Trading in the Zone

When you operate from the assumption that more or better analysis will create consistency, you will be driven to gather as many market variables as possible into your arsenal of trading tools. But what happens then? You are still disappointed and betrayed by the markets, time and again, because of something you didn’t see or give enough consideration to. It will feel like you can’t trust the markets; but the reality is, you can’t trust yourself.

the best traders have developed attitudes that prevent them from getting reckless. Everyone else is afraid, to some degree or another. When they’re not afraid, they have the tendency to become reckless and to create the kind of experience for themselves that will cause them to be afraid from that point on.

Think about the number of times you’ve looked at a price chart and said to yourself, “Hmmm, it looks like the market is going up (or down, as the case may be),” and what you thought was going to happen actually happened. But you did nothing except watch the market move while you anguished over all the money you could have made.

Ninety-five percent of the trading errors you are likely to make—causing the money to just evaporate before your eyes—will stem from your attitudes about being wrong, losing money, missing out, and leaving money on the table. What I call the four primary trading fears.

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. If the information the market generates doesn’t have the potential to cause you emotional pain, there’s nothing to avoid. It is just information, telling you what the possibilities are. This is called an objective perspective—one that is not skewed or distorted by what you are afraid is going to happen or not happen.

The market is neutral, in the sense that it moves and generates information about itself. Movement and information provide each of us with the opportunity to do something, but that’s all!

There’s a big difference between predicting that something will happen in the market (and thinking about all the money you could have made) and the reality of actually getting into and out of trades. I call this difference, and others like it, a “psychological gap” that can make trading one of the most difficult endeavors you could choose to undertake and certainly one of the most mysterious to master.

The trade either works or it doesn’t. In any case, you wait for the next edge to appear and go through the process again and again.

Those traders who have confidence in their own trades, who trust themselves to do what needs to be done without hesitation, are the ones who become successful. They no longer fear the erratic behavior of the market. They learn to focus on the information that helps them spot opportunities to make a profit, rather than focusing on the information that reinforces their fears.

Once you learn to identify patterns and read the market, you find there are limitless opportunities to make money. But, as I’m sure you already know, there can also be a huge gap between what you understand about the markets, and your ability to transform that knowledge into consistent profits or a steadily rising equity curve.