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them or you are not. The less acceptance you have for different types of market behavior, the more the market seems to turn on you like Dr. Jekyll and Mr. Hyde. In one moment it is satisfying all your needs; in the next it is like a greedy monster taking everything away. This Dr. Jekyll/ . Hyde characteristic of the markets only repre-sents your own mental inflexibility to flow with the changes and your lack of understanding-that you give yourself to the best of your ability what you end up with, out of what is available. And by the same token, what you lost, you gave away.

You cant change what the market is doing. You can only change yourself in a way that allows you to perceive what it may do next with increased clarity and objectivity. As a trader you want to know what is going to happen next, yet, how can you begin to know what could happen next, if you refuse to open yourself up mentally in ways that allow you to perceive the most likely possibilities? It is a complete contradiction in thought to want to know what is going to happen next in an event over which you have no control and at the same time to maintain a rigid mental structure that allows for only a very limited number of possibilities.

This contradiction in thought is the result of not understanding the nature of beliefs and how they limit a persons perception of environmental information. When you put on the trade, you had to have some belief about the future. What you need to do is learn how to release yourself from the demand your expectations be fulfilled exactly the way you expect them to be. Releasing yourself from the demand will allow you to shift your perspective to perceive whatever opportunities exist in the market now, as if you didnt have a trade on at all.

AH of us are in a position of having to pick and choose environmental information because we cant be aware of everything at once. If you pick and choose market information on the basis of having to justify your beliefs, you are putting yourself at an extreme disadvantage. You will be excluding from your awareness information that may be more indicative of the consistency of the market and its potential to move in any given direction. And it will be extremely difficult to learn how to develop a perspective for the "big picture," by expanding your time frame perspective.

So even though you cant actually control the markets movement, you can learn how to control your perception of the markets

movement in a way that allows you the maximum objectivity. Learning to perceive objectively will increase your ability to let the market tell you when to get in and when to get out. You can learn how to trade where you wont be using information to justify your beliefs but rather to perceive the most likely possibilities in any given moment. As you build a solid foundation of insight and understanding into the workings of your mental environment (which I will present in Chapters 9 through 14), you will learn how to change yourself in ways that will allow you to perceive the markets from an objective perspective and eventually trade intuitively.

What I will be offering you in the remainder of the book is a step-by-step process of how to adapt yourself to function more effectively in the trading environment. Essentially it is a process that will enable you to identify and manipulate your beliefs to be more consistent with your goals.

There are two dominant themes that form the foundation for this approach. The first we have already briefly covered, that you create the market that you experience in your own mind based on your beliefs, perceptions, intents, and rules. And, second, your trading results will be a function of the degree of skills you develop in three primary areas: perception, or your ability to perceive opportunity; execution, or your ability to execute a trade; and accumulation, or your ability to allow your account balance to grow over a period of time or series of trades.


Your perception of opportunity is a function of the depth of insight into the markets behavior. The depth of your insight into the markets behavior is equivalent to the number of distinctions you can make and the quality of these distinctions. Perception of opportunity is synonymous with your expectation of what the market will do next. To be effective, you will need to learn how to make kinds of distinctions that will provide you with an indication of a high-probability opportunity from an objective perspective, what I call making an uncommitted assessment of the probabilities.

To be able to make some kind of quality distinctions that will eventually develop into a "vision" of the broader perspective, you will need to learn how to expand your time frame perspective of market activity. There are several components to this process, but the two most important are (1) instituting a completely disciplined trading approach and (2} learning how to release yourself from the negative emotional energy stored in the memories of any past trading experiences.

The disciplined approach will naturally help you develop the degree of self-trust essential to function effectively in an environment that does not provide any external constraints to limit or control your behavior, as society does. Without the discipline, you will be at the mercy of your own unrestrained impulses and basically out of control. Consequently, without the self-trust that develops from the self-discipline, you will fear the unpredictability of your own behavior. At the same time, you will likely project this fear into the markets as being erratic and seemingly unpredictable, when it is your own behavior you fear the most.

It would be ludicrous to think that you could understand the markets behavior to any degree greater than you understand your own behavior first. To grasp the fundamental nature of your own behavior, you will need to understand thoroughly all the effects fear has on your perception of environmental information.

At the most fundamental level, fear will limit your awareness of market information that could clearly indicate those possibilities that are in your favor and those that are not. How could any deep level of insight into the markets behavior ever develop if you are constantly worried about what the market may do to you and cannot stay focused on the consistency and structure of the market itself. The market cant do anything to you if you trust yourself to act appropriately under any market condition. Learning this is the key to gaining the level of confidence every trader needs to be successful.

In the larger perspective, fear will reduce the likelihood of you ever developing to the point of making the kinds of distinctions in market behavior where you acquire a "vision" of the big picture. When you understand how fear operates in your trading and have conquered it, you will be able to see how fear operates in the market as a whole and then be able to anticipate the groups reaction to certain kinds of information.

If you did not start your trading career with the proper mental perspective or with a disciplined approach, then it is likely you have suffered some degree of psychological damage. I define psychological damage as any mental condition that has the potential of generating fear. The negative energy stored in these experiences (that create and support a belief about the threatening nature of the environment) will generate fear to the same extent as the degree of energy stored in the memory.

By learning to release yourself from the pain, you will be reducing the fear and automatically opening yourself up to new awarenesses about the nature of the markets. You will be opening yourself up because fear will not be causing you to narrow your focus of attention. Instead of being focused on pain avoidance, you can be focused on what the markets are telling you. Learning how to release yourself from fear will also free you up to think of creative ways in which you can respond to the new relationships you are perceiving in the markets behavior. As a result, you will be increasing your confidence in your ability to respond appropriately to any given market situation.


Your ability to execute your trades is a function of the amount of fear you generate or the lack of it. Fear is always the result of your beliefs about the threatening nature of the environment. What could be threatening about the market? Nothing, if you had the confidence and completely trusted yourself to act appropriately under any given set of market conditions. Essentially, what you fear is not the markets but rather your inability to do what you need to do, when you need to do it, without hesitation.

In your relationship with the markets you had to learn what to fear. What you learned to fear was a result of whatever you did that caused pain. Your pain was the result of your not knowing what to do next that resulted in an outcome you neither expected nor intended. In the market environment you are free to act or not to act; the markets cannot do anything to you that you dont allow, even if it is out of ignorance or a complete sense of powerlessness.

The effects of fear on ones behavior are obvious, limiting one to the point of complete immobility. If you cant execute your trades properly, even when you perceive the most perfect opportunity, it is because you have not released yourself from the pain contained in the memories of past trading experiences and because you still dont trust yourself to act appropriately in any given set of conditions. If you did, there would be no fear or immobility.


Your ability to accumulate profits either in a single trade or cumulatively with several trades over a period of time is a function of your degree of self-valuation. This sense of self-valuation is, in fact, the most important psychological component of success and will override all others in determining your results.

Your degree of self-valuation will regulate how much money you will give yourself (the market doesnt give you the money, you give it to yourself based on your ability to perceive opportunity and execute a trade) out of the maximum potential available or perceivable at any given moment or time frame perspective. Regardless of the depth of understanding you have of market behavior or what you consciously intend, you will only "give" yourself the amount of money that corresponds to your level of self-valuation.

This concept can be explained with a simple illustration. If you perceive an opportunity, based on your definition or what market conditions constitute an opportunity, and do not follow through by executing a trade, what stopped you? In my mind, there can be only two possible reasons. You were either immobilized by the fear of failure or you are struggling with a belief (value) system that says you dont deserve the money. Otherwise, you would have acted on your perception.


The second theme that provides a foundation for the belief system I am offering is that personal transformation, growth, and learning new skills are a function of self-acceptance. Your intent of learning a

new skill or way of expressing yourself is in essence an attempt to create a new dimension of yourself. It is a goal you have projected out into the future that you will then attempt to fulfill by growing into it.

The market will quite naturally make you face what is inside of you on a moment-to-moment basis. What is inside of you could be confidence or fear, a perception of opportunity or loss, restraint or uncontrollable greed, objectivity or illusion. The market just reflects these mental conditions, it does not create them.

Therefore, to grow into a new expression of yourself (fulfill your goal of being a more successful trader), you will need to learn how to accept the existence of any of these negative mental conditions and the psychological components that create them. Cultivating a belief in accepting whatever you find inside of yourself will give you the base you need to work from to change these conditions.

To illustrate this concept of self-acceptance, I will relate to you an example of a floor trader who came to me for assistance because he wanted to change his trading style. When he first went down to the floor he got caught up in scalping because it seemed like the easiest way to make money. However, he soon found that trying to scalp for one or two ticks in the bond pit was just too physically exhausting because he had to compete with so many traders. So he decided that he needed to learn how to hang on to his trades for more than one or two ticks.

The first thing we did was to preplan his trades. We used some fairly simple techniques to identify intraday support and resistance points within a 7- to 10-tick range. The plan was for him to stand in the pit and wait for the price to hit his target (buy support or sell resistance), execute the trade, wait for the market to hit his objective, and then exit the trade. If the market traded through his entry point in the opposite direction by more than two or three ticks, he was supposed to execute the toss without hesitation. Based on our assessment of the reliability of the support and resistance numbers, we believed he didnt need to risk more than two or three ticks to know if the trade was going to work or not.

The first day that he tried to execute his plan, he did very well waiting for the market to hit his entry point. However, when it came time to execute the trade, he couldnt do it. He was supposed to buy at a support level, and he didnt do it because he thought it was going to keep on going lower. When the market didnt keep on

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