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In some aspects of life, rationalization can go on for a long time before you have to deal wit h its effects. On Wall Street, rationalization can be instant death. If you dont own your failures, if you try to blame your failures on extemal events, then youll end up not teaming from your prior mistakes, and youll likely end up blowing out.

It is amazing how ingenious and resourceful we can be in finding reasons outside ourselves for mistakes and failure, and they often have a semblance of tmth. People who have had a series of failed relationships, for example, may find themselves keeping a controlled distance from a new person they are attracted to. They may say to themselves, "Im fooling myself. I cant move from one relationship into another. Im not ready for another relationship. I want to date, and to re-establish my sense of self." While there may be merit to this, it is also possible that the real motivation is simply the fear of failing again.

In any case, we must be careful and lock in to those fleeting moments when the tmth is within our grasp. If you can seize those critical moments of denial and recognize them for what they are, then you can apply focus, evaluation, and projection to eliminate them.


Focus is the method of directing awareness, the means with which we simultaneously narrow down and open up the field of conscious awareness. For example, traders who have a general knowledge of how the markets work should trade in only two to five markets (preferably related) at one time. By narrowing down the number of markets under consideration, they expand the amoun t of information they can take in about those specific markets.

The conscious mind can only take in so much at one time. In order to take in and understand the constant barrage of sensory data open to awareness, the mind selectively isolates the material a vailable to the senses and integrates it into the context of prior teaming and memory. We take in what we think and feel is important, and our values and beliefs act as the filters that direct our focus.

Values and beliefs determine the direction of our focus, which in tum determines how we perceive ourselves and our relationship to the physical world and to other people. If, through vigilant self-awareness, we can identify where our focus is, then we can isolate the values and beliefs that determine the direction of our lives and take control of that direction.

For example, when I examine where I acquired my ability to focus on the markets, I realize that 1 was very fortunate in my early childhood to have adoptee

a very empowering belief about teaming and achievement. At some point, and I dont quite know how or why, I decided that the only way to achieve anything was to leam as much as possible about what I wanted to do by reading, practicing consistently, and modeling myself after people who were successful.

I did this first with baseball, then with gymnastics, next with cards, and finally with trading and speculating in the financial markets. To put my belief into a single sentence:

With enough knowledge and practice, I can master anjihing 1 set my mind to.

There is also another very important association that I adopted very early about the whole process of teaming and practicing to achieve my goals:

This is fun!

I wasnt aware of it at the time, but these associations set me up for success. They are deeply rooted in my mind, and they serve me better now than they did when I was teaming to play baseball, because I know so much more about how to leam and grow now than I did then.

The belief that teaming is important directs my focus to acquiring as much knowledge as possible such that I have a broad context for awareness. When I was teaming baseball, for example, once I read about the fundamentals of the game, I could watch professional players and take in how they applied the fundamentals. That in tum widened my context of awareness and knowledge because the pros became a standard of evaluation with which to judge my own performance. I could picture in my mind how the pros looked and try to emulate their style in practice until I perfected my swing and my

fielding skills.

In the present day, the belief that leaming and practice are both important and get results enables me to focus on the pursuit of my goals with confidence, vigor, and enthusiasm. It makes me feel positive and energetic about doing what many people consider "hard work." My study of the markets is hard work, but that carries no negative connotation in my mind. Work is a source of pleasure for me. Like playing a baseball game, it is fun. Viewing what I do as fun enables me to open up my mind and take in all the data without fear. My subconscious mind has no reason to block my awareness of what is occurring because, in essence, I feel that in the long mn Ill be a winner just by participating in the manner that I do.

By contrast, I adopted another association in childhood which severely limited me and became something I had to overcome and still have to be cautious about. While I was excelling in baseball, gymnastics, and at cards, I was a very poor student in high school. I nev er studied, and did the minimum just to get by. My grades were mostly Cs and I failed foreign language. School to me seemed nothing more than an encumbrance to doing the things I loved, a necessary evil to be put up with because I had no choice. In effect, the association I made was:

School is painful, boring, dmdgery that takes me away from doing the things I love.

I cant tell you how many times I have wished that I had applied the same vigour and enthusiasm in school that I applied to other things. I had to hire a writer to help me with this book not only because I didnt have adequate time, but also because I never developed adequate writing skills in schooL

Fortunately, I have always loved to read, and that has been a great help, but I still find myself feeling intimidated at the prospect of leaming some new things. For example, I rely totally on Douglas, my computer wiz and associate trader, to take care of all the computers in the office and to teach me how to use them. When we installed a new market quote system, I looked at it and said, "Man, am I glad I have Douglas around, I could never figure out how to operate this thing on my own."

Can you see how the limiting belief about formal education tends to arrest my focus when it comes to leaming about computers? In moments such as when I made that statement, I dont think of leaming as fun. but as dmdgery. Consequently, I take care of the problem by calling for Douglas whenever I dont understand how to operate the system or when something goes wrong. I know that I could leam about computers-they cant be any more complicated than the markets are-but in general, my focus just isnt there. Fortunately, I really dont need to leam, because I can always have a Douglas around, but if I had to leam, I would have to challenge statements like the one I made.

Think of the power of the statement "I could never figure out how to operate this thing on my own." It is statements like this that limit our ability to focus. The subconscious mind may be a powerful resource, but it is also gullible-it believes whatever we tell it to believe. When you say to yourself, "I will never figure this out," or "I cant do this," or "Im kidding myself, this is impossible," or "People just dont do things this way," your subconscious mind dumbly says, "OK, got it!" and starts reinforcing the limit that you are already feeling.

This type of limitation can be brought under control very quickly just by being aware of the things you say to yourself and changing what you s ay; by making a practiced and conscientious effort to rephrase what you say in a way that forces your subconscious into positive action. You have to use the subconscious minds gullibility in your favor to manage your focus.

For example, instead of saying "I will never figure this out," you might say, "This is difficult-how can I approach this differently to make it easier?" Instead of saying, "I cant do this," you might say, "When I felt this fmstrated before, how did I get out of it?" Instead of saying, "Im kidding myself, this is impossible," you might say, "Why does this seem impossible, what am I missing?" Instead of saying, "People just dont do things this way," you might say, "I wonder why no one has ever done it this way before," or even, "I might be on to something here, I dont think anyone has ever tried it this way before!"

The way we speak to ourselves directs our focus. What we say to ourselves and how we say it makes the difference between a positive and a negative approach to life. In addition, I think it makes a tremendous difference in the quality and quantity of results that the subconscious mind puts out.

If you are aware of how you talk to yourself, what you ask yourself, and what you demand of yourself, you can shift the focus of your mind away from negative associations and toward positive associations simply by consciously changing the tone and focus of the statements you make to yourself, the questions you ask yourself, and the demands you place on yourself. THE POWER OF QUESTIONS

Did you notice how when I rephrased the statements most of them came out as questions? This is not accidental. Questions are the best possible way to shift the focus of your awareness.

Each and every one of us has an enormous store of knowledge in ou r heads, much, much more than we consciously realize. By asking ourselves questions, we direct the subconscious to find a solution to a genuine problem instead of trying to accept self imposed limitations. Often, the answers are tight there, all you have to do is ask! But you have to ask positive questions, genuinely and sincerely, while fully expecting to get an answer.

An excellent example of the power of questions in my own experience is one I mentioned in the introduction to Part I. When I missed the October lows in 1974,1 asked myself, "What do I need to leam so this wont happen again?" This question led to a whole chain of questions, such as "What exactly is a trend? How long does it normally last? How high or low does it normally go?" During the pr ocess of answering these questions, the concept of using statistical distributions of historical price movements as a means of assessing risk "occurred" to me, like the classic cartoon lightbulb.

How different would my life be, not to mention my net worth, if I had asked instead, "Sperandeo, how could you have been so stupid to have missed that move?! Just look at all the money -making potential you missed!" Obviously, there is no way to tell just w hat or where I would be, but I might never have developed my unique statistical approach to risk analysis, probably the achievement I am most proud of in my life.

So be aware of how you speak to yourself, and leam to change recriminating and reproachful conversations with yourself into questions that direct your focus toward positive change. Beware of questions like "How can this possibly be happening to me? How can I be so unlucky? How can I be so stupid? Why is the world so unfair? Why cant I be rich, too? How can anyone treat me so badly" When you ask questions like this, your subconscious may well provide answers that have nothing to do with reality, like "Because you are undeserving. Because you were bom to lose. Because you are an ignorant, worthless person. Because life is always unfair, except to the lucky. Because only the lucky are rich, and remember, you were bom to lose. Because, as I already told you, you are ignorant, worthless, and undeserving."

When you ask yourself these kinds of questio ns, it is like asking a man if he still beats his wife, even though you never had evidence that he did. The questions

are loaded; they imply acceptance of a negative belief that needs to be challenged, not reinforced.

Ive spent a lot of time talking about questions not just because they are so useful for changing the direction of your focus, but also because they are an essential element of evaluation, and evaluation is the way we can get to the root of the limiting values and associations that hold us back from achievement.


I think, before I proceed, that a review of the way the mind works is in order. Our actions are not so much decided upon as they are driven by the programming of the subconscious mind, by the beliefs and values that we hold whether we are aware of them or not. Specifically, we are motivated to act by two primary emotional forces at the subconscious level: the desire for pleasure and the need to avoid pain. These emotions, in tum, are determined by associations formed in the subconscious mind according to the values and beliefs we have accepted, whether consciously or not.

Until now, I have been using the terms "value" and "belief" as if they were virtually the same thing. They are not. Values are that which we seek, what we act to gain or keep. In order to val ue something, you first have to evaluate it, to place importance according to some standard of value or worth. Beliefs

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