We're continuing our series on the five Fundamental Truths from Mark Douglas's Trading in the Zone. Last, we explored truth number one: anything can happen. Today we move to truth number two.
You don't need to know what is going to happen next in order to make money.
Let that sink in for a second.
Because if you're like most traders, you've spent enormous amounts of time and energy trying to figure out what happens next. We all have. We study charts, read reports, follow the macro data, listen to the talking heads. And for what? To try to predict the future.
But if it were possible to predict the future, every trader would be a zillionaire.
Obviously, that's not the case. So why do we keep pouring energy into something that's impossible to do consistently? That's energy we could spend on more productive pursuits. Like managing risk. Like building better trade plans. Like working on ourselves.
Here's where it gets dangerous. Trying to predict the future leads traders to develop beliefs about what "should" happen. Those beliefs create expectations. Those expectations create disappointment. And disappointment? That's where the real damage begins. Revenge trading. Fear trading. Overtrading. Or just plain giving up.
I've watched it happen to traders over and over again. They had great analysis. They had strong conviction. And when the market didn't cooperate with their prediction, they fell apart. The analysis wasn't the problem. The attachment to the outcome was.
Sure, we can hope for certain outcomes. That's why we put the trade on in the first place, right? But hope and expectation are two very different things. We talked last about Douglas's first Fundamental Truth: anything can happen. We need to be prepared for that. Every time.
So what can we actually know?
Two things. "What is my max loss if I'm wrong?" and "What might I earn if the price goes to my target?"
That's it.
The sooner we come to terms with this limited but important knowledge set, the better off we'll be. Because once you stop needing to know what happens next, you free yourself up to focus on the only things you can control: your risk, your plan, and your response.
And that's more than enough to make money in this game.
Tomorrow we'll dig into truth number three: there is a random distribution between wins and losses for any given set of variables that define an edge.
Ready to stop predicting and start trading with a plan? At All Star Options, every trade comes with defined risk, clear targets, and a strategy built for whatever the market throws at us. Join us.
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