What do I have to believe to trade consistently?
Five things: anything can happen; you do not need to know what happens next to make money; wins and losses inside an edge arrive in a random order; an edge is only a higher probability of one outcome; every moment in the market is unique. Consistency comes from holding these, not from more market knowledge.
What it is
The five truths are a short list of what a trader has to accept before a plan can be followed without flinching. Paraphrased: anything can happen; you do not need to know what happens next to make money; wins and losses inside an edge arrive in a random order; an edge is only a higher probability of one outcome; every moment in the market is unique.
Why it matters
The journal in BuildTrade™ asks how you felt after each trade because the feeling is the symptom. Fear of a loss on a trade that followed the plan means the first and third truths are not yet believed. The discipline score measures the habit, not the money.
What the research says
The trading-psychology literature’s claim is that the market has no power to make you feel anything; the pain comes from expecting a single trade to behave. Once you expect only the series to behave, a loss stops being a mistake and becomes a cost of the edge.
Mark your next losing trade “in plan” if it was, and read the discipline score, not the profit.
Trading in the Zone, Mark Douglas (2000).
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