Trading in the zone
How The Fundamental Truths Relate To The Skills?
1. Anything can happen- As pointed out before, there are always unknown forces working in the market. Any anomalies that exist in your mind shall be a source of conflict and may cause you to perceive market information as threatening.
2. You don’t need to know what is going to happen next in order to make money- You are aware about the percentage of winning and losing trades you will have in any given sample size, based on historical backtesting. Nonetheless, there is a random distribution between wins and losses. This theorem makes trading a probability and numbers game. When you vehemently believe that trading is a numbers game, your expectations will be in symphony with the possibilities. Market information is intimidating only if you are expecting the market to do something for you.
3. There is a random distribution between wins and losses for any given set of variables that define an edge. If every losing trade puts you that much closer to a win, you will be anticipating, ready and willing to take the next trade as per your “setup”. However, if you lack this conviction you may thwart the next edge with trepidation. You might start gathering evidence for or against the trade. In case, the fear of missing out prevails, you will gather information in favor of the trade; if you preempt another loss you will gather information against it. In either case you will not be in harmony.
4. An edge is nothing more than an inkling of a higher probability of one thing happening over another. Creating consistency requires one to wholeheartedly accept that trading is not about hoping, wondering, or gathering evidence one way or the other to resolve if the next trade will work. The sole evidence you need to gather is whether the variables you deploy to define your edge are present at any given moment. If you believe that the market is offering you a legitimate edge, determine the inherent risk and take the trade.
5. Every moment in the market is unique. If each moment is distinctive, then there is nothing at the rational level of your experience that can vouch that you “know” what will happen next. Training your mind to trust in the uniqueness of each moment shall act as a counteracting force neutralizing the automatic association process. The firmer your belief in the uniqueness of each moment the lower you potential to associate. The less you are able to associate, the more receptive your mind is to perceive what the market is offering from its perspective.