I'm doing my second round reading of The Disciplined Trader by Mark Douglas. Fantastic book, and I'm picking up some additional stuff out of it.
I'm less than half-way through the book, but one of the key things I've gotten out of it this time round is this - How well you are able to control your emotions when trading depends on the meaning you attribute to your wins and losses.
Do I hear some of you going "huh?". Well, basically, its not the event of winning or lossing that is critical, its our interpretation of what those events mean to us that's important. A person who attaches the meaning that "I'm a loser" to a losing trade, reacts very differently from a person who attaches the meaning that "I've interpreted the markets wrongly this time." The former is a global and permanent statement at the identity level, the latter is a specific and temporal statement at the behaviour level. Who do you think would be in more control in his trades?
One side issue that this brings up, is also that of self-acceptance. The more self-accepting one is, the more one is able to accept the mistakes. In Mark's book he says
"Taking responsibility is a function of self-acceptance. You can measure this degree of self-acceptance by how positively or negatively you think of yourself when you make what you perceive as a mistake. The more negatively you think of yourself, the greater you tendency to avoid taking responsibility, so you can avoid the pain of your harsh thoughts, thus generating a fear of making mistakes."Well, I always say that trading is a journey of self-discovery. The better you know yourself, and are able to control your emotions, the better trader you are. And that's one reason why I believe, good traders who have undergone the necessary "training", generally tend to be of better character. Self-control is an important character to develop when you are a good trader... it shows in your trades, and your interactions with people.
