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RealTraders:
I was delighted to recently have the opportunity to conduct an
exclusive interview with Mark Douglas. This post contains the
first part of the interview. I highly recommend saving it for
future reference. I will repost this again for newcomers.
Over the past few days, I've had the opportunity read Mark's
new work, Trading in the Zone. As I read what he wrote, I could
not help be say to myself: "Damn--he's right on target."
There are priceless insights contained in it that you simply
won't find elsewhere because Mark is an original thinker.
No--make that an original deep thinker. Unlike the content of
many trading psychology books of I've read which are derived
from the current fads in pop psychology, Mark
acknowledges--quiet rightly---that trading is a pursuit that
requires an entirely different mental strategy from all other
human endeavors. That is why, he says, that many people who are
successful in other professions such as medicine, engineering,
and business come to trading and fail miserably. This rings
true in my own experience. In trading, positive thinking leads
to hope. Hope leads to sitting in a losing trade that you have
no business being in. Mark's strategy is formulated from those
of the best traders in the world as well as his own trading
experiences. Therefore, you want to think like a winning
trader, read this book.
Amid the pile of book carcasses about trading psychology that
gather dust on our coffee table, I'd like you to put this one
on top and refer to it often.
You can get Mark's book by calling 312 938 1441 or you can
inquire about ordering via email: mdoug927@xxxxxxxx I hope it
goes without saying that neither I or Kasanjian Research gets
any remuneration for saying anything of this. I just think Mark
is someone that is worth listening to.
Eddie Kwong
THE INTERVIEW, PART I:
(Note: Like any good coach, Mark does not pull his punches. If
you're sitting there in the locker room during halftime and
losing, you need someone to beat you up a little.
--EK)
Dear Mark,
I am a major fan of yours. I met you on your last visit to Bombay (you
autographed my book, if you remember!)Thanks for some major inputs for
my trading through your book. I have benefitted tremendously from your
perspective on the market (which has, in turn, helped me attain mine).
One thing keeps bothering me. I have turned myself into a very
successful trader since the time I read your book (and I mean that
sincerely as 200+ other books on "methods" never really seemed to have
changed my fortunes in the past several years! This is a question which
I addressed to the RT forum too but somehow did not get a satisfactory
answer.
At what point of time do you realise that you have gravitated
to being a
consummate (or is that too severe a word for it ?) trader ? How can one
stop shaking off the feeling that the streak is going to end. I do
realise that as long as I keep doing the right thing the rewards should
keep coming. But one does get this feeling of being on a run for too
long ? Or is there no such thing as "too long" for a
professional trader
? any thoughts ? Thanks a million, in advance.
Dr.Narayan.
Mumbai, India.
Dear Dr. Narayan,
I normally wouldn't remember signing someone's book. But since
I signed only
three books in all of India, I do remember you. I am also
really pleased
that
you derived so much benefit from "The Disciplined Trader."
Now, to your questions of how can you shake off the feeling that your
winning streak is going to end and is there no such this as
"too long" for a
professional trader. First, I am sorry that you didn't get a
satisfactory
answer
from me at the conference in Mumbai. I don't recall what I said
then, but
maybe this will help. You can stay on your winning streak for
as long as you
believe it is possible. If there are no limits as to what you believe is
possible, then I would say that your streak can and will last
indefinitely.
I would also say that if you had a strong tendency for self-sabotage, it
would have already surfaced by now. So enjoy your success. One
suggestion
for helping to sustain that success would be to have a specific
purpose for
all of the money you are accumulating.
----------------
I would like to hear anything about the tendency to defeat
ourselves when
we take a risk(so that we can say to ourselves; "told myself
so"). And or
learing to accept losses when we are already in a down turn.
Brent
Dear Brent
A persons tendency to defeat themselves comes from two major
sources. One, a
lack of the appropriate skills. Two, conflicting beliefs that
we may have
about winning. Conflicting beliefs about winning can come from
our religious
up-bringing, work ethic values, or a past of belittling
treatment, to name a
few. Sometimes these conflicts are so powerful that we find our
behavior --
that is, what we do -- is in direct conflict with what we want.
Most traders
do not compensate for their potential for self-sabotage,
either by actively
doing something to reconcile the conflicts or compensating for this
potential in their trading style and as a result, suffer the
consequences.
The second part of your question "learning to accept losses when we are
already in a down turn" is somewhat of a contradiction. The risk of any
particular trade is the dollar value of the distance the market
has to move
against our position to tell us the trade isn't working. If
you are going
to trade effectively, the that risk has to be accepted in
advance of putting
on the trade. "Accepted" means, no conflicts about spending the money to
find out if the trade is going to work. The way you know if there's no
conflict is if you can think about taking the loss and doing so doesn't
resonate any emotional discomfort.
The primary way, as traders, to learn how to accept losses is
by learning to
"think in probabilities." If this is something you are interested in, I
would suggest you buy my second book "Trading In The Zone - How
To Create A
State Of Mind That Eliminates The Fear, Stress And Anxiety From Your
Trading."
---------------
Hello Mark:
My question has to do with getting back into trading. I started trading
full-time about 7 months ago. The first few months was fast and
furious. I
was right and wrong around 50% each, I had no system other then
intuition,
other people's assertions and the term money management meant
nothing to me.
Well, eventually I overextended myself (short on the Yen in
January when it
was temporarily recovering) and refused to follow my own rules
re: cutting
losses. Call it stubborness which graduated into stupidity.
Anyway, for
the past 4 months I been trading very little, but watching, learning
indicators, building my own system based on price, breakouts, pattern
recognition, Support/Resistance and overbought/oversold indicators. I no
longer use other people's advice to trade on. Anyway my problem is that
I've only traded about 1/week for a couple of months now and fear is the
main driver. I'm cutting my trades way to short just to insure a small
profit,(7 good out of 11) thus losing many opportunities. I'm
not losing
money but neither am I making money. Anyway, I'm feeling frozen. But I
also recognize that impatience is one of my weaknesses.
Any advice to get me back in the saddle?
Joe Zelwietro
Dear Joe,
Your initial trading experiences are very typical. What's nice
about what
happened is, now you have a direct experience of what's
possible. Meaning
you have to learn how to get back to that "care free" state
mind that you
experienced in the beginning, but there will be one big
difference. You will
also have to build a framework of positive restraint. In other
words, it
will be difficult to get back to that "care-free" state of mind
until you
trust yourself (absolutely) to always act in your own best interests,
without internal conflict or hesitation.
As you already recognize, you are frozen because you're afraid,
and you're
afraid because you don't trust yourself. So now the question is
how are you
going to go about learning how to trust yourself. I have a couple of
suggestions. One, start placing more emphasis on the steps to success as
opposed to the results. When you're focused on the money (the
bottom line)
it is very difficult to stay positively focused on all of the
incremental
steps that result in a satisfactory bottom line. In this
respect, trading
isn't much different than learning how to play a sport. If you
were going to
learn to play tennis or golf, you would have to break the
movements down to
the smallest incremental steps and focus on mastering each of
those steps.
Two, trade at a level where the financial consequences of your
actions have
little, if any, consequence on your equity. There are mini contracts
available in several markets. You might feel some resistance to trading
mini's because there will be times when a winning trade may not
cover your
commissions. However, if you are genuinely committed to the learning
process, then spending the money to educate yourself in this
manner, will
also be of little or no consequence.
------------
(from Todd)
my psych hang up is that I wait for turns, if I miss it instead of
jumping in like I am supposed to , I wait for the next turn.
I know you are not supposed to catch tops and bottoms yet I still keep
doing it. How do I stop ?
Todd,
There are as many different ways to trade as there are traders.
If you like
to wait for turns in the market, in other words, buy support and sell
resistance, this is as valid of a way of trading as any other.
If the way
you define support/resistance is your edge, then your statement
that you're
not supposed to catch tops or bottoms doesn't make any sense to
me. Sorry, I
couldn't be of more assistance.
------------
Mark,
For years prior to August of 1997 I attempted to let profits
run and was
a steady loser. When I started targeting profits I have made money
consistently since then BUT no longer have any big winning trades. How
can I mentally toughen up enough to maintain a winning ratio of 67% but
at the same time allow enough leeway for some of my relatively small
winners to become big winners? Or am I expecting too much too soon(since
last August there were three full months that I did no trading so I'm
really only talking about 8 trading months with the account up 10+% on
48 trades).
Pete
Pete,
The part of your question that I find somewhat troubling is
asking how you
mentally toughen up to maintain a winning ratio of 67%. If you read my
second book "Trading The Zone - How To Create a State of Mind That
Eliminates the Fear, Stress and Anxiety From Your Trading, "
you will find
that winning as a trader has nothing to do with mental
toughness. Learning
how to create and maintain a care-free state of mind where you
are always
making yourself available to take advantage of what the market
has to offer
from it's perspective will enable you to maximum your profit potential.
Setting and trying to adhere to an arbitrary profit potential
of 67% has the
potential of diminishing your objectivity, as well as, cause
you to make a
whole host of trading errors.
-----------
Mark - The biggest problem I have right now is "pulling the trigger." I
will do the analysis. I will go here or another forum and tell everyone
to buy or sell at a level. I get kudo cause I was "right on." But, I
never make the trade. Just yesterday I made the following recs:
1) Buy bonds in the 122-20/26 zone for a big rally. Shud not go below
122-20.
2) Late in the day, sell stocks on sep spooz in 1146/47 area.
3) Also identified buying opportunity for USD at DEM 1.7950.
If I had taken those day trades, I'd be able to take a week or two off.
HOW DO I LEARN TO PULL THE TRIGGER! I have been an analyst my whole life
and am starting to trade.
Steve Poser
Steve,
You will learn to pull the trigger when you stop focusing on being an
analyst and start focusing on what you need to do to be a
trader. These are
two very different functions. Analysis certainly supports trading, but
because you have learned how identify patterns in the markets
behavior that
tell you when or where to buy or sell does not, in any way mean
that you are
a trader. Traders EMBRACE the responsibility and risk of
trading.Everyone
else, to one degree or another, uses their ability to analyze
the market to
avoid the responsibility and avoid the risk of trading. There's a Hugh
difference in perspective here that make a correspondingly Hugh
difference
in ones bottom line results.
Analysis is not the road to success as a trader, learning how
to think and
act like a trader is the road to success. Once you have learned the
appropriate mental skills, then and only then will all of your hard won
analytical abilities come to bare on your over-all trading success.
---------
PART II COMING SOON!!
Eddie Kwong
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