Recommended Books

Trading in The Zone

Have you ever heard of Mark Douglas’s famous
book, Trading in The Zone
?

Well, I venture to say that many have heard, some have read, but few have understood to the point of applying this ‘mental technique’ in their trading life.

Who was Mark Douglas?

Mark Douglas started trading in 1978 managing an insurance agency in the suburbs of Detroit.

In 1981 he moved to Chicago and became a broker at Merrill Lynch. Nine months later, he lost almost everything he had.

This made her live a unique experience and make it a unique learning about the role of trading psychology.

It was then that he began this hard and long journey to try to unravel this paradoxical mystery, so simple and complex at the same time, that it is the ‘being a consistent trader, winning trader,’.

In 1982 he began writing his first book, The Disciplined Trader: developing winning attitudes, which was only published seven years later in 1990.

After this project he spent the last 17 years dissected the psychological dynamics behind trading having developed effective methods to teach the principles of success.

Today he is considered one of the main trading coaches who have passed through this planet.

In 2000, Mark Douglas published his true ‘masterpiece’, the book Trading in the Zone which in 11
chapters
presents fundamental points for those who wish to have as a profession, be it primary or secondary, trading.

And that, primarily, seek an ascendant and consistency in this ‘arduous’ world of trading.

Trading in The Zone – A Brief Summary

In the introduction we perceive a sincerity and transparency, a ‘tear the verb’ that actually shows a hard and true reality.

“For beginners, the only challenge seems to be finding a way to make money. But when they realize that the tips and advice of the most experienced or other ways to justify buying or selling assets do not work consistently, they discover that they need to develop or acquire a reliable strategy. After that, negotiating should be easy, right? It would be enough to follow the rules and the money begins to fall into the lap! Guaranteed….. However, this is not what you see in statistics where 95 percent of futures traders lose all their money during the first year of activity.”

In the first chapter the author already presents an instigating and controversial theme, ‘The path to success: Fundamental analysis, technical analysis or mental analysis?’. It briefly presents the points of each school and how important or not these are for operations in the stock and futures market.

Many know the first two schools mentioned, but few know and understand the ‘mental analysis’ soimportant and valuable.

In the following four chapters we see key and important points of behavior in the face of operations/trading: fascination, taking responsibility, mental state and perception. Here we can clearly understand how flawed we are in acting in the market and the dangers we take on keeping the emotional strictly involved, thus compromising the success of trading.

In chapter six, the author presents us with the ‘most elementary feature of the market: Ability to behave in an almost infinite combination of forms’. That is, the market is a ‘system’ impossible to predict, we work with variables and probabilities that do not give us absolute certainty, but rather possibilities, signs of possible advantages in one direction than in another. The market is immeasurable, inexhaustible and undefined.

In the four later chapters the author presents important points and attitudes that if well applied can favor us advantageously when we are in front of the indicators and thus make better decisions, in a safer and more peaceful way.

The essence of the trader, terms of probabilities; the convictions and their natures; are characteristics and behaviors that can be vital in the day-to-day with the market.

In the first and last chapter the author closes with ‘goldenkey’: Think like a Trader. In this chapter he shows the mechanical phase; observing oneself, self-discipline, conviction of consistency.

We need to reach the phase of performing operations in a natural and mechanical way without any emotional feeling being involved, maintaining a “neutral” posture in the face of the consequences, without wanting to blame anyone or even us.

It is necessary to allow the game to be played and seen from within, in the process and in its centrality and not by the stands as a mere supporter. And finally, we seek to cross the threshold of consistency:

“The determining feature that distinguishes winners from everyone else is this: the winners have achieved a mental state, a unique set of attitudes, which allows them to remain disciplined, focused and, above all, confident, despite adverse conditions.”

Douglas, Mark (2001), Trading in The Zone. USA: Prentice Hall Press.