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Thursday, July 24, 2008

The Disciplined Trader: Developing Winning Attitudes

During such difficult and volatile trading times like now, I thought it was a good idea to read The Disciplined Trader: Developing Winning Attitudes by Mark Douglas. As the author rightly puts it, successful trading is 80% psychological and 20% methodological. This book is all about managing your emotions in the ups and downs of the stock market and acquiring the mental skills needed to stay in the market. If you're looking for technical indicators or trading strategy, look elsewhere.

His books is structured into 4 parts:
Part 1: Introduction
Part 2: The Nature of Trading Environment from a Psychological Perspective
Part 3: Building a Framework for Understanding Ourselves
Part 4: How to Become a Disciplined Trader

He listed 10 typical trading errors that have specific cause rooted in thinking methodology that can be changed. Of those 10, I can identify with 3 of then:

-Not acting on your instincts or intuition
-Planning for a move or feeling of one building, but finding it hard to execute, thereby denying self of opportunity to profit
-Focusing on price and monetary value of a trade

Obviously, my key problem lies in self-confidence and self-trust. So how to overcome these problems? One very good solution is to place the order in the market ahead of the anticipated move. This will keep me from having second thoughts about the entry since its placed in advance in the system.

A few chapters in this book is not so easy to read as they are all about psychology: association, memory, beliefs, but I think Mark Douglas puts it there for a purpose - he wants us to go back to the very root of these psychological issues and understand how they are being formed.

One very outstanding phrase from this book which I like very much is this: "Mistakes don't exist. They just point the way to something we haven't learned yet and obviously need to know". Wow, positive thinking! Mark Douglas emphasizes alot on this as he believes that positive energy is expansive.

On a final note, I have to add that this book is not recommended for those who have just started out trading, because most likely you have not gone through the ups and downs and will find it hard to understand. For those who have been trading for some time, I'm sure the themes discussed in this book will strike a chord with you and you will find it useful to apply the techniques for effecting change in your behaviour / attitude towards trading. I highly recommend you read at least this book or Mark Douglas's other book - Trading in the Zone. Do not underestimate the power of psychology on trading.


Anonymous Options Trading Beginner said...


Thanks for sharing about the book. :)

I absolutely agree with you: Never underestimate the importance of psychology in trading.
In fact, that's actually what makes the difference between successful & unsuccessful traders.
They may have the same strategies & techniques, but the results can be very different, due to their own psychology.

I find this aspect (trading psychology) is even the most difficult to master to be a good trader.

Options Trading Beginner

7:43 PM  
Blogger Simply Options Trader said...

Nice to hear from you! We're definitely on the same page and I hope many beginner traders will appreciate the importance of trading psychology.

10:25 AM  

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