"Discipline and the Trader" Market Psychology Analysis Part I [Chapter 7] In the world of the market, there is no need for a reason ~ The trap of ruin that those who seek “Why did it move?” fall into ~
? Mark Douglas’s Thorough Illustrated Series “Discipline and the Trader” starts, long awaited【Chapter 7: The World of Markets Requires No Reason】 to begin!?
In Chapter 6, we learned that markets have no fixed form or structure, so you must create your own framework (rules) of discipline.
Now in thisChapter 7, we dissect in depth the most dangerous obsession many traders have…“the trap of seeking a ‘reason’ for market moves”completely and thoroughly!??
Why do we frantically search for the “reason behind the rise” when prices surge or plunge on news and social media? And why does that behavior destroy trading profits? We reveal the cruel truth!
This series isthrough all 17 chapters (in 4 parts), the next will beChapter 8, Chapter 9… and it will progressively upgrade your mental state to a professional level as a practical curriculum. Please register as a favorite and install the lifelong “winner’s discipline” with us! ?✨
❓1. The pursuit of “Why did it move?” never directly ties to profits
When the chart moves sharply, do you unconsciously think like this?
“Why did it rise? Is it because of the jobs report? Or because of a statement by a leader?”
Mark Douglas states that such“attempts to pinpoint the reason for market movement”do not matter at all for future actions (the next trade) and are meaningless.?
Many traders don’t have a trading plan and enter impulsively. And those impulsive actions or trades that could not cut losses are“post-hoc rationalized”with plausible reasons (news or analyst explanations) after the fact, which is all it is.
?2. The truth about trading: the agreement between two people with completely opposite beliefs
Then, how does the market move? To understand its essence, let’s revisit the definition of “trade”.
At the moment a trade is made, there are always“a buyer” and “a seller.” They agree at the current price, but for future value they hold【completely opposite beliefs】.⚔️
?Buyer’s belief:“The current price is cheaper than future value (it will go up from here)”
?Seller’s belief:“The current price is higher than future value (it will go down from here)”
In other words, the current price in the market is merely the consensus resulting from the clash of these conflicting beliefs. There is no single logical reason that everyone will accept.
?3. The three different motives moving markets and the balance disruption
Even more trouble is that markets contain various players with completely different goals and time horizons.
?️Hedgers (commercial traders):Companies, etc. Their goal is not profit but to avoid price fluctuation risk. They trade to hedge even if the market looks unfavorable.
?Institutions (institutional investors):With enormous capital, they pursue long-term value and create large trend waves (forces).
?♂️Speculators (individuals):Aim for short-term arbitrage, and are a crowd prone to emotions and fear.
The differing aims of these players mix together, and only when the forces of buying and selling“balance of forces”are disrupted do prices move.
In short, price movement is not driven by “rational, efficient reasons” as scholars claim, but by the imbalance of desires, fears, and risk avoidance among various people.?
?️4. Why do we search for “reasons”? (avoiding fear)
So why do we keep seeking reasons even when we know it’s meaningless?
Because“we want to ease the fear of the unknown in uncertain markets and feel safe”.
The human brain fears what it cannot understand. Believing that “markets have clear reasons and are logically orderly” is an attempt to escape anxiety about the unknown market.
However, as long as you keep searching for reasons for that “sense of safety,” you will misread the true nature of the market (the imbalance of forces) and be swept away by the crowd psychology of the masses, ending as a loser.
?5. Cast aside the reasons and surrender to the actual facts (the forces) happening now!
This is the conclusion for surviving in the market world.
✅Stop searching for the past reasons of “why it moved” now, and focus only on the present fact of which force (buy or sell) is stronger right now.
You don’t need to know the reasons. The important thing is to objectively read whether the chart in front of you wants to go up or down, and adapt without resisting that current flow. ??♂️
The moment you abandon your ego (the urge to know the reasons), your view clears, and you will see the same scene as pro traders! ✨
?【Preview of next: Chapter 8 and 9—The Stairway to Winners Continues】
“Markets don’t need reasons. Just follow the imbalance of forces (the flow of power).” The lesson of Chapter 7 frees you from news and social media noise and enables stress-free trading!
And the series moves into the climactic Part III: “Mental State for Understanding Yourself”!
?Next:【Chapter 8: Three Steps to Becoming a Successful Trader】
We will reveal three concrete practical steps to completely destroy your old defeatist self-perception and become a member of the professional winners!?Further:【Chapter 9: Understanding the Realm of the Mind】
Now into Part IV! Delve into the essence of trading psychology—how your mind (mental environment) is formed and how you can master and control it at will!
A journey that will lead you to the “Invincible Pro Mentality”through all 17 chapterscontinues! Please don’t miss the next update, and check and follow (add to favorites) now! ?✨
? 【Today’s Reflective Exercise (tell us in the comments!)】
Thank you truly for reading to the end! To firmly embed today’s lessons in your brain, please answer the questions below.
?“Have you ever, after a big loss in a past trade, desperately searched online for news or reasons to understand why it fell? At that time, what reasons did you find to console yourself?”
Please feel free to laugh off and vent about your past habit of “finding reasons,” such as “it was due to the Bank of Japan governor’s remarks” or “it’s because of a XX shock,” in the comments! Realizing that searching for reasons is futile is the first step toward becoming a winner! ?✨