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Hi guys,
I just finished my 3rd read of Trading in the zone by Mark Douglas and it got me thinking about Brooks Trading Course and my edge in the market as a trader.
Here's my question:
In his book Mark Douglas talks about the importance of having a strategy that clearly defines your entry criterias, one that doesn't leave any room for interpretation or subjectivity. With such strategy the trader's job is just to take the trades, almost without thinking. Here's what I am struggling with. I have just finished the BTC (and the Forex version,) and the feeling I got is that Al's method is very much based on analysis and subjective thinking, it's not like: when this - buy, when that - sell, but more like whether you buy or sell always depends on the situation and can't be put into a strategy.
What would be my edge in the market?
Is it possible to come up with a set of criterias for entries in Al's school of trading, so that we can switch off the overthinking part of the brain that very often gets in the way?
Hope you guys understand where I am coming from. Would love to hear your thoughts on this!
Thanks!
Pat
Al do have criterias for entries in his learning. its different depending on if you are a "Value Trader" or a "Momentum Trader" The big Difference here, is how far you wanna put the stop. The Criterias are based on the Price Action as Al talks about.
I will focus more on the Douglas book here in my answer, as I believe you and many other will need help to understand what the REAL nuggets are from him.
Just so you Know, Trading In The Zone, was more written for people with knowledge of trading. He him self have admitted that it wasnt maybe something for a new "trader" to read. Thats why he and hes Wife wrote another book, that I believe came out just a couple of years ago. Unfortunately, he passed away too early.
Mark has become a very respectable man in Trading, many big traders talk about his books, cause it have helped them. You must understand, hes ONLY focusing on PSYCHOLOGY, thats what its all about. You should pick up the important things he says in the book, wich are;
-Connections we humans tend to make from the past, These ones ARE NEVER RELEVANT, you will have to learn in trading and LIFE too, dont connect things and compare one with another.
-How to gain (if you dont got it) and obtain a positive winning attitude in trading and LIFE.
-And that you really Embrace the Uncertainty of the Market that you dont really know whats gonna happen (we can never exactly know, but have some sort of clue, you can).
-And that the "goal" for you as a trader, is really becoming good at the Intuitive style of trading (everyone should in some way end up here, cause you have that many repititions and competence you need, but the other part of Intuition is, HOW is the intuition for you and CAN you act on it?).
And as Douglas says in the book (ive read these one many times before), you should have some sort of edge to be able to apply the Psychology needed for trading. Without a edge, it doesnt matter how much you know about the psychology, you still wont make it, you need BOTH.
What he is teaching you in the book, is a Mechanical trading. This kind of style suits NEW "traders". But as he writes in the Books, there is different stages in trading.
Mechanical, Subjective and the Intuitive stage. But learning the Subjective and Intuitive side for him, is harder, to suit more people. Thats why the Mechanical style is so easy to learn new people to GROW from.
Where you are, only you can answer. All I can say is, Ive focused ALL my time on the Intuitive style right from the beginning (yes, you can do it, theres no BS here), its just another way to learn trading, thats all.
Just to be clear, theres many different "schools" on how you can make it as a trader. Ive read as I guess you have, many, many different psychology books, and My conclusion is that, I need to learn to listen to myself a lot more and do what my minds tells me to do and what suits me, and trust myseld A LOT. Doing that and UNDERSTANDING a great book as Trading In The Zone, you have a REALLY GOOD foundation, Dont think too much about it.
So I started to listen and take notes of what Denice Shull was talking about (shes all about intuition and feelings).
Theres many different ways to learn, you know, early when trading started out, it wasnt many books about this Subject (if any), but they still could make it, cause all they did was having the passion, they used the power of observation and had a lot self trust in what they where doing and really understood what it takes in matter of Psychology.
I hope I have helped you a bit. Wish you well Pat.
Never forget, Theres many ways to skin a cat.
//Alexander
Thanks Alexander, appreciate you taking the time - you did help!
MD was a failed trader turned snake oil (trading psyop) salesman. He didn’t even understand trader’s equation as he once defined edge as high win rate only. Throw away his stuff before they cause irreparable damage to your mind.
Listen to Al. Most people’s psychological problems are the result of their trading too big for their experience level. Then the P&L has too much impact on them. They start to trade the P&L instead of the price actions.
MD was a failed trader turned snake oil (trading psyop) salesman. He didn’t even understand trader’s equation as he once defined edge as high win rate only. Throw away his stuff before they cause irreparable damage to your mind.
Listen to Al. Most people’s psychological problems are the result of their trading too big for their experience level. Then the P&L has too much impact on them. They start to trade the P&L instead of the price actions.
Have you even read the Book? I can tell by reading your answer that you didnt understand a thing about what Douglas talks about, and that the points I pointed out are essential in tradig. He does not talks about High Win rate as an edge, NEVER.
And that big traders like (John Rambo Moulton, Tom Hougaard, Al Brooks?) are all using things like Douglas talks about.
I know I should be open-minded, but this was a really stupid answer by Mark_H whos clearly havent understood a thing about what Trading Psychology is. Al Brooks is teaching Douglas "approach", so that makes me wonder if you even taken Al´s course or even read Marks Douglas book?
Everything you say Al is teaching, are Douglas talking about in the Book. Come back when you read the book and really understood it and taking Al´s course.
Have you even read the Book? I can tell by reading your answer that you didnt understand a thing about what Douglas talks about, and that the points I pointed out are essential in tradig. He does not talks about High Win rate as an edge, NEVER.
And that big traders like (John Rambo Moulton, Tom Hougaard, Al Brooks?) are all using things like Douglas talks about.
I know I should be open-minded, but this was a really stupid answer by Mark_H whos clearly havent understood a thing about what Trading Psychology is. Al Brooks is teaching Douglas "approach", so that makes me wonder if you even taken Al´s course or even read Marks Douglas book?
Everything you say Al is teaching, are Douglas talking about in the Book. Come back when you read the book and really understood it and taking Al´s course.
Sorry if I picked your bubble. Snake oil is something really convincing but useless and that’s what he was selling. Yes a lot of great traders such as Tom Hougaard use some of MD’s language to convey their own points but that is just common English. Those are the people one should pay more attention to.
Another salesman was Van Tharp. But he at least got the trader’s equation and expectancy right.
Here is MD’s definition of edge quoted “An edge is nothing more than an indication of a higher probability of one thing happening over another”. Now tell me it doesn’t imply high win rate.
I have read both of his books, and like anything written by people who haven't actually done it, they come across as verbose and vacuous - talking a lot but saying very little.
Yes, that’s exactly what it is, same as Van Tharp’s stuff, who was also an unsuccessful trader if you know his history.
Does some of their stuff make sense? Yes of course as they borrow many of their ideas from successful traders. But some of the things they are preaching are really suspicious. The main oil MD was selling was the “zone”, as if you can get into the “zone” you can make money at will. But as Al always said, there are no perfect trades, you need to think in trader’s equation to choose the trades making sense to you. You don’t need to be calm, free of fear or doubt to make money consistently, and you only need to be that to be a good monk. Lol
Sorry if I picked your bubble. Snake oil is something really convincing but useless and that’s what he was selling. Yes a lot of great traders such as Tom Hougaard use some of MD’s language to convey their own points but that is just common English. Those are the people one should pay more attention to.
Another salesman was Van Tharp. But he at least got the trader’s equation and expectancy right.
Here is MD’s definition of edge quoted “An edge is nothing more than an indication of a higher probability of one thing happening over another”. Now tell me it doesn’t imply high win rate.
Yes, the edge is just as it says, a higher Probability of one thing happening over another. Just like Al Brooks talks about probabilities, markets seems to be 50-50, goes to 60-40 and can reach 70-30. Dont think to much about it, what Douglas is saying is exactly that, nothing else.
And no, no one is picking on any bubble. Im stating the fact, nothing else. I do not Agree with everything Douglas is talking about, ive never implied that.
I will again be very clear what you need to pick up from Trading in the zone, and that is:
-Connections we humans tend to make from the past, These ones ARE NEVER RELEVANT, you will have to learn in trading and LIFE too, dont connect things and connect a earlier moment with an other.
-How to gain (if you dont got it) and obtain a positive winning attitude in trading and LIFE, you will need it, market will humble you more times then you wish, you will need to learn to pick yourself up and dont be hard on yourself.
-And that you really Embrace the Uncertainty of the Market, that you dont really know whats going to happen (we can never exactly know, but have some sort of clue, you can).
-And the "goal" for you as a trader, is really becoming good at the Intuitive style of trading (everyone should in some way end up here, cause you have that many repititions and competence you need, but the other part of Intuition is, HOW is the intuition for you and CAN you act on it?). This is the Zone in other words.
The main oil MD was selling was the “zone”, as if you can get into the “zone” you can make money at will. But as Al always said, there are no perfect trades, you need to think in trader’s equation to choose the trades making sense to you. You don’t need to be calm, free of fear or doubt to make money consistently, and you only need to be that to be a good monk. Lol
You clearly have no idea what the zone are, right? The zone is exactly what athletes reaches when they learned the right mindset needed to get there. Al is talking about this in the Books and the Course too, some traders are trading from a more Intuitive state, wich means they do not verbalizes why and what they are doing, but they do it.
John Rambo Moulton is a really great example of someone who does this. He says, " Theres no edge, all I have is my experience and I go from there", " Many times I have no idea what Im doing, Im just trying to make good trades" " Sometimes I win, sometimes I loose". What he Implies here, is that hes a truly Intuitive trader and uses all hes knowledge he has and know that hes brain will take care about it (the Subconcious).
The zone is Intuitive trading, a state where you CANNOT really tell why you should be doing what you are doing, it just feels like the right thing to do and you are just doing it without question it.
Thats why you are calm, free of fear and doubt to be able to reach the Zone. Theres no Hokus Pokus here.
Behavior Modification is crucial in trading, if you cannot understand this point, things will be hard if you want to make money in the long run.
A book like Trading In The Zone helps you with how to think while trading and set your expectations right to what is reasonable in trading (yes, Al is also teching this, but if you want to go deeper and get a more understanding, the book is great for this).
But clearly, if you not are open minded to new ideas, it wont happen. You will only see what you have learned to see.
You will still second guess yourself and have the self doubt after loosing some trades and when you loose you want to "make it back" and keep doing this for a too long time.
Psychology and edge goes hand in hand. Tom Hougaard is a great example about this, he had to finally come to the conclusion that, I need to change how I think while trading. I cannot act like the same way I do when im in the Supermarket. As he says, Flip the Switch.
This is the essential Behavior Modification that Douglas is talking about. Dont hang up on some sentences from Douglas Book, just dont, wont help you. Understand what nuggets he is providing in the book, thats WHY a book like Trading In The Zone is good.
Good evening.
//Alexander
There are 80% prob, no?
[EDIT] 80% - those times when Wedges fail - if not mistaken?
Yes, the edge is just as it says, a higher Probability of one thing happening over another. Just like Al Brooks talks about probabilities, markets seems to be 50-50, goes to 60-40 and can reach 70-30
Yes, the edge is just as it says, a higher Probability of one thing happening over another. Just like Al Brooks talks about probabilities, markets seems to be 50-50, goes to 60-40 and can reach 70-30
I don't think you got what I was trying to say about edge. MarkD's definition for edge was WRONG. I hope you didn't agree with him on his definition (it seems you did though). Higher probability itself is NOT an edge without consideration of average win and average loss (or risk/reward ratio if stops are used). There have been so many stories about day traders who had win rate 70-90% and kept winning for weeks, then lost it all and more in a few days as their average wins were quite small compared to the occasional losses. This is true also for many naked call sellers.
Now, if MarkD couldn't get the basic definition of edge right (i.e. his total ignorance of the trader's equation), and that means he didn't understanding trading at all. Do we still want to listen to his mumbo jumbo of trading psychology? Oh, get your life together before getting your trading success, oh, your next trade is random, win or lose, doesn't matter, ba lah, ba lah, LOOOL.
As someone said, listening to those failed traders turned shrinks talking about trading psychology was like having marriage and sex counseling with an eunuch. All reasonable, all convincing, and all sounding very helpful, but you always feel there is something missing on the back of your mind…
I do have some theories on why many successful traders praised MarkD. He did do his research on many traders and understood what most traders were thinking. His language and wording did resonate with traders. His "definition" of edge as higher probability, though wrong, was appealing to many, especially novice traders. He was a good salesman of his ideas and he did that for a living just as many snake oil sellers do.
Sure with all his faults, you can still learn something from his books. But do you really trust what he had to say if you know he couldn't get the basics of trading equation. Besides, there are many trading psychology books nowadays by some great traders, such as Mark Minervini's third book, Tom Hougaard's Best Losers book, and Al's chapters and videos on psychology etc.
I once learned from Kevin Haggerty who was with Fidelity's institutional trading desk. He was a Marine and very blunt in shunning those trading shrinks. "Being in that part of Asia, you either can get it done or not get it done - no trading psychology B.S. Trading is just numbers like any business, if you can't take the heat, go do something else." He also advocated trading smaller to deal with psychological problems. I tend to agree with him.
As to Van Tharp, there was something he went too far to sell his books, but that's for another day 🙂
There are 80% prob, no?
[EDIT] 80% - those times when Wedges fail - if not mistaken?
Yes, the numbers here are not important. I was just trying to say that the "Probability" fluctuates time to time during the day.
I don't think you got what I was trying to say about edge. MarkD's definition for edge was WRONG. I hope you didn't agree with him on his definition (it seems you did though). Higher probability itself is NOT an edge without consideration of average win and average loss (or risk/reward ratio if stops are used).
I can understand that we will not agree on all things, as it should be. It seems like nothing is right of what Douglas is teaching, however you refer to a trader like Tom Hougaard who is also a strong believer of the mental things Douglas is teaching. Both Tom and Al teach them in their own ways, like we all do. We all have different trues and how we see things, they will never be the same, even if we still read the same sentence in a book or whatever it is, or how we interpret a situation in life or trading, its never gonna be the same.
Theres many ways to skin a cat. Your path is your path and let it be. Just trust it and do your thing and I keep doing mine, cause it works for me. I dont need more of Tom and left that soon 2 years ago, I realised what I had to do and did my changes over time.
Though Als course is so great cause hes going down on the details, and I liked that, helped me get a wider perspective an see even more things, and yes, hes part of psychology is a good help for new traders too.
People who know me know that I dont like salesmen, I really hate what they doing tbh. But Douglas is giving (like POP and others) a good expectation of what trading is, thats all. I dont care about the edge hes refering to, I dont pay attention to that one, I know it, but I dont practice it during the day.
I agree with you, the Size is important to be able to stay objective. But same here, as Tom have teached me, you can Visualize (same method as athletes and Navys) and train your brain to go bigger and bigger and get "used to it" of coruse while also practicing it on the markets. I guess you know the story for him and what changed hes viewing of the Markets. He realized hes problem was not the technical parts, it was more of how he thinked while he was trading. This is the bump most of us hit, and dont even recognize while its happening.'
But I agree to that point that salesmen and all that kind of people, they always find something to make a market of, and there always will be thoose, you just have to learn to see through whats BS and whats maybe reasonable.
Wish you well.
//Alexander
Hey everyone, noticed Denise Shull and Tom Hougaard mentioned – definitely adding their books to my reading list. Any other top picks on the psychology/emotion side? Share your favorites! Thanks
Patrick
An edge in trading is something that has a positive expectancy. As Al says, that can come from a high reward/risk ratio and a lower probability or a low reward/risk ratio and a high probability. Anyone who talks strictly about risk reward without mentioning probability can safely be ignored. While Al's trading method is highly discretionary, it depends on developing an understanding of what the other market participants are likely to do. Listen to Brad at the end of the day. He is always looking at each bar in the context of who is in control and which side is likely to buy or sell above or below the next bar. What he is doing is developing his ability to use Theory of Mind in his trading. That may well be the most useful bit of trading psychology.
