THE IMPACT OF BELIEFS ON TRADING
If the external environment can express itself in an infinite combination of ways, then there’s really no limit to the number and types of beliefs available to be acquired about the nature of our existence. That is an elaborate way of saying that there’s a lot out there to be learned about. Yet, to make a general observation about the nature of humanity, I would say that we certainly don’t live our lives in a manner that is consistent with that statement. If it’s true that it’s possible to believe almost anything, then why are we always arguing and fighting with each other? Why isn’t it all right for all of us to express our lives in a way that reflects what we have learned to believe?
There has to be something behind our relentless attempt to convince others of the validity of our beliefs and to deny the validity of theirs. Consider that every conflict, from the smallest to the largest, from the least to the most significant, whether between individuals, cultures, societies, or nations, is always the result of conflicting beliefs. What characteristics of our beliefs make us intolerant of divergent beliefs? In some cases, we are so intolerant that we are willing to kill each other to get our point across.
My personal theory is that beliefs are not only structured energy, but also energy that seems to be conscious, at least to the extent of having some degree of awareness. Otherwise, how can we account for our ability to recognize on the outside what is on the inside? How would we know our expectations are being fulfilled? How would we know when they are not? How would we know we are being confronted with information or circumstances that contradict what we believe? The only explanation I have is that each individual belief has to have some quality of either awareness or self-awareness that causes it to function as it does.
The idea of energy that has some degree of awareness may be difficult for many of you to accept. But there are several observations we can make about our individual and collective natures that support the possibility. First, everyone wants to be believed. It doesn’t matter what the belief is; the experience of being believed feels good. I think these positive feelings are
universal, meaning that they apply to everyone. Conversely, no one likes to be disbelieved; it doesn’t feel good. If I said, “I don’t believe you,” the negative feeling that would resonate throughout your body and mind is also universal. By the same token, none of us likes to have our beliefs challenged. The challenge feels like an attack. Everyone, regardless of the belief, seems to respond in the same way: The typical response is to argue, defend ourselves (our beliefs), and, depending on the situation, attack back.
When expressing ourselves, we seem to like being listened to. If we sense our audience isn’t paying attention, how does it feel? Not good! Again, I think this response is universal. Conversely, why is it so difficult to be a good listener? Because to be a good listener, we actually have to listen, without thinking about how we are going to express ourselves the moment we can either politely or rudely interrupt the person who’s speaking. What’s the compelling force behind our inability to listen without waiting to interrupt?
Don’t we like being with people with similar beliefs, because it feels comfortable and secure? Don’t we avoid people with dissimilar or conflicting beliefs, because it feels uncomfortable or even threatening ? The bottom line implication is, the moment we acquire a belief, it seems to take on a life of its own, causing us to recognize and be attracted to its likeness and repelled by anything that is opposite or contradictory. Considering the vast number of divergent beliefs that exist, if these feelings of attraction or comfort and being repelled or threatened are universal, then each belief must somehow be conscious of its existence, and this conscious, structured energy must behave in characteristic ways that are common to all of us.
THE PRIMARY CHARACTERISTICS OF A BELIEF
There are three basic characteristics you need to understand in order to effectively install the five fundamental truths about trading at a functional level in your mental environment:
- Beliefs seem to take on a life of their own and, therefore, resist any force that would alter their present form.
- All active beliefs demand expression.
- Beliefs keep on working regardless of whether or not we are consciously aware of their existence in our mental environment.
- Beliefs resist any force that would alter their present form. We may not understand the underlying dynamics of how beliefs maintain their structural integrity, but we can observe that they do so, even in the face of extreme pressure or force. Throughout human history, there are many examples of people whose belief in some issue or cause was so powerful that they chose to endure indignities, torture, and death rather than express themselves in a way that violated their beliefs. This is certainly a demonstration of just how powerful beliefs can be and the degree to which they can resist any attempt to be altered or violated in the slightest way.
Beliefs seem to be composed of a type of energy or force that naturally resists any other force that would cause them to exist in any form other than their present form. Does this mean that they can’t be altered? Absolutely not! It just means that we have to understand how to work with them. Beliefs can be altered, but not in the way that most people may think. I believe that once a belief has been formed, it cannot be destroyed. In other words, there is nothing we can do that would cause one or more of our beliefs to cease to exist or to evaporate as if they never existed at all. This assertion is founded in a basic law of physics. According to Albert Einstein and others in the scientific community, energy can neither be created nor destroyed; it can only be transformed. If beliefs are energy—structured, conscious energy that is aware of its existence—then this same principle of physics can be applied to beliefs, meaning, if we try to eradicate them, it’s not going to work.
If you knew someone or something was trying to destroy you, how would you respond? You would defend yourself, fight back, and possibly become even stronger than you were before you knew of the threat. Each individual belief is a component of what we consider to be our identity. Isn’t it reasonable to expect that, if threatened, each individual belief would respond in a way that was consistent with how all the parts respond collectively?
The same principle holds true if we try to act as if a particularly troublesome belief doesn’t exist. If you woke up one morning and everyone you knew ignored you and acted as if you didn’t exist, how would you respond? It probably wouldn’t be long before you grabbed someone and got
right in their face to try to force them to acknowledge you. Again, if purposely ignored, each individual belief will act in the very same way. It will find a way to force its presence into our conscious thought process or behavior.
The easiest and most effective way to work with our beliefs is to gently render them inactive or nonfunctional by drawing the energy out of them. I call this process de-activation. After de-activation, the original structure of the belief remains intact, so technically it hasn’t changed. The difference is that the belief no longer has any energy. Without energy, it doesn’t have the potential to act as a force on our perception of information or on our behavior.
Here is a personal illustration: As a young child, I was taught to believe in both Santa Claus and the Tooth Fairy. In my mental system, both of these are perfect examples of what are now inactive, nonfunctional beliefs. However, even though they are inactive, they still exist inside my mental system, only now they exist as concepts with no energy. If you recall from the last chapter, I defined beliefs as a combination of sensory experience and words that form an energized concept. The energy can be drawn out of the concept, but the concept itself remains intact, in its original form. However, without energy, it no longer has the potential to act on my perception of information or on my behavior.
So, as I’m sitting here typing into my computer, if someone came up to me and said that Santa Claus was at the door, how do you think I would define and interpret this information? I would treat it as being irrelevant or a joke, of course. However, if I were five years old and my mother told me that Santa Claus was at the front door, her words would have instantly tapped me into a huge reservoir of positively charged energy that would have compelled me to jump up and run to the front door as fast as I could. Nothing would have been able to stop me. I would have overcome any obstacle in my path.
At some point, my parents told me Santa Claus didn’t exist. Of course, my first reaction was disbelief. I didn’t believe them, nor did I want to believe them. Eventually, they convinced me. However, the process of convincing me did not destroy my belief in Santa Claus or cause it not to exist any longer; it just took all the energy out of the belief. The belief was transformed into a nonfunctional, inactive concept about how the world
works. I’m not sure where all that energy went, but I know that some of it was transferred to a belief that Santa Claus doesn’t exist. Now I have two contradictory distinctions about the nature of the world that exist in my mental system: one, Santa exists; two, Santa doesn’t exist. The difference between them is in the amount of energy they contain. The first has virtually no energy; the second has energy. So from a functional perspective, there is no contradiction or conflict.
I propose that, if it’s possible to render one belief inactive, then it’s possible to de-activate any belief, despite the fact that all beliefs seem to resist any force that would alter their present form. The secret to effectively changing our beliefs is in understanding and, consequently, believing that we really aren’t changing our beliefs; we are simply transferring energy from one concept to another concept, one that we find more useful in helping us to fulfill our desires or achieve our goals.
- All active beliefs demand expression. Beliefs fall into two basic categories: active and inactive. The distinction between the two is simple. Active beliefs are energized; they have enough energy to act as a force on our perception of information and on our behavior. An inactive belief is just the opposite. It is a belief, that for any number of reasons, no longer has energy, or has so little energy that it’s no longer able to act as a force on how we perceive information or how we express ourselves.
When I say that all active beliefs demand expression, I don’t mean to imply that every belief in our mental environment is demanding to express itself simultaneously. For example, if I ask you to think about what’s wrong with the world today, the word “wrong” would bring to your mind ideas about the nature of the world that reflect what you believe to be troubling or disturbing. Unless, of course, there is nothing about the state of the world you find troubling. The point is, if there is something you do believe is wrong, you weren’t necessarily thinking about those ideas before I asked the question; but the moment I did, your beliefs about these issues instantly moved to the forefront of your conscious thinking process. In effect, they demanded to be heard.
I say that beliefs “demand” to be expressed because once something causes us to tap into our beliefs, it seems as if we can’t stop the flood of energy that’s released. This is especially true of emotionally sensitive issues or beliefs we feel particularly passionate about. You might ask, “Why
would I want to hold back expressing my beliefs?” There could be several reasons. Consider a scenario in which you’re interacting with someone in a superior position to you at work, and this person is saying something that you completely disagree with, or even find utterly absurd. Will you express your truth or hold back? That will depend on the beliefs you have about what is proper in such a situation. If your beliefs dictate that speaking up would be inappropriate, and those beliefs have more energy than the ones that are being contradicted, then you’ll probably hold back and not argue openly.
You might be looking at this person (the boss) and nodding your head in agreement. But is your mind in agreement? More to the point, is your mind silent? Absolutely not! Your position on the issues being presented are effectively countering each point the boss is making. In other words, your beliefs are still demanding expression, but they aren’t being expressed externally (in the environment) because other beliefs are acting as a counteracting force. However, they will soon find a way to get out, won’t they? As soon as you are out of the situation, you will probably find a way to “unload,” or even spew out your side of the argument. You will probably describe what you had to endure to anyone you think will lend a sympathetic ear. This is an example of how our beliefs demand to be expressed when they are in conflict with the external environment.
But what happens when one or more of our beliefs are in conflict with our intents, goals, dreams, wants, or desires? The implications of such a conflict can have a profound effect on our trading. As we have already learned, beliefs create distinctions in how the external environment can express itself. Distinctions, by definition, are boundaries. Human consciousness, on the other hand, seems to be larger than the sum total of everything we have learned to believe. This “larger than” quality of human consciousness gives us the ability to think in any direction we choose, either inside or outside of the boundaries imposed by our beliefs. Thinking outside of the boundaries of our beliefs is commonly referred to as creative thinking. When we purposely choose to question a belief (question what we know), and sincerely desire an answer, we make our minds available to receive a “brilliant idea,” “inspiration,” or “solution” to the issue at hand.
Creativity, by definition, brings forth something that didn’t previously exist. When we put our minds into a creative thinking mode, we will (by
definition, automatically) receive ideas or thoughts that are outside of anything that already exists in our rational mind as a belief or memory. As far as I know, there is no consensus among artists, inventors, or the religious or scientific communities as to exactly where creatively generated information comes from. However, what I do know is that creativity seems to be limitless and without boundaries.
If there are any limits on the ways we can think, we certainly haven’t found them yet. Consider the staggering pace at which technology has developed in the last 50 years alone. Every invention or development in the evolution of humanity was born in the minds of people who were willing to think outside the boundaries dictated by what they had learned to believe.
If all of us have the inherent ability to think creatively (and I believe that we do), then we also have the potential to encounter what I call a “creative experience.” I define a creative experience as the experience of anything new or outside the boundaries imposed by our beliefs. It could be a new sight—something we’ve never seen before, but from the environment’s perspective was always there. Or we could experience a new sound, smell, taste, or touch. Creative experiences, like creative thoughts, inspirations, hunches, and brilliant ideas, can occur as a surprise or can be the result of our conscious direction. In either case, when we experience them we can be confronted with a major psychological dilemma. A creative occurrence, whether in the form of a thought or an experience, can cause us to be attracted to or desire something that is in direct conflict with one or more of our beliefs.
To illustrate the point, let’s return to the example of the boy and dog. Recall that the boy has had several painful experiences with dogs. The first experience was real from the environment’s perspective. The others, however, were the result of how his mind processed information (based on the operation of the association and pain-avoidance mechanisms). The end result is that he experiences fear every time he encounters a dog. Let’s suppose that the boy was a toddler when he had his first negatively charged experience. As he grows up and begins associating specific words and concepts with his memories, he will form a belief about the nature of dogs. It would be reasonable to assume that he adopted a belief something like, “All dogs are dangerous.”
With the use of the word “all,” the boy’s belief is structured in a way that assures that he will avoid all dogs. He has no reason to question this belief, because every experience has confirmed and reinforced its validity. However, he (and everyone else on the planet) is susceptible to a creative experience. Under normal circumstances, the boy will do everything possible to make sure he does not encounter a dog. But what if something unexpected and unintended occurs?
Suppose the boy is walking with his parents and, as a result, feels safe and protected. Now, suppose he and his parents come to a blind corner and cannot see what is on the other side. They encounter a scene in which several children of about the same age as the boy are playing with some dogs and, furthermore, they are obviously having a great deal of fun. This is a creative experience. The boy is confronted with indisputable information that what he believes about the nature of dogs isn’t true. What happens now?
First, the experience was not at the boy’s conscious direction. He didn’t make a decision to willingly expose himself to information that contradicted what he believed to be true. We might call this an inadvertent creative experience, because the external environment forced him to confront other possibilities that he didn’t believe existed. Second, the experience of seeing other children playing with dogs and not getting hurt will throw his mind into a state of confusion. After the confusion wears off, meaning as he begins to accept the possibility that not all dogs are dangerous, several scenarios are possible.
Seeing other children his own age (with whom he could strongly identify) having such a great time playing with dogs could cause the boy to decide that he wants to be like the other children and have fun with dogs, too. If that’s the case, this inadvertent creative encounter has caused him to become attracted to express himself in a way that he formerly didn’t believe was possible (interacting with dogs). In fact, the notion was so impossible that it wouldn’t have even occurred to him to consider it. Now, he not only considers it, he desires it.
Will he be able to express himself in a way that is consistent with his desire? The answer to this question is a matter of energy dynamics. There are two forces within the boy that are in direct conflict with each other, competing for expression: his belief that “all dogs are dangerous” and his
desire to have fun and be like the other children. What he will do the next time he encounters a dog will be determined by which has more energy: his belief or his desire.
Given the intensity of the energy in his belief that “All dogs are dangerous,” we can reasonably assume that his belief will have far more energy than his desire. If that’s the case, then he will find his next encounter with a dog very frustrating. Even though he may want to touch or pet the dog, he’ll find that he can’t interact with it in any way. The word “all” in his belief will act as a paralyzing force, preventing him from fulfilling his desire. He might be well aware of the fact that the dog he wants to pet is not dangerous and won’t hurt him; but he won’t be able to pet it until the balance of energy tips in favor of his desire.
If the boy genuinely wants to interact with dogs, he will have to overcome his fear. This means that he will have to de-activate his belief that all dogs are dangerous so he can properly install a belief about dogs that is more consistent with his desire. We know that dogs can express themselves in a wide range of ways, from loving and gentle to mean and nasty. However, very few dogs on a percentage basis fall into the mean and nasty category. A good belief for the boy to adopt, then, would be something like, “Most dogs are friendly, but some can be mean and nasty.” This belief would allow him to learn to recognize characteristics and behavior patterns that will tell him which dogs he can play with and which ones to avoid.
However, the larger issue is, how can the boy de-activate the “all” in the belief that “All dogs are dangerous” so he can overcome his fear? Remember that all beliefs naturally resist any force that would alter their present form, but, as I indicated above, the appropriate approach is not to try to alter the belief, but rather to draw the energy out of it and channel that energy into another belief that is better suited to our purposes. To de- activate the concept the word “all” represents, the boy will have to create a positively charged experience with a dog; at some point, he will have to step through his fear and touch one.
Doing this might require a great deal of effort on the boy’s part over a considerable amount of time. Early in the process, his new realization about dogs might be strong enough only to allow him to be in the presence of a dog, at a distance, and not run away. However, each encounter with a dog, even at a distance, that doesn’t result in a negative outcome will draw more
and more of the negative energy out of his belief that “All dogs are dangerous.” Eventually, each new positive experience will allow him to close the gap between himself and a dog, little by little, to the point that he can actually touch one. From an energy dynamics perspective, he will be able to touch a dog when his desire to do so is at least one degree greater in intensity than his belief that all dogs are dangerous. The moment he actually does touch a dog, it will have the effect of drawing most of the remaining negative energy out of the “all” concept and transfer it to a belief that reflects his new experience.
Although it’s probably not that common, there are people who, for various reasons, are motivated enough to purposely put themselves through the above described process. However, they may not be consciously aware of the dynamics involved. People who work through a childhood fear of this magnitude usually do so somewhat haphazardly over a period of years, without knowing for sure exactly how they did it (unless they seek and get competent professional help). Later on, as adults, if they are asked or if they happen to encounter a situation that reminds them of their past (for instance, observing a child who is terrified of dogs), they typically characterize the process they went through as “I remember when I was afraid of dogs, but I grew out of it.”
The end result of the first scenario was that the boy worked through his fear by de-activating his limiting belief about the nature of dogs. This allowed him to express himself in a way that he finds pleasing and that otherwise would have been impossible.
The second scenario that could result from the child’s inadvertent creative experience with dogs is that he isn’t attracted to the possibility of playing with a dog. In other words, he could not care less about being like the other children or interacting with dogs. In this case, his belief that all dogs are dangerous and his new realization that all dogs are not dangerous will exist in his mental environment as contradictory concepts. This is an example of what I call an active contradiction, when two active beliefs are in direct conflict with each other, both demanding expression. In this example, the first belief exists at a core level in the boy’s mental environment, with a great deal of negatively charged energy. The second belief is at a more superficial level, and has very little positively charged energy.
The dynamics of this situation are interesting, and extremely important. We have stated that beliefs control our perception of information. Under normal circumstances, the boy would have been perceptually blinded to the possibility of interacting with dogs, but the experience of seeing other children playing with them created a positively charged concept in his mental environment that dogs are not all dangerous; some can be friendly. However, he hasn’t done anything to de-activate the “all” in his belief that “All dogs are dangerous,” and, as far as I know, beliefs have no capacity to de-activate themselves. As a result, beliefs exist in our mental environment from the moment they are born to the moment we die, unless we consciously take steps to de-activate them. However, in this scenario, the boy has no desire and consequently no motivation to step through his fear.
Therefore, the boy is left with an active contradiction where his minimally charged belief that not all dogs are dangerous gives him the ability to perceive the possibility of playing with a dog, but his powerfully charged belief that all dogs are dangerous still causes him to experience some level of fear every time he encounters a dog (maybe not enough fear to cause him to run in terror, because some of that fear will be offset by the other belief, but there will certainly be enough fear to cause a great deal of discomfort).
The ability to “see” and consequently know that a situation is not dangerous, but at the same time find ourselves immobilized with fear, can be quite baffling if we don’t understand that what we discover as the result of thinking creatively or realize from an inadvertent creative experience doesn’t necessarily have enough energy to become a dominant force in our mental environment. In other words, our new awareness or discovery could very well have enough energy to act as a credible force on our perception of information, thereby causing us to perceive possibilities that would otherwise be invisible; but it might not have enough energy to act as a credible force on our behavior. In making this statement, I am operating out of the assumption that it takes more energy to act or express ourselves than the amount of energy it takes to observe something.
On the other hand, new awareness and discoveries instantly and effortlessly become dominant forces if there’s nothing inside us that’s in conflict with them. But if there are conflicting beliefs and we aren’t willing to de-activate the conflicting forces (expending some effort), especially if
they’re negatively charged, then acting on what we’ve discovered will be a struggle at the very least, and perhaps down right impossible.
What I have just described is the psychological dilemma that virtually every trader has to resolve. Let’s say you have a firm grasp of the nature of probabilities and, as a result, you “know” that the next trade is simply another trade in a series of trades that has a probable outcome. Yet you find you’re still afraid to put that next trade on, or you’re still susceptible to several of the fear-based trading errors we’ve discussed in previous chapters. Remember that the underlying cause of fear is the potential to define and interpret market information as threatening. What is the source of our potential to interpret market information as threatening? Our expectations! When the market generates information that doesn’t conform to what we expect, the up and down tics seem to take on a threatening quality (become negatively charged). Consequently, we experience fear, stress, and anxiety. What is the underlying source of our expectations ? Our beliefs.
In light of what you now understand about the nature of beliefs, if you are still experiencing negative states of mind when you trade, you can assume there’s a conflict between what you “know” about probable outcomes and any number of other beliefs in your mental environment that are arguing (demanding expression) for something else. Keep in mind that all active beliefs demand expression, even if we don’t want them to. To think in probabilities, you have to believe that every moment in the market is unique, or more specifically, that every edge has a unique outcome.
When you believe at a functional level that every edge has a unique outcome (meaning that it’s a dominant belief without any other beliefs arguing for something different), you will experience a state of mind that is free of fear, stress, and anxiety when you trade. It really can’t work any other way. A unique outcome is not something we have already experienced, therefore it is not something we can already know. If it were known, it could not be defined as unique. When you believe that you don’t know what is going to happen next, what exactly are you expecting from the market? If you said “I don’t know,” you are absolutely right. If you believe that something will happen and that you don’t need to know exactly what that something is to make money, then where’s the potential to define
and interpret market information as threatening and painful? If you said “There is none,” you are absolutely right again.
Here is one more example of how beliefs demand expression. Let’s look at a situation where a child’s first encounter with a dog was a very positive experience. As a result, he has absolutely no problem interacting with dogs (any dog for that matter), because he has not encountered one that’s unfriendly. Therefore, he has no concept (an energized belief) that it is possible for a dog to inflict any damage or cause him to experience pain.
As he learns to associate words with his memories, he will probably acquire a belief along the lines of “all dogs are friendly and fun.” Therefore, every time a dog comes into his field of awareness, this belief will demand expression. From the perspective of someone who has had a negative experience with a dog, it will seem as if this child has an attitude of reckless abandon. If you tried to convince the child that he’ll get bitten someday if he doesn’t exercise caution, his belief will cause him to either discount or completely disregard your advice. His response would be something like “No way!” or “It can’t happen to me.”
Let’s say at some point in his life he approaches an unfamiliar dog that wants to be left alone. The dog growls. The warning will go unheeded and the dog attacks the boy. From the perspective of the boy’s belief system, he’s just had a creative experience. What effect will this experience have on his belief that “all dogs are friendly”? Will he now be afraid of all dogs as the child in the first example was?
Unfortunately, the answers to these questions are not cut and dried, because there may be other beliefs, also demanding expression, that don’t have anything specifically to do with dogs that come into play in a situation like this. For example, what if this child has a highly developed belief in betrayal (he believes he’s been betrayed by some very significant people in some very significant situations that have caused him to experience intense emotional pain). If he associates the attack by this one dog as a “betrayal” by dogs in general (in essence a betrayal of his belief in dogs), then he could easily find himself afraid of all dogs. All of the positive energy contained in his original belief could instantly be transformed into negatively charged energy. The boy could justify this shift with a rationalization like “If one dog can betray me, then any dog can.”
However, I do think this is an extreme and very unlikely occurrence. What is more likely is the word “all” in his original belief will instantly be de-activated and that energy will get transferred to a new belief that better reflects the true nature of dogs. This new experience caused an energy shift that forced him to learn something about the nature of dogs that he otherwise refused to consider possible. His belief in the friendliness of dogs remains intact. He will still play with dogs, but he will now exercise some discretion by consciously looking for signs of friendliness or unfriendliness. I think that a fundamental truth about the nature of our existence is every moment in the market, as well as in everyday life, has elements of what we know (similarities) and elements that we don’t or can’t know because we haven’t experienced it yet. Until we actively train our minds to expect a unique outcome, we will continue experiencing only what we know; everything else (other information and possibilities that are not consistent with what we know and expect) will pass us by, unperceived, discounted, distorted, outright denied, or attacked. When you truly believe that you don’t need to know, you will be thinking in probabilities (the market perspective) and will have no reason to block, discount, distort, deny, or attack anything the market is offering about its potential to move in
any particular direction.
If you are not experiencing the quality of mental freedom implied in that statement, and it is your desire to do so, then you must take an active role in training your mind to believe in the uniqueness of each moment, and you must de-activate any other belief that argues for something different. This process isn’t any different from the one the boy in the first scenario went through, nor is it going to happen by itself. He wanted to interact with dogs without fear, but to do so he had to create a new belief and de-activate the conflicting ones. This is the secret to achieving consistent success as a trader.
- Beliefs keep on working regardless of whether we are consciously aware of their existence in our mental environment. In other words, we don’t have to actively remember or have conscious access to any particular belief for that belief to act as a force on our perception of information or on our behavior. I know it’s hard to “believe” that something we can’t even remember can still have an impact on our lives. But when you think about
it, much of what we learn throughout our lives is stored at an unconscious or subconscious level.
If I asked you to remember each specific skill you had to learn so that you could drive a car with confidence, chances are you wouldn’t remember all the things you needed to concentrate and focus on while you were in the process of learning. The first time I had the opportunity to teach a teenager how to drive, I was absolutely amazed at how much there was to learn, how much of the process I took for granted and no longer thought about at a conscious level.
Possibly the best example that illustrates this characteristic is people who drive under the influence of alcohol. On any given day or night, there are probably thousands of people who have had so much to drink that they have no idea that they have no conscious awareness of how they drove from point A to point B. It is difficult to imagine how this is possible, unless you consider that driving skills and one’s belief in his ability to drive operate automatically on a much deeper level than waking consciousness.
Certainly, some percentage of these drunk drivers get into accidents, but when you compare the accident rate with the estimated number of people driving under the influence of alcohol, it’s remarkable that there aren’t a great many more accidents. In fact, a drunk driver is probably most likely to cause an accident when he either falls asleep or something requires a conscious decision and a fast reaction. In other words, the driving conditions are such that operating out of one’s subconscious skills is not enough.
SELF-VALUATION AND TRADING
How this characteristic applies to our trading is also quite profound. The trading environment offers us an arena of unlimited opportunities to accumulate wealth. But just because the money is available and we can perceive the possibility of getting it, that doesn’t necessarily mean that we (as individuals) have an unlimited sense of self-valuation. In other words, there could be a huge gap between how much money we desire for ourselves, how much we perceive is available, and how much we actually believe we are worth or deserve.
Everyone has a sense of self-valuation. The easiest way to describe this sense is to list every active belief, both conscious and subconscious, that has the potential to argue either for or against accumulating or achieving greater and greater levels of success and prosperity. Then match the energy from the positively charged beliefs against the energy from the negatively charged beliefs. If you have more positively charged energy arguing for success and prosperity than negatively charged energy arguing against them, then you have a positive sense of self-valuation. Otherwise, you have a negative sense of self-valuation.
The dynamics of how these beliefs interact with one another is not nearly so simple as I’m making it sound. In fact, it can be so complex that it could take years of sophisticated mental work to organize and sort out. What you need to know is that it’s almost impossible to grow up in any social environment and not acquire some negatively charged beliefs that would argue against success or accumulating vast sums of money. Most of these self-sabotaging beliefs have long been forgotten and operate at a subconscious level, but the fact that we may have forgotten them doesn’t mean they’ve been de-activated.
How do we acquire self-sabotaging beliefs? Unfortunately it’s extremely easy. Probably the most common way is when a child engages in some activity that a parent or teacher doesn’t want him to do and the child accidently injures himself. Many parents, to get their point across to the child, will respond to a situation like this by saying, “This (whatever pain you are experiencing) wouldn’t have happened to you if you didn’t deserve it,” or “You disobeyed me and look what happened, God punished you.” The problem with making or hearing statements like this is that there’s a potential for the child to associate every future injury with these same statements and, subsequently, form a belief that he must be an unworthy person, undeserving of success, happiness, or love.
Anything we feel guilty about can have an adverse effect on our sense of self-worth. Usually guilt is associated with being a bad person, and most people believe that bad people should be punished, certainly not rewarded. Some religions teach children that having a lot of money isn’t godly or spiritual. Some people believe that making money in certain ways is wrong, even though it may be perfectly legal and moral from society’s perspective. Again, you may not have a specific recollection of learning something that
would argue against the success you perceive as possible, but that doesn’t mean that what you learned is no longer having an effect.
The way these subconscious self-sabotaging beliefs manifest themselves in our trading is usually in the form of lapses in focus or concentration, resulting in any number of trading errors, like putting in a buy for a sell or vice versa, or allowing yourself to give in to distracting thoughts that compel you to leave the screen, only to find out when you return that you missed the big trade of the day. I’ve worked with many traders who achieved various levels of consistent success, but found they just couldn’t break through certain thresholds in acquiring equity. They discovered an invisible but very real barrier similar to the proverbial glass ceiling that many women executives experience in the corporate world.
Every time these traders hit the barrier, they experienced a significant draw down, regardless of the market conditions. However, when asked about what happened, they typically blamed their sudden run of bad luck on just that—luck or the vagaries of the market. Interestingly, they typically created a steadily rising equity curve, sometimes over a period of several months, and the significant draw down always occurred at the same spot in their equity curve. I describe this psychological phenomenon as being in a “negative zone.” As magically as money can flow into a trader’s accounts when he is “in the zone,” it can just as easily flow out, if he is in a negative zone where unresolved self-valuation issues mysteriously act on his perception of information and behavior.
I am not implying here that you have to de-activate every belief that would argue against your ever-expanding positive sense of self-valuation, because you don’t. But you must be aware of the presence of such beliefs, and take specific steps in your trading regimen to compensate when they start expressing themselves.
