The Disciplined Trader: Developing Winning Attitudes (Mark Douglas, 1990)

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Basics
  • Learn goal setting and focus.
  • Develop skills instead of money.
  • Versatile to market changes.
  • Identify your risk level.
  • Execute trades immediately.
  • Let market do the talking.
  • Develop a system in trading.
  • Being objective.
  • Recognise true information and act on it.
Unsuccessful trader

  • Lack of skills.
  • Limiting beliefs.
  • Lack of self-discipline.

General

  • The market is always right.
  • There is no beginning and ending price in the market.
  • The market is an unstructured environment, it can go all direction.
  • Reasons are unrelevant in the market.

Strong Mentality

  1. Complete disciplined trading approach.
  2. Release yourself from the negative trading emotions.
    • Memories are stored as charged energy.
Building a framework
  1. Understand your behaviour.
  2. Learn to manage your conscious.
  3. Monitor relationship with your environment.
Psychology of price movement

  • What kind of price action will sustain the buyers' beliefs that thay can make more money?:
  • When are sellers likely to come into the market in force?
  • Where are old buyers likely to take profits? Where are old sellers likely to lose faith in their positions and bail out?
  • What would have to happen for buyers to lose faith? What would have to happen to draw new buyers into the market?
Factors to anticipate

  • Highs and lows.
  • Support and resistancce.
    • Support and resistance can interchange.
  • Trends and trendlines.
  • High → retrace → rally to a lower high.
 Steps of success

  1. Focus on what you need to learn.
  2. Dealing with losses.
    • Set stop loss.
    • Execute trade immediately.
  3. Become an expert at just one market behaviour.
  4. Identify good trades.
  5. Think of probability.
    • What is the market saying?
    • What is paying up to get in or out?
    • How much strength is there?
    • Is momentum building?
    • Can it be measure relative to something?
    • What would have to happen to indicate the momentum is changing?
    • Is the trend weakening or is this normal retracement?
    • Is there a pattern or it is being disturbed?
    • Which side is showing dominance?
    • What happen if it doesn't stampede out of their positions?
    • Why traders believe it is a firm position?
    • What will disappoint the predominate force?
    • What is the likelihood of that happening?
    • What is the risk of finding out in a trade?
    • Is there enough potential for movement to make the trade worth the risk?
  6. Learn to be objective.
  7. Learn to monitor yourself.

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