Chapter 6 The Markets Perspective
Most traders perception of risk is a function of their most recent trades, the best traders do not have this problem.
You need to train your mind to stay in the now moment opportunity flow
The Uncertainty Principle - You need an unshakeable belief in an uncertain outcome with an edge in your favour, in order to
1) Trade without fear or overconfidence,
2) perceive what the market is offering from the markets perspective,
3) Stay focused in the now moment opportunity flow
4) Spontaneously enter the zone
The best traders make themselves available to take advantage of whatever opportunities the market offers at any given moment.
The fear of being wrong causes us to place an inordinate amount of significance on the information that tells us were right.
By making yourself available you know that your edge places the odds of success in your favour but at the same time you completely accept you dont know the outcome of any particular trade. By opening your mind up you can learn things about the market you didnt know and set up the mental condition most conducive to entering the zone.
In the zone means your mind and the market are in sync. To do this you need to:
1) Learn how to keep your mind focused in the now moment opportunity flow
2) Learn to trust the creative side of your brain instead of solely relying on the rational logical side. Its the creative side that holds the hunches, intuition and inspiration.
Once again you need an unshakeable belief in uncertainty and your edge.
Being a good trader is not synonymous with being a good market analyst.
Most traders dont do the mental work necessary to reconcile the conflicts that exist between what they have already learned and how that contradicts and acts as a source of resistance to implementing the various principles of successful trading. The Markets Most Fundamental Characteristic - The market can do anything at any time.
All price movement is a function of what traders believe about the future i.e. what is high in price and what is low.
Three primary forces exist in any market:
1) Traders who believe prices are to high
2) Traders who believe prices are to low
3) Traders who are watching and making their mind up (the potential force)
There can be extreme diversity of beliefs amongst traders of what they believe is going to happen in the market, in this makes virtually anything possible.
Know it all and arrogant analysts dont have the mental flexibility required to trade.
It only takes one trader to change the market, e.g. price has hit a resistance level, one trader could make a huge order above it and prove that resistance level incorrect.
Best traders
1) Predefine their risk prior to entering a trade
2) Cut their losses without hesitation once the market tells them the trade is not working.
3) Have a systematic money management regimen for taking profits
They have these systems because they believe anything can happen and always account for it.
Our edge may be recognising certain patterns but we dont know what the other traders are thinking. There are always constant unknown , hidden variables.
Most traders trade from the perspective what they cant see doesnt exist this causes them to not predefine the risk, cut their losses and have a systematic profit taking regimen. They do this because they dont think its necessary because they dont believe that anything can happen at any time, they believe they know what is going to happen next.
Our beliefs about what is true and real are powerful forces, they control how we interact, perceive and make decisions in the market. To counter this you need an unshakeable belief that anything can happen, by believing this you will train your mind to think in probabilities.