The winning attitude

[From Trading in the Zone by Mark Douglas, 2000, New York Institute of Finance, p.36-38]

Interestingly, most traders are closer to the way they need to think when they first begin trading than at any other time in their careers. Many people begin trading with a very unrealistic concept of the inherent dangers involved. This is particularly true if their first trade is a winner. Then they go into the second trade with little or no fear. If that trade is a winner, they go into the next trade with even less concern for what would otherwise be the unacceptable possibil-ity of a loss. Each subsequent win convinces them that there is nothing ing to fear and that trading is the easiest possible way to make money.

This lack of fear translates into a carefree state of mind, similar to the state of mind many great athletes describe as a "zone." If you've ever had the occasion to experience the zone in some sport, then you know it is a state of mind in which there is absolutely no fear and you act and react instinctively. You don't weigh alternatives or consider consequences or second-guess yourself. You are in the moment and "just doing it." Whatever you do turns out to be exactly what needed to be done.

Most athletes never reach this level of play, because they never get past the fear of making a mistake. Athletes who reach the point where there is absolutely no fear of the consequences of screwing up will usually, and quite spontaneously, enter into "the zone." By the way, a psychological zone is not a condition you can will yourself into, the way you can will yourself into a feat of endurance. It is a state of mind you find yourself in that is inherently creative, and usually if you start thinking about your actions at a rational or conscious level, you pop right out of it.

Even though you cannot force or will yourself into a zone, you can set up the kind of mental conditions that are most conducive to experiencing "the zone," by developing a positive winning attitude. I define a positive winning attitude as expecting a positive result from your efforts, with an acceptance that whatever results you get are a perfect reflection of your level of development and what you need to learn to do better.

That's what the great athletes have: a winning attitude that allows them to easily move beyond their mistakes and keep going. Others get bogged down in negative self-criticism, regret, and self-pity. Not many people ever develop) a positive winning attitude. The curious anomaly of trading is that, il you start with a winning trade, you will automatically experience the kind of carefree mind-set that is a by-product of a winning attitude, without having developed the attitude itself. I know this may sound a bit confusing, but it has some profound implications.

If a few winning trades can cause you to enter into the kind of carefree state of mind that is an essential component to your success, but is not founded on the appropriate attitudes, then what you have is a prescription for extreme misunderstanding about the nature of trading that inevitably results in both emotional and financial disaster. Putting on a few (or more) winning trades does not mean you have become a trader, but that's the way it feels, because it taps us into state of mind that only the most accomplished people experience on a consistent basis. The fact is, you don't need the slightest bit of skill to put on a winning trade, and if it's possible to put on one winning trade without the slightest bit of skill, it is certainly possible to put on another and another. I know of several people who started their trading careers with fairly substantial strings of winning trades.

When you're feeling confident and unencumbered by fears and worries, it isn't difficult to put on a string of winning trades because it's easy to get into a flow, a kind of natural rhythm, where what you need to do seems obvious or self-evident. It's almost as if the market screams at you when to buy and when to sell, and you need very little in the way of analytical sophistication. And, of course, because you have no fear, you can execute your trades with no internal argument or conflict.

The point I am making is that winning in any endeavor is most-ly a function of attitude. Many people are certainly aware of this, but at the same time, most people don't understand the significant part attitude plays in their results. In most sports or other competitive activities, participants must develop physical skills as well as mental skills in the form of strategies. If opponents are not evenly matched in the skills department, the one with superior skills usually (but not always) wins. When an underdog beats a superior opponent, what's the determining factor? When two opponents are evenly matched, what's the factor that tips the balance one way or the other? In both cases, the answer is attitude.

What makes trading so fascinating and, at the same time, difficult to learn is that you really don't need lots of skills; you just need a genuine winning attitude. Experiencing a few or more winning trades can make you feel like a winner, and that feeling is what sustains the winning streak. This is why it is possible for a novice trader to put on a string of winning trades, when many of the industry's best market analysts would give their right arms for a string of winning trades. The analysts have the skills, but they don't have the winning attitude. They're operating out of fear. The novice trader experiences the feeling of a winning attitude because he's not afraid. But that doesn't mean he has a winning attitude; it only means he hasn't experienced any pain from his trading activities to make him afraid.