The Disciplined Trader by Mark Douglas
The Disciplined Trader is the most famous book in the trading world by Mark Douglas. The valuable trading resource guides traders in their journey to making a profit in the unpredictable market.
In this Market Investopedia blog, we will summarize this book for you and provide the core concept on which the entire trading book is based.
What the Disciplined Trader book is about?
A Disciplined Trader is a famous book by Mark Douglas. Under this, the author talks about the importance of disciplined trading in attaining the desired trading goals and managing the risk associated with trading efficiently.
Traders generally think that trading is a way of making money. That’s true. However, profit comes after continuous learning, endless effort, impeccable knowledge, and, most importantly, the right trading psychology. And that’s the core idea of Mark Douglas’s The Disciplined Trader.
A quick glance
Trading in the Zone and Disciplined Trader are both books by Mark Douglas and deal with trading psychology. The Disciplined Trader is more suitable for beginners.
Yes, Disciplined Trader is amongst the best trading books that teach the psychological approaches to achieve success.
Have a trading rule, always trade with a plan, follow risk management, and learn continuously to become a disciplined trader.
The Disciplined Trader by Mark Douglas is an amazing book that provides a psychological approach to trading.
Jesse Livermore is the best and most successful trader in the world.
8 Key Lessons of the Disciplined Trader
There are two types of people: those who love reading books and those who cannot even read one paragraph. And the blog is for a second variety of people.
We have broken down the summary of the trading resource into a short paragraph to help you understand the concept efficiently
Trade with Discipline and Patience
The two psychological elements that decide your trading success are discipline and patience. The ratio of traders giving importance to these two elements is quite low. That’s the reason why the ratio of successful traders is also lower.
Discipline and patience got maximum space in Douglas’s book; even the name Disciplined Trader suggests that. The authors encourage traders to follow proper rules, wait for the right time to place a trade, and prepare a trading journal. Incorporating these elements will lead to success and help you survive in bad trading times
Self-awareness is the Key to Success
One of the major trading principles of the book is to have a clear idea of who you are and where you stand as a trader. You should know your strengths and weaknesses.
The author asks traders to organize their review sessions over a period. It will help them identify how they react to profits or losses, or how they make trade decisions during an uncertain market.
Self-awareness will help you determine your mental stability, decision-making skills, and risk-taking capacity. It will pave the way for self-improvement and enhancement.
Have a Blueprint for Your Trading Journey
Mark advocates the need for a trading plan for a profitable journey. A trader should develop a comprehensive plan containing the why, when, where, how, and who of the trade.
A trader should have a clear idea of the trading goals and what risks the trader is willing to take to attain them. A plan should include the specific trading style, financial instruments, risk, position sizing, analysis methods, money management, trading time frame, leverage, and other key details.
Having a plan is not enough; a trader should follow it. Hence, the author urges traders to continuously analyze their effectiveness and make changes accordingly. It will help them to stay relevant in trading dynamics.
Manage your Risk before Profit
Before entering the market, most traders decide what they will do with the profit. However, many traders don’t have the right idea of risk, even after entering the market. And that was when your trading approach became wrong.
Risk management should be a top priority that helps traders keep their trading journey disciplined. Douglas urges traders to have a solid risk management plan. The plan should include maximum risk, risk per trade, and ideal risk-to-reward ratio. Also, a trader should follow the risk guidelines and not let their emotions affect it.
Take Responsibility for Your Losses
Losses are a part of your trading, and even perfect traders have losses. However, the problem with most traders is that they blame the market conditions, trading platforms, or luck. However, blaming is not a solution; it is just a way of running away from your losses.
So, start by taking responsibility for losses. Every loss is a lesson for traders. It will help to improve your trading plan, identify your mistakes, and enhance your trading approach.
Emotions are your Biggest Enemy
Nothing can affect your trades more than your own emotions. And that’s what the traders say in the book. Emotion management is the biggest trading skill you need as a trader.
Greed, fear, FOMO, anxiety, stress, and frustration are the major emotions that tend to affect your trade. Douglas suggests that traders should avoid and overcome these emotions.
Take Responsibility for Your Losses
Losses are a part of your trading, and even perfect traders have losses. However, the problem with most traders is that they blame the market conditions, trading platforms, or luck. However, blaming is not a solution; it is just a way of running away from your losses.
So, start by taking responsibility for losses. Every loss is a lesson for traders. It will help to improve your trading plan, identify your mistakes, and enhance your trading approach.
Consistency is what you Need
Bigger profit or consistent profit, most traders choose bigger profit. However, Douglas suggests choosing consistency in trading. Trading is not about a few profitable trades but about overall profitability.
Consistent traders are those who believe in staying profitable throughout their trading journey. They keep their goals realistic, follow proper risk management, and aim for small, consistent profits.
The Market is always Right
Many traders think that they can control the market after making a few profitable trades. But that’s when the market starts playing with them. The market is uncertain; even the most experienced traders and professionals can not predict the market with 100% accuracy.
So, instead of controlling the market, prepare yourself for unexpected changes. In such cases, even if the market moves against your prediction, you can make changes in your trading plan accordingly.
Bottom Line
The Discipline Trader is a book that teaches you the psychological approach to trading. Generally, people think that you need money or technical skills to start trading. However, what you need in trading is a positive mindset and a disciplined approach.
And that’s what the book is about. You can integrate the right mindset and discipline only when you have knowledge. Market Investopedia can help you understand that. We have a range of trading resources on our website. You can either read them or contact us to join our exclusive webinars.