attack at a young age while doing some very strenuous exercise. Because of this experience my client grew up believing he would also die of a heart attack, if he exercised too strenuously.

What would have been just normal heart pounding, to anyone else, after working up a sweat, he would perceive as the beginning of a heart attack. He would start to hyperventilate and stop doing whatever he was doing. Obviously, his belief about dying was very limiting. As a result, he never participated in any sports as a child or well into his adult life.

Well, by the time he was in his late thirties, he decided that he was not going to die prematurely of a heart attack like his uncle. Actually he didnt make this decision until after he passed the age in which his uncle had died. {His uncles age at the time of his death was the age at which my client thought that he would also die.) When it didnt happen, he gave up the whole notion. Deciding to build up his stamina, he asked me for some tips on how to become a runner, since he knew I had been running for years. In a sense running was a new skill for him and definitely a new way of expressing himself. So we went running together. Of course, what he found out was that he couldnt run. Not that he couldnt take the steps in the fashion of a runner; it is just that every time his heart rate started to climb, he would stop dead in his tracks, even though his intent was to keep on going. His beliefs about dying from exercise still had a great deal of power in his mental environment. This belief acted as resistance, working against his conscious intent to run. Consciously, he was giving his body instructions to keep on going; his conflicting belief, however, was saying. "No way, pal; youre staying right here until your heart rate goes down." In this situation it was very easy to determine what component of his mental system had more power over his behavior.

The third reason why you would want to learn to change from the inside instead of forcing the environment to conform to your psychological makeup relates strictly to trading. The markets are just too big for one person or even a group of individuals to prevail for long. That is, if you dont have the financial power to move prices in your direction, then you are going to have to learn how to flow with and constantly adapt to the outer conditions.

The choice is you can either adapt or continue to experience some very painful lessons. A quick hint: the intensity of your emotional discomfort and pain you experience as a trader is an excellent

indication of how much you will have to change to trade without fear and be consistendy successful.

You might ask, "Why consider the market from a psychological perspective at all? Doesnt the market behave as it does regardless of what a single individual thinks or feels about it?"

My answer is this: "The market behaves as it does because of the interactions of hundreds of thousands of people. And since all these individuals are members of the human race, regardless of national origin, religious conviction, or what have you, they will all have one thing in common-the psychological structure of the human mind." This psychological structure behaves in certain highly predictable ways whenever it encounters stress or split-second decisions. In the market, the fear of losing ones fortune is every bit as intense as the fear of losing ones life from an attack by a wild animal.

However, even though we all participate collectively, the market is not the same for all of us. Every move the market makes has a different meaning and impact on each of us as individuals. And every traders experience of this movement is the result of his individual mental process of inputting environmental information (perception) and all the unique internal psychological factors that affect his behavior. So, even though two or more traders can agree on what the current price is, they will not be sharing the same experience of how that price is impacting them personally.

The meaning you place on any particular price change is the result of your beliefs. As a trader you constantly have to define what is high and what is low relative to your beliefs about the future. That is the only way you can make money: buy low and sell it back at a higher price (in the future) or sell high and buy it back at a lower price (in the future). As long as prices continue to move, that movement will create opportunities to buy low and sell high or sell high and buy low, and these opportunities are available for all traders. You create the game in your oum mind based on your beliefs, intents, perceptions, and rules. It is your own unique perspective and no one elses and the secret is, you can and do choose how you perceive events. Even if you are not aware of exactly how to control and change your perception to make other choices available to yourself, you are still choosing, even if it is out of ignorance.

Until you leam the appropriate skills, your success as a trader will be determined by a number of psychological factors that often have little or nothing to do with the markets.

Introdwcrion

UNSUCCESSFUL TRADERS

There are many reasons why traders are not successful. These reasons can be broken down into three broad categories.

Lack of Skills

The trader is generally not aware that the trading environment is different from all other environments. Trading has the appearance of something that should be easy to do coupled with the possibility of making vast amounts of money in a relatively short period of time.

The trader will thus create some inflated expectations of success. Adherence to these inflated expectations without the appropriate skills equals disappointment which equals pain which equals psychological damage which equals fear. Fear diminishes the traders ability to be objective, execute his trades, or learn about the fundamental nature of the markets.

Of course, it is possible to make money without the appropriate skills. However, without these skills the trader will invariably lose what he made back to the markets plus more. The result is disappointment, pain, psychological damage, and fear.

People generally dont know how to repair psychological damage and as a result dont know how to release themselves from their fear. To compensate, we learn some very sophisticated ways of covering our fear up. In society we can get by and even be successful with a facade of confidence because people will generally support each others illusions about themselves. The market, however, has no vested interest in supporting anyones illusions about himself. If a trader is feeling fearful, he can try to cover it up all he wants but his trading results will readily reflect his true feelings.

Limiting Beliefs

Most people have a whole assortment of beliefs that argue against their success as a trader Some of these beliefs you may be consciously aware of, most of them you may not be aware of. In any case, you cannot negate their significance in how they will determine and affect your behavior as a trader.

Many traders will try to circumvent confronting these limiting beliefs by becoming an expert market analyst. It doesnt matter how good a market analyst you become; if you dont release yourself from the effects of these beliefs, you wont be successful to the extent these limiting beliefs have power in your mental system. There are many market gurus who can predict market moves with uncanny accuracy but cant make money as a trader. Either they dont know the nature of beliefs and how they affect and determine behavior, or they dont want to confront the issues surrounding these beliefs. You have to want to do it or nothing will happen. And if you choose not to, you will be subjecting yourself to the same recurring cycles of negative experiences again and again until you either decide to work through whatever issues are necessary or lose all your money and have to give it up.

Lack of Self-Discipline

If the type of environmental conditions exist that are beyond your skill level to respond to appropriately (without doing harm to yourself), then you will need to institute some rules and limitations to guide your behavior until you learn how to act in your best interests. When you were a child your parents didnt let you cross the street by yourself because the consequences of your inability to cross safely might have precluded your getting a second chance. When you were able to make the appropriate distinctions about the nature of traffic, your parents trusted you enough to cross the street on your own.

Until they trusted you, they always feared the possibility of your getting hit by a car. As a result of their fear, they restricted your freedom of movement, regardless of the opportunities that may have existed for you across the street. Your interaction with the trading environment works the same way. The difference is that no one is stopping you from standing in the middle of the street (metaphorically) to get hit by a truck. You are the only one who can stop yourself. After you have been hit once or twice, it might not be so easy to cross the street, regardless of how good the opportunities look on the other side.

What makes it even more difficult (continuing with the traffic metaphor) to step out into the street is when you further realize that

Introduction

the cars and trucks can come at you in a seemingly random fashion. All of a sudden youre lying on the street not even knowing what hit you because you thought you were being careful.

PART II

The Nature of the Trading Environment from a Psychological Perspective