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Hi RealTraders:
My apologies for the long delay in getting Part II of the Mark Douglas
Interview posted. Mark is meticulous about getting things right. Here is
both Part I and Part II together:
PART I:
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. Here is the 3rd repost of Part I of the
Mark Douglas Interview.
--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
Peter,
There are a number of mental exercises and techniques that would help you
become a better trader. The techniques most suitable to you however, would
depend on a number of personal variables not indicated in your question, as
well as, your personal level of development as a trader.
The second part of your question on what do you watch out for that would say
you are not focused or letting your emotions wreck your strategy almost
answers itself, if you have a disciplined approach where you plan your
trades out in advance. If you plan your trades, then you know exactly what
you need to be focused on, making it relatively easy to notice if and when
you are not properly focused.
The same principle would also work when it comes to your emotions. If you
have a plan, any negative emotions you may experience, will virtually always
compel you to deviate from that plan. If you're not particularly sensitive
to how you are feeling, then you will need to pay close attention to your
stream of thoughts. If you find yourself arguing for a course of action that
is inconsistent with your plan or strategy, then start asking yourself why?
Is deviating from your plan in that moment really in your best interests? Of
course, to determine whether or not something is in your best interests, you
have to be relatively clear about what you're trying to accomplish in terms
of your over-all objectives and how you plan to develop yourself as a
successful trader.
Tom
The answer to this question is very easy, although somewhat self-serving for
me. The best way to counter the "four fears" is to fully integrate into
your mental system a framework of "thinking in probabilities." When you
learn and fully integrate at a functional level to principles of
probabilities these four fears will be neutralized. My new book "Trading In
The Zone - How To Create A State Of Mind That Eliminates The Fear, Stress
And Anxiety From Your Trading," is devoted to teaching the reader what it
means to think in probabilities.
Stig,
The answer to your question on how to cure tradeaholism is very difficult. I
don't know of any sure fire way of curing any addiction except to "trade the
addiction in" for something more important. Something that has greater value
or purpose in our lives. Any addiction, trading or otherwise can create
havoc because they put us in a state of "choicelessness." Meaning we feel
compelled to satisfy the object of our addiction regardless of the
consequences or other alternatives that may be available.
To be effective as a traders we need to be flexible and trust that we won't
damage ourselves. The markets present us with a constant, never - ending
flow of opportunities to take advantage of. However, just because
opportunities exist and we perceive them it doesn't mean that we are always
in the most conducive state of mind to take advantage of these
opportunities. In other words, there will be times when we are susceptible
to making any number of trading errors and so NOT TRADING or
scaling back has to be an available choice. An addiction to "not missing
out," as in your case, will negate any possibilities to your perceiving when
it is not appropriate for you to trade.
An example of what I mean by "trading an addiction in", is to replace your
addiction to missing out with an intense desire for consistent results. When
consistent success as a trader is more important than what you presently
experience, then you will take whatever steps are necessary to secure the
object of this new desire. That was a nice way of saying, when you get
really sick and tired of the consequences of your addictions (random,
inconsistent results), you'll do something about it.
I do have one suggestion for you. Your question implied that you do
find yourself in winning trades, but not taking any profit. It's extremely
difficult to take profits if you allow yourself to be convinced that the
market will keep on going in your favor or if you're addicted to not missing
out (you won't be able to tolerate the possibility of market continuing to
move in your favor after you're out of the trade). The simple solution
(although you may find it difficult to implement) is to divide your position
into quarters or thirds and scale out of a winning trade. In other words,
pay yourself as the market makes the money available to you. The long term,
positive psychological benefits of such an approach are enormous.
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