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“The less I cared about whether or not I was wrong, the clearer things became, making it much easier to move in and out of positions, cutting my losses short to make myself mentally available to take the next opportunity.” -Mark Douglas
“You need to ‘change your thinking’. The goal is to reach a ‘care-free state of mind’. When a pattern presents itself, don’t think. There’s nothing to think about. Take the trade because you have an edge. Then odds, probability and your risk control mechanisms will take care of everything. In the end, the key is to learn more about yourself. The most important lesson though is the importance of viewing every single trade as being part of a series of trades.” -Mark Douglas"
"In a narrow market when prices are not getting anywhere to speak of but move within a narrow range, there is no sense in trying to anticipate what the next big movement is going to be- up or down. The thing to do is watch the market, read the tape to determine the limits of the get-nowhere prices, and make up your mind that you will not take up interest until the price breaks through the limit in either direction."- Jesse Livermore
"When I put on a trade, all I expect is that something will happen."- Mark Douglas
"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."
"We need to be rigid in our rules so that we gain a sense of self-trust that can, and will always, protect us in an environment that has few, if any, boundaries. We need to be flexible in our expectations so we can perceive, with the greatest degree of clarity and objectivity, what the market is communicating to us from its perspective."- Mark Douglas
"It always seems the best trades are the small ones you don't care about. In that case, make them all small to take your emotions out of the equation and let the power of the option and whatever edge you use do its thing."
"When dealing with options, using stops take you out of the trade entirely. You never really know what the market will give you on any given day. If one assumes a 100% loss right from the start, and sizes their position appropriately, you can let the position expire painlessly but still have a position to take advantage of if something crazy happens within your option timeframe."
"Despite your best efforts, you never really know which edges are going to work and which aren't so stop trying to predict outcomes. By taking every edge, you increase your sample size of trades, which in turn gives whatever edge you are using ample opportunity to play itself out in your favor, just like the casinos."- Mark Douglas
"It is exactly like options, trial and error, not getting stuck, bifurcating when necessary but keeping a sense of broad freedom and opportunism. Trial and error is freedom.”- Nassim Taleb
"Markets are simple in that $1 in and $1 dollar out at end of day only generate trading volatility but does little to push prices higher. Markets need buyers who are willing to hold invesments overnight to sustain price moves. When these are absent, markets drop until levels are reached when these same buyers feel prices and conditions are attractive enough to hold investments longer term.
“I haven’t seen much correlation between good trading and intelligence. Some outstanding traders are quite intelligent, but a few aren’t. Many outstanding intelligent people are horrible traders. Average intelligence is enough. Beyond that, emotional makeup is more important.”- Mark Douglas
“Why do you think unsuccessful traders are obsessed with market analysis? They crave the sense of certainty that analysis appears to give them. Although few would admit it, the truth is that the typical trader wants to be right on every single trade. He is desperately trying to create certainty where it just doesn’t exist.” – Mark Douglas
Tune out the intraday noise. Use end-of-day, week or month as a guage for the general sentiment of your stock within the timeframe you're playing.
Randori is a term used in Japanese martial arts to describe free-style practice. The term literally means "chaos taking" or "grasping freedom," implying a freedom from the structured practice of kata. Randori may be contrasted with kata, as two potentially complementary types of training.
The 5 Fundamental Truths of Trading:
1. Anything can happen. 2. You don’t need to know what is going to happen next 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.
The 7 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.