Cover via Amazon
In Which Rogue Traderette has an Epiphany.
It amazes me how in trading, but also in life generally, some things are hidden from my awareness until just the right moment comes and that baby (that was always there, but sneakily concealed), leaps in front of me, waving streamers while sparkly confetti falls from the sky and yells “I’m Here! Hello! About time you bloody noticed me!” Then it rolls its eyes, grasps me firmly by the hand and tells me it’s high time I got to business doing things the right way.
I’ve heard people call these “Aha!”moments. Or when the ‘penny dropped’. Obviously, they lack sufficient drama. 
I’ve been re-reading Mark Douglas’s “Trading in the Zone” and I had such a moment. It’s a fantastic book, but somehow aspects of its brilliance just passed me by the first time I read it – obviously, I wasn’t ready for it.
This time however, I was in the right emotional place to learn. Humble enough to recognise I needed to change (a nice break from my usual arrogance). Open enough to receive new wisdom (a lovely change from assuming everything I know is correct – arrogance with its good mate stubbornness). And curious enough to find the answers I needed.
A little bit of History and inflection – sorry, bear with me.
I come from a family of very clever people. Out of the five of us, 3 of us are geniuses and 2 of us are fun
As luck would have it, I’m one of the fun ones.
Having to live up to my brilliant siblings through my school years didn’t erode my self-confidence, but it did give me a burning desire to be really great at something – and a few years ago I decided that something will be trading.
What I didn’t realise was that my need to be a great trader translated (subconsciously) into a need to be good, which translated into getting my trades right, which in turn led to me being fairly consistently wrong, via self-sabotage of my system. Whew.
The Lesson
In “Trading in the Zone”, Mark Douglas suggests that there are 5 Fundamental Truths that need to be accepted before you can trade from a totally objective mindset. That is, without all your years of accumulated baggage stuffing up your results. In very shorthand, he says you need to trade like a casino – probability based, with no particular outcome required of any one trade.
These are Mark Douglas’s Five Fundamental Truths –
1. Anything can happen. Translated – you have no control over the market.
2. You don’t need to know what’s going to happen next in order to make money. You don’t need to be psychic, or try to predict the market. This is not to say that you cannot predict what the market will do next and be correct, only that you don’t have to, and that by trying to predict you shackle yourself to ‘the need to be right’ and the associated ball and chain.
3. Wins and losses are random – You will never know when a trade will be a winner in advance, only that the conditions that define your edge are present.
4. Your edge is nothing more than a higher probability of one thing happening over another. Your edge is no guarantee of a winning trade, just of winning over time.
5. Every moment in the market is unique. Just because a similar trade won last time does not mean it will this time, and by treating each trade as totally unique you can see the truth of the trade without relating it to ‘what happened last time’.
These beauty in these theories is that they take the emphasis off any one trade, and turn your trading into a big picture endeavour.
Taking a view like this removes the emotional ups and downs that come from adding meaning to individual trades, because the results of individual trades don’t mean much in and of themselves – providing you’ve traded to your plan. It’s a great feeling to be able to let go, and let the system do its job without freaking and making it personal.
In order to become a great trader, I have to stop trying to be a great trader. And start being a consistent one.
Comments on: "The Art of Being a Casino" (11)
interesting post. thanks!
My pleasure!
hi Jess,
chaotic traders are growing ; you know, the kind that hate SL and TP
… and what mr Douglas is describing belongs to this universe … if i may :
his #1 comes as no surprise, true : “Anything can happen”, we cannot expect any foreseeable behavior, market structure (long term) is deterministic, for sure (my call) but any short term moves are chaotic and obey to attractors, which cannot be quantified ‘before the facts’ (only After, with their own spec. quad equation)
#2 : no need to predict, market is generous it s true if you have an edge (and can use it), once an Attactor is triggered she will ‘do’ her thing and anyone can enjoy and reap … so why are so many being merked? anyone?
#3 : random wins and loss … i d need more than this space to argue on this, but yea, if we go with cycles : there s no price determinism, only time…
#4 “the edge is just a higher prob” : sounds good, true, my edge would be i get the best entry and then i see if i take a 80 pip win or if my system tells me “now you have to close soon” so i take a 30piper loss … i just try to stay off the 2nd scenario, but yea, all so true…
#5 is just the sheer definition of what markets are : non_linear dynamic beast, this is why if you get a chaotic/attractor/fractal system you do not need any SL nor TP.
Thanks for this summary ; and you are right to remind us that this is a long term venture, every loss is to be integrated in the long range P&L and should not decimate confidence.
it is nice to see you are getting interested in the chaotic side of the market ; it has been denied by the “experts” for so long, just bc they could not understand it nor would they want to, as they would kill the golden goose that every potential new trader is as far as paying for their ‘ad-vice’.
thanks for the great articles.
I rekon people are getting ‘merked’ because they think they have something to do with how the market acts, and everytime it doesn’t do what they “expect” or “predict” they take it personally.
Taking it personally opens up a pandora’s box of screwed up trading plans, confusion as to why certain trades didn’t work, lack of belief in your system… and on it goes.
Hello,
I’m reading the book right now, I gradually discovered that one of my biggest problems as a beginner is taking profits (!?). I’m trying to resolve the issue but I have some problems (I’m relatively patient).
‘Believe it or not, of all the skills one needs to
learn to be a consistently successful trader, learning to take profits
is probably the most difficult to master. A multitude of personal,
often very complicated psychological factors, as well as the effectiveness
of one’s market analysis, enter into the equation.’
in Douglas Mark, ‘Trading in the Zone’
I agree. Exits are tricky! Best of luck finding a method that suits you
Hi Jess …nice blog.
From what I’ve read here, I believe you’ll enjoy this video interview of world class poker player Annie Duke on the subject of ‘probabilities’ and other things that Mark Douglas writes about.
http://consult-fx.com/annie-duke-poker-player-interview
Trade safe.
Rob
Thanks Rob! I’ve just been reading The New Market Wizards, and there’s a couple of black jack and poker players in there too. Very interesting!
Hi
What do you trade?
Hi Terry,
I trade CFD’s on the XJO (Aussie top 200), and any Aussie equities that fit my criteria. I’ve also traded FX and indices via CFD’s, but am not right now.
[...] “In Trading in the Zone, Mark Douglas suggests that there are 5 Fundamental Truths that need to be accepted before you can trade from a totally objective mindset. That is, without all your years of accumulated baggage stuffing up your results. In very shorthand, he says you need to trade like a casino – probability based, with no particular outcome required of any one trade.” (ROGUE TRADERETTE) [...]