At the start of this book, I said it would be a step-by-step guide in the process of adapting yourself to the trading environment. The first step in this process of adaptation is recognizing the need to adapt. If you cant manipulate or force the markets to change in a way that suits your needs, then you will need to leam how to change yourself to suit the conditions. The market places no limits or constraints on the ways in which you choose to express yourself, in that respect; unlike in the cultural environment, you have all the power. The primary purpose of Part II, The Nature of the Trading Environment from a Psychological Perspective, was to point out some of the vast differences between the trading environment and the social environment we were taught to function in and to demonstrate clearly a need for a new perspective.

The next two steps in this process are to learn how to (1) identify exactly what changes you need to make to function successfully in the trading environment and (2) how to effect any mental changes that are necessary. Manipulating the physical environment is as easy as moving a chair from one place to another because thats where you want or need to sit. However, to consciously change yourself to function more effectively in a market environment that will not respond to your attempts to manipulate it will require a thorough understanding of the nature and functioning of your mental environment.

The types of changes you will need to make will fall into two broad categories. First, you will need to learn some sophisticated mental skills to adapt yourself more readily to the constant changes with which the market confronts you-which will require neutralizing some commonly held cultural beliefs about success. {These are the beliefs that have the potential to distort market information.) Second, you will likely need to undo any psychological injury you may have sustained from your previous trading activity. Any psychological injury diminishes your capacity to execute your trades properly.

There are obviously a multitude of substeps to learn how to identify what you need to learn, what you need to change, and how to make those changes. The six chapters in this part are organized to take you through this process of adaptation by providing you with the insight you will need to understand what you have to do and why-

Building a Framework for Understanding Ourselves

The first thing you will need is a structural framework to make the things that go on in your mental environment more tangible and concrete. To give you this framework, I will describe, define, and organize the component parts of the mental environment into a manageable context to where you can (1) understand your behavior, (2) learn the various techniques for manipulating your mental environment at your conscious direction to be more consistent with the environmental conditions and your goals, and (3) learn how to monitor your relationship with the exterior environment.

It is essential that you learn how to monitor your relationship between the interior and exterior environment because our goals, intents, expectations, needs, and wants are all component parts of our mental environment that we project out into the physical environment for fulfillment in some future moment. In other words, they are all components of the mental environment that either happen or dont happen in the outside physical world. You need to be able to recognize immediately (especially as a trader) when you have the potential to distort the outside information to be consistent with the inner components. These distortions will inevitably result in pain and psychological injury.

What I intend to demonstrate in the following chapters is even though you cannot turn your eyes inward to actually see these mental component parts of the mental environment, it doesnt make them any less real. Besides, it isnt necessary to turn our eyes inward because we can just as easily learn to define what is inside of our mental environment by what we see and experience in the outside physical environment. By making the connection between what we believe and what we experience, it will be a lot easier to change what we experience by learning how to manipulate our beliefs.

We will examine the nature of beliefs and how they act as environmental information management systems. I will demonstrate how our individual beliefs about the nature of the market, and our expectations of what it will do next, manage and control the type and quality of information we perceive about it. By breaking down the dynamics of perception, you will be able to identify the various ways in which all of us place mental limitations on the markets behavior and how these limitations cause us to distort market information.

We will thoroughly explore the nature of fear and how it compels all of us to act without a perception of choice. The predominate

Building a Framework far Understanding Ourselves

underlying force behind most traders actions causing prices to move is fear-the fear of missing out (competing for the supply) and the fear of loss. If you really want to understand the markets behavior to anticipate what it will do next, then you will first have to learn about and understand the underlying forces beneath your own behavior and how you process and manage information.

When you understand how any number of typical market-related fears operate in your life and learn to release yourself from them, you will, in effect, be separating yourself from the "crowd." When you separate yourself from the "crowd" and expand what you know about the forces affecting your behavior to encompass the group, it will be much easier to anticipate what the group will do because they will merely represent a larger (collective) version of the way you used to be. In other words, you will know how other traders will behave before they do because you will be able to observe them from a detached perspective-due to your having evolved beyond the choiceless state of operating out of fear.

As you gain in your understanding of how beliefs interact with environmental information to control your perception and form your experience, along with learning how to distinguish between wishful thinking and what the market is indicating about itself, you will eventually be able to learn how to control your perception of the market activity in a way that allows you the greatest amount of mental flexibility, where you will be able to shift your perspective to flow with the markets and execute your trades without hesitation. If you cant change or control what the market is doing, then the only option you have left is to control yourself in a way that allows you to perceive what the market may do next with increased clarity and objectivity, requiring a thorough working knowledge of the nature of your inner environment in relationship to the outer physical environment.

Understanding yourself and learning how to function inside your mental environment is not as difficult as you may think it is. It does, however, require that you gain a thorough understanding of the general characteristics of the mental environment, its component parts, and how they work, which is exactly what this part of the book is designed to give you.

The only reason why any of this would seem so difficult is because we arent taught how to do it when we are young. In fact, we are usually taught exactly the opposite-that the mental environment is a mysterious place that cant be understood. As a result, we end up defining mental components in a haphazard fashion without ever really understanding the relationship between the components, or the relationship these components have with the outside physical environment in the ways that determine how we experience our lives. So, if you are going to consciously transform or adapt yourself to function more effectively as a trader, you will need a very fundamental and practical understanding of the nature of these mental components and how they operate. As will be explained in a moment, there

Understanding the Nature of the Mental Environment