[3 min read]
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Strategic Intelligence Questions
- For every dollar you risk, how many dollars of potential profit should you be aiming for?
- In essence, what separates the most successful traders from everybody else?
- When trading, what are the five fundamental truths?
- When trading, what are the seven principles of consistency?
- What is probably the most difficult trading skill to master?
- What is the direct similarity between trading the markets successful and the virtual world created by social media?
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Key Strategic Extracts from ‘Trading in the Zone’
‘Write down the five fundamental truths and the seven principles of consistency, and keep them in front of you at all times when you are trading… (p. 137).’
‘You can compensate for these subtle changes in underlying dynamics of market movement and still maintain consistent approach by trading in sample sizes…. at least 20 trades fulfils both of these requirements (p. 135).’
‘The typical trader practically lives or dies (emotionally) on the results of the most recent trade…. we have to expand our definition of success or failure from the limited trade-by-trade perspective of the typical trader to a sample size of 20 trades or more (p. 134).’
‘Ideally, your risk-to-reward ratio should be at least 3:1, which means you are only risking one dollar for every three dollars of profit potential (p. 134).’
‘Taking Profits…. is probably the most difficult to master…. Because the object of the belief is winning consistently, how you take profits in a winning trade is of paramount importance (p. 132).’
‘Do the best you can to pay yourself at reasonable profit levels when the market makes the money available. [Because] every proportion of a trade that you take off as a winner will contribute to your belief that you are a consistent winner (p. 134).’
‘Seven Principles of Consistency:…
1. I objectively identify my edges.
2. I predefine the risk of every trade.
3. I completely accept the risk or I am willing to let go of the trade.
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 (p. 128).’
‘Remember… putting on winning trade requires absolutely no skill…. whereas consistency is a state of mind that, once achieved, won’t allow you to be any other way… it will be a natural function of your identity (p. 126).’
‘The Role of Self-Discipline.… self-discipline is a technique to create new mental framework [you will no longer need self-discipline when the technique successfully becomes who you are] (p. 124).’
‘… imagine walking across a bridge over the Grand Canyon. The width… directly related to the number of contracts they trade… for one contract trader the bridge is very wide, say 20 feet… a great deal of tolerance for error [as opposed to a thin wire] (p. 122).’
‘In fact, trading is probably the hardest thing you’ll ever attempt to be successful at. That’s not because it requires intellect…. But because the more you think you know, the less successful you’ll be (p. 120).’
‘What separates the best traders from all the rest is that they have trained their minds to believe in the uniqueness of each moment (p. 97).’
‘The best traders are in the “now moment” because there’s no stress. There’s no stress because there’s nothing at risk other than the amount of money they are willing to spend on a trade (p. 91).’
‘A probabilistic mind-set pertaining to trading consists of five fundamental truths.
1. Anything can happen.
2. You don’t need to know what is 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 (p. 89).’
‘The point is that from our own individual perspective as observers of the market, anything can happen, and it takes only one trader to do it (p. 74).’
‘Good market analysis can certainly contribute to and play a supporting role in one’s success, but it doesn’t deserve the attention and importance most traders mistakenly attach to it (p. 70).’
‘The Power of Association…. This natural tendency for our minds to associate is an unconscious mental function that occurs automatically (p. 63).’
‘Perception and Learning…. The energy that’s inside of us will categorically limit and block our awareness of much of this information… (p. 59).’
‘There is absolutely nothing to indicate that we don’t have an unlimited capacity to learn. The difference between what we are aware of now and what we can do as a result of this expanded awareness would boggle the mind of anyone living 100 years ago (p. 58).’
‘Taking responsibility is the cornerstone of a winning attitude (p. 48).’
‘… your edge won’t make you a consistent winner if you don’t have winning attitude (p. 47).’
‘One of the many contradictions of trading is that it offers a gift and a curse at the same time…. perhaps for the first time in our lives, we’re in complete control of everything we do. The curse is that there are no external rules or boundaries to guide or structure our behaviour (p. 28).’
‘Nothing we do in society properly prepares us to function effectively in such a “boundary-less” environment (p. 28).’
‘What’s important for us to understand about these unreconciled, denied impulses (that exists in all of us) is how they affect our ability to stay focused and take a disciplined, consistent approach to our trading (p. 27).’
‘You will need to learn how to adjust your attitudes and beliefs about trading…. That’s exactly what this book is designed to teach you (p. 21).’
‘… no matter how much you learn about the market’s behaviour, no matter how brilliant an analyst you become, you will never learn enough to anticipate every possible way that the market can make you wrong or cause you to lose money (p. 20).’
‘Ninety-five percent of the trading errors you are likely to make… will stem from your attitudes about being wrong, losing money, missing out, leaving money on the table (p. 19).’
Involgize!