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If our hypothetical trader wants to develop into an effective and consistently successful trader, he will need to engage in some self-improvement. He will need to understand that the market is always right and that he can profit from that Tightness if he doesnt impose a rigid mental structure on its behavior. He needs to release himself from his fear of being wrong so that he can observe the markets behavior from an objective perspective. Otherwise, his fear of being wrong will have the effect of making htm wrong. He will also need to establish some definite trading rules to guide his own behavior and learn how to adhere to those rules. If he had been operating out of a definite set of trading rules he would have never let the loss accumulate sufficiently that his pain would take him out of the trade- If, however, he refuses to acknowledge and accept his current state of development by blaming the market for his losses or trying to convince himself that somehow he wasnt responsible for what he ended up with, then he would be indulging himself in illusion He would be denying who he is and, in effect, cutting himself off from the information he needs to become who he wants to be.

"We have to be willing to confront the truth about ourselves so that we can confront the truth outside of ourselves. The less illusion we indulge ourselves in, the more our perceptions of the outside environment will reflect the actual conditions, because we wont be blocking so much available information. By available information I mean information we are capable of perceiving. The less we block, the more we learn. The more we learn, the easier it is to anticipate how the outside environment will react or respond under any given set of conditions. Otherwise, we will not allow ourselves to perceive in the environment what we refuse to know about ourselves.

None of us likes to acknowledge what we perceive to be our weaknesses. Yet it is exactly what we need to do to grow beyond them. Otherwise, we keep building our lives on this base of illusion that requires so much energy, alcohol, or drugs to maintain that it eventually has to crumble, leading to these very painful forced awarenesses. Confronting the truth in the environment or the truth about ourselves is no more painful than are the forced awarenesses that result from these illusions. Its just more immediate. However, when we do confront what is inside of us, it is the first step in the process of breaking a cycle of dissatisfaction to turn it into an expansive cycle of

success. What better form of goal achievement could there be than to confront conditions as they exist, identify what we need to learn to operate most effectively, and then go about the task of learning it, making our adjustments along the way?


Traders put on trades and then take them off when they choose. That decision-making process is the result of the sum total of all the mental components interacting with one another. If we were to inventory all these components, measure the energy they hold, and then balance the components that contribute to a positive sense of self-valuation against the components that contribute to a negative sense of self-valuation, what would be left is a net amount that we value ourselves. This net amount will correspond directly with how much money we give ourselves out of what is available in any given trade, in any day, month, or year, or by the same token how much of our money we give away.

I know that this can be a very difficult concept to accept. However, other than taking into account what we havent learned yet in terms of insights and skills, how could it be any other way? We make up all our own rules when we trade. No one forces us in or out of the markets, unless a position is liquidated by a brokerage firm for lack of margin. In any given trade, there are a number of possibilities to take profits or cut losses. What we decide to do in each instance with respect to each possibility will be the result of our perceptions and all the internal components affecting those perceptions. What we actually end up doing will be the result of what we decide and our ability to execute our decisions, which again will be determined by a number of mental factors, all of which contribute to our sense of self-valuation.

Trading is an exercise in accumulating money. Once we have learned how to trade (perceive opportunity and execute our trades), who else or what else could be responsible for what we end up with? In fact, if traders were to chart their equity, it would reflect their internal conflicts and what they think of themselves on a day-to-day, month-to-month, or year-to-year basis. These charts would look

very much like the typical bar or point and figure charts of the markets themselves, with support and resistance levels, consolidation zones, rallies, selloffs, and retracements. All these patterns would reflect the traders state of mind, just as the markets themselves reflect the collective state of mind of all its participants.

Charts like these also can have the same predictive value as in the markets, if one learns what to look for. Some of the more sophisticated brokerage firms that manage large funds keep these kinds of charts on the CTAs that they employ to trade their money under management. They will switch the amount of equity available for each to manage based on each individuals chart formations. In other words, once you build up some history it isnt too difficult to determine when someone is about to take a big hit because of the psychological forces building inside of him, just as the collective forces of the market build before a big move.

As individual traders if we want to give ourselves more and more money out of the markets, we have to learn how to value ourselves more and more so that we believe we deserve what we want or deserve what we get. Trading can result in the fast accumulation of windfall profits. To keep those profits, we have to have inner support. Most of the time, that support doesnt exist, and that accounts for all the rags to riches to rags stories that can be told in the trading world. Of course the first step in the process of valuing ourselves more is to accept our true starting point; that is, we have to take complete responsibility for what we end up with as being a reflection of what we need learn about the markets, about ourselves, or both. Ultimately, everything that we do contributes to or detracts from our sense of self-valuation. That is why it can fluctuate from day to day or moment to moment. The best way that I know of to add to our sense of valuation is to commit ourselves to the process of growth.

What do I mean by "managing mental energy," you ask? There are many ways that we already manage mental energy but probably wouldnt think of it in such a way. For example, isnt it possible to take what starts out to be a slight emotional wound (like some minor insult) and intensify the emotional energy behind that wound to the point where we could end up in a state of emotional frenzy? How do we accomplish this? By our willingness to think about whatever caused us to feel insulted. Our thoughts can add energy to or detract energy from the wound, depending on what kind of thoughts we choose to think. If we think destructive thoughts, we will be adding negatively charged energy to intensify the wound. And it goes without saying that we can carry this to whatever extreme we choose and, furthermore, stop whenever we choose or whenever we are willing to. However, stopping does become more difficult in direct proportion to the amount of energy involved. Arent we, in effect, managing or manipulating mental energy when we purposefully make ourselves more angry than when we started out by channeling negative thoughts through an experience?

Managing Mental Energy

By the same token, if we think positive thoughts, we will detract emotional energy from the wound. I am sure anyone reading this book has noticed that when a person wants to stay angry, he will refuse to listen to anything that might defuse his anger. When we refuse to listen to "the voice of reason" so to speak, we are making a choice not to manage mental energy. The only reason why an angry person has to shut out "the voice of reason" is because he knows the information has the potential to change the way he feels. He knows that if he changes his perspective-which will, in turn, change the way he feels-he will experience a different environment on the outside. If he isnt "willing" to change-regardless of what the benefits may be-he will refuse to use his thoughts in a way that would allow him to experience those benefits. These examples are just a few of the many ways in which we already manipulate our mental environment to suit our purposes based on our willingness to do so. Certainly, if it is possible to manage mental energy for destructive purposes, it must also be possible to manage it for constructive purposes. The key concepts here are willingness and purpose. The willingness is to consciously direct our thoughts toward a specific intent to change something on the inside that isnt useful.

Thoughts are a very powerful tool to effect changes in the mental environment. We can use them to shift, rearrange, add to, detract from, or change the polarity of various mental components. Thoughts are a form of energy, probably no different from electricity or light. They can act as a cause to produce some effect in the physical environment, as when we speak our thoughts, for example, as well as act as a cause to produce an effect in the mental environment. When we use our thoughts directed inward, we are basically using one form of energy as a tool to change the consistency and makeup of another form of energy, like using our thoughts to change a belief or release the negative energy out of a painful memory.

It is precisely because of the inherent power within thoughts that people are so protective of themselves with the kinds of information (others peoples thoughts expressed physically) they will expose themselves to. Everyone instinctively knows that if we allow ourselves to think about something, the thoughts have the power to change the way things exist inside of us. And once things change on the inside, we know we will perceive and experience a different

outside. If we dont want to disturb the current relationship between inner and outer, we will consciously do whatever is necessary to make sure that we dont expose ourselves to anything that might threaten that relationship or think about anything in a way that would change the relationship. Change is the result of, first, a willingness to think.

Personally, I believe that if we werent meant to keep on growing mentally (adding to who we are by transcending what we have already learned) and furthermore if we werent meant to direct that growth at a conscious level, then we would not have been given the ability to think, reason, and create. Implied within our ability to think, reason, and create is the inherent capability to learn our way out of the painful situations and dissatisfying life cycles in which we find ourselves. Painful life cycles begin with and are perpetuated by painful memories. So in essence what I am stating is that inherent within our ability to think and reason is the capability to heal our emotional wounds so that we can perceive what is available from the environment beyond our fears. Healing emotional wounds is something that we have to learn how to do by learning how to manage mental energy. Learning how to forget our painful memories by making them subconscious does not in any way reduce their significance on our perception of environmental information, or their potential to cause us to behave in certain ways.

This is the gift of creativity that we were all born with. It is the capability to think beyond what our current beliefs, memories, and association would dictate as being true about the environment. The capability to reason beyond our current set of limitations (beliefs, painful memories, and erroneous associations) or use our imaginations creatively is the one compensating force that allows us to grow, improve, and evolve beyond the painful and destructive life cycles that we get caught in, both as individuals and as a culture. However, there is something here that you may need to be mindful of: a capability to do something is not necessarily an ability to do something. Before a capability becomes an ability, it has to be cultivated into a skill. For example, we can use our imaginations to visualize and then project into the environment the fulfillment of some need or goal in some future moment. But that doesnt mean we are using our imaginations creatively. We may just be using our imaginations to project what is already in our memories or what we already believe. The

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