Mark Douglas quotes page 2
Learning more and more about the markets only to avoid pain will compound his problems
because the more he learns, the more he will naturally expect from the markets, making it all
the more painful when the markets don't do their part.
The market generates behaviour patterns and the patterns repeat themselves, but not every
When you trade from a carefree state of mind, everything about your trading changes.
Remember, that the primary skill that we are talking about here is simply trading without fear.
This is a trading skill. It is the primary trading skill that you will have to aquire to create
consistency - to trade without fear.
If your goal is to trade like a professional and be a consistent winner, then you must start
from the premise that the solutions are in your mind and not in the market.
Ideally, your risk-to-reward ratio should be at least 3:1, which means you are only risking one
dollar for every three dollars of profit potential.
Your last trade has nothing to do with the potential that exists in the market at any given
moment. When you feel compelled to get back, it puts you in an adversary relationship with
the market. The market becomes your opponent, it is you against it, instead of being in
harmony with it.
Why do casinos make consistent money on an event that has a random outcome? Because
they know that over a series of events, the odds are in their favor. They also know that to
realize the benefits of the favorable odds, they have to participate in every event.
Winning and consistency are states of mind in the same way that happiness, having fun, and
satisfaction are states of mind.
Rarely will the typical trader stay with his system beyond two or three losses in a row, and
taking two or three losses in a row is a very common occurence for most trading systems.
Most people know that the outcome of a coin toss is random. If you believ the outcome is
random, then you naturally expect a random outcome. Randomness implies at least some
degree of uncertainty... When we acept in advance of an event that we don't know how it
will turn out, that acceptance has the effect of keeping our expectations neutral and
open-minded... If you really believed in a random distribution between wins and losses, could
you ever feel betrayed by the market?
For the most part, a typical trader's perception of the risk in any given trading situation is a
function of the outcome of his most recent two or three trades (depending on the individual).
The best traders, on the other hand, are not impacted (either negatively or too positively) by
the outcomes of their last or even their last several trades.
What separates the "consistently great" athletes and performers from everyone else is their
distinct lack of fear of making a mistake.
Good market analysis can certainly contribute to and play a supporting role in one's success,
but it doesn't deserve the attention and importance most traders mistakenly attach to it.
If you asked me to distill trading down to its simplest form, I would say that it is a pattern
recognition numbers game. We use market analysis to identify patterns, define the risk, and
determine when to take profits. The trade either works or it doesn't.
Once you have aquired the discipline necessary to interact with the trading environment
effectively, you can start using your reasoning skills and intuitive power to determine what
the market is likely to do next.
Learning to accept the risk is a trading skill - the most important skill you can learn... When
you learn the trading skill of risk acceptance, the market will not be able to generate
information that you define or interpret as painful.