by Mark Douglas is, for a change, a book that deals with the psychological side of trading. It attempts to help readers develop a professional attitude to trading - although unfortunately, like most books in this field, it is far from scientific. Once again, there is a complete lack of references in this German edition of the shockingly worldwide bestseller Trading in the Zone.
There is no doubt that it offers some interesting perspectives on the mental challenges that active traders face in their daily trading. It is just not clear to me why, if at all, it is only superficially based on scientific findings. The psychological perspective behind human decision-making - completely detached from the capital market - has not only been known worldwide since Daniel Kahneman, Richard Thaler and co. won Nobel Prizes and become a branch of science in its own right: behavioral finance.
Instead of orienting himself on these findings and thus paying tribute to the people who have critically and methodically verified assumptions and theses over decades, Mark Douglas again loses his way in personal experience, hearsay and the typical front between science and practice.
An incredibly naïve and limiting assumption that, in my opinion, closes its eyes to the fact that the scientific facts that Kahneman and co. have created across the board in recent decades and have themselves repeatedly critically examined are based on real observations and experiments and do not represent „academic textbook knowledge“, as authors such as Mark Douglas like to present it.
For me, Mark Douglas is once again the perfection of the typical trading coach. After a few years of being active on the capital market himself, in which he delivered more or less convincing results - the occurrence of which of course had nothing to do with chance, but with his own ability - he took the path and marketed his track record to show other traders how to become successful. He then cleverly focused on the psychology behind the trading rather than the trading itself, because nothing is less tangible and therefore more relaxed from the coach's perspective.
The content of the book consists of various topics dealing with fundamental and technical analysis, the temptations and dangers of trading, taking responsibility and developing consistency in thought and action. The author also explains the importance of beliefs and how they can influence trading.
The absolutely absurd and not even remotely verifiable statements that Mark Douglas makes are sometimes mind-boggling. For example, he argues, without providing any sources, as with all other evaluative statements in the book, that technical analysis is superior in today's world:
„The technical analysts knew something that took the broad mass of market participants generations to understand.
As a method of predicting future price movements, technical analysis has proven to be far superior to a purely fundamental approach.“
Mark Douglas
In my opinion, these two claims, which are in no way scientifically tenable - just open one of the books by John Bogle, Burton Malkiel, Pirmin Hotz, Gerd Kommer or Nate Silver - once again perfectly illustrate the mindset of the industry: the supposed experts know something that others simply cannot understand. Perhaps because they are simply not intellectually capable of doing so - despite Nobel prizes etc. - or because they have not yet found their way into the group of the enlightened. Precisely because they cannot understand it, they find dozens of scientific proofs that it is bullshit. They lack faith, conviction, even foresight and are therefore condemned to watch the successful traders succeed forever.
„If you put 1024 gorillas in a sports hall and teach them to throw coins, one of them will throw heads ten times in a row. Most people would call that luck, but in the investment business it's called: What a genius!“
John C. Bogle from Tony Robbins' book Unangreifbar
It is really frightening that countless people still believe this obvious mumbo-jumbo, although it is always the same game: chart analysis preachers like Mark Douglas and co. publish books full of assertions, conjectures and unscientific statements without any evidence - the practice and the success of some traders, which is of course exclusively due to skill, is evidence enough (survivorship and overconfidence bias apparently do not exist among them) - and rational investors publish several studies and books full of evidence that this is absolute nonsense. I simply cannot understand why people still have any serious doubts or even believe that both approaches are similarly relevant.
„It's difficult to get someone to understand something if their salary depends on them not understanding it.“
Upton Sinclair aus Rolf Dobellis Buch The art of clever thinking
Perhaps some people simply don't want to give up hope of finding the holy grail of the capital markets or the one ring to enslave them, to find them all, drive them into underperformance and bind them forever.
„The technical approach opens up many more opportunities because it shows how the same repeatable patterns of behavior occur from moment to moment, daily, weekly, yearly and every period in between. In other words, technical analysis turns the market into an endless stream of opportunities to get rich.“
Mark Douglas
Needless to say, it is almost impossible to choose correctly between all these options. Looking back, you can always find the „right“ signal, but looking forward, it's a completely different story. At this point, perhaps Nate Silver should be mentioned again:
„Perhaps we should have some sympathy for these poor chart analysts. It's not always easy to distinguish the signal from the noise.“
Nate Silver aus seinem Buch Calculating the future
However, this is not just a detached statement on his part from his book: he develops it beforehand on hundreds of pages with countless sources. Mark Douglas' book, on the other hand, is not even hundreds of pages long and is quite thin and straightforward.
Even the back cover of the book reveals that Mark Douglas once again earned most of his money not by trading securities himself, but by coaching other traders. Translated into a portrait, he is once again not the prospector, but the one who supplies the prospectors with shovels. And of course the person selling shovels will always tell people that there is a lot of gold there. He has seen it with his own eyes and is just such a philanthropist that he lets them know. It doesn't matter to him whether there really is gold there or not, because he has sold the shovel and made his money with it.
This is the best way to sell seminars, training, coaching, mentoring programs and books.
We should thank people like Marc Douglas for being such sincere and humble people that they don't carry the gold out of the rivers and mines themselves, even though it is so easy. Out of pure charity, they prefer to tell others how to do it so that they too can become as wealthy as they are.
„Trading Psychology presents a serious psychological approach to becoming a consistent winner in trading. I am not offering a trading system; I am more interested in showing you how to think in a way that is necessary to become a profitable trader. I assume that you already have your own system, your own edge. You need to learn to trust your edge. Because this edge means that the probability of one outcome is higher than another. The greater your confidence, the easier it will be to execute your trades. This book is designed to give you the insight and understanding you need about yourself and the nature of trading to make trading as easy, simple and stress-free as just watching the market and thinking about doing it.“
Marc Douglas
I find it somehow strange to describe his own approach as serious, but then not to cite a single source in his book of almost 200 pages and not even provide a bibliography. Of course, he will have been forbidden to do so by the publisher - as is allegedly the case with so many books in the field of trading. But that's just the way it is when you have no sources for your own assertions. Then you simply write yourself in advance that the approach is serious and then that's the way it is. No further sources are needed.
In the end, it remains at one star for a book that certainly provides a few interesting psychological tips and tricks to be able to act mentally stronger and more consistently on the markets. However, there are clear and unambiguous devaluations for numerous scientifically untenable statements and a rather straightforward book with little visual design, no source references, no bibliography, etc. It conveys and confirms a scientific claim, but is basically only based on the author's assertions, speculations and assumptions, the origin of which we cannot trace in any way.
For me, this is not worthy of a non-fiction book and is also not acceptable due to the large number of steep theses in the book. And that's why I can't give the book two stars, which would at least still be a „solid“ rating.