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The market doesnt make you right, you make yourself right. Your inability to execute or the degree to which you hesitate after you perceive an opportunity to get in or out of a trade or reverse your position will be an excellent gauge as to how locked in you are mentally. Making note of these occurrences of hesitation or immobility will give you an indication of the exact state of your mental resources to execute. You need this information to use as a reference point to build from.

When you are about to enter into a position, ask yourself, by imagining, what the next five minutes or tomorrow (depending on your time frame) would have to look like to validate your trade, to confirm that the trend is still intact. What would the next five minutes or tomorrow have to look like to indicate the opposite. Then, again, place your orders at the appropriate price in advance of the markets getting there.

All these questions will keep reminding you that anything can happen, and you will be preparing yourself in advance for those possibilities. Also, if anything can happen, then of course, you will have to consider that there will always be something you havent taken into consideration, had absolutely no awareness of or could have no prior knowledge of, for example, such as how many traders may enter the market for the first time with enough force to reverse its direction.

Keep in mind that prices move in the direction of the greatest force (traders fulfilling their beliefs about the future). Or said in its converse form, prices will move in the direction of the least resistance to the prevailing force. Significant reference points give you the opportunity to make high probability assessments of the degree of balance or imbalance between the two forces, the point at which it is likely to shift, and in whose favor.

By learning to identify significant reference points, you can determine what each group will do based on what they already believe about future value. If you can determine on a collective basis what will validate or invalidate those beliefs, then you will know how each group is likely to behave.

I want to remind you that this approach is to help you stay detached and understand that price movement is a function of traders acting individually and collectively as a force expressing their beliefs in future value. The greatest number with the strongest belief will

always be right. The easiest way to make money is to go with the flow. To identify the flow, you need to stand apart from the crowd and suspend what you believe about relative value so that you can determine who is likely to do what and with how much force, how is everyone else likely to react, and if it doesnt happen, what will traders do then?

By asking yourself these questions you are automatically keeping your focus of attention on the market and what the possibilities are. Any limitations you place on the markets behavior will cause you to focus on the impossibility instead of the possibility of something happening. Your belief that the market has to behave in certain ways proscribed by your mental structure will cause you to focus your attention on what the market is doing to you, and if what it is doing is causing pain, then the potential exists for you to avoid or distort information, usually resulting in a painful forced awareness.


To achieve a state of objectivity you need to operate out of beliefs that allow for anything to happen, as opposed to beliefs that allow only for the market to express itself in a limited fashion. If you operate out of a belief that anything can happen, then whatever does happen wont be threatening to you in any way, thereby causing you to avoid or distort certain categories of market information. Any limits you place on the markets behavior will be a compensating factor for your lack of trust and confidence to act appropriately in any given situation. This will be evidenced by the fear, stress, and anxiety that you will feel when the market expresses itself beyond your mental limits and you cant do anything to control the situation.

However, you do have to have some belief or expectation about the future or you wouldnt ever put on a trade in the first place. To be objective, you will need to release yourself from "demand-backed expectations" and make what I call "uncommitted assessments of the probabilities." Unlike the markets, in our everyday social lives we can and do exert control over the environment to assure ourselves of the outcomes that we desire. The rules we learn to abide by in order to interact with one another are our expectations about the

future. Once we learn these rules, especially if we have learned them in a painful way, we can demand certain outcomes from the environment. Hence, our expectations of the future are actually demands that the environment conform to our expectations of it. Without really thinking about it, we will carry these same kinds of demands with us into the trading environment because of our natural resistance to letting go of our expectations. That is, staying committed to any limited belief about the possibilities that exist in the markets is virtually the same as making a demand.

If you have any doubts about this, consider that if we werent demanding that the market conform to our expectations, then we wouldnt ever have a reason to get angry when it doesnt. Have you ever gotten angry at the market? Anger is a natural defense mechanism. When we feel anger, it is an indication that the environment is assaulting us in some way, creating an imbalance between the mental and outer environments. The outer environment is either showing us something about itself or ourselves that we dont want to accept. We protect ourselves with our anger to ward off this assault. In our everyday lives our anger can be an effective tool to get what we want (change what the outer environment is showing us about itself that we cant accept) or to ward off what the environment is showing us about ourselves that we cant accept

However, if we interact with the market with demand-backed or committed expectations of its behavior, we will cut ourselves off from the information that we need to make accurate assessments of its potential to move in any given direction. If we dont have the power to control the markets in such a way as to make them do what we expect them to do and at the same time we arent willing to give up our expectations and accept the way things are, then it would create what would otherwise be an irreconcilable dilemma if it werent for our ability to distort, alter, or exclude information from our awareness. Perceptual distortion is the one compensating factor that will, at least temporarily, correct the imbalance between what we expect and what the market is offering, when there is a difference between the two.

Our committed expectations about the future will act as a force on our perception of market information to control its flow into our mental system in such a way as to avoid a confrontation with anything that doesnt conform with what we already believe is possible.

Which, of course, is always going to be less than what is possible from the markets perspective. If we are perceiving much less than what is available, then we are out of touch with what is possible from the markets perspective and setting ourselves up for a painful forced awareness. To be objective you have to make "uncommitted assessments of the probabilities." Which simply means that you have no commitment to any particular outcome. You just observe what is happening in each moment as an indication of what will probably happen next.

Here is what objectivity feels like, so that you can recognize when you have achieved it.

You feel no pressure to do anything You have no feeling of fear You feel no sense of rejection There is no right or wrong

You recognize that this is what the market is telling me, this is what I do

You can observe the market from the perspective as if you were not in a position, even when you are

You are not focused on money but on the structure of the market

To stay objective anticipate as many possibilities as you can and how probable each of these possibilities are. Then decide in advance what you are going to do in each situation. If none of your scenarios is working out as you anticipated, then get out. Release yourself from the need to be right. The more uncommitted your assessments are the less potential for distortion and experiencing a painful forced awareness.


As outlined in the exercise to develop self-discipline in Chapter 14, you need to start paying attention to what you are thinking about and what market information you are focused on.

Trading Rules

When you are in a trade constanriy ask yourself if anything "has to happen." Obviously, you want the market to go in your direction; however, what I want you to do is monitor how you feel, your level of commitment ro what has to happen. Remember there is a big difference in perspective between "what is happening" and something that "has to happen." If you And that your commitment levels are rising, keep on telling youself that it is all right for anything to happen because you are confident in your ability to respond appropriately to whatever does happen.

Ask yourself what cant happen? What cant the market do? When you find yourself rationalizing the markets behavior to support your position, you are operating in the realm of illusion and setting yourself up for a painful forced awareness. Remember the market can do anything, even take your profits away if you allow it. Always take something out of the markets when you find yourself in a winning trade.

A question to ask yourself is if you are prepared to give yourself money today. If the answer doesnt come back a resounding yes, then find out why before you trade. If you cant reconcile the issue or set it aside, then you would be better off not trading, until you do. If you are determined to trade anyway, at the very least make a substantial reduction in the number of contracts you normally trade.

When you find yourself focused on the monetary value of a trade Instead of the structure of the market {i.e., what the trade is worth to you in dollar terms, dreams, goals, and so forth instead of what the market is telling you about its potential to move in any given direction) then assume you are distorting or avoiding certain information and either dont put the trade on or take what you have off until you become more objective.

Even after you have learned all of the skills set forth in this book, at some point in time it will probably occur to you that your trading is simply a feedback mechanism to tell you how much you like yourself in any given moment After you have learned to trust yourself to always act in your best interests, the only thing that will hold you back is your degree of self-valuation. That is, you will give yourself an amount of money that directly corresponds with what you believe you deserve based on some value system you acquired at some point in your life. The more positive you feel about yourself, the more abundance that will naturally flow your way as a by-product of these positive feelings. So, in essence, to give yourself more money as a trader you need to identify, change or decharge anything in your mental environment that doesnt contribute to the highest degree of self-valuation that is possible. Whats possible? Stay focused on what you need to leam, do the work that is necessary, and your belief in what is possible will naturally expand as a function of your willingness to adapt

Final Note

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