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BLASTING OFF
In the market:
honesty Is power,
simplicity Is energy,
and innocence Is ability.
You are standing in the airport terminal of Your Life, and the jet plane departing for the 21st
century is about to take off. You must make a choice: Do you remain in the terminal, eating
the stale vending-machine food of outmoded thinking? Or do you get on the plane and soar
into the stratosphere of trading computerization, swept along by the jet stream of evolving
technology? Do you enjoy the in-flight snack of virtually unlimited information access, secure
in the knowledge that when you encounter the inevitable turbulence of rapid market
fluctuations, you are holding, in this book, the "automatic pilot" of expert advice and
guidance? That is the vision of tomorrow that I am offering you. Let's explore together this
amazing new cyberworld of science and trading. If you don't know about these latest advances
in science and trading, have no fear. I'm not going to bombard you with technical
gobbledygook. I'm going to present you with simple, practical, well-organized, easy-to-
understand information and guidance. If you are ready to travel to places you have never been
before, let's queue up. Our goal in this chapter is to understand how our personal biases
determine whether we become consistent winners or chronic losers. If you are a type A++
trader, you may be tempted to go directly to Chapter Three and begin to use our energetic and
trading dimensions immediately. Instead, I recommend that you study this material from the
beginning. I believe that understanding the underlying structure of trading is imperative if you
hope to reach your potential in trading for profits. Let's begin our journey of understanding by
looking at one of the most important underlying aspects of all markets—and, actually, of any
endeavor we select.
CONTENT VERSUS PROCESS
Suppose that you are a space traveler. You have just landed from a faraway planet, and you
find yourself in a room where a chess set has been arranged on a table. You want to
understand exactly what is going on in this strange Earth. You examine the chess pieces
individually and notice that there are several different shapes and sizes. You want to really
understand, so you do an "electron analysis" of each individual piece. You know the exact
location, size, and makeup of each piece. You thoroughly understand the makeup and the
content of the entire set. But unless and until you understand the
process
of playing chess, you
will never understand the game and its significance will be lost on you. In over four decades
of observing traders and trading, I have come to the conclusion that most traders approach the
market with the same orientation as our fictitious space traveler. Both are primarily concerned
with content as opposed to process. Our space traveler will never understand the game of
chess until he observes two people playing and competing against each other. This is not
necessarily bad; it just doesn't have a great payoff. We traders do it with each other when we
ask:
• How much did you make this month?
• Did you go long the gold?
• What kind of car do you drive?
• Will you show me your P&L statements?
• Can you give me someone who is using your approach profitably?
• Did you know that this market is heavily oversold?
All the above examples center on content rather than process. Both my scientific background
and my experience in trading have convinced me that the primary difference between winners
and losers is whether they focus on content or process.
ENDING YOUR STRUGGLE AND DANCING WITH THE MARKET
Most guys had this happen in high school. You ask a pretty girl to go to a dance and she
accepts. Now you are in trouble! You fear you will make a fool of yourself dancing and not
only will she never speak to you again, but she will tell all the other girls in the school that
you are a klutz. You practice with your little sister and your cousin before the date. When you
get to the dance, you are determined to make the dancing work. You
try hard
to be a better
dancer than you really are (you are content-oriented). But because you try so hard, you end up
stepping all over your partner's feet. Your life is ruined; you were never meant to be anything
but an other-handed klutz. If you could have only relaxed and become a bit more process-
oriented, you could have pulled your partner close to you, she could have felt your
movements, and you both would have appeared to be dancing with some skill. The key to
dancing well—and profiting in the market—is an ability to relax and simply go with the flow.
That is what this book is about—
getting with the process;
letting go and going with the flow.
This material will defuse much of the miseducation of modern technical analysis and
demonstrate the way the market really works and how to profit from that knowledge. When
Trading Chaos
was written several years ago, our goal was to take 80 percent out of a trend
move. We wanted to get in on the bottom 10 percent and get out on the top 10 percent of the
price movement. In the intervening years, we have sharpened both our research and our
strategy. Today, our goal is not to take 80 percent from a trend move but to take 300-500
percent of the trend move. Previously, if there was a 200-point move in a commodity or stock,
we were well satisfied with 160 points in our pocket. Now our achievable goal is to bank 600
to 1,000 points on that same move. Unbelievable? Not after you have read this book and seen
the results in your own trading.
THE MARKET
VERSUS
ME OR THE MARKET
AND
ME
The average trader feels that trading the markets is a highly stressful occupation. Below are
some actual questions we have received from active traders:
• How can I both enjoy trading and make profits trading the markets?
• Why am I so addicted to doing this when there are so many disappointments (losses)?
• How can I keep serenity inside myself and my loved ones while living in this turbulent
world of the markets?
• How can I stop worrying so much in such a threatening atmosphere?
• Why do so many traders/investors lose money so consistently?
• How can I distinguish among all the hucksters who are hawking their wares as being
the
answer, when none of them seems to last even a couple of years?
• Why does my broker give me such bad advice?
• Why do all the newsletters I read boast of such enviable track records, but when I start
trading them, they lose money?
Even when we are winning, there is an undercurrent of fear that the next trade will probably
be a loser. We exhaust ourselves as we try to control the present and the future while our
minds futilely search for ways to recreate the past. We yearn to trade while being more
relaxed, calmer, more in control, and excited about trading. To most traders, the possibility of
that kind of life seems like a long-lost dream. The joy of trading is gone, and our life is filled
with stress. We have tried all the hotlines, newsletters, psychobabble, books, and private
sessions. Our love of the market is wearing thin. Something is very wrong. But what is it? We
often blame government action, bad information, surprising crop and corporate reports, and
other vagaries of the market. But these are not the real causes of our distress and our constant
struggle with the market. The answer lies at a deeper level. After much research and personal
experience, I have come to the conclusion that those who approach trading with serenity
rather than struggle—those who have looked beyond the confusion and mastered the art of
"dancing with the market"—are consistent winners.
Dancing with the market
is mowing with the flow of the market up,
down, or sideways
with a feeling of harmony,
trust, gratitude, and yes, even love.
To really dance well and enjoy the process of dancing, you must let yourself be moved by the
music rather than follow any preplanned agenda. In other words, the dance floor (market)
must become a friendly place.
Friendly
here means comfort, relaxed enjoyment, and a place
where you feel friendly. Remember Einstein's most important question: Is the universe a
friendly place? I want to assure you, based on not only my personal experience but the
experience of over 700 people whom I have privately trained to become independent
speculators, the market
is
a friendly place. Any unfriendliness always comes from us, not
from the market. We often hear phrases like "The market stopped me out." The market never
in all its history stopped any trader out. We all do it to ourselves. Win or lose, it is always our
own fault. That is because no one trades the market; we all trade our own personal belief
system. Remember the Jimmy Buffett song "Margaritaville," where the singer concludes that
no one should blame a woman; his problem is his own damned fault. Well, he was right.
Those of you who have worked with me and are familiar with my work know that what I say
comes largely from my own experience. I have had much help and advice from other traders
and from researchers using modern technical tools, but the actual implementation of this
research is a very personal matter. We are going to look closely at how we create our own
internal struggle, which goes on whether we are winning or losing. My 40 years of research
and trading experience have produced what I think is the most successful approach to trading
available today. Recently, I was offered a seven-figure amount if I did
NOT
show this material
to other traders. That money is a mere pittance compared to what is possible using these
techniques. I have come a long way on this issue of dancing with the market, and I am amazed
at how obvious it all becomes once a person starts experiencing the reality of this approach to
trading. I am reminded of an ancient Buddhist saying: "The road is smooth; why do you throw
rocks before you?" We all do this in the market. All of us, at times, throw rocks before us, and
it is difficult to dance on rocks and come out pain-free. So let's begin by clearing the debris
and making way for a more profitable, peaceful, joyful, and abundant trading life.
RISING ABOVE THE CLOUDS OF DOUBT
To say that trading is simple, easy, and profitable is incredulous to most traders and absolutely
absurd to others. Almost all traders experience a great deal of doubt. In this section, we are
going to look at ways to rise above the clouds of doubt. This will ultimately happen only after
enough experience in using my trading techniques to prove their overall profitability. The key
to rising above doubt is to again realize what game we are playing. The game is
trading our
own belief systems.
If we want to change our results, we must change our beliefs. Beliefs are
what we "know" to be true. We almost never question our deep beliefs, but that is exactly
what a losing trader must do: question personal beliefs not only about the market but, even
more, about themselves. Very few traders know
why
they trade, much less
how
they trade. We
all can spout our superficial reasons: to make money fast, to enjoy competing with other
traders, to gain the prestige of being able to say "I am a trader," and so on. In your last trade,
did you lose because you couldn't see the market going the other way, or because of a deep,
unexamined belief that you shouldn't get rich that easily? If the latter, it's time to free yourself
from some old beliefs.
RELEASING THE OLD BELIEFS
Your next task is to release, get rid of, or, at the very least, become aware of these beliefs. The
best method is to examine the difference between process and content. Classical sciences have
always tended to deal with content. "My head, it hurts" is an example of how the classical
sciences divide everything into three parts:
1. The observer.
2. The thing being observed.
3. The process of observing.
Modern sciences (relativity, quantum physics, and the Science of Chaos) do not create or
condone this separation. A quantum scientist would report, "I am in the process of headaching
myself "—a much more accurate description. Modern science does not believe there is any
such thing as nouns. Everything is energy and all energy is process. Buckminster Fuller titled
his autobiography I Am A Verb. This distinction between process and content will become
very important to our proficiency at dealing with the market. In general, we are educated to be
goal-directed, making
what isn't
more important than
what is.
We make lists of our goals,
plan them out, and then neglect the present and live, in our head, in the future. The problem
with living in the land of goals rather than the land of now is that when we center our
attention on the future, we cannot concentrate on or even accurately observe what is
happening now. We can't dance well while thinking about how we are dancing. We can't trade
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