5 Truths About Trading

1. Anything can happen.
2. You don’t need to know what’s going to happen next to make money.
3. There is a random distribution between wins and losses for any given set of variables that define an edge.
4. An edge is nothing more than an indication of a higher probability of one thing happening over another.
5. Every moment in the market is unique.

7 Rules of Consistency

1. I objectively identify my edges.
2. I predefine the risk of every trade.
3. I completely accept the risk or I am willing to let go of the trade.
4. I act on my edges without reservation or hesitation.
5. I pay myself as the market makes money available to me.
6. I continually monitor my susceptibility to making errors.
7. I understand the absolute necessity of these principles of consistent success and, therefore, I never violate them.

Trading Attitudes

• Learn to accept risk (objective perspective)
  • fearless. Allows you to think appropriately and make the right decisions, unbiased.
• take responsibility because you alone are responsible for your outcomes. Don’t think the market has any responsibility. The market is other traders and you have no responsibility to other traders. Only to yourself. Responsibility will promote confidence and fearlessness and allow you to operate objectively consistently and appropriately. Embrace the responsibility and stop expecting the market to do anything for you. This makes the market no longer your opponent.
• adopt an appropriate state of mind. Truly happy people are happy people that do things. They don’t rely on outside forces to determine their emotion. Consistent traders and consistent people that trade.
  • “Having to try indicates that there is some degree of resistance or struggle. Otherwise, you would just be doing it and not have to try to be doing it. It also indicates that you’re trying to get what you want from the market. While it seems natural to think this way, it’s a perspective fraught with difficulties. The best traders stay in the flow because they don’t try to get anything from the market; they simply make themselves available so they can take advantage of whatever the market is offering at any given moment. There’s a huge difference between the two perspectives.
• Learn to really accept the risk. Traders, contrary to logical belief, are not risk takers. They should accept the risk fully and accept that what they’re doing is simply a probability. Make the right decision at entry and assume the outcome is a matter of probabilities.
• Make yourself available. The market does what it does and you’re available to take an opportunity.
• think in probabilities and never try to predict the outcome of one occurrence. Casinos never do this.
  • Anything can happen.
  • You don’t need to know what is going to happen next in order 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.
• Learn to have rigid rules and no expectations for each trade.
• Eliminate all emotional risk.
  • Think from the market’s perspective, and in probabilities. Nothing is certain.
• Never feel betrayed by the market––there is a random distribution of wins and losses due to the probabilistic game so there is no reason to ever feel betrayed or rewarded by the market.
• Recognize when your mind is associating something in the now moment opportunity flow with something in the mental environment from the past. The “now” is a completely unique moment, always.
• Understand that losses are simply the cost of doing business. Therefore, they should cause no emotional pain.
• All you “know” is your risk, profit target, obstacles, and plan. Nothing more, and nothing about the market’s movement.
• Adopt a carefree, objective state of mind.
  • Carefree: confident but not euphoric. No fear, hesitation, or compulsion. Unthreatened. Acceptance of risk, at peace with any outcome. Nothing is blocked or altered by pain avoidance mechanisms.
• You have nothing to prove. Come to the market with no agenda. Be in the best state of mind to reconcile and take advantage of whatever it gives.
• Be in the “now”. Nothing from the past or mental environment will affect how you see the market in the now or how you make any decisions.

Chapter 6 Uncertainty

If there is such a thing as a secret to the nature of trading, this is it:

• Trade without fear or overconfidence.
• Perceive what the market is offering from its perspective.
• Stay completely focused in the “now moment opportunity flow”.
• Spontaneously enter the “zone”.