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Book Review: Trading in the Zone by Mark Douglas

September 30, 2012 (Last updated on September 25, 2018) by

Trading in the Zone by Mark DouglasAlmost twenty years of coaching experience did not pass unnoticed for Mark Douglas when he created his apex work — Trading in the Zone. As the book’s full title suggests, its aim is to help trader master the market with confidence, discipline, and a winning attitude. Actually, the whole book’s subject can be summarized by that “winning attitude.” Before proceeding to any further details, it can be said that if your Forex trading attitude cannot be described as winning, you are strongly suggested to get this book (you can borrow one from a friend, if you do not want to spend money on it.)

Mark Douglas wrote his first book on the role of discipline and psychology in trading, The Disciplined Trader, back in 1990 — an era that has quite a lot of differences with our days in terms of financial markets and their accessibility. His work from 2000, Trading in the Zone, is not only more up-to-date but also extends the study of successful trader’s thinking introduced in the previous book.

As you have probably understood already, I am quite positive about this book. That is really so. Although, you will easily find some really stupid things there, it is worth both time and money spent. It is also one of the few books whose Kindle version is not a complete crap compared to the paper version.

The Main Idea

The main contents of Trading in the Zone is dedicated to one goal — becoming a consistently successful trader. According to Mark Douglas, it is a big mistake of the majority aspiring traders does it all wrong by studying the market’s behavior rather than starting looking into one’s own mind and traits. There are five “fundamental truths” about the market at the core of the “right” trading mind-set:

  1. Anything can happen.
  2. You do not need to know what will happen to earn money.
  3. The distribution of winning and losing trades is random.
  4. An edge means only a higher probability of a winning trade compared to a losing one.
  5. Every instance of the market is unique.

Anything can happen means that the market is composed of traders and there is no way any of the traders can know with certainty what the other one is going to do. Even if some technical, fundamental or sentiment indicators strongly forecast some movement, the real outcome could be completely different as it may take only one trader to affect the prices.

But that is not the problem for earning money. Like the casino owner does not need to know what will happen with the particular spin of roulette, or like the insurance company does not need to know whether specific contract will get claimed or not. What is important to know is that the total of a big enough series of outcomes will be in their favor.

The distribution of these outcomes can be only random. There may be streaks of losses or gains, but there cannot be any dependency between two outcomes because anything can happen.

An edge of the trading strategy is just an indication of a higher success ratio, which can be expressed either as more wins than losses or as bigger wins than losses. In the end, with a big enough sample set, trading strategy that has some edge will result in a positive gain on account balance.

By admitting that every moment of the market is unique and cannot be repeated, we acknowledge that what we see now, no matter how similar it is to some previous moment in history, will not necessarily end up similarly to that previous outcome. If we won three times in a row using some pattern it does not mean that we will win the fourth time we use that pattern. Because anything can happen.

Accepting these five truths leads to elimination of fear and euphoria from the trading process. A trader will enter a care-free state of mind and will operate “in the zone”, which means intuitive, semi-subconscious trading, resulting in a consistent success.

The Good Side

Now, why have I liked this book and why do I recommend reading it? The following points sum up the positive sides of Mark’s book:

  • It is written almost perfectly from the psychological point of view. If you start out with a lot of skepticism, you end up reading it with an open mind and ready to accept its main idea.
  • The author manages to explore thoroughly one of the most important aspects (if not the most important one) of trading — the attitude.
  • It is quite short and is very easy to read, and is filled with anecdotes from the author’s life. Unlike with many other trading books, your head will not hurt after trying to understand every presented concept.
  • The principles found in this book can be applied not only in trading.

The Bad Side

Although Trading in the Zone is a great book, there is one big striking flaw and a few minor ones that spoil the overall impression a bit:

  • The biggest disadvantage of Douglas’ work is that it is ridden with loads of pseudo-scientific bullshit. Strangely, it is not even needed there to prove anything at all. I do not know, perhaps, some readers just need such “reasoning” to believe in the presented ideas, but to me it looks like what it is — a completely out-of-place nonsense.
  • Some claims (like the “ideal 3:1 risk-to-reward ratio”) are not supported with any reference. Maybe that is just a part of the overall pseudo-science entourage or something.
  • Despite the impression you might get after reading this book you still will have to learn how the modern online Forex market functions before starting your way to becoming a consistently successful trader.
  • There is a trading strategy example near the end of the book — it is pretty naïve. But what else could you expect from a book on psychology?
  • I could list the book’s price as a disadvantage. After all, $30 for a Kindle version of a 12-years old book is a bit unfair. But the book is so good that it is worth it. There is plenty of ways to read it for free anyway.

Conclusion

It looks like that in the end I have listed more disadvantages than advantages for a book that I liked. Please do not let my criticism stop you from acquainting yourself closer with the ideas presented by Mark Douglas. I doubt you will regret reading this one.

If you have any questions, comments or opinions about Trading in the Zone by Mark Douglas, please feel free to post them using the commentary form below.

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