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This is going to be one of those posts that you want to bookmark and read over and over because there is so much wisdom here from Mark Douglas and these concepts really need to sink in. The majority of this post are my notes from a recorded seminar that I watched within the INO TV library, which has an enormous amount of resources available on the following topics: options, psychology, trading systems, futures, and much more.
I personally don’t watch much tv and it’s nice to have all these resources available in one place that I can just turn on whenever I want. If you’d like to gain access to this same trading library for free, click here.
Why Mindset is so Important
The professions that correlates with trading the best is a gambler because the focus on money management and continuously calculates probabilities.
Most people understand the nature of probabilities, but what they don’t know is that they have not integrated what they understand at a functional level inside their mental environment.
Traders may understand probabilities, but that doesn’t mean they can function in probabilities. You must have a key belief in a random outcome for each trade. This is a problem for traders because they see consistent patterns everywhere that produce similar outcomes over time, but the statistical reliability causes them to only focus on the consistency and not the randomness. This happens over and over because we don’t want to deal with the uncertainty.
The outcome to each individual pattern is random in relationship (in other words statically independent) to the outcome the last time it showed up. There is a random distribution between wins and losses. You must believe this to the core in your trading personality. When you grasp these concepts you will be taking trading out of a right/wrong context and more in a system based trading structure.
Do you get worked up when you flip a coin and it comes up heads when you thought it would be tails? Does it tap you into the accumulated pain of every time you’ve been wrong in your life if it comes up a side you didn’t expect? Of course you don’t because it’s a random outcome.
It’s when you believe it isn’t that you put trading into a right/wrong context that creates the potential to tap you into pain, that then starts narrowing your focus of attention, to where you end up attracting the very thing you’re trying to avoid.
Whatever your edge (higher probability of one thing happening over another) is, it will never be exactly the same as the previous scenario because unless every single person who created the pattern in the past, would have to be present in this now moment, interacting exactly the same way with everyone else…so that the two patterns are exactly identical.
