Trading Rules

If you’re trading for a while, you probably came across the trading books “The Disciplined Trader” and “Trading In The Zone” by the author Mark Douglas.

Both are among the best books on trading psychology ever written.

Let’s take a look at the most important trading priciples and rules, beautifully summarized and taken from Mark’s second book, Trading In The Zone.

Trading Rules

The 5 Fundamental Truths of Trading

  • Anything can happen
  • You don’t need to know what is going to happen next to make money
  • There’s 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

I’ve been contemplating and studying these truths for years.

Actually, by now for decades already.

If you truly believe these truths and therefore implement strict rules in your daily trading, you quickly get to this point:

Trading is all about risk management.

And the biggest risk is ourselves.

Therefore, our success depends on our mental state control.

The consistency you seek is in your mind, not in the markets.
- Mark Douglas

Mark also gives us highly practical rules to ensure we’re not srewing up: The 7 principles of consistency.

The 7 Principles of Consistency

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

Sounds easy, right?

If you’ve been trading longer than a few months, you know how hard it can be.

I highly suggest you bookmark this page, and come back to it over and over and over again.

It’s too easy to get lost in the technical aspects of trading, while what we really should care about is managing ourselves.

To get a better understanding of Mark’s clear and brilliant thought patterns, here’s an interesting interview with him:

Mark Douglas - Mind Over Markets (Interview)

Definitely worth watching.

Thanks for reading and plenty of great trades,

Tim for