PART 1
WORKING ON YOURSELF
The Components of Trading Well
I’m a neuro-linguistic programming (NLP) modeler and a coach for traders. As an NLP modeler, I encounter a number of people who excel in something, determine what they do in common, and then determine what beliefs, mental strategies, and mental states are required to perform each task. Once I have this information, I can teach those tasks to others and expect to get similar results. My job as a coach is to find talented people and make sure they learn and follow the fundamentals of my modeling work.
I remember doing a workshop with the Market Wizards Ed Seykota and Tom Basso around 1990. All three of us agreed that trading consists of three parts: personal psychology, money management (which I subsequently renamed “position sizing strategies” in my book Trade Your Way to Financial Freedom1), and system development. We also agreed that trading psychology contributes about 60% to success, and position sizing strategy contributes another 30%, which leaves about 10% for system development. Furthermore, most traders ignore the first two areas and don’t really have a trading system. That’s why 90% of them fail.
The Components of Trading Well
After years of extensive modeling in all three areas, I now disagree slightly with our conclusions in 1990. First, I would argue that trading psychology accounts for 100% of success. Why? This conclusion is based on two findings. First, people generally are programmed to do everything the wrong way. They have internal biases that seem to lead them to do the exact opposite of what is required for success. For example, if you are the most important factor in your trading, you should spend the most time working on yourself, but the majority of people totally ignore the “you” factor in their success. Read over the checklists in this part that deal with good trading. If you’ve worked extensively in all the areas listed, you are probably very successful and are certainly a rarity.
Second, every task I model requires that I find the beliefs, mental states, and mental strategies that are involved. All three ingredients are purely psychological, so it’s hard not to conclude that everything is psychological.
I now think that there are six components to trading well:
1. Developing and consistently maintaining a trading process. The trading process encompasses all the things you need to do on a day-to-day basis to be a good trader.
2. Understanding the wealth process. To trade successfully, you need to explore your relationship with money and why you do or do not have enough to trade with. For example, most people believe that they win the money game by having the most toys and that they can have it all right now if their monthly payments are low enough. This means that they save zero dollars and are over their heads in debt. If this is you, it also means that you don’t have enough money to trade. Not understanding this process is one of the major reasons that individuals, corporations, and governments in the United States and around the world are in such deep debt.
3. Developing and maintaining a business plan to guide your trading. Trading is a business. The entry requirements are much easier than they are for other types of business because all you have to do is deposit money in an account, sign a few forms, and start trading. However, the entry requirements for successful trading require that you master all the areas listed here. That requires a lot of commitment, which most people do not have. Instead, they want trading to be easy, fast, and very profitable.
4. Developing a system. People often consider their system to be the magic secret for picking the right stocks or commodities. In reality, entry into the market is one of the least important aspects of good trading. The keys to a moneymaking system are elements such as determining your objectives and the way you exit a position.
5. Developing position sizing methods to meet your objectives. We’ve discovered through our simulation games that 100 people at the end of a set of 50 trades will have 100 different equities. (They will all get the same 100 trade results.) This extreme variability of performance can be attributed to only two factors: how much they risked on each trade (that is, their position sizing methods) and the personal psychology that determined their position sizing decision.
6. Avoiding mistakes. I’ve seen many short-term trading systems that would allow you to make 2R (twice your risk) per week or more. If you risked 1% of your equity on each trade, you would consistently make well over 100% each year. But most people cannot do this because they trade at about 70% efficiency or less. This means that they make three mistakes (meaning they don’t follow their rules) every 10 trades. This will turn any winning system into a losing system.
Based on the six components of trading well, rate yourself by asking the following questions:
• How well have I mastered the discipline of trading well each day? Do I do a daily self-analysis or a daily mental rehearsal to begin each day? If not, why not? I will give you a lot of ideas about how to improve in this area in the remainder of this book.
• Do I really have enough money for trading to make sense? If you do not, you probably need to work on yourself and the wealth process.
• Do I have a working business plan to guide my trading? If you don’t, you are not alone. We estimate that only about 5% of traders have a written business plan. Then again, perhaps you’ve heard that only about 5% to 10% of all traders are really successful. Part 2 of this book will guide you toward developing this kind of working document.
• Do I have a set of objectives thoroughly written out to guide my trading? Most people don’t. How can you develop a system to meet your objectives without having objectives?
• Have I paid attention to the how-much factor—that is, my position sizing strategy? Do I have a plan for using my position sizing method to meet my objectives? It is through position sizing strategies that you either meet or fail to meet your objectives.
• How much time do I spend working on myself? You have to overcome your psychological issues and develop the discipline necessary to carry out the processes described above, which are necessary for success and for avoiding mistakes.
Most of the items described here could be the topic for an entire book. However, my intention is to give you an overview of what is required for successful trading, and my job as a coach is to find talented people and coach them on following the fundamentals I’ve described here.
Do an Honest Self-Appraisal
Peak performance traders are totally committed to being the best and doing whatever it takes to be the best. They feel totally responsible for whatever happens and thus can learn from mistakes. These people typically have a working business plan for trading because they treat trading as a business; that business plan gives them the confidence to do what they need to do to make large returns from the market and learn from the mistakes they make.
The first section of this book is not about some hot new investment. It’s about how to be in the best possible condition mentally to trade at a peak level. My favorite cartoon character is Sam, the trading tiger, shown here looking inside himself. Sam will be guiding us through the process of successful trading/investing.
Look Inside Yourself
Getting Started: Some Concepts You Must Master as a Trader
First, you need a strong initial evaluation of yourself and what you need to do to improve your performance. Look at it this way. Suppose you are in the middle of the desert. There are no roads, but you have a map indicating where you are to go. However, what’s missing from the map is an indication of where you are now. Remember that you are in the middle of the desert. How can you get where you want to go when you don’t know where you are? Similarly, how can you work on yourself as a trader if you don’t know much about yourself? That’s the situation most people face. They think they know themselves well, but they really don’t know anything about themselves. Have you, for example, made an inventory of your beliefs about yourself?
Second, if you want something, you must practice “being” it. Being comes before doing or having. In my opinion, most people want to trade well, but their primary concern is how to do it and have success. You must practice being a successful trader first. From that state of mind you will get information about what to do, and that will produce what you want to have. Many people also believe that they must struggle and work hard to get ahead. This is the antithesis of the statement above about “being” successful. If you believe you must struggle to become successful, you probably will struggle a lot.
Third, many traders have what I call the perfectionism-complexity complex. In other words, what you have is never quite good enough. It can always be improved in some way. There is always another exit or another entry that will make it better. What this means is that you always will be struggling with new ideas. Consequently, you never will get to the real issue of trading and just being a trader, doing trading. Instead, there is always one more thing to test—always one more thing to do—and never enough time to just relax and trade.
Give up complexity and move toward simplicity. The best traders are always those who practice simplicity. For example, at a recent seminar one trader remarked, “I just buy what’s going up. If it goes against me, I get out immediately. If it goes in my favor, I let it run. I’ve made a lot of money doing that.” That is simplicity, but you can do it only if your mind and spirit are pure and you are paying attention to what the market is doing. It’s purity of spirit that makes the difference. This particular trader always asks for internal guidance before beginning the trading day. I tend to believe that makes a big difference.
Fourth, many traders—and people in general—have low self-esteem. If you don’t believe you are worthwhile, that belief will tend to dominate everything else. You may believe, “If I can just make money trading, I’ll feel better about myself.” However, that belief actually is composed of two parts: low self-esteem and the belief that low self-esteem will be “fixed” by trading success. Unfortunately, that doesn’t seem to be the case. Low self-esteem always seems to dominate and produce behaviors to justify itself unless, of course, you are aware of it and do the kind of self-work that will improve your self-esteem. If you think that life is a struggle, it’s probably because of your low self-esteem.
The key to all these issues is to understand yourself and realize that you are the root cause of your results in trading. When you do that, you have started on the road to success.
Think about the last loss you had in your trading. What caused it? Who was responsible for it? If your response is anything other than yourself (for example, the market, my broker, bad advice), you are not taking responsibility for your results. You will repeat mistakes over and over until you understand this. In contrast, if you are willing to accept total responsibility for your investment results, you begin to understand all the mistakes you’ve made and are able to correct them. The market will become your financial university. Moreover, you will realize that you are the most important factor in your trading or investment success. If you understand that, you are way ahead of the crowd.
If you want to be good at something, you must design a method that fits you. That is possible only if you design the methodology to fit your beliefs, meet your objectives, and match who you are.
I once had a call from a gentleman in England who had been working through my peak performance home study material. He said, “I’ve been working through your course for over six months. It has helped me realize a lot about myself, but there is one thing it hasn’t done. It hasn’t given me a positive expectancy system.” The ironic thing about that statement is that I had not attempted to provide a methodology in that course; it is about how to become a peak performance trader/investor so that you can design a method that fits who you are.
Psychology is far more important than methodology. In fact, psychology is part of methodology. For example, when we attempt to help people develop a reasonable method that works, they resist the process strongly because they have so many biases that keep them focused on the wrong aspects of trading—areas that have nothing to do with success. It is very difficult to show them the correct direction.
The best thing you can do to increase your income from the market is to determine how you are blocking yourself. This should be done at two levels. Whenever you develop a trading business plan, a large part of that plan should have to do with introspection. Take a look at all your beliefs. Are they useful beliefs, or do they hinder you in some way? What are your strengths and challenges? What about yourself can’t you see clearly because you are part of it? You should consider doing this sort of assessment at least once each quarter.
The second self-appraisal you need to make is at the beginning of the day and perhaps even hourly throughout the day. What’s going on in your life? Are you ready to face the markets? How are you feeling? Is some sort of self-sabotage surfacing in you? For example, are you starting to get too confident? Are you starting to get too greedy? Do you in any way want to override your system? The best traders and investors constantly do this sort of self-assessment. If you want to make more money in the market, perhaps you should start doing it too.
To help you with your self-assessment, I developed a quick 17-point questionnaire you can use to evaluate yourself. Take it and pass it on to your friends; I’m sure you’ll all get some insights into your performance. Answer each question with true or false:
1. I have a written business plan to guide my trading/investing. _____
2. I understand the big picture about what the market is doing and what is affecting it. _____
3. I am totally responsible for my trading results, and as a result I can correct my mistakes continually. (If either part is false, all of this statement is false.) _____
4. I honestly can say that I do a good job of letting my profits run and cutting my losses short. _____
5. I have three trading strategies that I can use that fit the big picture. _____
6. For my first trading strategy, I have collected an R-multiple distribution of at least 50 trades (that is, from historical data or live trading). (If you don’t know what an R-multiple distribution is, you haven’t collected one, so answer false. The R-multiple distribution will be discussed later in this book.) _____
7. For my second trading strategy, I have collected an R-multiple distribution of at least 50 trades (that is, from historical data or live trading). _____
8. For my third trading strategy, I have collected an R-multiple distribution of at least 50 trades (that is, from historical data or live trading). _____
9. For each of my trading strategies, I know the expectancy and the standard deviation of the distribution. _____
10. For each of my trading strategies, I know the types of markets in which they work and in which they don’t work. _____
11. I trade my strategies only when the current market type is one in which the strategies will work. _____
12. I have clear objectives for my trading. I know what I can tolerate in terms of drawdowns, and I know what I want to achieve this year. _____
13. I have a clear position sizing strategy to meet my objectives. _____
14. I totally understand that I am the most important factor in my trading, and I do more work on myself than on any other aspect of my trading/investing. _____
15. I totally understand my psychological issues and work on them regularly. _____
16. I do the top tasks of trading on a regular basis. _____
17. I consider myself very disciplined as a trader/investor. _____
Give yourself one point for each true answer. Be honest with yourself.
Fill in your score here: _____
Let’s take a look at how you rate:
14 or more. You have the makings of a great trader/investor and probably do well in the markets.
10 to 13. You have a lot of potential but probably are making some major mistakes; for many of you, these may be psychological mistakes.
7 to 9. You are way above average but haven’t graduated to the big leagues yet. You are like a high school football star trying to move to the NFL.
4 to 6. You are better than the average investor on the street but have a long way to go to hone your skills. You probably need to work on yourself, your discipline, and your trading strategies.
3 or fewer. You represent the average trader/investor. You probably want someone to tell you exactly what to do, and you expect to make big profits now; when it doesn’t happen, you look for a better advisor or guru to help you. Guess what? It doesn’t work that way. If you answered true to questions 3 and 12, you have some potential, and, if you are willing to commit yourself to excellence, you could move to the top of the scale in a few years.
In a study in the Journal of Finance,2 entitled “Trading Is Hazardous to Your Wealth,” two researchers studied 66,465 online trading accounts for a period of six years, from 1991 through 1996. They found that the average trader’s returns were 11.4%, about 6.5% less than the overall market return of 17.9% for that period. That’s even worse than most mutual fund managers, who routinely do about 4.8% worse than the market. The conclusion, of course, was that people shouldn’t trade. I think the conclusion should be modified: trading is hazardous to those who don’t do the necessary work to succeed.
You’ll get a strong boost toward improving your score from going over the material in this book, but you must do the necessary work.
What’s Your Trading Type?
Can everyone become a good trader? I tend to think not. Take, for example, the Turtles experiment in which 1,000 people responded to ads in the Wall Street Journal, New York Times, and Chicago Tribune to be trained by Richard Dennis and Bill Eckhardt in the Turtles system. The respondents all had to take a 52-item questionnaire. The top 40 were flown to Chicago for an interview, and fewer than half of them were selected and trained to become Turtles. Although Richard Dennis won the bet, Curtis Faith3 says that he thought the experiment was a draw. Some of the traders were good, but many were not that great, and that was after an extensive selection and training process!
What Trader Type Are You?
As an NLP devotee, I’ve always believed that if someone can do something well, that skill can be taught to anyone else. I have modeled all aspects of the trading process and developed workshops to train people in how to become great traders. However, not everyone has the mentality and commitment to do the work it takes to follow through on the training.
Because of my findings over the years, I’ve come to the conclusion that there are certain trading types of personalities. Some of the types tend to make good traders, whereas others need to go through a real struggle to master what’s important to trading. As a result of years of research, we have divided the universe of people into 15 different trader types. I can tell what type you are through your answers to a series of questions.
For each trader type, I’ve developed a set of strengths and challenges, and I have found a prototype trader. Find out what trader type you are by going to www.tharptradertest.com—it’s a free test. Spend a few minutes answering a questionnaire, and you’ll find out your type and what you need to do to be successful. Do it now. It takes only about five minutes.
Write your trader type in the space here: ___________________.
About half the trader types have a high potential to become successful, with the strategic trader being the most natural and the fun-loving trader being the least natural. It was interesting putting the scale together because one of my jobs was to find a prototype trader to fit each category. It was pretty easy to find good models for the trader types that tend naturally to be successful. Paul Tudor Jones is a good example of a strategic trader.
However, the trader types that were not a natural fit had very few examples for me to pick from because those kinds of people simply don’t make good traders. For the fun-loving trader, I ended up choosing the CEO of Starbucks. He’s definitely a fun-loving type, and because he’s invested in his own company, I can call him a successful investor/trader. However, he is certainly not a Paul Tudor Jones and never could be.
Now that you’ve figured out your trader type, here are the 15 types, with some of the challenges for those types that tend to make better traders:
1. Strategic trader. This type of trader has a great chance of success. Your major challenges are that (a) you are likely not to recognize emotional mistakes, (b) you lean toward perfectionism, and (c) you have a strong desire to be right.
2. Planning trader. Again, this type of trader has an excellent chance of success. Your major challenges are the desire for excitement and the need to be right. You easily could become bored with trading and do things to lessen the boredom and thus limit your profits.
3. Detailed trader. The detailed trader has a good chance of success. Your major challenge is that you could be so into the details of what you are doing that you miss the big picture.
4. Administrative trader. An administrative trader also has a good chance of success. Your major challenge is that you may be overly critical of yourself while not recognizing mistakes that are right in front of your eyes. Furthermore, under stress you may question your commitment to trading because you don’t find it satisfying.
5. Facilitative trader. This type of trader has an above-average chance of success. Your major challenge is that you could have a problem with logic and ideas because you are always finding something new. Furthermore, you may need external confirmation of your ideas, beliefs, and systems.
6. Innovative trader. This type of trader has an above-average chance of success. Your major challenges are that you probably want external confirmation for everything you do and you have a strong need for a mentor. Furthermore, you may tend to abandon a good system prematurely if it goes against you because of your emotional reactions.
7. Values-driven trader. This type of trader has an above-average chance of success in trading. Your major challenge is that you must do things your way. In addition, discipline, follow-through, and attention to detail will always be problems for you. You also may find trading boring and do things to fulfill your need for excitement.
8. Independent trader. This type of trader has a good chance for success if he or she applies himself or herself. Your major challenge is that you are driven by logic and could easily reject systems that work well because you don’t understand them logically. Furthermore, your trading could dominate your time and leave you socially isolated. That said, you have a good chance of success if you apply yourself.
The remaining seven types have a much more difficult time becoming successful in the trading arena:
9. Socially responsible trader
10. Spontaneous trader
11. Supporting trader
12. Accurate trader
13. Artistic trader
14. Fun-loving trader
15. Adventurous trader
If you are in one of these last seven categories, you will have to work harder and make a stronger commitment to becoming a great trader, but it’s still possible.
Commitment
My job as a coach is to find talented people and make sure they learn and follow the fundamentals. But what is a talented trader? What do I look for in people before I coach them?
One of the first qualities I look for is commitment. Most people come into trading having accumulated a lot of money in another profession. We see a lot of doctors, lawyers, engineers, information technology (IT) professionals, and the like. All those professions require a lot of training to master the skills involved. You cannot walk into a hospital with no training and say, “I’d like to do some brain surgery today.” Instead, it requires 16 years of basic education, 4 years of medical school, several years of serving as an intern, and several more years of completing a residency. It requires a lot of dedication and commitment to begin to practice as a doctor.
Let’s look at trading. What is the entry price for trading? Perhaps you watch a show on television in which some guru tells you what stocks he or she likes. You then open up a brokerage account by filling out an online form and depositing some money. Then you can buy stocks and wait for your profits. Entry into trading is that easy! It’s designed to be that easy so that other people can take your money in fees and commissions. People who trade with that little preparation will have the same kind of results that an off-the-street brain surgeon might have: the patient dies. In the case of the off-the-street trader, your account dies.
Earlier, I covered some of the elements of successful trading:
1. Doing what’s required on a daily basis and going through the trading process
2. Having a strong enough money mindset to have sufficient funds to trade with
3. Having a business plan to guide your trading
4. Having a good system or perhaps two or three good systems
5. Having proper position sizing strategies in place
6. Avoiding mistakes
Behind all of those elements is the key to everything: your personal psychology.
Working extensively in these six areas requires immense commitment, the same commitment level that is required to become a brain surgeon. That makes sense: great traders make a lot of money, but to be great traders, people have to be willing to do what it takes to become successful.
This requires that you have a goal in mind and an intense desire to reach that goal so that you’ll do whatever it takes to get there. This is the essence of commitment. Most people don’t realize that commitment and hard work are necessary for trading success because those are not required to start trading. Although I can teach people what’s important, I cannot give them the commitment to do it, and potential traders must have an intense commitment to work through the elements of successful trading.
What is it like if you lack commitment? Imagine someone who is driving around and has nowhere in particular to go. We’ll call him Henry. Henry stops at a fast-food restaurant and orders a sandwich. The sandwich turns out to be the worst one he’s ever had. It’s been burned and dropped, and the sauce on it is spoiled. As a result, Henry complains and then talks to the other restaurant patrons about the food. The manager is not very happy and kicks Henry out. Now Henry is infuriated and starts a campaign through the local newspaper to have the restaurant closed. This goes on for weeks, but Henry is willing to spend the time because he doesn’t have anything else to do.
When people are not committed to anything in particular, they run into distractions. Henry had no place to go, no motivating force behind him, so he just attached himself to a bad-tasting sandwich, and his campaign against the restaurant took up a lot of his time. When you are going from point A to point B and are not committed to reaching point B, you tend to do a dance with any obstacle you run into instead of just moving around it.
If You Aren’t Committed, You Tend to Do a Dance with Any Obstacle You Encounter
Now imagine someone who has an important appointment that she must reach within the next 3 hours. We’ll call her Katie. Katie still has a 2.5-hour drive to make the appointment. However, she stops at the same restaurant where Henry stopped, and she gets the same bad sandwich. Does the sandwich suddenly consume her? No. Katie may complain and throw it away, but then she moves on because she is committed to something else. She either stops at another restaurant to buy something to go, or she skips lunch. To a committed person like Katie, the most important thing is the destination. She doesn’t do a dance with any of the distractions she encounters.
In my experience, people who are not committed to becoming a great trader find numerous distractions that take up most of their time. They complain that they are too busy to do what it takes to be successful as a trader even though most of their time is preoccupied only with distractions.
When you are committed to becoming a great trader, you do whatever it takes, and little things don’t throw you off track. When distractions arise, you go around them and focus on your goal. That’s the power of commitment, and it is essential for trading success.
A football coach looks for talented players who have the commitment to follow the fundamentals and do what it takes to be the best. You may be the most talented athlete ever, but if you don’t have the commitment to be the best, the coach probably will drop you from the team. I find myself doing exactly the same thing with traders: I look for talented people with a lot of commitment because they are the ones who will be successful. What is your commitment to trading excellence? Read over the elements of successful trading that were given earlier. How committed are you to achieving them? This is the real entry requirement for trading success.
To illustrate my point, here are a couple of letters that I’ve gotten and my responses to them.
Dear Dr. Tharp:
What’s a reasonable goal for me as a trader? Can I make a living trading? Can I make millions trading? Is that reasonable for a former professional?
I’m aged 46, and I’d like to move into full-time trading. I’ve accumulated about $200,000 in cash. What is possible for me given my age and goal to become a full-time trader?
Sincerely,
E.R.
Dear E.R.:
Your trading goal is up to you. You can certainly become a full-time trader. That is probably possible within a year to 18 months. You can certainly take a million dollars out of the market, and you could reach the stage where you take a million dollars out of the market each year. It depends on what you are willing to do.
However, there are a number of questions that you will need to ask yourself because each scenario has a different answer.
How much do you love trading? How committed are you to being a full-time trader making millions? Are you willing to work 12 to 16 hours a day, six days per week, for the next five years? Are you willing to use at least 4 to 6 of those hours a day to start your own trading business? Are you willing to spend another 1 or 2 hours a day developing probably the most valuable skill you could ever have, self-knowledge?
Are you willing to give up most of your free time, at least until your trading business is off and running soundly? And are you willing to think about trading when your family is still enjoying the things that you used to do together? Will you do whatever it takes to become the best (including discipline and accepting full responsibility for your results)? You will need to start by spending at least the first 6 months really working on yourself, looking at all your psychological patterns and developing ways to overcome any personal obstacles.
In addition, you will need another 4 to 6 months to develop a business plan that will be the basis of your trading business. Most people don’t treat trading like a business. And most businesses fail because people don’t plan.
Are you willing to learn a new way of thinking about the markets? This means thinking in terms of a reward-to-risk ratio, understanding that risk is what you lose when you lose in a trade, and understanding that your position sizing strategy is the core of how you’ll work to meet your profit targets. Most of what you have learned about the markets needs to be turned upside down, examined, and then thrown out as garbage. Can you handle that?
Will you be able to develop at least three trading systems that fit the big picture? Are you willing to work on these systems enough that they become great systems?
I mention all this because all these things are required if you are serious about being a top trader who earns a lot of money in this field. I have made the study of top traders my vocation, and I have written books on all these subjects for years.
It’s all up to you. Are you willing to do the necessary work or is the goal too lofty?
Van Tharp
Dear Dr. Tharp:
I’m just an average investor. Tell me how to make a lot of money, but make it easy and not complicated. I don’t have the time, and I’m an average investor.
Thanks,
R.M.
Dear R.M.:
What you don’t seem to understand is that trading is a profession. If you are a doctor, you spent years of study learning to practice your profession well. You can’t just walk in off the street and perform brain surgery even if you’ve read a textbook about it.
Similarly, if you are an engineer, you also spent years learning your profession. You can’t just start building a bridge without the proper training. If you did not have the training, the bridge probably would fall apart.
So when you tell me you are an average investor, you are telling me that you have no training and that you don’t plan to spend the time getting the training. That means you’ll probably get average results, and average investors generally lose money.
Van Tharp
Do What You Love
I have a pretty good taste in art, I think. I can go into most art galleries and find the painting I like best, and it is usually one of the most expensive pieces in the gallery. I can do that for all types of art except abstract art, which I don’t understand.
With that introduction, I’d like to mention that I’ve watched my wife study art and go from being a beginning artist to a fantastic artist in a period of about 5 to 10 years. Many of her pieces might now be the type of work that I’d gravitate to in a gallery. Here are a couple of examples.4 The first one is an abstract piece that she painted for our office.
Heartbeat
The second one is a piece that she modeled after a French artist whose work we both admired. I personally think it is as good as the work of the French artist whose style she copied. This one is entitled Fearless.
Fearless
My point is not to tell you how good she has become but to tell you what she did to get that good. I think her movement from amateur to master occurred as a result of three things she did. First, she went to an Avatar workshop in Ireland. She didn’t think that she got that much from the workshop, but her painting took a leap forward afterward. She said that somehow it freed her creativity. She wasn’t worried about the results. Instead, she just started to express herself.
The second thing she did was to start a self-improvement program in a book called The Artist’s Way5 by Julia Cameron. As she worked through the program, I noticed that her art was getting better and better. At this point, what I noticed was that she really loved her work.
She also completed the 28-day Transformational Meditation course that the Van Tharp Institute sponsors for all of our Super Traders go through as well. In the course she found her passion and commitment. Not long after taking that course, she won first place in a local art contest in which numerous professional artists were participating.
So what does her transformation have to do with trading and success? The path she followed is one typical way to find success. People who have done well in one area start some sort of program in self-improvement. Then they move to a new area that they love, and as they commit to it (because they love it), all sorts of things happen to make it work for them.
One day, as she was going through her program, my wife said, “No one has more self-sabotage than me.” I was delighted to hear her say that because when people begin to think like that, I know they’ve come a long way in their self-work program. In fact, just her saying it told me that she was way ahead of most people, who are so numb to their self-sabotage that they are not even aware of it.
Most of my Super Traders spend at least six months or even a year doing psychological work. When they realize how much self-sabotage they have and decide to move through it, I know they’ll make it. I don’t expect people to clear out all their major issues involving self-sabotage, but once they’ve transformed on at least five major issues (and know that they are different as a result), I feel confident that they can move around any other obstacles that come into their pathway.
Personal Responsibility
It’s time to talk about the most important trait that any trader can have: personal responsibility. Why is personal responsibility so important? One of my beliefs is that YOU are the most important factor in your trading. It’s not your system because YOU both produce and execute your system. It’s not your position sizing strategies because YOU must execute the proper position sizing algorithm to produce YOUR results to meet YOUR objectives. And it’s not the market because you don’t really trade the market. YOU trade YOUR BELIEFS about the market.
You produce the results you get as a trader. When you understand that, you realize that you must make changes if you want more effective results. YOU must produce the changes.
At some of my workshops, I play the simulated trading game that I mentioned earlier, and we use a bag of marbles. Everyone playing the game gets the same trade results, so the only real decision is how much to risk (thus, it’s really a game about position sizing methods). The objective is to win a big prize by having the most money at the end of the game. In fact, since everyone gets the same trades, the only two factors operating in the game are position sizing strategies (deciding how much) and personal psychology. The trading system the game simulates has a positive expectancy (that is, it makes money). Even so, if I have 100 people playing the game with the objective to win, I’ll typically see a third of the room go bankrupt, another third of the room lose money, and the remaining third make very nice profits.
I usually ask audience members to pull out marbles from the bag. Each marble’s color represents a trade result in R-multiple terms, so the activity simulates trading a system and you never know what results you will get, but you know something about the kinds of overall results to expect. In addition, if someone pulls out a loser, I ask the same person to keep pulling marbles (that is, trades) until he or she gets a winner. That means that if there is a long losing streak (and there usually is), it will be associated with the person who pulled the marbles out of the bag for that streak.
After a long losing streak, I point to the person who pulled out the losing streak marbles and ask the audience, “How many of you think you went bankrupt because of Bill?” Amazingly, quite a few of the bankrupt people raise their hands. The problem with that assumption is that nearly every simulated trading game will have a long losing streak (it’s designed that way), and that streak always will be associated with the person who pulled it. Thus, if you believe someone else was responsible for you losses, you’ll probably make the same mistake over and over. You’ll go bankrupt in many games, and it will always be “Bill’s” fault.
If someone doesn’t want to be responsible for his or her results, there are many possible responses to the question “Why did you lose money in the game?”
• It was the fault of the guy who pulled all the losing marbles (trades).
• This is a stupid game, and it doesn’t reflect real trading.
• It’s random chance and has nothing to do with me.
• I didn’t have a good system.
• I’m a stupid idiot.
All of those responses are excuses, and none of them will help you improve. There is only one response that will help you improve: “I risked too much money on a number of the trades because my position sizing strategy was inadequate. That’s why I lost money or went bankrupt.”
When you understand that, you can fix the problem. When you give any of the other excuses, you just compound the problem and will repeat those mistakes.
Now are you beginning to understand why taking personal responsibility for your trading is so important?
When you look at your trading results and say, “I created those results,” you are in charge of the process. If you don’t like the result, you can start to look for the mistakes you made. When you find the key mistakes that actually produced your results, you can make changes and get better results. That is why personal responsibility is so important and why I look for it in all of my Super Traders.
Do you like the results you produced as a trader in the last 12 months? If not, what mistakes did you make and how can you correct them? Ask yourself the following:
• Do I have a business plan to guide my trading?
• Do I have a worst-case contingency plan?
• Do I have several positive expectancy systems that are well tested that I can trade in this market climate?
• Do I have something else that will work if the market type changes?
• Do I even pay attention to the type of market we are having?
• Do I regularly work on myself as the core of my trading results?
If you answered no to any of those questions, you have some real clues about why your results in the past have been undesirable. These, by the way, are only a few of the questions you could ask yourself.
What Are Your Excuses?
By now you should have many ideas about how to improve your trading. There is probably no good reason not to spend a month (or six months) developing a good plan to work on yourself and implementing many of these ideas. What is stopping you?
Take some time and write down your excuses. Do some of those excuses and justifications look like the following?
• I just don’t have the time.
• If I do it, I’ll probably miss something and just lose more money.
• This material isn’t for me. When I bought it, I was looking for something simple. I didn’t think there would be so much work involved.
• Dr. Tharp really doesn’t understand me. If he did, this material would be easier.
• My life is going fine. I don’t have any problems, and I just don’t need to deal with all this stuff.
• Working on me is scary.
Working on Myself Is Scary
• I have too many distractions and cannot focus.
• I’m right, and Dr. Tharp just doesn’t get it.
• I need to really study this stuff, and I just can’t seem to find the time.
• It would be much easier if my spouse understood this and how important it is.
When you make excuses of this nature, you do it simply so that you can be right. You are basically saying that you like certain beliefs because they are right. Being right doesn’t make you happy. It doesn’t make you successful. However, you do get to be right, and if that is what’s important to you, then so be it.
What Are Your Excuses?
Rather than evaluating if you are right about some belief that you hold, you could apply a different strategy. Ask yourself, “Is it useful? Is it getting me what I want? Is it working?” One of the basic presuppositions of NLP is that if a person is not getting the results he or she wants, the person should do something else. Doing almost anything else will produce different results.
If your trading isn’t working, change what you are doing. If your trading system isn’t working, change how you approach the system (focus on your exits and your position sizing strategy). If your life isn’t working, change the way you approach your life. Ask yourself—whatever it is you are facing—“Is it working, or is it not working?”
Life is a process. There is no success or failure, only feedback. You’ve been getting feedback about what you’ve been doing for a long time. Are you willing to change now? It’s never too late. You’re never too old. Today is always the first day of the rest of your life, so begin now.
Imagine that you are responsible for everything that has happened to you up to now in your life. Didn’t we just discuss that topic? When you finally decide you are responsible for your own life—for what has happened in the past—you will find that you get an immense rush of freedom. You can decide right now what you want, and you are in charge of making it happen.
Empower Yourself
Traders can tap in to one of three general attitudes when they approach the market. The first attitude is one of pessimism, the second is one of randomness and/or neutrality, and the third is one of empowerment. The first attitude never works, the second attitude seldom brings much success, but the third attitude, when properly employed, guarantees success.
Empower Yourself
Let’s imagine that you have the immense power to create the results you want from your trading activity. A good reason to make this assumption is that you do have such power. We’ve been talking about it. Now, if you had such power, what do you think would happen if you approached your trading from a viewpoint of pessimism? You would lose money. Regardless of the quality of your system, you would consciously or unconsciously figure out a way to lose money.
If you approach the market with neutrality—and you have this power to create your life—the best you can do is perform at an average level. You certainly won’t add any personal energy to the market, and I suspect that your performance will be substandard.
Let’s look at the third option: approaching trading with an attitude of empowerment. In my modeling work with traders, I’ve observed that all good traders know they will win at the end of the year. I might take that one step further and say that great traders know they probably will win at the end of the month (or week). What does that imply? It implies a great deal of faith. You must believe in yourself and in your trading. You must know deep in your heart that you have won and feel grateful for your success.
Faith is like a magic power that propels you to greatness. For example, let’s take a look at a few Bible quotes:
Let it be to you according to your faith. —Matthew 9:29
If there is faith in you even as a grain of mustard seed, you will say to this mountain move away from here, and it will move away; and nothing would prevail over you.
—Matthew 17:20
If you can believe, everything is possible to him who believes.
—Mark 9:23
Whoever should say to this mountain, be moved and fall into the sea, and does not doubt in his heart, but believes that what he says will be done, it will be done to him.
—Mark 11:23
Therefore, I say to you, anything you pray for and ask, believe that you will receive it, and it will be done for you.
—Mark 11:24
Incidentally, I used to avoid using a lot of spiritual references because I found that many people’s beliefs about spirituality were both very strong (the essence of who they were) and very narrow (if you went beyond their boundaries, you entered dangerous territory). However, my objective is to help people change, and I’ve found that the most powerful change is at the spiritual level. Thus, it is time to begin to open up the spiritual basis of trading.
When you have faith, you take personal responsibility (even if it amounts to God acting through you) to another level. When you operate at that level, you are definitely a peak performer.
Write Down Your Beliefs
Earlier, I talked about doing an honest self-appraisal. What does that mean? Let’s go deeper into yourself and the way you create your trading results.
Let’s look at a couple of the simple steps that are involved in peak performance trading. I’ve developed a procedure to help traders reach peak performance called the Trader Reinvention Paradigm.6 Part of this paradigm involves setting a goal for yourself that stretches you and puts you outside your comfort zone. Then the paradigm shift helps you make the commitment to achieving your goal.
Going for such an impossible goal will stretch the beliefs that limit you, and you will have to think continually about how to produce the result. To reach your goal requires regular focus on your progress toward the goal and asking the questions, “How can I do something different and move closer to my committed goal?” and “How did I produce that result?” This process has produced many positive results for people who had previously believed their goals were unattainable.
You do not trade the markets—no one does. That may sound surprising to many of you, but what you really trade are your beliefs about the market. Furthermore, your ability to trade is tempered by your beliefs about yourself.
I’d like you to do an exercise. Write down your beliefs about yourself. Those beliefs typically start in the following ways:
• I am …
• I feel …
• I experience myself as …
If this sort of exercise is new to you, when you first do it, you’ll probably write down a bunch of your positive attributes. Furthermore, you’ll probably have trouble writing down more than 20 or 30 of those beliefs, but you actually have hundreds.
Let’s say you think for about five minutes and come up with the following items:
• I am a fairly good trader.
• I feel positive about my potential.
• I like myself.
• I am fairly astute in thinking about the markets.
• I am intelligent.
• I am creative.
You know there are a lot more, but after 15 to 20 minutes of thought, that’s all you can come up with. Okay, that’s a start, but now I’d like you to continue the exercise each time you make a trade, either opening a position or closing it.
Let’s say it’s Monday morning and you open four positions in the market. After doing so, you continue to assess yourself and notice your thoughts:
• I feel really excited.
• I like fast-moving stocks.
Okay, you are gaining more insights about yourself.
By midafternoon, the market is in a steep decline, and three of your stocks are down $500 on the day. Notice your thoughts:
• I’m angry about those positions. I just got in, and they’re going against me.
• I’m not going to let them take advantage of me this time. I’ll hang on until it goes back up.
You’ve just gathered some more insights about yourself. Keep this up until you’ve written down 100 or more statements that reflect you and your feelings. When you do that, you’ll have a lot more insight into the way you produce your trading results, and you will be on your way to becoming a peak performance trader.
After you’ve written down 100 beliefs, examine those beliefs by asking yourself six questions about each one. I call this the Belief Examination Paradigm:
1. Who gave me this belief? My parents? My peers? The media? School? Or did I select it for myself?
2. What does this belief get me into? (Write down at least five things.)
3. What does this belief get me out of? (Again, write down at least five things.)
4. How does this belief limit me?
5. Is this a belief I want to keep because it is useful, or is it a belief I want to get rid of because it limits me? (By the way, at a very deep level all beliefs limit you in some way, but some are still useful for the level at which you now find yourself, and they are thus worth keeping.)
6. If the belief is not useful, can I simply drop it for something more useful, or is there a charge (emotion) holding it in place?
If you find that there is a charge—that is, an intense emotion that comes up for you when you ask these questions—holding your belief in place, you will need to release the charge to be free from the belief. We’ll discuss how to do that later.
Let’s look at one example of a belief: Good performance comes from picking the right stocks. Let’s put that belief through the Belief Examination Paradigm as one person might answer it:
• Who gave me this belief? Answer: I hear this all the time. There are lots of books about how to pick stocks. I watch experts give their picks on the financial channel. Everyone talks about how important it is, and so it must be true.
• What does this belief get me into? Answer: I spend a lot of time looking for the right stock. I listen to people who think they are good stock pickers. I read books about stock picking. Once I’ve picked the right stock, that’s all I have to do—just buy it and hold on to it. I question my stock picking criteria to see if I can improve them.
• What does this belief get me out of? Answer: I don’t have to do much planning because that has nothing to do with stock picking. And I don’t have to pay attention to the market generally because the right stocks should be good all the time. I don’t spend time working on myself so it gets me out of personal responsibility. It gets me out of looking for my own mistakes if the trade failed. Instead, I can safely assume that I did a poor job of stock picking. I get to avoid working on other important aspects of trading such as exits and position sizing strategies.
Can you begin to see how some of the aspects of this belief might not be that useful? I hope so. Let’s move on to the next question:
• How does this belief limit me? Answer: It makes me think that entry and stock selection are the most important aspects of making money. If I don’t do well, something is wrong with my selection criteria. Instead, I should be able to focus on myself. I should focus on the other parts of the system and whether the system is working. In addition, I need to know how the system will be able to perform in various market types and how to position size my trades to meet my objectives. This belief causes me to ignore those things. (Of course, most people would not be able to give this answer because the belief would typically limit their knowledge of the other factors.)
• Is this belief useful? Answer: Since stock selection is one of the least important aspects of trading, this belief is probably not that useful.
• Can I change it, or does it have a charge on it? Answer: I should be able to change it, but I’m afraid to drop it because I’m not convinced that those other things will make me more money than picking the right stocks.
This person probably needs to release the fear.
Imagine the control you’ll have over your life after you’ve completed this exercise on 100 beliefs. What would happen if you applied it to 1,000 of your beliefs? Whether you do that will depend on how useful you believe the exercise to be—which just proves the power of your beliefs—and how committed you are to being in control of your life and your trading account.
Enjoy Your Obstacles
Let’s look at some processes you can use to work on yourself. There are many of them in later parts of this book; find the ones that seem useful to you.
You already know that a committed person with a clear goal will encounter an obstacle, refocus on the goal, and move out again toward the goal. In contrast, an uncommitted person may do a dance with the obstacle that could last a long time. In fact, most people spend their entire lives doing dances with obstacles that get in their way.
In any endeavor, you have up and down periods, and dealing with the market has many such periods. To profit from the up periods, you have to tolerate or even enjoy the down periods; to enjoy the profits, you have to get through the losses. Perhaps it would be useful if you could celebrate your losses.
Celebrate Your Losses
As mentioned earlier, I’m an NLP modeler—that is, if someone does something well, I can figure out the essence of what that person is doing by understanding his or her thinking. Thus, when such a person goes from point A to point B easily and effortlessly, I can determine how he or she does it and teach that skill to other people. Some people make money through trading easily and effortlessly, and I’ve been studying those people for over 25 years.
It turns out that one of the major problems people have in going from their current location to their desired goal is all the walls or obstacles they run into each day. There is a common solution to these obstacles: Make them okay. If you enjoy bumping into the walls, it is usually easy to refocus on the goal.
If you’re in the market, one of biggest obstacles you’ll face is the wall of losses. It’s fairly difficult dealing with the markets if you are not willing to lose. It’s actually almost impossible. It’s like walking but wanting to use only your left foot, avoiding your right foot. That doesn’t work, and neither does trading without losses.
When you want to be right, you’re not dealing with the obstacles. Instead, you will try to force things. When you want to make a profit out of today’s trade even though it’s a big loser, you’re not dealing with today’s obstacle. Enjoy the obstacle—embrace it— and be willing to accept it. If the market tells you it’s time to get out at a loss, do that.
Good traders typically have some point in the markets at which they know they must get out of a position to preserve their capital. Taking this loss is essential. It preserves your capital, and so you should enjoy doing it.
However, if you don’t understand that the loss has nothing to do with being right or wrong—it’s just part of the process—you could turn it into a monster by interpreting it to mean something. What then happens is that you fight each loss, and in the struggle the losses typically get bigger. For example, if you are afraid of a $500 loss and won’t take it, you easily could watch it become a $1,000 loss. The $1,000 loss, when not taken, can easily become a $2,000 loss. The net result is a losing trading system.
Think about it. If you have this problem with losses, you easily could turn a good trading system into a losing system. If you don’t realize that it’s your problem with losses, you might believe the problem is with your trading system. Or if you are following someone’s advice, you might think the problem is your advisor or your money manager.
Guess what? Quite often traders take the relationship they are having with the market and transmute it by developing a different system or trading with a new money manager. Now the old problem they used to have with the market of not accepting what the market gives them becomes a similar struggle they are having with their system or with the new advisor. Instead of giving up on the market after a string of losses just in time to miss the really big move, they avoid their system until it is doing really well.
When it is showing tremendous profits, they jump on board, only to be blown away by the market in short order. The same thing happens when they invest with money managers. This desire to be right motivates them to jump to the top money manager when she’s hot, only to go through a big string of losses.
Psychologically, if you don’t come to grips with your obstacles and embrace them, you will find another way to repeat them. Realize that you find walls because they are there for you to bump into. When you accept and embrace this fact, you’ll accept bumping into walls. Strangely enough, you then hardly even notice that the walls are there, and you will then be free to achieve a new level of success in the market.
Good traders realize that they can have 10 to 20 losses in a row. It’s part of the business of trading. It happens, so just accept it and move on. If you have trouble accepting that, you need to realize that the problem is you and deal with it.
Trade through Mindfulness
What would happen if you could just pay attention to what the market is doing right now? You’d be totally in the present with no preconceived ideas or biases to influence you. If you did that, your trading probably would accelerate to a new level. You can trade that way if you practice “mindfulness.”
For example, in October 2008 a friend of mine had lost a lot of money in the markets. I told him to get out. I said that we were in a major bear market and he should just get out until it ended. He followed my advice.
The next week the Federal Reserve lowered the discount rate. The market moved up on the news, and he called me, wanting to get back in the market. I said that when the market starts going up again, it will be obvious. Short-term reactions to news tend to be large in bear markets; however, if you just watch what is going on, it is obvious. Most people have trouble with this. They can’t watch what is going on because their heads are so full of chatter. The solution is to trade through mindfulness.
Mindfulness first came to my attention as a form of meditation in which you simply quiet your mind and then “watch your thoughts” as they come up. When a thought pops into your mind, you notice that it is there and then release it. That’s all there is to the meditation, but it can have a profound impact on your life if you do it regularly.
Mindfulness is also a state of being. The Harvard psychologist Ellen Langer has popularized the term through two books: Mindfulness and The Power of Mindful Learning.7 She defines mindfulness as a state of being in which one is likely to be (1) creating new categories, (2) welcoming new information, (3) looking at things from multiple perspectives, (4) controlling the context, and (5) putting the process before the outcome.
Creating New Categories
Mindfulness is the opposite of mindlessness. Mindlessness means living by your conditioning. It means assuming that all your beliefs are fixed and true so that all you can do is find evidence to support that truth. Mindfulness, in contrast, is the continual creation of new concepts and categories with no real attachment to their truth.
For example, think about your last day of trading. What was it like? You might say, “I put on some long trades and some short ones. I also closed out some trades—some at a profit and some at a loss. In between, I watched the market.”
Even if I offered you money for everything you could list that you did yesterday with respect to trading, you still probably couldn’t come up with much more than what I just listed. Yet you did so much more. You probably experienced a thousand different emotions, which you’ve forgotten. You probably read 100 news items. You probably talked on the phone to some people. But unless I mention those things to you, you probably wouldn’t think of them.
Most strong opinions rest on global categorization:
• The market went up yesterday.
• We’re in a C wave of an ABC correction.
• I lost money yesterday, but I followed my system.
• We’re in an up move in a secular bear market.
• I should pay attention to what is going on now in the market.
All those statements reflect global categories that you probably use to form your opinions. What would happen if you formed new categories of thought about the market? Think about the market in great detail. Who are the different players? What do you think each of them is doing with respect to the market? Call people you know, and notice their reactions and their perspectives. Break old thinking patterns by creating new categories, and you’ll step up your trading.
Welcoming New Information
New information continually impinges on all living creatures, and their ability to survive depends on their openness to that information. Research has shown that people undergo temporary psychological damage if they are deprived of new information for any length of time. If they are deprived of sensory input, young animals become severely impaired later in life. You need sensory information to stimulate you.
Most people are exposed to new information continually, and so the lack of it is not a problem. However, most of us tend to filter, generalize, distort, or delete most of that information. Becoming more receptive to the information that is coming in to you is a major step toward improving your performance as a trader.
Welcoming New Information
Looking at Things from Multiple Perspectives
There are at least three general positions or perspectives from which information can be viewed. The first perspective, position 1, is the “I” position: “How does this information affect me?”
The second perspective, position 2, is how it affects another person directly: “What is that person’s perspective?” The second position might be that of the person who takes the opposite side of your trade or perhaps the person who is making the market for you. Looking at new information from that person’s perspective may be a valuable thing to do.
The third perspective, position 3, is that of the neutral observer who is watching all the other participants. This is like someone out in space who can see what everyone else is doing and then view it all from a global perspective.
These three perspectives were crucial in Einstein’s thinking processes. This was part of how he formed his great ideas about relativity. Those perspectives are also the basis for some of the most powerful change work I know about. Try them on. Of course, there are many possible players for positions 1 and 2. You can try on numerous possibilities and gain tremendous insights as a result. You’ll gain choice in terms of how to respond, empathy for other people, and the ability to change your behavior much more easily.
One of our instructors actually developed a trading system by determining his strongest beliefs, then taking the exact opposite viewpoint. It turned out to be one of his best systems.
Remember that most people have “good” reasons for behavior that you might consider negative. The intentions behind those behaviors are good. If you close out a trade early, are you “nervous” or are you “cautious”? If you fail to take a trade, is it because you are “afraid” or because you haven’t totally developed and tested your plan for trading? Typically, the behaviors you most want to change are the mirror images of the qualities you value most. Thus, if you are having trouble “pulling the trigger,” you probably value a thoroughly tested plan and don’t have one.
Controlling the Context
Much of your behavior is context dependent. For example, many professional traders know it is possible to lose $20,000 in a trade, perhaps paying $1,500 in trade costs in the process. However, the same traders are much less likely to pay $1,500 to attend a course that could reshape their trading and help them avoid many of those losses. The thinking behind such logic is that the loss is a cost of doing business whereas the course is an unnecessary expense. Notice what happens to the logic if the trader switches it around and starts to think of instructional learning as being essential to doing business well. It becomes much more significant than the losing trades, especially since it may save the trader many thousands of dollars in a single year. Of course, that depends on the course the trader selects.
People who practice mindfulness are aware of the context in which they are interpreting events. They are also willing to shift contexts to determine the impact on their behavior and their thinking. As a result, they give themselves much more choice and are much more likely to make money.
Ask yourself the following questions:
• How am I interpreting my losses?
• What is the context in which I am viewing all my trading?
• How does trading fit into the scheme of things in my life?
• What if I shifted the context on just one of these questions?
Putting the Process before the Outcome
People can imagine themselves taking gradual steps, but great heights seem totally forbidding. Yet when you take enough gradual steps, you’ll reach great heights.
If you are concerned with the final result—the outcome—you probably will have problems attaining the outcome. However, if you concentrate on the process of getting to the outcome, you are much more likely to arrive at your destination.
Every outcome is preceded by a process. You will not make money trading unless you follow a predetermined plan and stick to that plan. That’s why you should pat yourself on the back every day if you can honestly say that you totally followed your rules throughout the day. Every Super Trader arrives at that stature by taking one trade at a time. The primary difference between that person and the average trader is that the Super Trader probably continued to follow his or her plan every single day. The Super Trader probably made very few mistakes.
What can you do to practice mindfulness in your trading?
1. Do a 20-minute mindfulness meditation each day for at least a week. If you practice watching your thoughts (and releasing them as soon as you notice them), you can be satisfied that you are doing the exercise appropriately.
2. Keep a regular diary of what is going on in your life. Do it for a few days before you start the mindfulness meditation and then keep it up. When you’ve completed a week of mindfulness meditation, look at your diary and notice how your life is different.
3. Bring mindfulness into your trading and investing by doing the following:
• Imagine yourself taking the other side of every trade that you actually take. What does that position feel like? Also imagine yourself being a neutral observer who watches as you and the other person both take a position in the market. What do you think that person would think?
• Look for new information about each new trade. What information are you normally accepting and what information are you normally rejecting?
• When you do something you don’t like in your trading, notice the context in which you are interpreting not liking it. How else might you interpret that behavior? What other intention might cause that behavior? Perhaps those other intentions are something you value highly.
• Concentrate on the process of trading—following your rules. In fact, at the end of each day, ask yourself a simple question: “Did I follow my rules?” If you did, pat yourself on the back. If you don’t have any rules, you obviously didn’t follow them. Think about it.
These exercises are powerful if you do them. If you don’t do them, they are meaningless. Are you going to do them? If the answer is no, ask yourself why not. It is probably because you don’t believe they will help you. If that’s the case, put that belief through the Belief Examination Paradigm I showed you earlier. Perhaps you are not committed to trading success. If that’s the case, what are you committed to? What do you love to do?
Mindfulness Trading: An Example
At a recent workshop, I took all the traders through a process designed to increase their mindfulness. One woman in attendance, who had received some Buddhist training in Vietnam, said she got in a very peaceful state that reminded her of that training.
My response was, “Why don’t you start trading in that state?” So she went home and took some more training so that she could reach that state regularly. And then she started trading from it. The results were quite phenomenal.
She had the following beliefs about the market:
• If a stock fails to make a new low after it has already made three or more lower lows, it will make a new high. And the opposite is also true.
• I will not enter a trade in the first five minutes after the opening bell. I will just monitor my watch list for five-minute high/lows.
• Trade against the strongest stocks in the bear market (due to rally) and the weakest stocks in a bull market.
• Trade in the direction of the last daily bar.
• If the price is above the 200-period moving average (MA), look at two other short-term moving averages based on five-minute bars. Most short-term averages would work, so let’s use the 12-period MA and the 24-period MA.
• To go long, look for a multiple bar drop but not below the 20-period MA. Enter on a rally with just a slight uptick. Place stop at the low, and target at the swing high. Do not take the trade unless there is a 3:1 reward-to-risk ratio.
• Short trades are the opposite of the long trades for these various factors.
Notice that these are all just her beliefs or her filters to reality. You might not have those beliefs at all, and, if you don’t, you definitely could not mimic her trading.
She would usually trade only one high-volume stock each day for about an hour or two—that’s it. And each day she seemed to be able to take about 5R in profits from the market. Her trading was very fast, and there were multiple opportunities to make errors. In fact, her trading was so fast that she didn’t have enough time to write down what she was doing. Instead, I had her dictate into a recorder exactly what she was doing. By trading through mindfulness, she made very few errors—trading at above 95% efficiency.
At one of our Super Trader Summits, she explained what she was doing and talked us through several examples. Everyone else was amazed that she could do what she was doing because it was so fast and the price moves were quite tight. However, subsequently, a number of other Super Traders were impressed enough that they were also able to adapt their various trading styles to mindfulness trading.
Mindfulness trading is merely following the market and your system—and avoiding extraneous thoughts and chatter. The extraneous chatter is what introduces mistakes and blocks your ability to see what the market is actually doing. But when you see what is actually happening through mindfulness, the results can be amazing.
Make Friends with Your Inner Interpreter
Think about a problem you have with your trading. It could be almost any problem. Perhaps you have trouble taking profits too soon. You might get angry when a trade gets away from you. Perhaps you frequently second-guess yourself. Whatever your problem is, write it down. You can apply this exercise to almost anything you think might be a problem.
Once you have identified that problem, write down several statements about it. Why do you think you have the problem? What caused it? What’s your reaction to the problem? Your statements could be almost anything: “Why do I keep doing that?” “That behavior just shows that I’m stupid.” “I just can’t seem to control myself.” “The problem is really nothing, but it just seems to continually repeat itself.”
These statements are your interpretation of the problem. In fact, without this interpretation, you probably wouldn’t have a problem. Thus, perhaps it’s important to work with your inner interpreter.
Make Friends with Your Inner Interpreter
You need to use your imagination with this exercise. Be willing to play like a child:
1. Now that you have listed a problem and some statements about it, ask yourself how you can best explain the way the problem happened. Perhaps you’ve already done that with one of your statements. If you have not, that’s your next statement. Write down what you hear. In addition, notice the qualities of the voice making the statement. Where do you hear the voice; which direction does it come from? Whose voice is it? Is it your own? Is it someone else’s?
2. Now find two more problems and repeat step 1. Make sure the problems have some emotional significance for you.
3. Look at the three statements you’ve written about how your three problems happened. What do they have in common? Notice how permanent and pervasive the statements are. Also notice the overall personality behind the voice.
4. Rewrite the three statements and make them more optimistic and specific to a time or occasion and to the place where they happened. Make them impersonal to separate them from your behavior.
5. Let’s assume that a part of you—your inner interpreter—is responsible for these statements. Where does this part of you seem to live? Is it on one side of your head? Is it at the front of your head? Or perhaps it’s coming from your heart. Notice once again where the voice seems to come from.
6. Think of this part of you as a friend that you created for a positive reason. Thank this part for helping bring you to where you are today. It’s really been a friend to you, and you need to acknowledge it.
7. Once again, now that you are in communication with your inner interpreter, ask it to come up with even more positive reasons for your three experiences.
8. Move your interpreter voice to another part of your body, say, your right shoulder. Change the tone of the voice. Make it sound like a cartoon character or a famous celebrity you like. Try moving it again and giving it another new voice. Listen to that voice go over your new excuses and perhaps some more optimistic ones.
9. Notice how you feel about your interpreter now.
10. Now let your inner interpreter go where it feels best. That may be its original spot or a new place in your body. Give it the voice you find most reassuring.
If you get stuck in this exercise, it is okay to make up an interpreter. In fact, you really never make up anything, or perhaps you make up everything. Either way, when you make something up, you are just bringing it up from your unconscious mind.
You’ll find that when you do this, you suddenly have much more control over your feelings. Your interpretations are never reality. Instead, they are just judgments, feelings, or beliefs about a particular event. They feel real because they give you an emotional response. However, emotions have nothing to do with reality. They are simply coming from you.
The nice thing about such interpretations is that they are changeable. They cost nothing to change but give you tremendous benefits. It’s now time to put your inner interpreter on your side. After all, it is your friend.
Here’s how one person, let’s call him Bill, went through this exercise. When Bill thought of a problem, it was the criticism he got from his spouse whenever they talked about trading. He could hear her voice in his head, saying, “Trading is nothing but gambling. It’s a waste of time and has no redeeming value.”
Bill wrote down some statements about the problem and came up with the following:
• I married the wrong woman. She’s an idiot, and she just doesn’t understand what I do.
• Her parents instilled an old work ethic in her, and trading doesn’t fit that work ethic; that’s why she gets upset.
• She wants security and doesn’t feel comfortable when I tell her about trading.
He noticed that the voice was kind of high-pitched and always seemed to come from the right side of his head. It seemed to be coming from an elevated position down into his head. When he repeated the exercise with several more problems, the voice had the same qualities and came from the same place.
When he tried to move the voice, he first put it in his throat and made it raspy. That didn’t feel comfortable at all. However, he didn’t have any problem moving it between his eyes and giving it a child’s voice. That seemed very comfortable.
When he made new, more optimistic interpretations of situations, he found that it was quite easy when he kept the voice in the new position. As a result, he decided to give his inner interpreter a new home. Now this part seems to appreciate him much more and gives him very few problems.
Try this interpreter exercise at least once a week for the next four weeks. Notice what happens after you do it and keep practicing. You could be adding a very valuable tool to your life.
These exercises are useful only if you do them. Decide how important they are to you and then do them.
Learn to Dissociate
If you wanted to know what peak performance trading looks like, you could examine a market genius and study how that person approaches her craft. However, you also could look at a genius in some other area and notice if some of his behavior could be applied to trading. In that regard, I’ve been thinking about how Einstein would think about the modern markets. I learned that one of the things Einstein did well was to dissociate. He used imagery to step out of his body and assume another perspective.
Try this exercise for yourself. During each part of the imaginary adventure that follows, notice what your thoughts are and what your experience is like.
Here is the first imaginary scene. See yourself (your whole body) on a movie screen skydiving. See yourself in the airplane with the parachute attached. Now see yourself getting ready to jump. After you jump, see yourself free-falling for about 10 seconds and then you pull the rip cord. Notice what happens when you pull the rip cord; it’s as if the parachute were pulling you up in the air. Now watch yourself gently floating down to the ground. That’s called being dissociated.
Repeat the same scenario, but this time, see it out of your own eyes. Imagine that you are actually in the plane prior to the jump. Notice your hands and feet as you are sitting in the plane getting ready to jump. Now move over to the door, get yourself ready, and then jump. Notice yourself moving rapidly away from the plane as you free-fall. After about 10 seconds, see your hand as you pull the rip cord and notice what the experience of your parachute opening is like. Now feel yourself floating gently down to the ground. That is called being associated.
Note that the scene was the same for both experiences—you were jumping out of an airplane. Yet the images, both of which were imagined, were quite different.
We live most of our lives in an associated state. As a result, everything seems real. Our feelings seem real. Our beliefs seem like reality. Yet that is the case simply because we seem to be part of it. What we are thinking seems to be all there is.
As soon as you assume another position—dissociated—your experience changes dramatically. Your thoughts are different. Your experiences are different. Yet is this second experience any more or less real? It’s neither one. It’s just another experience.
This quality of assuming other perspectives, especially this dissociated perspective, is common to many great people in many fields. Einstein is just one example. Great quarterbacks have claimed to have the perspective of being above the entire football field (even while they are playing) so that they can see the entire field in a detached manner.
Imagine the perspective that would bring for anyone who could do it.
Michael Jordan has claimed to be able to imagine floating over the basketball court and from that perspective seeing everything that is going on. Perhaps that explains why he seems to know where everyone is. Again, think of the advantage such a skill would give you.
I did two interviews with the former fund manager Tom Basso. Jack Schwager interviewed him in The New Market Wizards and gave him the nickname “Mr. Serenity.”8 In my interview with Tom, he revealed that his ability to dissociate was one of the secrets of his success. Here’s a little of what he said:
In situations in which I felt I needed improvement or in which I wanted to improve my interactions with other people, I would just play key events back in my head— figuring out how others had handled the situation. … I’ve always thought of it as some Tom Basso up in the corner of the room watching Tom Basso here talking to you in this room. The funny thing about this secondary observer was that as time went on, I found the observer showing up a lot more. It wasn’t just at the end of the day anymore. As I got into stressful situations, as I started trading, doing more interacting with a lot of people, getting our business off the ground, dealing with clients, and so on, I found that this observer was there to help me through it. If I felt awkward or uneasy, then I was able to watch myself do it. Now, I have this observer there all the time.
—Excerpt, Course Update 9, December 1990
A fundamental presupposition of NLP is that if one person can do something, everyone else can do it too. Since being able to move to another perceptual position is one of the critical aspects of genius and greatness, it’s important to start practicing it.
Here’s an exercise. At the end of the day, replay the day in your mind, especially critical junctures in the day. Do it from a disassociated point of view in that you watch yourself going through the day. Once you’ve completed the exercise, write down what you notice about yourself.
How can you apply this to your trading? Here is a simple exercise for when you feel that you are not trading well. Simply stand up and walk away. Move to a different part of the room and observe yourself. Notice what you looked like sitting there in the state you were in. What did you do with your body? How did you hold yourself? What did your face look like? What was your breathing like?
After you’ve observed all those things, notice how you feel now. You are no longer in that body. Instead, you are watching yourself from a dissociated perspective. All the feelings and emotions should be gone. If they are not, make sure you are watching yourself.
Now ask yourself some questions: What resources do I need to be able to handle this situation like a Super Trader? Do I need confidence? Do I need the courage to get out? Do I need some perspective? How would I look if I had those resources?
Imagine yourself in the same situation with those new resources. See yourself sitting there full of those resources, and notice how different the situation is when you bring those resources to the table.
Chances are that things are quite different. Now we’ll find out the real application of this exercise. Go back to the situation and become what you were just imagining. What is that like? Chances are that it’s an entirely different perspective on the situation, and chances are that you are performing at a totally different level.
That’s the power of dissociation. Practice this technique at least once a day for the next week. The more you do it, the easier it will become.
Achieve Balance in Your Trading/Investing
Achieving balance certainly would rank as one of my top 10 tips to you. First we’ll talk about balance between profits and losses. If you can understand that portion of it, it will be easier to understand the importance of balance in other areas.
Achieve Balance in Your Trading
We live in a world of polarities: good-bad, up-down, young-old, happy-sad. The win-versus-lose polarity is just one example among many. In most cases, we tend to judge the polarity in that we prefer one side and dislike the other side. However, one of the secrets to life is to make both sides of the polarity okay. What does that mean?
This is hard for most people to understand, but perhaps it will be easier when I explain it in terms of profits and losses. You cannot be a successful trader if you are not willing to have both profits and losses. Both are a significant part of the trading process.
Most people don’t understand this concept. They want to be right all the time. They want to make money on every trade. Yet that will not happen because losses are a part of the trading/investing process. When you understand this relationship, you can come to terms with losses and make them okay.
A natural part of the trading process is to have a point at which you must unload a position or trade at a loss to preserve your capital. It’s your initial risk—what we call a 1R loss, where R stands for your risk amount. Those losses happen to most people about half the time or more, and you must make them okay or neutral.
If a loss is not okay, you will not take it now. When you’re not willing to take a loss, it usually gets a little bigger. When it rains, it pours. As a result, it becomes even harder to take—much more painful. If you didn’t take the loss initially, as it becomes bigger, you will be even less likely to take it. What’s going to happen? It probably will become even bigger. The cycle typically continues until the loss becomes so big that you have to take it. This typically occurs when you get a margin call from your broker.
However, investors may never get a margin call if they are not margined. Instead, they tie up valuable capital in a falling investment that may last forever. There are probably millions of investors right now who are hanging on to investments that have been down since their highs in the year 2000 because they are waiting for the market to come back. As you can see, you must make it okay to take losses.
The other half of the equation is also important and is equally puzzling: You can’t put too much importance on gains. People who value profits too highly tend to take them quickly. Why? Because if they don’t take them, they are afraid the profits will get away from them.
A client pointed out an example to me in the case of a group of real estate investors. These investors got into a real estate deal that started to lose money. Instead of getting out and taking their loss, they elected to stay in and ride it way down. When asked why they didn’t get out of a bad investment, their comment was, “We haven’t gotten our money back yet.”
The same investors subsequently got into another real estate deal. It started to become profitable very quickly. In fact, it rose to 100% profit and more. However, the investors who held on to the bad investment now sold out quickly at a small profit. When they were asked why they sold it so quickly, the reason was, “We lost money on the other deal, so we wanted to make sure we got our money back on this one.”
This concept of balance is very important and applies to any polarity you can think of—not just profits and losses.
Overcome a Stuck State of Mind
When you are marching toward a goal such as trading excellence, you may do so by overcoming obstacles. When your focus is on problems you have, such as lack of funds, limited resources, or limited knowledge, you probably are going to generate feelings of guilt, anger, or frustration in yourself. Little is accomplished with such mental states. You feel stuck, and your orientation toward “stuckness” tends to persist.
Are You stuck?
Whatever you cannot accomplish in life is a model of a stuck state. Early in life, when you tried to accomplish something, you probably were attacked by some sort of unforgiving failure. The problem was not so much the failure as the intensity of the attack. That event planted a psychological stop sign in front of you whenever you started in certain directions. That psychological stop sign has an impact that is as strong as the original bashing. It creates internal conflict when you attempt to accomplish certain things, with part of you wanting to go on and part of you wanting to retreat. You oscillate back and forth, producing a stuck state of mind.
When people are stuck, you can see the oscillation in their bodies. Typically, they see two pictures. With the first blink, they see what they want, and with the second blink, they see their psychological stop sign. You can observe this in sales professionals, for example. The salesperson wants to make the sale, yet she hates rejection. She decides, “I can do this, but I don’t have a worthwhile product” or “My product is good, but people just don’t respond to me,” or “People will personally reject me.” The result is usually the stuck state of procrastination.
The same thing goes for a trader. One part of the trader says, “Get out of the trade; it has hit your exit point, and you need to cut your losses.” Another part says, “Stay in the trade; it’ll turn around, and you don’t want to take a loss now.” Usually the result is a stuck state.
I’ve seen hundreds of people in stuck states. One state that was particularly striking involved a man in his forties who still lived with his parents. He wanted to go out on his own, but something held him in place, keeping him dependent on his parents. When I saw him, he had decided that trading was a way he could earn money to escape. However, he’d become stuck because earning enough money to escape would result in an extreme negative state. As a result, he found he could not pull the trigger.
Every time we put something off, some dream or goal, we start to oscillate. We want to achieve the dream or goal, but we also want to avoid the pain that it takes to accomplish the task. The result is e-motion—a lack of motion outside us and a clearly noticeable motion (emotion) inside.
Some Simple Solutions
When you are stuck, the more effort you put into trying to unstick yourself, the worse off you become. It’s a little like being stuck in quicksand: the more you struggle, the more quickly you sink. The first solution is always to relax and move slightly in the direction that is opposite to what your instincts tell you. For example, a pilot going into a nosedive must push gently into the dive to get air flowing under the wings properly. Only after he has done that can he begin to control the airplane. Similarly, when you start to skid in your car, you must steer into the skid until you gain control over the car although your natural reaction is to do the opposite.
If you are stuck in your goal of becoming an excellent trader, try doing the opposite of your instincts. If you must take a trade, make it okay to not take the trade. Instead, move toward working on your emotions.
The second solution is to focus on what you want. When you focus on limitations, you feel the emotions of the stop sign or the limitation. When you focus on what you want to achieve, you begin to see possibilities and new resources that open you up. What is your focus?
The third solution is to focus on being what you want to be. If you want to be a great trader, don’t focus on what great traders have or do; focus on their state of being. What is it like to be a great trader? What is it like to step into their shoes?
I do an exercise in a workshop in which I ask students to step out of a stuck state to notice what they look like. This dissociates the person and takes her out of the stuck state. I then ask her to imagine a great trader in the same situation. What would that trader look like? What would she be like? I then ask her to step into the “beingness” of the great trader. The result is almost instant transformation. Try it.
Does Failure Motivate You?
I once read a wonderful book by Jerry Stocking titled Laughing with God.9 In that book the following dilemma is brought up, and I’m going to rewrite the conversation a little to make it pertinent to trading/investing.
God: Do you want to win without losing?
Trader: Of course.
God: If you win, you must lose as well. But you weren’t honest with me. You said that you’d like to just win. If that were the case, you’d win much more often.
The possibility of failure motivates you much more than the possibility of success. Your whole society thrives on failure or at least the fear of losing. If there were not the possibility of losing, you could not take any credit for success. Making money in the markets would seem meaningless for you.
Think about it. What if you had recorded a sporting event but someone told you the final score? Would you still watch it? Probably not, because it’s the uncertainty of the outcome that keeps your attention.
You could make money on every trade, but that wouldn’t be fun. You’d lose the uncertainty you love and yet pretend to eliminate.
The last statement may get to some of you. But what if it’s true? Ed Seykota said in Market Wizards10 that people get what they want out of the market: excitement, punishment, and a justification for their emotions. I’ve certainly seen plenty of evidence to suggest that his observation is true. But the conversation gets even more interesting.
God: You know what will happen in the market because the future is an illusion you invent. Ignoring what you know at the soul level proves how much you love uncertainty. You use the illusion of the future to keep yourself locked in time.
To make this conversation more meaningful, imagine that you are 100% accurate on every trade. You know every top and every bottom on every stock. You are never wrong about a trade. Suppose you just entered the market and made $10 billion in a year. Would you keep going if it were that easy? Would $10 billion be enough? Would you keep trading?
Perhaps your response is, “Sure I would! I’d get all the money in the world.” Would that be interesting? I tend to doubt it. Trading is interesting only because of the possibility of losing. You are now in a position where you can buy anything or do anything because you will never lose money on a trade. Would you still trade? Why or why not?
Everything in this section may be made up. Nothing may be true, but I’d like you to assume (act as if) it is true. Just pretend that it’s true. When you do so, what happens to you inside? How do you feel about trading? Would you keep on trading? If so, how often? If not, why not? What does that tell you about yourself? Is it the uncertainty that keeps you in the game? Would you keep trading if you had all the money in the world? Why? What do your answers tell you about yourself?
I encourage you to do this exercise and notice what comes up for you. How many trades would you take if you had no uncertainty about the outcome? What do your answers tell you about yourself?
A Note for Your Consideration
There are many books that claim that the text “came from God.” I don’t know whether such books actually come from God, but if they give me new ideas to ponder, I find them very exciting. If it stretches your beliefs to think something came from God, then assume that someone made it up, but at the same time imagine that it might be true. Laughing with God gave me a lot of new ideas, and if you open yourself enough to do the same thing, you might find the ideas quite expansive.
Also notice if there were any buttons pushed by this exercise. If there were, ask yourself, “What’s the belief behind my buttons getting pushed?” When you find the belief, go through the Belief Examination Paradigm with it. If you actually do the exercise, you’ll find that the belief is limiting you. The key question now is, “What is the charge behind the belief?” When you get rid of that charge, your whole life will change.
No Requirements to Be Happy
Imagine that you are infinitely wealthy. That means that if you stopped working today, your passive income would be enough to live on for the rest of your life with your current lifestyle. What would you do? Would you continue to do the same work? Would you work to earn more passive income so that you could improve your lifestyle? Suppose you did that and your lifestyle became 10 times as affluent as it is now. Then what would you do? More of the same? Perhaps you’d work to give to others or to charity? Would you be happier if you were 10 times more affluent? Are you sure?
Once again let’s look at the book by Jerry Stocking titled Laughing with God. As I’ve said, I have no idea whether God was involved in writing the material. However, the statements made are quite useful and stimulating, and that’s enough for me. In that book, God says, “If you cannot be perfectly content with nothing, you obviously cannot be content with anything.”
Take Joy in the Simple Things
Although this might sound satirical to some of you, remember what we said before about having, doing, and being. Most people want to have what the good trader has (the money and success). Some are actually willing to do what the good trader does, taking a bigger step in the right direction. However, the real secret is to “be” the good trader. If you want to be happy or content or satisfied with your trading success, you have to be able to step into those states first.
Thus, the statement from God is perfectly logical. If you cannot be happy with nothing (that is, if you cannot just BE happy), you’ll have trouble being happy as a result of some sort of doing or some sort of having.
God goes on to say, “The moment you focus on anything that you did not have at birth, you are deciding that you are somehow incomplete and can be fulfilled from outside of yourself.” Later he says, “I put you in paradise, but you don’t realize it, and you are attempting to improve on it.” This sort of approach does not work for the reasons I’ve just described.
God also says that our priorities are backward. That’s probably nothing new and is easy to see in other people, although it’s not always as easy to see in oneself. We tend to value what is rare. The less people have of something, the more valuable it tends to become. In contrast, God suggests that everything worth having is available in abundance.
Everything we need is available in the proportion that we need it—things such as air, water, light, sunshine, and beauty. The most abundant thing we have is uncertainty, and we talked about how important it is in the last section. The markets would not be any fun if all that existed was certainty. In fact, most people would stop playing. Perhaps I should have put the word “playing” in italics because playing is what children do that gives them joy. As adults, we’re taught to take life seriously and stop the joy.
Children take joy in the simplest things: walking through the woods, taking a deep breath of fresh air, being with someone who is fun, seeing a sunset, splashing in the rain. Adults tend to ignore all that wonderment. Instead, we work for money, security, and an improved lifestyle.
A long time ago I had a major goal to accumulate enough money to pay off my house. At that point, I felt I wouldn’t have to work anymore. I knew I still would work, but it would be nice to be in a position in which I didn’t have to. About 10 years ago, I fully began to understand the concept of infinite wealth as I explained it earlier. My passive income had to be greater than my expenses for me to be infinitely wealthy. Within six months I had become infinitely wealthy. Was I still doing the same things? Yes. Did I feel any different? Not really, except to the extent that I changed a lot about who I was “being” in order to become infinitely wealthy.
In Laughing with God, God says, “You have set up a world of unattainable goals—having the most or being the best. Those who come close will readily admit that there is nothing there worth attaining.”
Here is an example of this logic that is worth thinking about:
You have a brand-new $250,000 car, and your neighbors do not have such a car. As a result, you must be more important than they are. Right? You must be good, successful, and important. Yet you don’t spend much time joyriding in your $250,000 car because you don’t want it to get dirty or damaged; mostly you just drive it a little to show people how important you are.
One day you decide to get in your car and take it for a long drive. You plan to drive 500 miles to a different state. However, when you’re driving your expensive new car, you notice that you are tense and upset. Other drivers bother you. High-speed driving makes you tense. During the trip you get in a minor accident. Your car is badly dented, and you are miserable. Rather than laugh at the chance occurrence, you act as if it were you who was dented. Your value was in something else—your car. As a result, you’ve become vulnerable. You’ve confused yourself with your car, your boat, your house, whatever.
We have developed a value system in which we feel we earn something through hard work. We don’t appreciate “things” unless we have suffered to obtain them. Making a difficult sale to an irate customer seems much more valuable than making an easy sale to a happy customer. We may celebrate the former and not think anything at all of the latter. All these values do is lead to hard work and irritation. We work overtime to get it done. Then we must spend time unwinding, usually by watching the television with a beer or a cigarette. What happened to simply enjoying life?
We invent substances that the average child would never want to consume or drink without being told it was “adult” to do so. The substances I’m talking about include beer, wine, whiskey, coffee, cigarettes, and cigars. We then invent “refined” tastes around these substances. Thus, people spend years learning about good wine, great coffee, or what a great cigar tastes like. Part of our enjoyment of life seems to lie in developing a refined sense of these substances (substances that the average child would never want to consume because they taste awful), and we consume them to unwind. Does that make sense to you?
What I’m saying may be true, but what does it have to do with good trading? Part of the reason I’m bringing these ideas to your attention is that most good traders can identify with what I’m talking about. They are into simplicity and the joy of life. That’s part of what makes them good traders. When you can learn to “be” these things, you’ll find that your trading will improve as a result of just being.
Let’s continue with the idea that happiness comes from your “beingness,” not from things or from what happens.
What most of us really want are mental states such as joy, love, and freedom. To have those states, you need merely to step into them. They have nothing to do with what you have or do. Instead, they have everything to do with being. To raise the quality of your life, you need only look around you and rejoice. Are you having fun? Do you feel lighter? Are you experiencing more pleasure in the simplest things?
Reality, as it is described in Laughing with God, is all possibilities. It is absolute possibility. In fact, God says, “All possibility is infinitely interesting, whereas some possibility is somewhat interesting, and one possibility is a problem.” In life, we get upset when we think that our possibilities have been limited; yet we also feel secure when we have certainty and possibilities are eliminated.
Someone asked me a question one day about all the bad news in the markets. It went something like this: “What is going to happen to the markets with the potential bear market, the devaluation of the dollar, and everything else that is going on? I find it a little scary, and it makes it hard to pull the trigger.” What this person wants is one possibility—the markets going up. Yet the moment people feel that other possibilities are lost—for example, suppose someone says the markets will only go up—they act as if they’ve lost something or been robbed of something. What do you know? How can the markets only go up? We want the uncertainty that comes from not knowing.
A critical difference between good traders and average traders is that good traders thrive on simplicity and not knowing. They simply go with the flow of the markets. If the markets tell them it’s time for stock prices to go up, they buy. They may be wrong 60% of the time, but that is part of the game. They’ll get out when the markets are no longer going up. They do this by simply observing what is happening and are joyful because they are going with the flow. They allow themselves to let their profits run because it’s okay to be in the market when it is going up. They also allow themselves to get out because it’s okay to get out when the markets start to do something else.
What I’ve just described is pure trading. Its essence is simple. It doesn’t require a lot of time. Instead, it gives you lots of time to play. It also involves seeing all possibilities and being in the flow of what is happening right now. You cannot do this if you are preoccupied with being right, doing hard work, or having money or profits. You can do this only when your mind is pure and you can be at one with what is going on around you.
Some Simple Tips for You to Try
1. Give up being right and embrace every possibility. You’ll find that by not predicting the markets and enjoying the uncertainty, you are better able to observe what the markets are doing right now.
2. Add novelty to your life. Find five habits that you have and break them. If you put your trousers on with the right leg first, start with the left leg. If you listen to the phone with your right ear, pick it up with your left hand. Take two-plus hours to eat dinner and savor every bite. Go on a romantic holiday and make love in a new place every day in a different manner.
3. Pick several things that you do (especially in trading) and find a simpler way to do them. For example, if you are a day trader, open up a position and either take a loss or get out at the end of the day. When you do that, you are not tied to the market all day, and you may find that you take small losses and get huge profits. Simplify your entry technique and concentrate on exits. Or simplify both your entries and your exits and concentrate on position sizing strategies.
4. Spend a full day doing absolutely nothing except meditating or walking outside.
5. Make a new friend and teach that person how joyous life can be. Pick someone who needs this lesson.
Vitamins for Your Soul to Improve Your Trading
Giving vitamins to your soul may not have a direct, noticeable effect on your bottom line. However, these vitamins could prevent a disaster and certainly will make you a lighter and happier person. Lighter and happier people usually make better traders and investors.
Several years ago, I began the year with a resolution to do a lot of spiritual work. I was planning to do a lot of meditation during January and February. I had a one-week spiritual retreat planned. In essence, this was to be a year to nurture my soul. Instead, what happened was that I spent December through February taking antibiotics for a bug that was resistant to antibiotics. My condition then worsened into chronic bronchitis or pneumonia because I had initially ignored it. I felt awful, and my illness took all the energy out of me. The last thing I wanted to do was any spiritual exercises or meditations.
Vitamins for Your Soul
I believe in taking full responsibility for what happens to me. In most situations, I can explain exactly how I managed to create what happened, but not for the first few months of that year. I honestly had no idea how I went from wanting to do spiritual work to going through physical exhaustion. But that’s what happened.
During that time I still had a strong urge to do things that might give my soul a charge—to feed it and nurture it. At the same time, I had no idea how to do that until the weekend I found a book called Vitamins for the Soul.11 The book was just what I needed, but more important, it helped me classify soul enrichment activities. I was very strong already in some of the areas, but I had totally neglected many other areas.
Focus on the Moment
Mark Twain once said, “I’ve had many fears in my life, most of which never happened.” So too, in my life I’ve noticed that I’ve had many worries, most of which never happened. Nevertheless, I can spend a lot of time being concerned about them. Yet the simplest solution is to concentrate on the opposite: What are your blessings, right now? What are you grateful for now?
Here are some interesting exercises you could do when the weather is nice just to concentrate on the wonders of this moment. Spend some time outside and really stretch your senses. Smell the flowers. Take in the smells and enjoy them. Close your eyes and listen to the sounds of nature. Hear the birds. Listen for the wind. What other animals do you hear? Take in the wonder of it all. Or go to a magnificent place and take in the scenery. What do you see? Look everywhere and take it all into your soul. Notice the magnificence of the moment.
Everything you think about is in the past. Even if you are feeling excruciating pain, what you actually are experiencing happened milliseconds ago. It’s not what is happening now. Everything you think about and everything you worry about are in the past. When you release them and concentrate on the now, you’ll find that everything is beautiful and peaceful. It’s only our thoughts, based on our interpretations of what happened in the past, that cause upset and struggle. When you realize this, I believe that you’ll have an enormous breakthrough in understanding who you really are.
Try this out: Take 15 minutes each day to enjoy the magnificence of the moment. Find something beautiful and take in the sights, sounds, smells, and so on. Notice how wonderful it all is, and spend the full 15 minutes taking it in. When you are finished, give thanks. Notice what this does for your soul, how you feel, and ultimately for your trading. You’ll be surprised! Just try it.
Spend Some Time Laughing
Norman Cousins, the author of Anatomy of an Illness,12 believed that he cured himself of cancer by using laughter therapy. He found lots and lots of funny things and spent the day laughing and enjoying himself. The effect of changing his outlook to one of humor seemed to have immense healing effects on his body. However, there is no need to wait until you have a serious disease to practice taking vitamins for the soul.
I enjoy jokes and will laugh when something is funny, but until recently, I have not made a conscious effort to bring more laughter into my life. It’s something that is quite easy to do if you set an intention to do it daily. So try it.
Find some movies that are really funny and watch them. Better yet, invite some friends over and watch them together. There’s only one rule for how to watch them: Laugh as much as you can. If something is a little funny, force yourself to laugh out loud. It’s not that hard, and it’s contagious. Also, save Internet jokes. You probably have friends who get lots of Internet jokes and would be happy to send them to you. I personally have at least four people who send me jokes all the time, and I save them. I can read through my old files any time I like, and some of the stuff is really funny. Get your friends to start sending you jokes (and send them jokes as well) and save your collection. Memorize them and tell them often. You’ll find that when other people laugh at your joke collection, you’ll laugh with them. Even though you know the joke and the punch line isn’t a surprise, you’ll get immense joy and fun from telling a joke to others.
Let me give you an example. About 10 years ago, one of my friends told a joke at dinner having to do with the three biggest lies a cowboy tells:
1. My truck is paid for.
2. I won this belt buckle at the rodeo.
3. I was just helping that sheep over the fence.
When my wife, who had just arrived from overseas and wasn’t used to American humor, heard the joke, she didn’t get the last lie at all, and the process of explaining it to her put everyone at the table in stitches. I don’t even think the joke was that funny, but it’s one I’ll always remember because of my wife’s reaction when I was explaining it to her. Telling jokes to others can brighten up your soul. Practice doing it.
A healthy soul is a happy soul that experiences joy, laughter, and lightness. This doesn’t mean that you must avoid looking at the suffering that occurs all around us, but it does mean that you avoid letting that suffering steal your joy over the many blessings God presents to us. The opposite of joy is not necessarily sorrow; it’s unbelief in the true nature of your soul or the essence of God. In reality, all suffering is simply believing the thoughts that occur to us.
Many of us as adults have to relearn how to laugh, and that starts with a slight desire to do so. One of the amazing things about my wife is her laughter. She can laugh at almost everything, and I almost never hear her talking on the phone without hearing many bursts of laughter. It’s pure joy to hear, and it’s one of the many reasons I’m so attracted to her. But the real secret of laughter is to just do it. If something is the least bit funny, try laughing at it even if it seems that you are forcing it at first. It becomes catching once you start.
There used to be a video on the Internet entitled Metro Joy. Unfortunately, I can no longer find it on YouTube, but let me give you an idea of what it’s about. In it, a man gets into a subway car where everyone is very serious—either sleeping or deep in suffering through their thoughts. But the man that just entered the metro car just starts to laugh. At first, the others seem to think he’s irritating (of course, I’m reading their minds here), but soon they start to chuckle a little themselves. And with a little time, the entire subway car is full of laughter. The man then gets off the car and moves to another car. Whenever I watch it, I usually break out in pretty strong laughter.
Read something funny before you go to sleep each night. Get a collection of cartoon books or joke books and have them by your bedside. When something strikes you as the least bit funny, laugh out loud. You’ll find that it is contagious and that the material becomes funnier and funnier.
Finally, you’ll find that young children are much less inhibited about laughing than most adults are. Thus, spend time with kids and see what they think is funny. Go watch a movie or cartoon with them. Laugh when they laugh.
Here’s your assignment with laughter for each day this week: Find something to laugh about each night before you go to sleep. In addition, watch a funny movie at least once a week this month. Enjoy it and have fun.
Give It to God
About 10 years ago a traumatic event happened in my life; it changed a number of my values. It also caused me to worry a great deal—mostly over nothing—and spend a great deal of time feeling sorry for myself. Essentially, a lot changed in my life, mostly as a result of my own internal creations. I hated how my life was different, and I became very concerned about it. Every day I was just afraid of what might happen that day; it was not a great way to live.
Ironically, I had spent four years going through A Course in Miracles13 and learned that what we think of as reality is an illusion. I understood that what I created was an illusion and that I created it. Nevertheless, I worried about it constantly, even though nothing happened. My values changed, and I stopped doing certain things that I used to do, yet nothing changed but the creation of new illusions.
Although much of what I’ve said in the prior two paragraphs may not make sense to you, perhaps it will when I give you the solution, the vitamin for the soul. My solution was to make a God Box. We keep this box in a special place in the house. Whenever something seems to really bother me, I do the following:
• First, I notice that I am spending a great deal of time in illusion and that it is not food for my soul.
• Once I’ve noticed the impact this item has on my life, I take a small piece of paper and write it down.
• As I write down what’s bothering me, I give it to God.
• In addition, I give thanks to God, knowing that He will take it from me.
• I then put the piece of paper in my God Box and forget about it.
I’ve noticed that an amazing thing happens when I do this exercise. A problem that once dominated my thinking suddenly disappears. If it doesn’t, the problem usually changes in some way and then I give the new problem to God the same way. To date, I’ve never had the same problem recur after I’ve offered it twice.
Occasionally, I might have a thought about the problem, but then I realize, “You just gave this to God. Are you now taking it back?” The answer is usually no, and I automatically drop it.
There is an interesting statement in A Course in Miracles that goes something like this: “Everything is in God’s control unless you have fear about it. When you have fear, you are taking control away from God and trying to control the situation yourself through your own creations.” Perhaps this explains why the God Box works so well. I strongly recommend this important vitamin for your soul.
Practice this exercise for one week. Write down everything that bothers you. Even if you find yourself with a little irritation, just write it down on a piece of paper and put it in your God Box and then forget about it.
Give Thanks for Your Blessings
A great book that I recommend is called The Marriage of Spirit.14 It’s a whole program to help you lighten yourself, and part of the program is to keep a daily journal. When I did the program, I wrote down all the issues and emotional turmoil that I seemed to be going through that day. When I finished writing, I did exercises to clear out the turmoil.
What was interesting to me was noticing how much turmoil I could write down in that journal. The exercises seemed to work, but there was always something to write down. That surprised me since I had spent hundreds of hours of personal clearing work over the years; I’d expected to be pretty clear.
I remember an old adage that goes, “You are what you think about.” Actually, that’s the law of attraction that you hear so much about these days. I’m very strongly in favor of personal clearing because most people have major scars on their souls that they need to heal. However, I had cleared just about all of them as far as I knew, but I was still coming up with stuff.
Then it began to dawn on me how much time I was spending in my life looking for things to clear. When you look, you always find something. As a result, I changed my focus to giving thanks each day. Instead of looking for issues, I spent the same amount of time writing down the blessings in my life and giving thanks for those blessings. Quite often the blessings are the same ones, but that’s okay because I’m still thankful for them.
I find that the process of writing down my blessings and giving thanks changes my focus entirely from the old process of finding my issues. What’s occurred is a gradual lightening of my spirit. Again, this is a wonderful vitamin. Try it.
Here’s your assignment: Get a journal, and each day write down five blessings you’ve experienced for which you are very grateful. In addition, if you find yourself worrying about anything or fearful about anything, write it down on a piece of paper and give it to God. Put it in your own God Box, but remember that you have to be totally willing to turn it over to God and release it. If you don’t give it willingly, you’ll find that God is quite willing to let you keep it. The Secret Gratitude Journal15 is an excellent vehicle for this purpose. In addition, there is a free iPhone app called “Gratitude” which serves the same purpose.
Follow Your Bliss
When I first went through A Course in Miracles, I made a commitment to follow my bliss. Joseph Campbell stated in his remarkable series The Power of Myth16 that following your bliss is essentially following God’s path. That seemed great to me: Do what gives me joy, and my life will work better.
In 1986, I made a commitment to quit my part-time job. I was working one day a week on a job I hated, but that job was a security blanket. As long as I was part time, I had medical benefits and the possibility of returning to working full time again.
Follow Your Bliss
I quit the job and got rid of the security blanket. Two weeks later my ex-wife unexpectedly lost her job and was not reemployed for about nine months. However, we made it through that year without having to borrow much money. Everything worked out fine.
By 1987 my own business was progressing. I decided that I needed to hire a secretary to keep up with the workload. However, I hadn’t made that much money the prior year, and a secretary’s salary would take up most of that. Nevertheless, I took the plunge—another sign of commitment—and that year was the first year I made a six-figure salary. My business really seemed to take off from there.
In each case, the decisions were difficult. I was giving up security and the status quo for something unknown. Even though I hated the known and loved what I was going into, it was very scary. By the way, these are all steps to show commitment, and I’ve already talked about how important that is.
Along the way, through following this guidance about where joy seemed to be, I moved away from almost every attachment I had at the time, which included my first marriage. It wasn’t working, and we couldn’t seem to fix it. Much of this was very scary even though I was moving toward more joy. In the end, the results were wonderful. It’s a big step, but following your bliss is a very important vitamin for your soul.
What do you love to do? You probably should be doing more of that. What do you hate to do? You probably should be doing less of that. At one point, when my business was already quite successful, I made a note of all the things I hated to do and all the things I loved to do. Guess what? All the things I loved to do were the things that made the most money for the business. They revolved around helping people, doing creative things, teaching my workshops, developing new products, and trading. Those were all things that made money.
I hated the day-to-day routine of managing the business and all the details that came with it. Although I still have some of those tasks, I have elected to find people who do a much better job with those things than I ever could. Now I concentrate totally on the things I love to do.
Make a list of what you love to do and what you dislike. If you love something, decide how you can do more of it. If you dislike something, determine how you can turn it over to someone else. You’ll probably find that this simple act makes a tremendous difference in your life.
Commit to Love
I once attended a self-improvement workshop given by someone I considered very loving. Most of the workshop involved people bringing up problems, and he would lovingly help them release the problem. That was great, but I noticed that certain people would bring the same problem up over and over. In fact, one person, who might be described as a starving actor, had been to over 10 of those workshops and still was bringing up trivial stuff, almost as if he’d accomplished nothing. In fact, I’m sure he got in the workshop for free for being an assistant, but that means he probably brought up the same stuff over and over at each workshop. Nevertheless, the workshop guru laughed with him and gently took him through a release of his problem.
My initial thought was, “How can the instructor not react to this person’s lack of progress?” Then, he told me the secret. The secret was to love the person as he was. This means that he has no emotional investment in whether the person makes a change. He just loves the person, and that means he can respond lovingly no matter what happens. When I understood that, I really began to understand unconditional love.
This section is all about being loving. That means loving everything exactly as it is without making any judgments.
Most of our decisions are made from fear and worry. I can remember numerous times in the past when I might have noticed that a future workshop we were doing had a very low enrollment. My natural tendency would be to start to worry about that. What if no more people enroll? What if there are not enough enrollments to pay for speakers’ fees, much less the hotel? But what if we cancel? Then we have a bad reputation with the hotel because they cannot rely on us. We also lose all the marketing money we’ve already spent on the workshop. I could go on and on with that kind of dialogue and worry. When I do that, I’m operating out of fear, and that’s not useful. Instead, I elect to operate from love.
One way to operate out of love is to declare who you are. For example, you might make a declaration that says: “I’m a loving, kind, compassionate man.” Write it out! Memorize it and declare it to yourself so that it becomes second nature to you. When you make decisions, you’ll then begin to say, “What does a loving, kind, compassionate man do in this situation?” He certainly doesn’t make decisions that are based on fear. Instead, he bases decisions on love and compassion. Of course, the first thing that pops into my mind when I say that is, “How can I handle this situation so that everyone wins?” What more can I give to increase enrollment in this workshop? How can I add more value to this workshop so that more people can attend? Of course, those responses get a much different response than I would get by saying, “We’re going to lose a lot of money here even if I cancel the workshop.”
Here’s your next assignment: Decide who you are, and make a commitment statement that reflects who you are. That statement might go something like this: “I’m a powerful, generous, kind leader” or “I’m a courageous, loving, compassionate woman.” Write down whatever you think might fit you. Put it on a sheet of paper and memorize it. When you make decisions, read your personal declaration and act as if it were true. Once you’ve done that, make your decision. If you do it that way, you’ll probably find that your results are much different in all aspects of your life.
Meditate and Listen
When the day’s activities have ended, take time to meditate. Or if you prefer, you might begin the day with meditation—whichever feels better for you. I believe meditating is very important. Here we’ll just consider it as a soul vitamin.
Sit in an upright posture with your feet on the floor (if you’re sitting in a chair) or your legs crossed (if you’re sitting on the floor). Breathe slowly and notice the air going into your lungs and filling them. Notice where the air seems to go. In fact, you might want to control that by taking deep breaths and filling your lungs with air. Or perhaps you might want to allow your lungs to breathe by themselves as they have been doing for some time. Just notice what happens.
While you are noticing your breath, slow down or stop the chatter in your mind. Just concentrate on your breath. With practice, you’ll get better and better at watching your breath. When you notice a lot of chatter going on, let it go and go back to watching your breath.
When you do this on a regular basis, you’ll notice several things.
• First, you’ll notice that you have a lot of chatter. That’s great; just get it out of your system and allow yourself to quiet down. When stuff goes through your mind, notice that it’s just the stuff of consciousness. It’s not you at all; you are merely the awareness of that stuff going through your mind.
• Second, you might notice that you tend to fall asleep. If that’s the case, great! You needed the sleep, and you get to refresh yourself with a little nap.
• You’ll eventually notice that you are not the chatter in your head. Instead, you are the awareness of that chatter.
• Last, you might notice that you just slip into the space between your breaths.
From this space come forth creativity, contact with higher realms of consciousness, and messages you may need to hear. Just listen. My recommendation is that you do this for about 20 minutes each day for an entire week. At a minimum, I think you’ll find that when you do this for a week, you’ll start to become more creative. The creative ideas may not happen while you are meditating, but you may find them flooding in at other times and may find that they help you become a better trader.
And another benefit of meditation, if you spend enough time watching your thoughts, is that pretty soon you will realize two things:
Notice Your Breathing
• Thoughts just seem to happen. You are not necessarily the “thinker.”
• You are definitely not your thoughts. Instead, you are the awareness of your thoughts.
When you begin to observe that you are not your thoughts and that your thoughts just seem to happen automatically without your doing anything, you’ll reach a very powerful self-realization. And from this position, trading is much easier.
Around 1990, I worked with a retired professor of engineering. We did some clearing work together, and at the end of that task, I taught him how to follow his internal guidance. His internal guidance took him a long way over the next 18 years. I again found myself working with him recently, only this time I was the student doing spiritual work under his guidance.
What impressed me the most was the purity with which he could watch the market and still do what it was telling him to do.
This means he’d buy what was going up and sell it when it stopped going up. He’d also sell short what was going down and buy it back when it stopped going down. Over the 18 years his personal account had grown big enough to be the size of a substantial hedge fund. All his money was earned through trading simple principles. Don’t dismiss the value of vitamins for your soul.
Breathe Deeply
If you think about the essentials of life, the body can live without food for at least a month. You can do without water for several days, but you can do without air for only a few minutes. Air is absolutely essential for life, so why not promote it?
Many of the ancient meditation techniques involve the breath, and with good reason. Dr. Harry Goldblatt17 found that rat cells deprived of oxygen easily developed malignancies whereas normal cells did not. Athletes, who get much more oxygen than other people do, have a cancer rate that is one-seventh the rate of the average American.
The lymphologist Jack Shields18 has shown that deep diaphragmatic breathing is the most effective way to stimulate and clean the lymphatic system and actually stimulates the immune system. Deep breathing multiplies the rate at which the body eliminates toxins.
I’d like to extend this information and suggest that healthy breathing, enough to stimulate the immune system, not only prevents disease but actually improves performance. I suggest that you do the following exercise: At least once each day, take 10 deep breaths.
Breathe in the following manner: Inhale for five seconds, starting the breath deep in your abdomen with your diaphragm. Now hold that breath for 20 seconds to help it oxygenate your blood and activate your lymphatic system. Finally, breathe out for 10 seconds.
If this exercise is too strenuous, use a smaller number in the ratio 1:4:2. In other words, hold for four times as long as you inhale. Try this exercise twice a day for the next month and note how you feel.
Chances are, if you commit to it, you’ll find yourself becoming a littler clearer, a little more open, and a little more receptive to what is really happening. If that happens, even if you are only slightly aware of it, you should notice a difference in your trading. However, all this assumes that you are following some of the other ideas in this book.
By the way, the Hindus have developed an extensive set of breathing exercises designed to help the body and soul. These are called Pranayama exercises and Pranakriya exercises. If you like this one, consider researching these exercises and doing more.
Discipline in Meeting Your Goals
You should now have some specific goals in your trading. If you don’t, I suggest that you develop some. However, even if you do, you may need some discipline to help you meet those goals. As a result, I thought I’d focus on helping you meet your goals.
1. Divide a General Goal into Specific Steps
Most trading goals are huge. To reach a large goal, I’d suggest that you divide it into specific steps. It’s much easier to accomplish small steps that you can imagine doing for the rest of the year (or the rest of your life) than it is to fulfill a giant goal. Start with something that is easy, and make sure you can accomplish it.
A resolution to make 50% this year in your account could be broken into a number of steps: (1) Look at ideas that might help improve your trading, (2) test each idea and see how much improvement you will get from it, and (3) implement the best idea by following the top tasks of trading. In fact, your resolution might simply be to follow the top tasks of trading each day and notice what that means for you. Many of those tasks are mentioned throughout this book. By the way, if you risk 1% per trade, you need to make only 1R per week to have a 50% return. In addition, keep track of your mistakes, as described in Part 5 of this book. Improving your efficiency from 85% to 95% will have a huge impact on your profits.
2. Make Promises to Yourself, and Include the Reason for a Promise in the Resolution
Suppose your promise to yourself is to do a daily mental rehearsal, one of the tasks of top trading. The way you might phrase that is to promise to do a daily mental rehearsal to plan ways to increase your discipline and not make mistakes. The second statement is much easier for you to follow through with on a regular basis. Also make sure that the promise you set is something you want to do and not something someone else wants you to do. If I tell you that you must do a daily mental rehearsal, you are not likely to do it. In contrast, if you decide that this kind of rehearsal is important for your well-being and your trading, you are much more likely to do it.
3. Determine Your Triggers
If you are setting a resolution, it is probably because you want to do something you have not been able to do. There is probably a reason for your inability to do it, certain triggers that set you off. What are those triggers? Are there environmental triggers, such as the presence of certain people or certain conditions? Are there certain internal feelings that set you off? What are those feelings, and when do they occur?
Once you determine your triggers, you are much more prepared for them. I strongly recommend doing extensive mental rehearsal around the issue of dealing with those triggers. Awareness is a big part of keeping your resolutions.
4. Look at the Positive Side of Your New Goal
When we get into the act of keeping our resolutions, we sometimes feel that we are denying ourselves. Instead, look at the positive side of what you are accomplishing. Turn on something positive. For example, if you are trying to stop taking trades that have nothing to do with your system, concentrate on the joy of following your system and making money. Concentrate on the joy of the new behavior instead of the negative thing you are trying to overcome. You’ll find that moving forward is much easier.
5. Keep a Diary of Whatever It Is You Are Working On
A lot of what I’ve suggested involves mental awareness. Most people are unaware of the big picture that’s involved in accomplishing a goal. However, when you keep a diary that lists your accomplishments and your thoughts, you’ll find it much easier to understand what is going on inside of you.
Listing your accomplishments is also a form of reward. When you focus on your accomplishments—especially if you’ve followed step 1 and set small steps toward your total goal—you’ll feel great about what you achieved and where you are going.
6. Make It Okay to Give in Occasionally
If you are attempting to make a major change, you may have occasional setbacks. If you view a setback as a failure, the resolution is over. You can give yourself a bad name. In contrast, if you make it okay to have occasional setbacks, you can keep going—it’s just a setback.
Realize that a setback is an opportunity to learn something about yourself. What happened? What were your thoughts? Write down all that information in your diary, and determine what you can learn from it. You may discover a new trigger, and then you can make a plan for getting around that and other triggers. In any case, forgive yourself for the setback and move on.
Quite often setbacks are due to inadequate preparation. Perhaps you didn’t do enough research with respect to your trading. Perhaps more mental rehearsal was needed. Perhaps you discovered something about your thought process that you didn’t expect but now can use in your preparation. What additional preparation can you do to make sure you move ahead toward generally keeping your resolution?
7. Reward Yourself throughout the Process
You need to acknowledge accomplishments early in the process. The first few days will probably be the hardest. Consequently, when you get through those days and accomplish your goals, find a reward. Make the process fun through a system of rewards.
Removing Stored Charges
We talked about the Belief Examination Paradigm earlier in this book and how charges (stored feelings) will cause you to keep limiting beliefs because the charges give a belief energy. Now it’s time to remove some of those charges. Let’s say you’ve done the belief exercise at least 100 times. You’ve come up with a list of common charges attached to a number of your beliefs:
• Fear
• Anger
• Rejection
• Guilt
• Loneliness
• Uncertainty
• Losing control
• Abandonment
What do you do with this list?
First, let’s look at why we store feelings in the body. We judge a feeling to be good or bad. We are willing to feel the good feelings, but we are not willing to feel the bad ones. This probably was conditioned by our parents, who said things like this: “Big boys like you shouldn’t be afraid” and “If you do that again [express anger], I’ll really give you something to be angry over.”
The net result is that we attempt to suppress negative feelings. For example, the hero in action movies doesn’t show his or her emotions. Heroes just stuff their emotions and get on with their lives, and you probably learned to admire such people.
Now let’s look at what might happen when you stuff an emotion inside that you are not willing to feel. For example, suppose you see an attractive person and you go up to meet him or her. This person has nothing against you, but he or she has had a bad day. As a result, his or her reaction to you is, “Get lost! I’m not interested.”
You feel rejected. You don’t like the feeling, and you stuff it away (you are not willing to feel it). You probably mumble something like, “I didn’t want to go out with him or her anyway.”
What happens now is that you have stored rejection in your body. Also, you’ve probably created a part of you that doesn’t want to feel rejection again. In fact, its job is to never again feel rejected.
A week later you see another attractive person you want to approach. You start to move toward that person, and suddenly this part of you says, “Remember what happened last week,” and it releases a little of the stored rejection. The new person has done nothing, but you already feel rejected. However, you start to approach him or her, even while that part keeps warning you and releasing more stored rejection.
One result might be that you give up and never approach the person, feeling that the possibility of rejection is so strong that you don’t want to take a chance. But remember that this second person has not even seen you or reacted to you. You are just reacting to what might happen.
Let Go of Negative Emotions
The second possibility is that even though you are anticipating rejection, you approach the person and say something like, “You wouldn’t want to go out with me, would you?” This approach almost guarantees rejection, and you get to be right about it. Now rejection is a permanent part of your experience unless you do a feeling release on it.
I know of three feeling release exercises that you could do right now:
• Welcoming the feeling
• Just releasing it
• Using the park bench exercise
Welcoming the Feeling
Think about one of the beliefs you’d like to get rid of but cannot. Let’s say there is some rejection involved in that belief. It’s charged with rejection. Think about the belief and about releasing it. When you notice rejection coming up, welcome it. Open your arms wide and just welcome the feelings you have. I personally find this exercise to be quite powerful. Feelings are meant to pass through you, not be stored inside you. Welcome it and release it.
Just Releasing It
The second exercise amounts to releasing the feelings as they come up. Just feel it and let it go. It’s that simple. For more information on how to do this, read Hale Dwoskin’s The Sedona Method.19 I strongly recommend that you take the Sedona Method Course, which includes 20 CDs on feeling release. It covers these methods and quite a few more.
Actually, the only time it is difficult is when you resist doing it. The resistance magnifies the feeling, and you then have to deal with the resistance. If the feeling seems like a category 5 hurricane, it means you are resisting it strongly. Notice that you are resisting it; then just welcome it and let go of the resistance. Once you have done that, releasing the feeling should be easy.
Using the Park Bench Technique
I advocate using the third method—the park bench technique— when a feeling you are resisting is dominating your life. Let’s say a loved one has died and you are preoccupied with grief. Let’s say you are spending 15 hours a day grieving over your loss. If this is happening, I recommend the park bench technique, in which you actively commit to the feeling. You are spending 15 hours a day with it, so why not commit 1 hour each day to really feel the feeling?
Find a neutral spot, such as a park bench. Sit down on the bench, and commit to feeling the feeling as strongly as you can for one hour. What you’ll find is that you probably can do it for 20 minutes, but then the feeling gets boring and starts to dissipate. However, you must do it for an hour. After the first day you may find that you are not thinking about it so much.
The next day you decide to spend 45 minutes on the bench thinking about the feeling. And after 15 minutes it gets boring, but you must do the whole 45 minutes.
The next day you reduce it to 30 minutes, then to 20, then to 10, and then down to 5 minutes. Pretty soon it seems to go away instantly, and you are not thinking about it all day. Why does this happen? It happens because you’ve been willing to feel it actively.
Now look at the beliefs you want to change that have a charge on them. Practice one or more of the feeling release techniques just recommended on the charge behind those beliefs. Pretty soon, the charge will be gone from the beliefs that aren’t useful, and you’ll simply be able to replace them all with much more useful beliefs.
How Do You Know When You’ve Done Enough Self-Work?
In my experience no one solves all of his or her personal issues. Working on oneself is a lifelong task, and when you get through one area, another one usually appears. If you’ve never solved or even recognized an issue of self-sabotage, the first one you deal with will have a major impact on you. When you get through the first major issue and know it’s finished, the feeling is tremendous. You know you’ve accomplished something major, perhaps something you’ve been working on for a long, long time.
My belief is that once you’ve worked through five major areas, you are generally a changed person. Furthermore, I have faith that you will continue to work on yourself and be able to deal with anything else that gets in the way of your goals.
Here are some examples of what people have said after working through a major issue.
Example 1, a good answer. I have noticed that whenever I feel stressed and out of harmony with the universe, I am acting out of fear. That fear may be related to being liked, feelings of unworthiness, or fear of making mistakes, but it is unimportant what the fear is related to. The fact that a decision is based on fear puts it out of harmony with the universal order, whereas decisions based on love increase that harmony. To tell the difference and make a decision that is based on love, I need to notice the way my body feels when the decision is being made. If my body reflects feelings of tension, anger, or irritation, I am acting out of fear. If my body reflects feeling of relaxation, well-being, or harmony, I am acting out of love. I am trying to increase my attention to this before the decision is implemented.
Here is an even better example.
Example 2, an excellent answer. I am working on insecurity, fear of failure, and fear of loss, which I believe are related and which I’ll collectively refer to as “insecurity.” This has been a difficult issue for me to realize existed and work on, but as I’ve worked on it and other issues, it has become easier to deal with. I have used a variety of approaches toward insecurity, one of which has been to look back over my life to see where the insecurity comes from; I didn’t have a deprived, unloving childhood. Nevertheless, I have been able to recollect insecurity being an influence on my behavior in a variety of situations over many years. For certain situations that I didn’t handle well, I’ve gone back in my mind to recollect what I was thinking and feeling to analyze my emotional state. I’ve replayed the situations in my mind a number of different ways to show myself how they could have been better and why my insecurity was unjustified and a hindrance.
I have been a very successful professional. I think my insecurity has, in part, been a driver for my worldly successes, and it has influenced me to undertake new, major challenges in my life. Fear of failure or loss has motivated me to do well in situations in which excellent performance was needed and expected by third parties such as clients. However, it also has caused me to refuse to recognize that a situation has soured and requires a change in action. I have had to learn to tell myself that it’s okay to lose (or fail) at something, to cut my losses and move on.
I believe these insecurity issues are bound up with self-esteem issues, and so I have been working more and more on self-esteem. As I have done so, I have felt much better able to deal with the insecurity issues. This is the case because I have found that self-esteem issues, if they are recognized and acknowledged, are somewhat difficult but tractable. I have gone through several periods of change in my life and in the way I think about myself. I find the process hard but manageable. For me, it requires stepping outside myself and trying to view myself as others may see me. It also involves putting any situation in which I have reacted insecurely in perspective.
When someone has gone through five major issues that he or she can explain in this manner, I know that person can handle anything.
Here are two examples of unacceptable answers I’ve seen that reflect shallow self-awareness.
Example 3, an unacceptable answer. My marriage is a major issue. My spouse and I effectively separated and then decided to reunite, but the result was not satisfactory to me. As a result, I found a counselor and persuaded my wife to begin counseling.
The counselor likes us, and my spouse likes him, and so we seem to have established a stable counseling relationship. However, I don’t feel the marriage has improved at all, and I don’t have an image of how counseling will help. However, I trust the process because the counselor is very experienced and because I don’t know any alternative.
My response to this answer: What’s wrong with the marriage? What are the issues involved? How do they reflect what’s going on inside you? The answers to these questions may be acceptable responses for several areas you are working on.
Example 4, a second unacceptable answer. Health and diet are where it all starts. The quality of the substances you put in your body is equal to the quality of energy, decisions, and actions you get out. When I’ve taken the time to nourish my body properly, the level of focus that becomes available is very high. Ideas flow and being creative comes easily.
My response to this answer: This is a statement of beliefs; it reflects very little internal awareness. If there is a struggle with diet (that is, because of a feeling of being deprived when you can’t have something or similar types of feelings), that may be an area you are working on.
I hope you can see the difference. Now ask yourself, “What are five major issues I have had in my life? How did I produce those issues, and how did I make them nonissues?” When you can answer this question from a position of transformation, it’s safe to move on. Otherwise, continue working.