The mind-set of the successful trader

"The longer I live the more convinced I become that life is 10 percent what happens to us and 90 percent how we respond to it." Charles Swindoll

The above is a very powerul quote that captures the essence of a successful trader's attitude or mind-set.

Let me give a few specific examples of various trading situations to clarify the point.

- A trader has his 5th consecutive loss. The losing trader will get upset and subsequently increase his risk on the next trade to recoup the losses. Just as bad he might begin holding on to losing trades in the hope that the market will reverse and save him. The successful trader does something very simple yet disciplined: cut his losses quickly and patiently waits for the next opportunity. He acknowledges that trading is a game of probabilities and that losing streaks are part of the game. He continues to manage his risk intelligently.

- 2 traders each set a profit goal of 25% for the year. The losing trader will get greedy and continue to trade believing that trading is easy and more profits are within easy reach. Stops respecting risk management, takes big risk trades believeing that he can't go wrong. The winning trader shuts off his computer and spends the rest of the time with his family, realizing fully that anything can happen in the market and that if he abandons his plan he will very likely get hurt.

The difference between the winners and losers in this game is the winners think and do the things losing traders won't even consider. In Mark Douglas' legendary book "Trading in the Zone", he outlines quite well what these differences are.

This is absolutely essential reading for any trader of any level. I would even go as far as re-reading it several times throughout your trading career. Based on your own experiences you will pick up new gems with every single read...guaranteed! His first book, "The Disciplined Trader" is also quite valuable, but i would start with "Trading in the Zone"



What you should take from "Trading in the Zone" is quite simply that there are 5 fundamental truths (and 7 rules of consistency) about the nature of the market that winners embrace as naturally as they breath. Print them out, keep them in front of your computer and read them aloud every single day. They are:

The Five Fundamental Truths of Trading
1. Anything can happen.
2. You don’t need to know what’s going to happen next in order to make money.
3. There is a random distribution between wins and losses for any given set of variables that define an edge.
4. An edge is nothing more than an indication of a higher probability of one thing happening over another.
5. Every moment in the market is unique.

The Seven Principles of Consistency
1. I objectively define my edges.
2. I predefine the risk of every trade.
3. I completely accept the risk or I am willing to let the trade go.
4. I act on my edges without reservation or hesitation.
5. I pay myself as the market makes money available to me.
6. I continually monitor my susceptibility for making errors.
7. I understand the absolute necessity of these principles of consistent success and, therefore, I never violate them.