Ourselves
At the start of this book, I said it would be a step-by-step guide in the process of adapting yourself to the trading environment. The first step in this process of adaptation is recognizing the need to adapt. If you can't manipulate or force the markets to change in a way that suits your needs, then you will need to learn how to change yourself to suit the conditions. The market places no limits or con-straints on the ways in which you choose to express yourself, in that respect; unlike in the cultural environment, you have all the power.
The primary purpose of Part II, The Nature of the Trading Environ-ment from a Psychological Perspective, was to point out some of the vast differences between the trading environment and the social environment we were taught to function in and to demonstrate clearly a need for a new perspective.
The next two steps in this process are to learn how to (1) identify exactly what changes you need to make to function successfully in the trading environment and (2) how to effect any mental changes that are necessary. Manipulating the physical environment is as easy as moving a chair from one place to another because that's where you want or need to sit. However, to consciously change yourself to func-tion more effectively in a market environment that will not respond to your attempts to manipulate it will require a thorough understand-ing of the nature and functionunderstand-ing of your mental environment.
The types of changes you will need to make will fall into two broad categories. First, you will need to learn some sophisticated mental skills to adapt yourself more readily to the constant changes with which the market confronts you—which will require neutralizing some commonly held cultural beliefs about success. (These are the beliefs that have the potential to distort market information.) Second, you will likely need to undo any psychological injury you may have sustained from your previous trading activity. Any psychological in-jury diminishes your capacity to execute your trades properly.
There are obviously a multitude of substeps to learn how to iden- tify what you need to learn, what you need to change, and how to make those changes. The six chapters in this part are organized to take you through this process of adaptation by providing you with the insight you will need to understand what you have to do and why.
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82 Building a Framework for Understanding Ourselves Building a Framework for Understanding Ourselves 83 The first thing you will need is a structural framework to make
the things that go on in your mental environment more tangible and concrete. To give you this framework, I will describe, define, and organize the component parts of the mental environment into a manageable context to where you can (1) understand your behavior, (2) learn the various techniques for manipulating your mental envi-ronment at your conscious direction to be more consistent with the environmental conditions and your goals, and (3) learn how to moni-tor your relationship with the exterior environment.
It is essential that you learn how to monitor your relationship between the interior and exterior environment because our goals, intents, expectations, needs, and wants are all component parts of our mental environment that we project out into the physical envi-ronment for fulfillment in some future moment. In other words, they are all components of the mental environment that either hap-pen or don't haphap-pen in the outside physical world. You need to be able to recognize immediately (especially as a trader) when you have the potential to distort the outside information to be consistent with the inner components. These distortions will inevitably result in pain and psychological injury.
What I intend to demonstrate in the following chapters is even though you cannot turn your eyes inward to actually see these mental component parts of the mental environment, it doesn't make them any less real. Besides, it isn't necessary to turn our eyes inward because we can just as easily learn to define what is inside of our mental environment by what we see and experience in the outside physical environment. By making the connection between what we believe and what we experience, it will be a lot easier to change what we experience by learning how to manipulate our beliefs.
We will examine the nature of beliefs and how they act as environ- mental information management systems. I will demonstrate how our individual beliefs about the nature of the market, and our expec- tations of what it will do next, manage and control the type and quality of information we perceive about it. By breaking down the dynamics of perception, you will be able to identify the various ways in which all of us place mental limitations on the market's behavior and how these limitations cause us to distort market information.
We will thoroughly explore the nature of fear and how it compels all of us to act without a perception of choice. The predominate
underlying force behind most traders' actions causing prices to move is fear—the fear of missing out (competing for the supply) and the fear of loss. If you really want to understand the market's behavior to anticipate what it will do next, then you will first have to learn about and understand the underlying forces beneath your own be-havior and how you process and manage information.
When you understand how any number of typical market-related fears operate in your life and learn to release yourself from them, you will, in effect, be separating yourself from the "crowd." When you separate yourself from the "crowd" and expand what you know about the forces affecting your behavior to encompass the group, it will be much easier to anticipate what the group will do because they will merely represent a larger (collective) version of the way you used to be. In other words, you will know how other traders will behave before they do because you will be able to observe them from a detached perspective—due to your having evolved beyond the choiceless state of operating out of fear.
As you gain in your understanding of how beliefs interact with environmental information to control your perception and form your experience, along with learning how to distinguish between wishful thinking and what the market is indicating about itself, you will eventually be able to learn how to control your perception of the market activity in a way that allows you the greatest amount of mental flexibility, where you will be able to shift your perspective to flow with the markets and execute your trades without hesitation. If you can't change or control what the market is doing, then the only option you have left is to control yourself in a way that allows you to perceive what the market may do next with increased clarity and objectivity, requiring a thorough working knowledge of the nature of your inner environment in relationship to the outer physical environment.