In the zone - trading & beliefs Flashcards
Trading exercise is easy to understand, but we need to go a bit deeper to understand how to use it to change our beliefs
we must be aware of certain concepts for this exercise to change beliefs
What should we not understimate?
The mental effort to fully rain mind to accept 5 principles of success
BOB - Guy who traded, always did 12-18% returns, thought he traded out of probabilities, and his market analysis was like this, but his actions and reactions to the market were from beliefs and fears, not probabilities.
WRITE IT OUT WITH REPRETITION SCHEDULE IN PROCREATE - look at pages 149-155 in PDF for this
1 - anything can happen - just one trader can tip the balance of a price
2 - don’t need to know what will happen next to make money - market is only threatening if we expect things to happen - causes emotional pain
3 - Wins / Losses are randomly distributed - every loss doesn’t put you closer to win, and same vice versa, mind will fall into trap of looking for confirmation of edge then go in heavy as next will be an edge, or overdo analysis to protect against upcoming losses, these all mess up minds ability to see clearly information market is presenting us
4 - Edge is nothing more than indicator high probability of one thing over another - this is NOT gathering evidence trade will works using parameters you use (not random parameters you don’t usually use, adding random variables makes it impossible to know what works and what doesn’t), you are just gathering evidence edge it there and then putting on the trade.
5 - Every moment in market is unique - don’t fall into association trap, our minds are wirred to spot patterns, this moment is the same as before etc., reality is, each moment in the market is unique, they can be similar, but they are unique, none are similar, accepting this removes expectation and opens mind
What mistake do most people make when learning?
They think once they understand something this insight / new understanding becomes part of their identity
Understanding is usually just STEP 1 - the start of the integration at a functional level - mind not naturally wired to stay objective or in the NOW - mind must be trained to think from these perspectives
What must be identified and resolved? ALL OF THEM? (beings with C)
Contractions must be identified and solved, books, Nils, and repetitively writing out answer can fix this.
What are 5 trust and 7 principles from Trading in the Zone
The 5 Fundamental Truths of Trading:
- Anything can happen.
- You don’t need to know what is going to happen next to make money.
- There is a random distribution between wins and losses for any given set of
variables that define an edge. - An edge is nothing more than an indication of a higher probability of one thing
happening over another. - Every moment in the market is unique.
The 7 Principles of Consistency:
- I objectively identify my edges.
- I predefine the risk of every trade.
- I completely accept the risk or I am willing to let go of the trade.
- I act on my edges without reservation or hesitation.
- I pay myself as the market makes money available to me.
- I continually monitor my susceptibility for making errors.
- I understand the absolute necessity of these principles of consistent success
and, therefore, I never violate them.
3 mental components that create beliefs?
1 - memories,
2 - cause and effect relationship with our environment brings these memories
3 - how this cause and effect can go both ways giving us a belief on how things (we or others) interact with other things
Beliefs create what? (hint E)
Expectations (we need to believe anything can happen with a trade)
Things that aren’t important and are important when trading
NOT IMPORTANT / IRRELEVANT
- being better than my bro
- getting FTX cash back
- be able to lecture family and friends to show how smart I am
IMPORTANT
- being able to be stable good source of advice for siblings and parents
- provide predictable gains for myself and loved ones
3 believe characteristics of beliefs we need to understand before we can EFFECTIVELY INSTALL the five fundamental truths
1 - beliefs have a life of their own and resist any force that changes them
2 - all active beliefs demand they be expressed (santa claus is an example of a de-activated belief, climate change is an activated belief) - a trigger / event or question can cause a beliefs to be expressed
3 - beliefs keep working whether or not we are aware of them in our mental environment (subconsciously etc.)
To remove belief we don’t focus on it, we just de-activate it, where focus goes energy flows - example (santa claus, the belief structure is still in my mind, no energy returns from it 24th December now)
five fundamental truths
1 - anything can happen - just one trader can tip the balance of a price
2 - don’t need to know what will happen next to make money - market is only threatening if we expect things to happen - causes emotional pain
3 - Wins / Losses are randomly distributed - every loss doesn’t put you closer to win, and same vice versa, mind will fall into trap of looking for confirmation of edge then go in heavy as next will be an edge, or overdo analysis to protect against upcoming losses, these all mess up minds ability to see clearly information market is presenting us
4 - Edge is nothing more than indicator high probability of one thing over another - this is NOT gathering evidence trade will works using parameters you use (not random parameters you don’t usually use, adding random variables makes it impossible to know what works and what doesn’t), you are just gathering evidence edge it there and then putting on the trade.
5 - Every moment in market is unique - don’t fall into association trap, our minds are wirred to spot patterns, this moment is the same as before etc., reality is, each moment in the market is unique, they can be similar, but they are unique, none are similar, accepting this removes expectation and opens mind
How to remove a belief?
trick question, it’s not removing, it’s de-activating
To remove belief we don’t focus on it, we just de-activate it, where focus goes energy flows - example (santa claus, the belief structure is still in my mind, no energy returns from it 24th December now)
Energy, belief, observation and action
Which of the below takes more energy behind a belief to perform it
Observation
Action
The answer is action (according to Douglas)
Why?
We can believe something is true, like the boy understanding now that not ALL dogs are dangerous, but, his energy is split between going towards the DOGS CAN BE FUN TO PLAY WITH, and ALL DOGS ARE DANGEROUS.
- Whilst the boy understands now not all dogs are dangerous, the MOST DOGS ARE SAFE belief doesn’t have enough energy behind it to activate it so the boy isn’t as terrified of dogs now, but he still cannot enjoy playing with them
Trader example
- A trader can belief and understand that Five fundamental truths (scroll to bottom to see) are necessary, and he can know them and recite them, but the energy going to those beliefs must outweigh the energy that goes towards any beliefs that are contrary, such as, I can predict the market a bit and expect to win if X happens, or, efficient market hypothesis is true in some markets
Example of conflicting beliefs is above
- See another below
BELIEFS / desires
1 - the ALL DOGS ARE DANGEROUS BELIEF still gets some energy.
2 - dogs are fun to play with gets other energy
3 - I want to play with dogs and have fun, also gets energy
If the belief, 1, still gets enough energy, and 3 doesn’t get enough, the desire won’t occur, and will be outweighed
- Traders must trust themselves and have the correct beliefs in order to spot opportunities and be able to act on them
five fundamental truths
1 - anything can happen - just one trader can tip the balance of a price
2 - don’t need to know what will happen next to make money - market is only threatening if we expect things to happen - causes emotional pain
3 - Wins / Losses are randomly distributed - every loss doesn’t put you closer to win, and same vice versa, mind will fall into trap of looking for confirmation of edge then go in heavy as next will be an edge, or overdo analysis to protect against upcoming losses, these all mess up minds ability to see clearly information market is presenting us
4 - Edge is nothing more than indicator high probability of one thing over another - this is NOT gathering evidence trade will works using parameters you use (not random parameters you don’t usually use, adding random variables makes it impossible to know what works and what doesn’t), you are just gathering evidence edge it there and then putting on the trade.
5 - Every moment in market is unique - don’t fall into association trap, our minds are wirred to spot patterns, this moment is the same as before etc., reality is, each moment in the market is unique, they can be similar, but they are unique, none are similar, accepting this removes expectation and opens mind
How to change beliefs and desigend and five fundamental truths
Programming, writing out, repetition
Expectations ultimately come from beliefs
How do self-sabotaging beliefs manifest in some traders?
(self-valuation is essential)
Often it’s down to a lapse in focus / concentration
Some traders do well for several months, then experience significant draw down (hitting a proverbial glass ceiling with their performance)
- Douglas call’s the zone the “negative zone” - just as magically as money can flow into accounts when IN THE ZONE, it can flow out of accounts
Negative zone can be from self valuation issue, over confidence - or other habits creeping in
Beliefs are essential - which one is central to percetpions and interpretations
Believing that “I am a consistently successful trader”
Observe self, thinking and saying, THIS IS WHAT JOURNALLING IS SUPER HELPFUL FORLearning to monitor oneself is pretty simple, ENJOY finding mistaken thoughts as others in the market will have these also
Learning to monitor oneself is pretty simple, ENJOY finding mistaken thoughts as others in the market will have these also
What’s the first line of defence against a trading error?
Spotting yourself thinking it, a trading journal will assist in doing this
Need to associate positive energy with catching self making mistake —> needs to product pleasure when I spot mistake
alternative to above is trade only from mechanical stage and don’t use intuition but this has limits
Learning to monitor oneself is pretty simple, ENJOY finding mistaken thoughts as others in the market will have these also
