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move. This devastated me, but I also became completely hooked on trading and even more determined to be successful. From that experience I decided to buy all the books 1 could get and attend all the seminars I could afford.

Something stated in virtually all the books I read was that it is very difficult to learn how to trade or sustain any success if one is under a great deal of financial pressure-meaning dont expect to become a successful trader if you have limited trading capital or if you are trading with money you cant afford to lose. I was obviously violating both these rules because I had very little trading capital relative to my life-style that I absolutely could not afford to lose. Also I had a lot of other evidence that the odds were not exactly in my favor.

I came to Chicago because I believed that if I could get close to the action and meet people who knew how to trade, I could then learn from them. I was in for a very rude awakening. I was at Merrill Lynch Commodities, its second largest commodity office, with 38 account executives. At first I was shocked to find out only one of the account executives had any experience trading his own money. Then I was further shocked to learn that none of these account executives had any customers who were making any money. In fact, the typical customer lost his original stake within an average of four months.

My next major disappointment came when I began to meet and make friends with as many floor traders as possible, believing that if the guys up in the offices dont know how to make money, the floor traders certainly must. Again, I found the same conditions that existed up in the offices. Other than a handful of floor traders who had a reputation and a mystique that everyone seemed to be in awe of, I couldnt find one person who was making money consistently, who wasnt confused or knew what he wanted to do and then did it, without first having to ask everyone around him for confirmation that he was doing the right thing. I am not implying that I didnt meet traders who at some point in the day hadnt made money. They just couldnt keep it. I knew many traders who could make $2,000 or $3,000 the first couple of hours if trading. But they would always lose it back, plus more, a short time afterward.

Everybody seemed to be suffering from the same kinds of problems and mistakes that nobody really recognized as problems. Obviously, the nature of the markets made it easy not to have to confront

anything that otherwise might be perceived as a problem because the next trade always had the possibility of making everything else in ones life seem irrelevant. Why deal with anything if the next trade can make you rich? All the traders I knew, including myself, were affected by this type of "big-trade" mentality. In fact, my big-trade mentality was so pervasive that I would refuse to take profits of $500 or $750 in many trades even when I knew thats all there was to be made. This may sound absurd, but I wouldnt take profits of such small amounts, because, at that time, it felt as if the market was insulting me by offering such paltry sums compared to what I needed or expected.

As my financial problems grew, so did my desperation. And I certainly wasnt comforted by anything I saw going on around me. But I still held on to the belief that I could trade out of these difficulties. That is until March 1982; by then it was all over. A mere eight months after moving to Chicago to pursue my dreams of financial independence, I had nothing left except my job, apartment, clothes, a television, and a bed.

Practically overnight, almost all the symbols that validated my identity were gone. What I mean is, a big part of my self-concept was made up of my possessions like my house, my car, and especially my credit. Maintaining flawless credit was something I had always been proud of. Now I found myself without any of these things. As Ive already pointed out, its not as if there hadnt been plenty of evi dence to suggest the possibility of this happening, because there had been. But there was a part of me that wouldnt allow a direct confrontation with this evidence or the implications. It was just too easy to make excuses for all the things going on around me that didnt add up.

Refusing to confront or consider the implications of all the conflicting information created a great deal of stress. And to compound the situation, I had this intense fear that I would lose everything. But again, I did everything possible to hide this fear and put it somewhere in my mind where I couldnt feel it. Yet, there must have been a part of me that sensed my impending fall. Why else would I have been so consumed with fear? But how could I face any of this when I had no way of reconciling the imbalance that losing all of these things would create? What I mean is the imbalance between what I believed about myself and the things that validated these beliefs. Who would I be after all these things were gone?

Well it didnt take me very long to find out. As my financial condition deteriorated to critical levels, my mental defenses also began to break down. I eventually accepted the inevitability of doing what I believed was the ultimate act of failure and filed for bankruptcy.

There were a lot of things that changed inside of me as a result of this experience. And like any one else forced to deal with major changes in his or her life, I learned a lot about myself. The first thing that happened, which was quite surprising, was that the stress dissipated. Actually I was overcome with a great sense of relief with nothing to anticipate, dread, or try so desperately to defend against. 1 was living through my worst fear and found there really wasnt anything about the situation that I couldnt deal with. It wasnt nearly as bad in reality as I imagined it would be. I was still alive and healthy, I was able to think and function, and I started to appreciate my ability to think as my greatest asset.

This sense of appreciation began to grow into a deeper level of understanding about the basic nature of my identity. For the most part, I grew up believing that who I was consisted of the things that I owned. The more possessions I owned, the more of a person ir made me. What I began to realize is that I was more than the things I had accumulated. When the facade was stripped away, it allowed me to sense this deeper dimension that, up to this point, I had only the slightest inkling of. These new awarenesses, in turn, helped me understand how being wrong and losing something didnt in any way diminish me as a person. I was beginning to learn that there was a certain freedom in granting myself permission to be wrong and maybe there was no such thing as a failure, unless something positive and useful isnt learned from the experience.

However, I didnt relate these personal experiences because I thought they were particularly unusual, except for one. Everyone knows there are many traders who lose everything they own, and even though some of them will come to the same kind of awarenesses about themselves, they wouldnt necessarily be able to do it as a trader, considering the financial requirements. I, too, was not in a financial position to keep on trading, except that I still had my job at Merrill Lynch. In fact, for me it was business as usual, as if nothing at all had happened I certainly wasnt about to announce to my customers or anyone in the office that I had just filed for

bankruptcy. My job as an account executive was one of the few things I had left, and as far as I was concerned, it depended on me being a good trader.

This is the one key difference for me that ultimately lead to the creation of this book. I was fortunate enough to be able to keep on trading (although not with my own money) while these major psychological changes were taking place, putting me in a unique position to examine and study the various ways in which the condition of my inner psychological environment affected what I experienced in the outer physical environment.

This relationship between inner and outer isnt always that apparent but in this situation it was inescapable. I learned that the markets offer the trader an opportunity to profit from price movement, and these opportunities are basically in perpetual motion. It is an environment where the individual has the freedom to create his own results, unimpeded by many of the constraints that exist in everyday social life. These never ending opportunities make the market a perfect mirror of the traders attitude. What the trader sees in that movement and what he can do about it the markets have no control over. All the choices and all the power to turn these choices into experience reside in the mind of each trader.

For example, if I perceived the market as a threat, afraid of what it might take away from me, it wasnt because the outside conditions were actually threatening me in some way. It became very apparent to me that my fear was a result of my inability to anticipate events or act in a way that most appropriately served my best interests. It was only the lack of trust I had in myself to do what needed to be done that I was really afraid of.

Furthermore, I discovered that my mental framework was structured to avoid losses at all costs and in my desperate attempts to do so, I actually created them You can think of it this way: none of us has the mental capacity to be aware of everything going on in the environment at once. The environmental information we focus our attention on, out of all that exists, will be the information that has the most importance to us. As we allocate more and more of our attention to certain kinds of information, because of its importance, we are at the same time systematically excluding other types of information from our awareness. I created my losses instead of avoiding them simply because I was trying to avoid them.

Instead of being positively focused on market information that would indicate the potential for opportunity, I was more concerned with information that validated what I feared the most. As a result, a great deal of market information pertaining to other possibilities and opportunities that existed in any given moment completely escaped my attention, passing me by. The only way I could have perceived these opportunities (other than after the fact) would have been to let go of whatever was causing me to divert my attention away from what was happening in the market "now."

I had no way of knowing what I was missing ut on until my beliefs about the significance of losses and being wrong started changing. Once this shift in perspective occurred, I started to notice behavior characteristics of the market and relationships between those characteristics that I was otherwise totally oblivious to.

At some point, I realized that because I had already lost everything, I really didnt have anything to fear, and, as a result, I inadvertently learned one of the most important lessons to becoming a successful trader: how to "accept" a loss without any negative consequences. No guilt, anger, shame, or self-punishment.

As my fear of losing dissipated, I was seeing and experiencing a different market because I was different. It was as if someone had removed blinders, which I didnt know existed, from my eyes. Up till then, my trading had always been affected by my fears I didnt have the slightest notion of what it would be like to trade without fear or that doing it was even a possibility and least of all, that it was, in fact, necessary to be successful.

What also became very apparent to me was the extent to which all of my fears had effectively blocked me from understanding why it was so absolutely necessary to have some clearly defined trading and money management rules that must be followed. It was all starting to make sense. The more I followed my rules the more I trusted myself. The more I trusted myself the more I could focus my attention on subtle relationships in the markets behavior to learn new things about the market helping me become a better trader. Eventually I could gauge the positive effects these new attitudes had on my ability to shift my perspective and flow with the markets. The less I cared about whether or not I was wrong, the clearer things became, making it much easier to move in and out of

positions, cutting my losses short to make myself mentally available to take the next opportunity.

By June 1982 I was starting to make consistent money for my customers who relied on me for their trades. Not a lot of money by most traders standards, but steady. I was having winning days that were turning into winning weeks and months. Then sometime in August 1982 I thought of writing a book or at the very least developing a seminar to explain to other traders what I had discovered for myself.

In the area of education there was a definite void in the market. There really wasnt any material that addressed trading psychology at a deep enough level of insight to effectively help someone understand why success was so elusive. I wrote this book to address what I believe is a critical need for people who want to trade the futures of stock markets to have an organized, systematic, step-by-step approach to learn the mental skills necessary to accumulate wealth as a trader. The secret to this approach is learning a new thinking methodology.

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