“There is a random distribution between wins
and losses for any given set of variables that define an edge. In other words,
based on the past performance of your edge, you may know that out of the next
20 trades, 12 will be winners and 8 will be losers. What you don’t know is the
sequence of wins and losses or how much money the market is going to make
available on the winning trades. This truth makes trading a probability or
numbers game. when you really believe that trading is simply a probability
game, concepts like ‘right’ and ‘wrong’ or ‘win’ and ‘lose’ no longer have the
same significance. As a result, your expectations will be in harmony with the
possibilities.” -Mark Douglas
“The less I cared about whether or not I was
wrong, the clearer things became, making it much easier to move in and out of
positions, cutting my losses short to make myself mentally available to take
the next opportunity.” -Mark Douglas
“You need to ‘change your thinking’. The goal
is to reach a ‘care-free state of mind’. When a pattern presents itself,
don’t think. There’s nothing to think about. Take the trade because you have an
edge. Then odds, probability and your risk control mechanisms will take care of
everything. In the end, the key is to learn more about yourself. The most
important lesson though is the importance of viewing every single trade as
being part of a series of trades.” -Mark Douglas
Mark Douglas’ 5 fundamental truths:
- Anything can happen
- You can make money without knowing what is going to happen next
- There is a random distribution of wins and losses that define an edge
- An edge is just the greater probability of one thing happening over another
- Every moment in the market is unique
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