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Look at his last action in the stoty-flight. He literally ran out of the office and spent the rest of the day altering his mental state with alcohol, trying at that point to transform the pain. Look at the results: He lost more money than he should have, missed a better trading opportunity the next day, and suffered a head-wrenching hangover, all because he valued the avoidance of pain connected to bei ng wrong. His emotions led him on a path of self destruction.

Sometimes, even when you think you are doing your best, you can be acting self destructively. For example, when you day-trade the S&P futures from upstairs, you are going to get a lot of poor executions. It works like this. I call the floor clerk and ask for a market.

Floor clerk: "345 25-30."

Victor: "Buy me 30 at the market." Floor clerk: "You bought 30 at 35." Victor: "At 35! Whats the market?" Floor clerk: " 25-30."

I put a market order in when the market is 25-30, get none at 30, get filled at 35. and the market is still 25-30. Someone has just stolen $25 from me 30 times, and there is nothing I can do about it: $750 is gone. These are the kinds of activities that brought the FBI to the floor of the Chicago futures exchange. It makes me furious.

In 1986 and early 1987,1 was trading the S&Ps as many as 30 times a day and was getting a lot of executions like I just described. Even though I was making money, the injustice of it all kept me angry, and I developed high blood pressure. Being health conscious, I had to consider the altematives:

1. Dont day-trade the S&Ps.

2. Expect to be cheated when you do trade them.

3. Continue getting angry and risk your health to make some money.

Being health conscious, I chose a combination of one and two. I quit trading the S&Ps so intensely, and when I did trade, I resigned myself to getting robbed. My blood pressure went down.

This kind of scenario is what Gaylin was referring to when he postul ated that modem civilization has made fear and anger somewhat obsolete. Returning to John Trader, all of his emotional reactions were designed by nature to protect him, to prepare him to respond to danger either by fight or flight. John faced a real, tangible threat with the possibility of losing money, and some fear response would be quite understandable in that regard. But his anger was totally out of proportion with what actually occurred. He could, in fact, neither fight nor flee, at least not in the p hysical sense. He tried to flee, but look what it got him. The only way to flee was to execute his stop. And what is there to fight? If you want to live a life of fmstration, just try to fight the markets.

What if John had executed his stop, where would that have put him? In much better shape. He would have suffered some pain, but he would also have saved money and been in a position to step back with confidence, knowing that he had followed his mles. Then he could have reconsidered what was happening. He might have concluded that he was doing too good a job of anticipating the market and decided to wait for a new selling opportunity. But he didnt. He let his contradictions beat him; he let his emotions change roles from protector to destroyer.


I have yet to meet a totally consistent, integrated person, and Im not going to hold my breath while waiting. To expect that people can grow up in this difficult world with all the crazy philosophies that exist, inherit the pressure of their familys errors, reap the contradictions of a troubled educational system, try to make a living, put their entire value system in perfect integrated order, and simultaneously change their emotional responses to fit their value stmcture is simply stretching the bounds of probability. So what can we do? All we can do is strive for integrity -for consistency in

thought, action, and emotion-and do it in such a way that life is experienced as a predominantly joyous process.

To trade well you have to:

1. Establish goals.

2. Acquire knowledge of the markets.

3. Define rules of trading that work.

4. Execute in strict adherence to the rules.

The first three steps are relatively easy, but executing them can be terribly difficult. With perfect knowledge of ourselves and the markets, execution would be easy. The same is true for everything we pursue in life. But given that our knowledge is incomplete and that mistakes are inevitable, to act to the best of our knowledge without succumbing to the temptation to break the rules because of the unavoidable fears and anxieties that pop up is both mentally and physically difficult. As with any skill, gaining mastery over irrational impulses requires training and discipline, in this case, emot ional discipline.

Discipline is training to act in accordance with a set of rules or principles. As Ive already discussed, emotions are inherent in our biological nature and dependent on our values and beliefs. Strictly speaking, emotions cannot be traine d directly, and the concept of discipline in the emotional realm applies not to the emotions themselves, but to how we deal with them, how we respond to emotions in both thought and action.

Emotional discipline is an active and ongoing process of accepting emotions, attempting to identify their source in our values, and evaluating their validity in relationship to the event at hand in order to establish an integrated and consistent relationship between our goals and actions. With consistent practice, exercising emotional discipline becomes almost habitual, allowing you to deal with your emotions without being overcome by them.

By accepting emotions, by understanding that emotions simply exist and you cannot fight them, you free your mind to look at them not as a villain, but as an integral aspect of yourself that provides invaluable information about the content of your subconscious. Then, by redirecting the energy formerly used in a futile fight with your emotions, you can introspect to find their source and establish why you reacted as you did to the event at hand. Through this process, and by projecting the disastrous consequences of acting according to the impulsive desires bom in your emotional state, you reinforce the belief that altematives exist, that you have a choice whether to behave rationally or irrationally, that you are in control.

Nature provides us with an enhanced state of energy and awareness when we are in an excited emotional state. Why not use that energy and awareness instead of fightin g it? Practiced consistently, emotional discipline helps build a sense of confidence and control over your actions. It allows you to channel formerly wasted energy into the life -serving goal of self-understanding. Emotional discipline is the tool that lets you hamess your heightened state and choose the best course of action

rather than be controlled by reaction-it provides you with the will to execute your knowledge.

Having the will to execute means having the capability or power to carry through on a plan of action designed to achieve a specific goal. It means having the ability to decide. The word decide comes from Latin roots that mean "to cut off." When you really make a decision, your mind has concluded that no other altemative is either desirable or possible. When you achieve this state of mind, carrying through your plan becomes less a matter of choice and more a matter of necessity. The plan itself becomes a value, and if integrated into your subconscious, can actually be supported by your em otions. In this way, practicing emotional discipline not only enhances your ability to act, but also reduces the level and frequency of emotional conflict-it becomes a source of consistency in thought, actions, and feelings.


Mr. Spock personifies a central problem that we all share: the conflict of emotion and reason. But in his method of handling the conflict, he violates the supreme rule of Vulcan philosophy: he is illogical. He ignores the fact that emotions are an integral part of our biological make-up that cannot be ignored without creating a constant state of war in our minds. He fails to realize that we are beings that must define our values according to a chosen standard: life as a rational being.

Our emotions are determined by the values we choose, consciously or subconsciously. To ensure that emotions are life-serving, we have an inescapable responsibility to provide order and integrity to our emotional responses through the practice of emotional discipline. Otherwise, our emotions a nd reason will remain in a state of permanent conflict.

As a trader, speculator, or investor, you put your judgment and emotions on the front line every time you take a position. By definition, you take a risk, and with risk comes some degree of fear and a whole complex of other emotions. If, like Spock, you attempt to ignore or fight your emotions, then you will create a state of inner turmoil that will take a toll both mentally and physically. Mentally, a mind burdened with emotional conflict is debilitated in direct proportion to the degree of the conflict. Physically, the stress induced by emotional responses can result in high blood pressure, loss of sleep, exhaustion of energy, and worse.

By practicing the active and ongoing process of emotional discip line, you can take control over your mind and become decisive, while simultaneously reducing the intensity and frequency of emotional conflicts. This is crucial not only to trading, but to a positive approach to life. It is the only method I know of that engenders consistency and the constant nurturing and/or growth of self-esteem.

But because most of us have accepted mixed and contradictory values and beliefs, many of which are hidden in our subconscious, practicing emotional discipline is never easy. In particular, sorting out the roots of our emotional reactions is

an enormously difficult task. It requires looking inward to identify and understand the relationship of our values and beliefs to reality and discarding beliefs that are contradictory. Further, simply discarding wrong beliefs and adopting new beliefs is no guarantee that our emotional reactions will change. To change emotional responses takes constant self-awareness, time, fundamental personal honesty, and the willingness to suffer the pa in of letting something go that we feel is dear to us.

In this chapter, I have identified a central problem not only in trading, but in life: the Spock Syndrome; and Ive outlined a broad approach to resolving the problem: emotional discipline. In the next chapter, I will discuss the meaning and source of success and break down the problem of emotional conflict in much more concrete terms. Specifically, I will address the nature of motivation and commitment, how they relate to achieving success, and what stops us from achieving them. The objective is to break down the problem of emotional conflict into de fined and understandable areas that lend themselves to the application of a formula for change.

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