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1-Page Summary of Trading In The Zone
Fundamental vs. Technical Analysis
Fundamental analysis was the dominant trading strategy in the late 1970s. It’s about creating mathematical models that incorporate all the variables affecting supply and demand for a stock, commodity, or financial instrument.
Technical analysis has been around for a long time. It’s recently become more popular because it helps traders make money. Technical analysts focus on patterns and how people interact with the market. They can identify predictable behavior, which is why technical analysis works so well.
Mental Analysis
Technical analysis is only one way to make money. It’s not a guaranteed method, and there are many people who don’t do well with it. The difference between successful traders and unsuccessful ones is their attitude toward trading – it’s mental.
A trader who is grounded in the market understands that he can’t control everything. He doesn’t get upset if a trade doesn’t work out, but moves on to the next one without looking back. The average trader has an unhealthy mindset and wants validation from his trading. He puts too much pressure on himself to be right about trades, which leads him to hold onto losing positions and take profits prematurely off of winners. This ultimately results in more losses for him than wins.
Discipline and Focus
To be successful, you need to have focus and discipline. Consistent winners are able to stay focused on the big picture even when faced with adversity. They don’t get scared or distracted easily because they’re disciplined in their thinking. This helps them avoid many of the common mistakes that most traders make, so they can become consistently profitable.
Trading is risky. It’s hard to make money and even if you do, there are no guarantees that it will stay with you. The way people think in everyday life doesn’t work when trading, because traders have to deal with the inherent risks of trading while also dealing with their own emotions.
Trading is a risky business, but that doesn’t mean you’re taking risks. It means you can accept the consequences of your actions and take action knowing full well that some trades won’t work out as planned.
Transcending Fear
The difference between consistent winners and everyone else is their attitude. They are not afraid to take risks, but they also know when to be careful about taking too many risks. They can listen to what the market tells them and move in or out of trades fluidly while still remaining cautious. Their only concern is making money at the end of every day, no matter how much they make or lose on any particular trade.
On the other hand, most traders live between two extremes: recklessness and fear. When things are going well, they feel invincible and take unnecessary risks. However, when a significant loss occurs, their confidence is shattered and replaced with fear. They’ve created an experience that reinforces their fears of losing money in the future.
Traders are afraid of four things: being wrong, losing money, missing out on opportunities and leaving money on the table. These fears often dominate their trading decisions and they can’t see situations or opportunities accurately. They can’t act objectively and feel immobilized. The source of these fears is not the market but rather a trader’s attitude towards life itself. This is difficult for most traders to perceive because it requires an honest assessment of themselves as well as an understanding about why they trade in the first place.
A child was bitten by a dog when he or she was young. That experience caused the person to fear dogs. However, that fear is not valid in all situations and can prevent positive experiences with dogs. It’s possible that no other dog will bite this person, but the fear of being bitten again still causes problems for him or her later on in life.
