<s> TheDisciplined Trader
Developing Winning Attitudes
Mark Douglas
NEW YORK INSTITUTE OF FINANCELibrary of Congress Cataloging-in-Publication Data
Douglas, Mark.
The disciplined trader: developing winning attitudes / by Mark Douglas.
p. cm.
ISBN 0 13-215757-8
1. Stockbrokers—Attitudes. 2. Stock-exchange. I. Title.
HG4621.D68 1990
332.64—dc20 90-30237CIP
This publication is designed to provide accurate and authoritative information in regard to thesubject matter covered. It is sold with the understanding that the publisher is not engaged inrendering legal, accounting, or other professional service. If legal advice or other expertassistance is required, the services of a competent professional person should be sought
From a Declaration of Principles Jointly Adoptedby a Committee of the American Bar Associationand a Committee of Publishers and Associations
© 1990 by Mark Douglas
All rights reserved No part of this book maybe reproduced in any form or by any means withoutpermission in writing from the publisherPrinted in the United States of America1098
New York Institute of Finance
A division of Simon & Schuster. Inc.
2 BroadwayNew York. NY 10004-2207To Paula Webb for her love, understanding and beingthere throughout the process of writing this book.Contents
ForewordPrefaceAcknowledgments
Part I Introduction
1 Why I Wrote This Book2 Why a New Thinking Methodology?
Part II The Nature of the Trading Environmentfrom a Psychological Perspective
3. The Market Is Always Right
4 There Is Unlimited Potential for Profitand Loss
5 Prices Are in Perpetual Motion with NoDefined Beginning or Ending
6 The Market Is an Unstructured Environment
7 Inthe Market Environment, ReasonsAre Irrelevant
8 The Three Stages to Becoming a SuccessfulTrader
Part III Building a Framework forUnderstanding Ourselves
9 Understanding the Nature of the MentalEnvironment
3739
41
4349
56
61
72
7610 How Memories, Associations, and BeliefsManage Environmental Information
11 Why We Need to Learn How to Adapt
12 The Dynamics of Goal Achievement
13. Managing Mental Energy
14 Techniques for Effecting Change
Part IV How to Become aDisciplined Trader
15 The Psychology of Price Movement16 The Steps to Success17 A Final Note
Index
88105119132141
151
152166184
185Foreword
My unique position in the financial community has allowed me the rareopportunity to talk to and question thousands of traders, brokers, and tradingadvisors since 1979. I am not a broker or a letter writer. I am the chief executiveofficer of CompuTrac, a company that supplies technical analysis to stock andfutures traders. I perceive my position as being neutral, one that allows peopleto open up and talk to me freely. I started trading for my own account in 1960and very quickly became aware of the underlying psychological blocks to goodtrading and money management. This realization has been confirmed by all whohave counseled with me.
As a result, I sincerely feel that success in trading is 80 percent psychologicaland 20 percent one's methodology, be it fundamental or technical. For example,you can have a mediocre knowledge of fundamental and technical information,and if you are in psychological control, you can make money. Conversely, youmay have a great system, one that you have tested and has performed well for along period of time, yet if the psychological control is not there, you will be theloser.
A good trader knows from experience that over a period of time he mayengage in more losing trades than winning ones. But money management,and a careful assay of the risks protected by realistic stops, will keep thetrader out of trouble and ensure that on the "big" moves, he will profit.Money management is composed of two essential elements: psychologicalmanagement and risk management. Risk management stems from thepsychological factors being truly understood by the trader and "in place"before risk is even considered.I would especially caution new traders and market participants thatreading and passively analyzing your motivations are certainly a necessity,but the acid test comes with active trading under pressure. Start slowly.Question every trade. What motivated it? How was the trade managed? Wasit successful? Why? Did you lose? Why? Write down your assessment andrefer to your comments before making your next trade.
At all major CompuTrac seminars I try to have a workshop leader addressthe attendees on the psychological aspects of trading. The grim reaper whokills off "your equity" and disappears with your profits is not themysterious and ubiquitous "they" but a simple misguided "you." Medeasaid just before she murdered her children, "I know what evil I'm about todo, but my irrational self is stronger than my resolution.” If this sentimentreflects your mind set when you trade, then The Disciplined Trader isdefinitely the type of book you should be reading.
What a pleasure to read this book. My own education cost me a lot "thehard way." I can read myself into the pages - that's me, that's me! Markhas carefully fashioned his book into a comprehensive logical dialogue. Itreads as if you are at his side and he is explaining it as a friend, which Iknow you will enjoy. You are fortunate because you are taking the timenow, before you have made a serious mistake, I hope, to learn aboutyourself and to study your craft. The traders who take the time to reflect andpractice will survive and possibly prosper.
TIMOTHY SLATERPresidentCompuTrac Software, Inc.Preface
The Disciplined Trader is a comprehensive guide to understanding thepsychology of self-discipline and personal transformation needed to becomea successful stock or futures trader. This book will serve as a step-by-stepguide to adapting successfully to the unusual psychological characteristics ofthe trading world.
I say "adapting" because most people venturing into the tradingenvironment don't recognize it as being vastly different from the culturalenvironment in which they were brought up. Not recognizing thesedifferences, they would have no way of knowing that many of the beliet’sthey acquired to enable them to function effectively in society will act aspsychological barriers in the trading environment, making their success astraders extremely difficult to achieve. Reaching the level of success theydesire as traders will require them to make at least some, if not many,changes in the ways they perceive market action.
Unlike other social environments, the trading arena has manycharacteristics requiring a very high degree of self-control and self-trustfrom the trader who intends to function successfully within it. However,many of us lack this self-control because as children we learned to functionin a structured environment where our behavior was controlled by someonemore powerful than ourselves, whose purpose was to manipulate our behaviorto conform to society's expectations.
Thus, we were forced by external forces to behave in certain ways througha system of rewards and punishments. As a reward, we would be given thefreedom to express ourselves in some desired manner. As a punishment, we
8would either be prevented from getting what we wanted, causing emotionalpain, or we were inflicted with various forms of corporal punishment,causing physical pain. As a result, the only form of behavior control that wetypically learned for ourselves was based on the threat of pain - eitheremotional or physical - from someone or something we perceived as havingmore power than ourselves. And since we were forced to relinquish ourpersonal power to other people, we naturally developed many of ourtraditional resources for success (the particular ways in which we learned toget what we want) from the same mental framework. Accordingly, welearned that acquiring power to manipulate and force changes upon thingsoutside of us was the only way to get what we wanted.
One thing you will learn as a trader is that the mental resources you useto get what you want in your everyday life will not work in the tradingenvironment. The power and control that are necessary to manipulate themarkets (make them do what you want them to do) are beyond all but ahandful of individuals. And the external constraints that exist in society tocontrol your behavior don't exist in the market environment. The marketshave absolutely no power or control over you, no expectation of yourbehavior, and no regard for your welfare.
If, in fact, you can't control or manipulate the markets and the marketshave absolutely no power or control over you, then the responsibility forwhat you perceive and for your resulting behavior resides only in you. Theone thing you can control is yourself. As a trader, you have the powereither to give yourself money or to give your money to other traders. Andthe ways in which you choose to do this will be determined by a number ofpsychological factors that have little or nothing to do with the markets.And this will be so until you acquire some new skills and also learn how toadapt yourself to suit conditions as they exist in the market environment.
To operate successfully in this environment you will need to learn how tocontrol yourself in ways that may be completely alien to you.
You will also have to learn how to grant yourself the mental freedom toshift your perspective to notice alternative possibilities to getting what youwant in the trading arena, regardless of your expectations of how you aregoing to get it. There are only a few traders who have come to therealization that they alone are completely responsible for the outcome oftheir actions. Even fewer are those who have accepted the psychologicalimplications of that realization and know what to do about it.
Rarely do any of us grow up learning how to operate in an arena thatallows for complete freedom of creative expression, with no externalstructure to restrict it in any way. In the trading environment, you willhave to make up your own rules and then have the discipline to abide bythem. The problem is, price movement is fluid, always in motion, quiteunlike the highly structured events that most of us are accustomed to. Inthe market environment, the decisions that confront you are as endless asthe price movements you intend to take advantage of. You don't just have
9to decide to participate, you also have to decide when to enter, how long tostay in, and under what conditions to get out. There is no beginning,middle, or end - only what you create in your own mind.
In addition to the negative psychological implications that accompanythese decisions, you must be aware that even if you make the minimumfinancial commitment of one contract per trade (as in the futures market),there is an unlimited potential for profit as well as an unlimited potentialfor loss. From a psychological perspective, this means that each trade hasthe possibility of fulfilling your wildest dreams of financial independence,and simultaneously presents you with the risk of losing everything youown. The constantly changing price movement makes it extremely easy foryou to ignore the risk and tempt yourself into believing you don't have tofollow your own rules, this time.
Here is an environment that offers complete freedom of expressioncombined with unlimited possibilities and unlimited risk. If you place in it aparticipant who is oblivious to these psychological conditions (one whooperates from a mental framework oriented toward external structure,constraints, and expectations), then what you have is a formula foremotional and financial disaster.
This grim scenario certainly explains why so few people ever makemoney as traders. Actually, almost all of those who make an attempt attrading completely underestimate the difficulty and consequentlyoverestimate their ability to fulfill their inflated expectations. Therefore,most, if not all, people who trade inflict some degree of psychologicaldamage upon themselves. I am defining "psychological damage" as anymental framework that has potential for generating fear.
Fear results from any belief about environmental conditions that has thepotential to cause either physical or emotional pain such as stress, anxiety,confusion, disappointment, or betrayal. Painful emotional conditions arebasically the result of unfulfilled expectations. Unfulfilled expectationscreate a conflict between a person's beliefs about the way things should beand the actual environmental conditions that don't match those beliefs.This conflict is expressed through our emotions in the form of pain that wegenerally label as stress, anxiety, confusion, and so on.
People seem to avoid pain instinctively by building up mental defensesagainst the intrusion of environmental information that would confirm theexistence of any conflict. These defenses consist of denials, rationalizations,and justifications - all of which will result in perceptual distortion.
"Perceptual distortion” occurs when our mental system automaticallydistorts environmental information by shaping and selectively excludingcertain information to compensate for the conflict between what we expectand what the environment is offering us. This will be done in such a way thatwe will believe a shared reality exists between ourselves and the outsideenvironment, thus avoiding any pain. I am defining a "shared reality" as acorrespondence between one's beliefs about the environment and the
10actual environmental conditions that exist.
If you are distorting market information, you are not sharing a realitywith the markets, and you are also indulging yourself in an illusion, to theextent that you hide from the possibility of disappointment. At this point,you would be setting yourself up for what could be called a "forcedawareness." Obviously, if the markets are doing something other than whatyou are allowing yourself to perceive (because some, if not most, of theinformation the markets have to offer won't validate what you want orhope), then something has to give. These distortions will continue untilthere is such a disparity between your acquired mindset and the conflictingmarket information that the mental defenses (illusions) will break down.This usually creates a state of shock, where you may wonder how thingscould get so bad so quickly.
In such a situation, the market forces you to confront your illusions of ashared reality, creating a painful forced awareness. At some point in yourtrading career you will need to understand how all of us, because of ourcommon upbringing, try to control market events through our perception ofwhat we think will happen next and then rigidly hold on to theseexpectations. This is where you need to learn how to gain the kind of mentalflexibility that allows you to shift your perspective to be aware of otheralternatives and possibilities. You may not be able to control the markets,but you can control your perception of them in order to achieve a higherdegree of objectivity, resulting in a higher degree of shared reality with themarkets.
As painful as these forced awarenesses may be, they are not likely todeter you from being attracted to the opportunities the markets have tooffer. However, the cumulative psychological effect on you will be verynegative. If you have suffered through several forced awarenesses, yourperception of market activity will eventually become heavily weightedtowards avoiding pain instead of seeking opportunity. Your fear of losingmoney, being wrong, or missing an opportunity will become your primarymotivation to act or not act.
Now, there are several major problems that result when fear becomes amotivation to do or not do something. First, it will limit your range ofperceived opportunities by narrowing your focus of attention, keeping it onthe object of your fear. This means that out of all available marketinformation, you will only perceive information that will, in effect, validatewhat you fear the most. Your fear will systematically exclude from yourawareness market information that would indicate the existence of otheralternatives and opportunities.
As you begin to understand the negative relationship between fear andperception, you might be surprised to learn that in your attempts to avoidlosses, you actually create them. Fear will also limit your range of responsesto any given situation. Many traders suffer considerably when they knowexactly what they want to do but, when the moment to execute arrives, find
llthemselves completely immobilized.
Before anyone can become successful in an environment with theunstructured character of the trading environment, one needs to develop asupreme sense of self-confidence and self-trust. I am defining self-confidence as an absence of fear and self-trust: knowing what to do at themoment it needs to be done, and then doing it without hesitation. Anyhesitation will only create self-doubt and fear. To whatever degree self-doubt exists as a state of mind, to that same degree you will feel fear,anxiety, and confusion.
The negative experiences that result from trading in a state of fear, anxiety,and confusion, will create or add to an already-existing belief of inadequacyand powerlessness. Regardless of how hard any of us may try to hide fromothers what is going on, we obviously can't hide our results from ourselvesIf the market's behavior seems mysterious to you, it's because your ownbehavior is mysterious and unmanageable. You can't really determine whatthe market is likely to do next when you don't even know what you willdo next, regardless of what you may perceive or want.
The few successful traders who have, in some way, transcended thesepsychological obstacles have been generous with their one-line gems oftrading wisdom: "Learn to take a loss," "Go with the flow," "The trend isyour friend," "Cut your losses and let your profits run," "To know themarkets you need to know yourself," and on and on. The DisciplinedTrader fully explores, breaks down, and then organizes the psychologicalcomponents of this advice into a step-by-step learning process, a processthat takes you through the various stages necessary to orient yourselfsuccessfully to the trading environment. This book will explain to you whatskills are necessary, why you need to understand them, and mostimportant, how to go about learning them.
This book is organized in four sections. The first consists of the first twochapters and serves as an introduction. The second consists of Chapters 3through 8 and defines the problems or challenges of becoming a successfultrader. The third section consists of six chapters that will give you the basicinsight you will need to identify what has to be changed in your mentalenvironment and what you can do to change it. The fourth section consistsof Chapters 15 and 16 which put everything together into a unifiedframework to develop specific trading skills. You will learn how to observemarket action from an objective perspective, determine where you need tolimit yourself, and establish the steps you will need to take to expandthose limitations in a productive and psychologically healthy way.Acknowledgments
Most people are probably well aware that writing a book is a very difficulttask, one that often requires the help and support of a number of people inthe author's life. There are a number of people I want to acknowledge asbeing instrumental in helping me make this book a reality including myparents, John and Helen Yosin; my brothers and sister - Craig, Dean, andSandy Yosin - for all their love and support; Brad Johnson, my partner inTrading Behavior Dynamics, for all of his patience and kindness; JimSutton, Bonnie Marlowe, Jake Bernstein, Elizabeth McKinsey, MichaelHeadley, Steve Sukenik, and Jack Carl for helping me get started; all of thetraders that I have worked with over the last six years, especially JimGriswold, Jerry StahInecker, Jack Brassuel, Steve Bianucci, Mike Gamble, andChuck Pettet for their friendship and support; Tim Slater for giving me theopportunity to express myself as a speaker and a writer; Rich Miller for hissupport and being a good friend; Lori and Nikki Marlowe for the happinessthey brought into my life; and most of all, my friend and fellow author KurtLeland for everything he has taught me and for showing me the way.PART I
IntroductionCHAPTER 1
Why I Wrote This Book
Since I started working on this book - in the summer of 1982 - nearlyevery dimension of futures trading has exploded in growth. There are brandnew exchanges, new contracts, more advisory and news services, anincreasing variety of books and publications, and ever more sophisticatedtechnical trading systems, most all of them with computer applications tomake it easy to track the markets. However, even with this tremendousgrowth in services related to trading, one inescapable fact remains: there isstill a very small group of sophisticated traders who take the greatestpercentage of profits out of the markets, making well over 90 percent of allthe other traders net losers year-in and year-out.
In futures trading for every dollar of profit gained by one trader, there hasto be an equivalent dollar lost by another trader. If a few traders areconsistently making money on a grand scale, then their profits have to becoming directly out of the pockets of the thousands of other traders whovery faithfully contribute to their daily winnings. Some of these verysuccessful traders are public figures, but most are only known in theChicago or New York areas. Needless to say, everyone wants to know whatthey do and how they do it.
There must be a difference between these two groups of traders - thesmall minority of winners and the vast majority of losers who want toknow what the winners know. The difference is that the traders who canmake money consistently on a weekly, monthly, and yearly basis approachtrading from the perspective of a mental discipline. When asked for theirsecrets of success, they categorically state that they didn't achieve any
15measure of consistency in accumulating wealth from trading until theylearned self-discipline, emotional control, and the ability to change theirminds to flow with the markets.
First, I want to point out that self-discipline, emotional control, andlearning to change one's mind after making a commitment are allpsychological issues that have nothing to do with news services, advisoryservices, new exchanges, or technical or fundamental trading systems -computerized or not.
Second, from my trading experiences, observations, and research, I havediscovered that all traders - both winners and losers - seem to share somevery common experiences. Either in the beginning or at some point early intheir trading career, all traders experience confusion, frustration, anxiety,and the pain of failure. The few-traders who pass through this phase toaccumulate wealth are those who eventually confront and work throughsome very difficult psychological issues about what it means to be a trader,and this process of realization and change normally takes several years, evenfor the best of them.
If self-discipline and emotional control are the keys to success, they arealso not necessarily traits any of us are born with. On the contrary, they arecharacteristics we acquire by learning certain mental skills. Acquiring thesemental skills is often the result of a trial-and-error learning process that canbe very costly financially and usually filled with emotional pain andsuffering. The biggest problem with a trial and error approach in trading isthat most people lose all their money before they get through the process.And other traders who have enough money to keep on trading never fullyrecover from the effects of the psychological trauma they have inflicted onthemselves to ever learn how to trade successfully on a consistent basis.This leaves only a relatively small number of people who make it.
All the great traders, both past and present, have found it very difficultto explain what it is they do, how they do it, and more important, theprogression of steps they took to get where they got. Many would gladlyshare with others what they know about the market and its behavior but notnecessarily about their behavior as individuals. They would, however,often caution those who sought their wisdom to understand that all themarket knowledge in the world won't do them any good until they learnedwhat can be called self-discipline and emotional control, without necessarilybeing able to explain what they were.
For instance, "Cut your losses short" is great advice that is often given asan axiom of trading wisdom. But how do you explain to someone the stepsneeded to learn how to do that? Especially when he is interacting with anenvironment that is in perpetual motion and will always offer him thepossibility that the market can come back and make him whole, if he is in alosing trade. If you take into consideration that his money and self-esteemare at stake and the market coming back is always a viable possibility,regardless of how remote it may be, then you can see how difficult it is to
16explain why he needs to "cut his losses." It is even more difficult to explainhow he can do it in a way that suits his unique psychological makeup.
The easiest way to explain how to apply this type of wisdom, withoutactually explaining it at all, is to say, "Well, if you want to be a successfultrader, you need to learn self-discipline and emotional control." I don'tbelieve this type of vague advice was intentional, however, for principallytwo reasons. First, self-discipline and emotional control are abstractconcepts that are not easily explained or understood. We all hear or read thewords a lot, but ask anyone you know to define either of these concepts,and you'll probably get a blank stare.
Second, today's successful traders started out their journey without maps,signposts, or guidelines or the benefit of knowing exactly where they had toend up, from a psychological perspective, to accumulate their fortune.They had to explore the trading world through a means of self-reflectionand readjustment that was very demanding and time consuming. One couldsay they more or less stumbled through it learning from each mistake,many small and others that were devastating both financially andemotionally.
At some point, they probably realized that something about themselveshad changed because the normal kind of market activity that once had avery negative emotional impact on them, like anger, stress, anxiety, andfear, just didn't have that same effect any longer. They must have gainedsome measure of confidence in themselves to respond appropriately to allpossible market conditions because there is a direct correlation between aperson's level of confidence and the negative emotions mentioned.Confidence and fear are states of mind that are similar in nature, onlyseparated by degree. As a person's level of confidence increases, his or herdegree of confusion, anxiety, and fear dissipates proportionately.
This confidence would naturally develop as people learned to trustthemselves to do whatever needed to be done, without hesitation. As aresult of this kind of self-trust, they would no longer need to fear theseemingly unpredictable and erratic behavior of the markets. However, themain point I am making here is that the process of change that took placewas in the mental environment and psychological makeup of eachindividual trader; the markets didn't change, the tools that were used didn'tchange, the trader did.
Now, when traders go through a transition in their personal developmentand learn a new skill on a trial-and-error basis, it is unlikely that theywould keep a detailed record of the steps to that learning process, especiallyif that process was characterized by pain, anxiety, and frustration. Obviously,if someone doesn't know exactly how they acquired the skills they now have,then, naturally, it would be extremely difficult for them to explain tosomeone else how they got them.
Besides, when it comes to trading, once someone is making the kind ofmoney he had always dreamed of, there isn't much incentive to spend the
17time and energy necessary to break down these abstract skills into aneffective learning process from which others can derive some benefit.Developing educational programs to explain how to become a successfultrader requires a completely different set of skills from the skills necessaryto be a trader. As will be explained in a moment, the learning process and thekind of personal transformation that was necessary to enable me to writethis book was distinctly different from the kind of learning process Iexperienced as a trader to realize why a book like this needed to bewritten. One learning process was chosen and the other was forced.
What I mean by forced is, I had to lose my house, my car, andpractically everything else I owned to learn some of the ways in which Ineeded to change my perspective to operate in the trading environmenteffectively. Losing all my possessions was a complete life-alteringexperience, an experience that taught me a lot about the nature of fear andthe debilitating effects it has on a person's ability to trade effectively.
The kind of insight I gained as a result of this experience is the type oflearning process I call a forced awareness. This is where the nature andcharacteristics of the environment I was operating in were much differentfrom what I believed they were, first out of ignorance, and because I put upmental defenses to block my perception of certain information. Eventually Iwas forced by the markets to acknowledge many things about myself that Iotherwise wouldn't consider. When all the external symbols that representeda major part of my identity were gone, I didn't have any other choice andwas forced to perceive myself in new and different ways.
These events occurred in March 1982. At the time, I was an accountexecutive with Merrill Lynch Commodities at its Chicago Board of Tradeoffice. Less than a year before, in June 1981, I moved from the suburbs ofDetroit where I was enjoying, at least financially, a very successful career incommercial property and casualty insurance. I left Michigan and success tomove to Chicago and be a trader. I went to work for Merrill Lynchbecause I didn't have enough money to buy a seat at the Board of Trade orthe Chicago Mercantile Exchange and didn't know that you could leaseseats at that time.
I had an expensive apartment on the gold coast of Chicago and a Porsche;I was maintaining a house in an affluent suburb of Detroit that mygirlfriend and her two daughters were living in; and I was driving or flyingback and forth between the two cities almost every weekend to visit them. Iwas under extreme financial pressure to succeed because my life-styleexpenditures were far and away in excess of what I could afford. Unless Imade it big as a trader, it would be very hard to reconcile some of thedecisions I made to put myself in that kind of a situation.
By the time I moved to Chicago I had already been trading for over twoyears. Twice, before moving, I lost all my trading capital. Of course, I wouldquickly save up and start again. My brief periods of success and fewwinning trades were enough to justify that I continue trying. Once I was
18very close to making over a quarter of a million dollars on a trade, but Ipulled out of it just before the big move. This devastated me, but I alsobecame completely hooked on trading and even more determined to besuccessful. From that experience I decided to buy all the books I could getand attend all the seminars I could afford.
Something stated in virtually all the books I read was that it is verydifficult to learn how to trade or sustain any success if one is under a greatdeal of financial pressure—meaning don't expect to become a successfultrader if you have limited trading capital or if you are trading with moneyyou can't afford to lose. I was obviously violating both these rules because Ihad very little trading capital relative to my life-style that I absolutely couldnot afford to lose. Also I had a lot of other evidence that the odds were notexactly in my favor.
I came to Chicago because I believed that if I could get close to the actionand meet people who knew how to trade, I could then learn from them. Iwas in for a very rude awakening. I was at Merrill Lynch Commodities, itssecond largest commodity office, with 38 account executives. At first I wasshocked to find out only one of the account executives had any experiencetrading his own money. Then I was further shocked to learn that none ofthese account executives had any customers who were making any money.In fact, the typical customer lost his original stake within an average of fourmonths.
My next major disappointment came when I began to meet and makefriends with as many floor traders as possible, believing that if the guys upin the offices don't know how to make money, the floor traders certainlymust. Again, I found the same conditions that existed up in the offices.Other than a handful of floor traders who had a reputation and a mystiquethat everyone seemed to be in awe of, I couldn't find one person who wasmaking money consistently, who wasn't confused or knew what he wantedto do and then did it, without first having to ask everyone around him forconfirmation that he was doing the right thing. I am not implying that Ididn't meet traders who at some point in the day hadn't made money. Theyjust couldn't keep it. I knew many traders who could make $2,000 or$3,000 the first couple of hours of trading. But they would always lose itback, plus more, a short time afterward.
Everybody seemed to be suffering from the same kinds of problems andmistakes that nobody really recognized as problems. Obviously, the nature ofthe markets made it easy not to have to confront anything that otherwisemight be perceived as a problem because the next trade always had thepossibility of making everything else in one's life seem irrelevant. Whydeal with anything if the next trade can make you rich? All the traders Iknew, including myself, were affected by this type of "big-trade" mentality.In fact, my big-trade mentality was so pervasive that I would refuse to takeprofits of $500 or $750 in many trades even when I knew that's all therewas to be made. This may sound absurd, but I wouldn't take profits of such
19small amounts, because, at that time, it felt as if the market