Michael Douglas's Mind over Market

Michael Douglas has this wonderful interview on YouTube. Watching the interview reminded me of the points from his all-time famous book "Trading in the Zone".

Thinking in probability

This is about not expecting to win every time. He mentioned that when we are trading with an edge, we swap positions to be the casino. We will win in the long run like how casinos work. Trend following strategies are known to have long periods of drawdowns. The key is to stay in the game, believe in yourself and your system.

In the zone

Someone says humans always look for comfort. Our behaviours change base on the outcome. We tend to take the easier path. That's how our brains are programmed to work, especially in times of duress. This concept of "in the zone" basically tells us to practise so hard that we subconsciously do what we have to do when we are in a trade, when we are experiencing the pressures from the market, to not let our conscious brain determine out next course of actions but instead leave the decision making to the subconscious part of our brain.

Approaching the market with the right attitude

I have asked myself many times over.

Why Ed Ponsi's strategies in his book Forex Patterns and Probabilities are so simple but yet he is able to make money trading forex?

Why Linda Raschke mentioned in her book Street Smarts that we only need to be good in 1 strategy to be profitable?

Again, Curtis Faith brought up the same idea of simplicity in trading in his book Way of the Turtle:

...The funny thing is that most of the principles that Richard Dennis taught us were not new. Some were basic principles that had been espoused by other famous traders since before Richard was born. Yet the very simplicity of the principles we were taught in some respects was a hindrance for those of us who tried to follow them in those initial months. People have a tendency to believe that complicated ideas are better than simple ones. Many find it hard to comprehend that Richard Dennis could have made several hundred million dollars by using a handful of simple rules...

Why Fibonacci levels work like miracle for Joe DeNapoli but not for everyone?

Why not everyone makes money trading complex concepts like Gann or Elliot waves?

Why so many traders say K.I.S.S? Keep it simple and sweet?

There is a lot to learn from Jesse Livermore's attitude and approach to the market. I really take my hat off him for recording the prices with pen and paper. And the rules are not trivial at all. I believe many of us started with studying the strategies to approach the market but how many of us started with studying the market itself? I also realized that it is not wrong to begin with a strategy. However, the focus should always be on the market. Beginning with strategy helps us to zoom in and to filter out the noise such that we can concentrate on a part of the market and develop our research of the market from there. Can you imagine Jesse Livermore merely traded with the quotes from the ticker tape? No charts at all. He treated the stock prices like a giant puzzle, like how we play Sudoku or any other games. And that should be the right attitude - To crack the market puzzle, a piece at a time, using a strategy that we personally believe in.

Trading Lingo Revealed: I Profitted 1000 Pips

Well, sometimes, it is difficult to convey our thoughts accurately with our natural language. I find this especially true with trading.  I am starting this series to debunk/reveal what else could people mean when they talk in the trading lingo that we hear commonly.

First up: "Hey, I profitted 1000 pips last night, the strategy works!"

Some questions that you may need to probe further:

1. Ok, last night is 1000 pips, how was it the night before or the night before before? Trading is not about one hit home runs. Or the person may lose the 1000 pips in the next few days.

2. What does 1000 pips mean? Can 1000 pips profit mean $10 profit? It sure can!

3. Does the strategy really work? Single hit wonders don't count in trading.