BOOK SUMMARY: TRADING IN THE ZONE

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Trading in the zone book is written by Mark Douglas. This book is about stock market trading. It is more about psychology of stock market trader, his mind set and thinking in probabilities.

Everyone in the market wants to make money but in the book it is suggested that anything can happen. It is market which decide our profit or loss not we. Any trader even professional one cannot avoid loss in the market. It is suggested to think in probabilities before grabbing any opportunity in the market. Analyze your stop loss and reward before placing any order. No trader assumes that he will get a loss in the current trade. He puts his money to win only but market will not move as per our thoughts. So, it gives random results. It gives loss, loss and loss etc. sometimes and this makes the trader frustrate but it is a random event. It can also be loss, profit and profit etc. sometimes our trade can be in losing sequence and sometimes it can be in winning sequence. It can be random. In the book it is suggested that we should accept the risk as uncertain outcome before entering in any trade.

If you have an edge then it is sure that you will win if you trade in more and more stocks. In the market anything can happen. Some group of people predict that market will go up and they enter in the trade while some people predict the market will go down and place an order. It is a sentiment of people which is impossible to predict the market. We should accept the outcome but we should be quick to grab any opportunity and react to place order.

It is our thinking, if a coin is tossed five times and in the entire event it get head and we assume that in the 6th event it will also get head but in the book it is suggested to avoid gambler’s fallacy. In the 6th event, coin may get head or tail. It is 50-50 probability. In the stock market everyone follows same thinking. If we get 5 winning trade, we think that our strategy is the best and in the 6th event we get profit but it is not true. Similarly if we get five losing trade we get frustrated and think that our strategy is the worst, I’m not going to be a profitable trader. So we assume that our sixth trade will also be a losing trade but it is not true. Sixth trade will be losing or winning, it has 50-50 probability.

For a trader, it is very important to be carefree and confident on his strategy. We should follow our strategy with discipline whether we are winning or losing. We will win ultimately.

It is very easy to place order, and go as per the strategy but there are so many mistakes we do due to fears. We fear of being wrong, losing money, missing out and leaving money on table. These fears affect our profit and trading as well.

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