal work of legendary author Mark Douglas

In the world of trading, few books have had the impact of Mark Douglas’ big hit Trading in the Zone.

Written almost two decades ago, the book has become a must read for traders looking to elevate their game to legendary status.

While there is so much wisdom to be found in the book, we’ve compiled 5 of the best quotes every trader should read.

“If you can learn to create a state of mind that’s not affected by the market’s behavior, the struggle will cease to exist.”

When we make trades, we focus all of our attention towards the market. Simply put, when the market goes up, we’re happy, and when it goes down, we’re sad.

In past articles, we’ve reviewed all of the stages of emotions that traders encounter while trading. If you’ll recall, the only emotion that is healthy to experience while trading is no emotion.

When you feel good, you may have a tendency to be overcome with self confidence, which could lead to reckless trading. The opposite is true for sadness. When you’re in a funk, you might be apprehensive about making another trade. You might hesitate and miss your opportunity.

If we come to the market free from emotions that come as a response to market events, we are free to focus on the actual facts of a trade.

The reality is, each trade is just a small part of the overall, wide picture of your trading. One loss doesn’t necessarily matter, nor does one win. Disconnect emotionally from each trade and stay focused on the long term, bigger picture.

“When you genuinely accept risks you will be at peace with the outcome.”

Before you enter a trade, if you have a concrete risk management plan as part of your trading strategy, you should not sit by and worry as a trade develops.

If you accept the risk you’re willing to take, anxiety as a trade progresses will diminish.

If however, you find yourself worrying anxiously while watching a trade develop, it’s a good sign that you need to dial down your risk to an acceptable level.

“Trading is not about being right or wrong. It’s a probability game.”

When you make trades, you’re playing into the probability that those trades will go in the direction of your favor.

Over time, the probability game will dictate which trades you should make and which trades you shouldn’t make. However, since it’s a probability, the chances of the trade not working in your favor is always there.

This is why it’s not about being right or wrong. Even the best looking trade might not work out in your favor due to unforeseen events. The same holds true with a trade that initially looks bad. Overtime, it may prove to be incredibly fruitful.

“…a typical trader wants to be right on every trade.”

Whether they’d admit it or not, it’s a safe bet to say that most traders feel this way.

While losing is part of the trading game, most traders would obviously prefer to win on every trade. This mentality leads many traders to over analyze and rationalize each and every trade.

The problem with this is, losing is a part of the business. Once we accept this, we can move away from over analyzing and just accept that some trades won’t work in our favor. It will reduce anxiety and allow us to enjoy bits of the bad times along with the good.

“The hard, cold reality of trading, is each trade has an uncertain outcome.”

This one is a bit of a summation of the previous four quotes.

Even when you have what you think is a sure thing, the outcome is still uncertain because there are absolutely zero guaranteed trades.

A good way to deal with part of this psychological obstacle is to grade your setups. Take a look at each of them and assign them a letter grade according to how good or how bad they are. At least this way you’ll know how prepared or unprepared for a trade you were. It will also help to accept that even an A+ rated setup is no guarantee to succeed.

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