Notes I took from a Mark Douglas interview: “There’s no way to know the sequence of wins and losses. If we want to be able to trade our methodology in an effective fashion, to be able to utilize this methodology in a way where we can extract the maximum amount of profit that it makes available to us based on the pattern that it identifies, we have to do it in certain ways. Our mind has to be free to be able to execute these trades without making trading errors and the trading errors come from believing that because the pattern is present, that it’s going to give me a winning trade on THIS one; THIS trade is going to be a winner. You can’t think that way. That’s the way the typical trader thinks. The typical trader thinks ‘I’m not gonna put on this trade on unless I think it’s gonna be a winner or why would I do it?’”
“Trading a technical methodology or a technical pattern does not have anything to do with being right or wrong. It’s just an odds game. You’ve got to be able to take every single trade because you don’t know the sequence of wins and losses. You’ve got to be able to identify what your risk is and that’s simply ‘How much am I willing to spend to find out if other traders are going to come into this market and bid it higher than my price or offer lower than my price if I sold?’”
The solution is to change your mind, to change the way you think. “[You’ve] got to eliminate the potential to think that the market’s going to disappoint you. And the way [you] eliminate the potential is by understanding that trading is not about being right or wrong. It’s a probability game.”
There are stages of development such as learning how to think in probabilities so the market doesn’t have the potential to cause us to feel emotional pain.
“When you put on a trade and it doesn’t work, all it really means is that some of the traders didn’t come into the market that had the same belief that you had, or the same conviction about this market doing whatever it is you thought it was going to do. You have to learn to walk away.”
We can’t predict collective human behavior. “The methodologies that we have access to, these mathematical formulas, do that for us. But you have to understand that there’s no possible way that these mathematical formulas can predict the outcome of these patterns on a trade by trade basis, only on a series of trades. So when I get a signal from my methodology, at the most fundamental level what this is telling me is that the odds are in my favor that somebody is going to come into the market (this is what the pattern means) and bid it higher than here if I bought or offer it lower than here if I sold. That’s all that it’s saying. Now they’re either gonna come or they’re not, and so as a result I don’t look at this as being a ‘right’ or a ‘wrong’; I look at this as How much distance am I going to give the market to move away from my entry point to tell me that they’re either going to come or they’re not, and any further is not worth the cost of finding out.”
I can't speak for Lescor, but my guess is that he learned to attain this mindset before he became a master trader.
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