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Mark Douglas’s “Trading in the Zone” is a seminal classic of trading psychology. The book should be read from cover to cover but its essential tenents are :
1. Anything can happen.
2. You don’t need to know what is going to happen next in order 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.
Everyone one of those points is a fundamental truth trading and the title itself is a reference to the idea of trading without fear. When you are in the “zone” you focus on process rather than outcome and therefore build an indomitable psychological mindset that helps you perform to your best ability every single day.
Douglas’s points are timeless and true, but I want to discuss something much more mundane -- literally trading in the actual “zone”, which is often overlooked as a key ingredient to trading success.
This week I was in Philly for an impromptu gettogether with some of my oldest and dearest camp friends. Now I am a horrible map reader and whenever I get to a new place I usually just try to get the general direction of where I am going and then set out on foot. So against Google Maps better warning that I should take public transport or Uber, I simply stepped outside the 30th street station, found my way to Chestnut Street and then just headed to downtown Philly.
Philadelphia is less than 90 minutes away from New York but like almost every New Yorker I know, I never visit the place. Which is a shame. Because it’s a great city with a wonderful history, beautiful architecture, a thriving nightlife and generally a level of cool that no longer exists in the stodgy you-can-only-live-here-if-you-are-a-billionaire Manhattan.
But my walk down Chestnut was more than just a rumination on gentrification, it was an indelible lesson in geography. I quickly grasped how Philly is contained between the Schuylkill and Delaware rivers. As I crossed Chestnut and Broad I finally understood the term Broad Street Bullies ( a name given to the legendary 1970’s Philadelphia Flyers hockey team). And as I made my way towards the Delaware river I could see Indendence Hall on my right and literally imagined Franklin and Jefferson writing the country’s constitution.
My pedestrian stroll through the City of Brotherly Love made me more knowledgable about the place than any Google Map ever could. Nothing beats touch and feel for not only acquiring but absorbing knowledge.
Which brings me back to Trading the in Zone. Being mentally tough is a laudable goal for sure, but what about trading in the actual zone? What about studying every tick and quirk of the timeframe you trade. For the past several months K and I have been making Market Mapper tools to help traders see price patterns more intuitively. But it was only after walking those maket maps day in and day out that I started to pick up subtle clues to price action that improved my edge tremendously.
This is why wizened market veterans always talk about the need for screentime. And it’s absolutely true. There is just no substitute for engaged observation. That’s why newbies traders who are just looking for a “winning setup” always fail. There are no winning setups. There are only setups that you adapt to your own style. So just like a native of a city, I can point the tourist in the right direction but to truly discover the place you need to do your own walking and discover the Zone that works for you.