 Welcome back to the Trade Hacker Mindset. We are going to be continuing with our discussion points from the book Trading in the Zone by Mark Douglas. In this episode, we're gonna be talking about the impact of beliefs on trading. Trading the markets can be difficult to master and seemingly just out of reach. Professional traders have a secret. Trading requires total mental and emotional control. It requires the Trade Hacker Mindset. All right, so let's jump into our discussion of the impact of beliefs on trading. We know that if there are conflicting beliefs within your mind, this is going to impact how you trade. If the external environment can express itself in an infinite combination of ways, then there's really no limit to the number or types of beliefs available to be acquired about the nature of our existence. In other words, there is a lot that we can learn 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 way that's 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 is it not okay 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 this relentless attempt to convince others of the validity of our beliefs and to deny the validity of others beliefs. Think about this, every conflict, no matter how small or how big, how little, how insignificant or how significant, whether it's between two individuals, entire cultures, societies, countries, the result of these conflicts are over conflicting beliefs. In some cases, we are so intolerant that we're willing to kill other people just to get our point across in the way of a war between nations. And these beliefs are not only in our subconscious, right? I mean, we consciously go to war. We consciously have these conflicting beliefs to a real high degree, to a major extent, in some cases. So really, each individual belief has to have some quality of either awareness or self-awareness that causes it to function as it does. As humans, we all want to be believed, right? It doesn't matter what the belief is, the experience of being believed feels good to us. And I think these positive feelings are universal, right? It doesn't matter what culture you're in, what country, what society, meaning they apply to everyone. And on the flip side of that, conversely, no one likes to be disbelieved. It doesn't feel good. When you hear somebody say, I don't believe you, then you have kind of a negative feeling that resonates inside you. And to some degree, none of us like to have our beliefs challenged. The challenge feels like an attack, like somebody is attacking us and we always become defensive if somebody attacks our core beliefs. When we express ourselves, we like to be listened to. If we sense that our audience, whether it's one person or a group, if they're not paying attention, how does it feel? Not good, right? I mean, again, this is kind of a universal response. Conversely, why is it so difficult for us to be good listeners? 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 that person who's speaking. So what is this compelling force behind our inability to listen without wanting to interrupt? Don't we like being with other 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 is the 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's the opposite or contradictory. Considering the large number of divergent beliefs that exist in the world, if these feelings of attraction and comfort or being repelled or threatened or universal, then each belief must somehow be conscious in its existence. And this conscious structured energy must behave in characteristic ways that are common to everybody. In the book, Trading in the Zone, Mark Douglas talks about, there are three basic characteristics about beliefs that you really need to understand to effectively install these five fundamental truths of trading that we've talked about in previous, so these three basic characteristics about beliefs are, number one, beliefs seem to take on a life of their own and therefore they resist any force that would alter their present form. Number two, all active beliefs demand expression. And number three, beliefs keep on working regardless of whether or not we are consciously aware of their existence in our mental environment. So let's talk about this first one, beliefs resist any force that would alter their present form. Now, 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 history, there are many examples of people who believe in some issue or some cause that was so powerful that they chose to endure torture and death and in all kinds of stuff just because of their beliefs, right? We've all heard these, it could be the Bible, it could be some historical event where we've seen these types of situations happen. Now, this does not mean that beliefs can't be altered. It means that we have to understand how to work with them. Beliefs can be altered, but not in a way that most people may think. Once a belief has been formed, it can't be destroyed. In other words, there's nothing we can do that would cause one or more of our beliefs to cease to exist or just evaporate as if it never existed at all. Each individual belief is really a component of what we consider to be our identity. So if somebody tries to attack you, then your natural reaction is going to be to fight or to defend yourself, right? Fight back and possibly even become stronger than you were before, before you knew of this threat that was coming at you. Well, our beliefs make up our entire system, so doesn't it make sense if somebody's challenging your beliefs, your natural reaction is to resist that and fight back and defend what you believe? So the most effective way to work with your beliefs is to deactivate them. It's to make them softly inactive or non-functional. So after you deactivate the belief, the original structure of the belief remains intact, so technically it hasn't changed. The difference is that belief no longer has any energy. You're basically, you're sucking the energy out of that belief. And without energy, it doesn't have the potential to act as a force on our perception of information or on our behavior. In his book, Mark Douglas talks about how growing up, he was taught to believe in Santa Claus, right? A lot of Americans are. And so this is a good example of, you know, think about how passionate or how big of a belief that might have been when you were a kid, but once you found out that Santa wasn't real and now today as an adult, you know that that belief, you know, it's not gone, it still exists, but now it's just inactive. It's non-functional. And these beliefs exist as concepts, but they have no energy to them. So now today, if you're sitting here right now as an adult and somebody comes up to you and says, hey, Santa Claus is at the door, how would you react to that? How would you interpret that information? You would probably treat it as pretty irrelevant or as a joke, right? However, if you were still five years old and your mom told you that Santa Claus was at the front door, it probably would have created some massive amount of energy, probably a positively charged energy that would have made you jump up and run to the front door as fast as you could, right? So now as an adult, you basically have two contradictory distinctions about the nature of the world that exists in your mental system. One, Santa Claus exists. Two, Santa Claus doesn't exist, right? The difference between them is the amount of energy that each of these contain. The first has virtually no energy and the second has energy. So from a functional perspective, there's no contradiction or conflict. If it's possible to render one belief inactive, then it's possible to really deactivate any belief despite the fact that all beliefs seem to resist any force that would alter their present form. Now, the secret to effectively changing our beliefs is in understanding and consequently believing that we really aren't changing our beliefs. We're simply transferring energy from one concept to another. One that we find more useful in helping us fulfill our desires or goals that we're trying to achieve. All right, so now let's talk about the second characteristics of beliefs and that was all active beliefs demand expression. I've already mentioned beliefs fall into two basic categories. They're either active or 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 this information and inactive belief is just the opposite. So when I say beliefs demand to be expressed, it also depends on the level of energy or passion that you have around that belief. Sometimes you may want to hold back expressing on your beliefs. And this might happen for several reasons. I mean, think about a scenario when you're with a person that's saying something that you completely disagree with or even think of it as completely absurd. Will you express your truth or will you hold back? Well, that depends on the beliefs that you have about a specific 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 might hold back and not argue openly. I think we've all been in situations where somebody said something that we completely disagreed with but we just kind of nodded our head and yep, okay, yep, mm-hmm, yep, okay, okay, see you later, that kind of thing. And so it depends on the amount of energy. If it's something that you're really passionate about and you wanna make sure you get a point across, then of course you're gonna speak up and you're gonna defend your belief but there are times that you might find it inappropriate and that amount of energy that finds it inappropriate is stronger than your actual belief on a particular topic. Or in other cases, there are a lot of people who just don't like conflict and so they may completely be passionate about something but they may avoid conflict with that person but as soon as they leave, they find somebody who has the same belief system as them and they just spew it all out and unload and talk about what an idiot this person was and why they were an idiot and why what they said was wrong and what they think is correct and because they know they're gonna get that positive feedback from an individual who shares the same beliefs. So what happens when one or more of our beliefs are in conflict with our goals or dreams or desires specifically when it relates to trading? The implications of such a conflict have a profound effect on our trading. As we've already talked about in previous episodes, beliefs create distinctions in how the external environment can express itself. Remember, these distinctions by definition are boundaries and in trading it's kind of a boundary-less environment and when we think outside of the boundaries of our beliefs this is commonly referred to as creative thinking, right? And as far as I'm aware of there's no real consensus among artists or inventors or what we call creative communities as exactly where creativity is generated from. But what we do know is that creativity seems to be pretty limitless. It doesn't have boundaries. If there are any limits on the way that we can think we certainly haven't found them yet. Just think about how quickly things move today with technology and think about 20 years ago what you're seeing today and things that you probably couldn't even conceive of 20 years ago. Well, these were all born in the minds of people who are willing to think outside the box, willing to think outside these boundaries. And whether you think of yourself as a creative person or not we all have the potential to think creatively and we all have the potential to encounter a creative experience which is basically anything new or outside the boundaries imposed by our beliefs. It could be a new sight, a new smell, a new taste something we've never seen before but from the environment's perspective it was always there. And sometimes these creative experiences can happen we can expect them but sometimes they can happen as a surprise. But regardless when we experience them we can kind of be confronted with a major psychological dilemma, right? 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 past beliefs. Remember in past episodes when we talked about that example of the boy who encountered a dog who bit him and that was kind of his first experience with the dog well, remember that that experience was real for that boy but other experiences with dogs going forward were actually the result of how his mind processed that information. So the end result is that he experiences fear every time he encounters a dog. And so in this example since this happened to a boy when he was kind of a young toddler type age then it's not out of the realm of possible that going forward he's gonna have this belief and he's gonna have these sayings in his mind like all dogs are dangerous. And think about that just with that 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 that's confirmed and reinforced this validity. However, the boy along with everybody else is susceptible to a creative experience. Under normal circumstances the boy would probably do everything possible to make sure that he does not encounter a dog. But what if something unexpected or unintended occurs? Let's say the boy is walking with his parents and as a result feels safe and protected. Now suppose he and his parents come to a corner and can't see what's on the other side they encounter a scene where several children about the same age of the boy are playing with some dogs and they look like they're having a lot of fun. Now this would be considered a creative experience. The boy's confronted with this indisputable information that what he believes about the nature of dogs isn't true. So what happens now? Well, first of all, this experience it wasn't at the boy's direction, right? This came up unexpected. He didn't make a decision to willingly expose himself to this information that contradicted what he believed to be true. And second, this experience of him seeing other children playing with dogs and not getting hurt that's gonna kind of throw his mind into a state of confusion. And so after he processes this information and starts to accept the possibility that not all dogs are dangerous, several scenarios might start to be possible. Seeing other children his own age having such a great time playing with dogs could cause this boy to decide that he wants to be like the other children and have fun with dogs too. And so if that's the case then this creative encounter has caused him to become attracted to express himself in a way that he formally didn't believe was possible which is 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, but he might desire it. But the question is, will he be able to express himself in a way that's consistent with this desire? And the answer to this question is it's a matter of the amount of energy that is flowing to each belief, right? Is the energy of him being scared of dogs more powerful? Or is the energy of his desire to be with the other kids and play and have fun with dogs more powerful? And that's the balance. And that's the kind of the way that beliefs work and in one working its way over another. So this is an example of what you call an active contradiction. When two active beliefs are in direct conflict with each other, both demanding to be expressed. So in this scenario, the boy has to find a way to, if he has this desire to wanna play with the dogs and have fun with the other children, he has to find a way to deactivate his thought that all dogs are dangerous, right? He's gonna have to take that all out of the equation and understand maybe that some dogs are dangerous, but some aren't. And the key thing is that these beliefs, when they get in this direct conflict, beliefs just don't necessarily deactivate themselves, right? Something has to happen or we have to consciously take steps to deactivate them. And all of our beliefs, they start when we're first born and all the way up until today and these new awarenesses and new discoveries, they instantly and effortlessly become dominant forces within our belief system. Now, you might be thinking, so what the heck does this have to do with trading? Well, what we've just described with the example of the boy and the dog is the exact same psychological dilemma that virtually every trader has to resolve. So in navigation trading, we always talk about that we trade based on statistics and probabilities, not hype or emotion. And so let's say that you think you have a firm grasp on 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 probabilistic outcome. Yet you find you're still afraid to put that trade on or you're still susceptible to several of the fear-based trading errors that we've discussed in previous episodes. Remember, that underlying cause of fear is the potential to define and interpret market information as threatening. So what is the source of this potential interpretation that market information is threatening? It's our expectations. It's our expectations of what we think should happen. When the market generates information that does not conform to what we expect, which is just the up and down ticks, they seem to take on a threatening quality. So consequently, we experience fear, stress, anxiety. And what is the underlying source of our expectations? It's our beliefs. So regardless of what you now understand about the nature of beliefs, if you're still experiencing negative states of mind when you trade, you can assume that there's a conflict between what you know about probable outcomes and any other number of beliefs in your mental environment that are arguing or 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, you will experience a state of mind that is free of fear, stress, anxiety, or any negatively charged energy when you trade. And remember, a unique outcome is not something that we've already experienced. By definition, it's unique. When you believe, when you truly believe that you don't know what's going to happen next, then what exactly are you expecting from the market? If you said, I don't know, then you're absolutely right. If you believe that something will happen that you don't need to know exactly what that something is to make money, then where's the potential to define an interpret market information as threatening and painful? There isn't. Every moment in the market is really as well as in everyday life, it has elements of what we know and it has elements that we don't know 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. And everything else will just pass us by. When you truly believe that you don't need to know, then and only then will you be thinking in probabilities and you will have no reason to block or discount or distort or deny or defend 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 by what I just said and it's your desire to do so, that's a big one, you've got to have the desire to have that mental mind state, then you have to take an active role in training your mind to believe in the uniqueness of each moment and you must deactivate any other beliefs that argue for something different. Now, as I'm saying this personally, I can tell you my mind thinks this way, I would say probably 90% of the time, but there are still times and whether it's just because I'm not focused, I'm distracted or for whatever reason, there's 10% of the time when I don't fall into this category where I don't think in probabilities, where I start to feel anxious or stressed or something when I'm in a position or I'm getting ready to take a trade and so it's a continual process for me to continue to think in probabilities, to continue to think in this unique probabilistic outcome to get those negatively charged thoughts out of my mind and so it's a constant process. It's not one of those things where you can just check a box and say, okay, I'm gonna think this way, I'm done. It just doesn't work that way. It's a journey and that's why we talk about our trading journey and becoming better traders and learning over and over and over. Now, I've gotten to a place where I'm very consistently profitable and have been for the last 10 years, but that doesn't mean I'm not gonna have periods of time when I fall out of my mental state that I need to be in, but the fact that I'm aware of that and the fact that I am constantly thinking about it is gonna help me get back on track a lot quicker than somebody who doesn't even have this awareness of the mindset stuff that we're talking about here. Okay, so let's touch on the third fundamental characteristic about beliefs. 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 consciously have access to any particular belief or for that belief to act as a force on our perception of the information or on our behavior. So I know it's hard to believe that something we can't 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 in an unconscious or subconscious level. So if I asked you to remember each specific skill that you had learned so that you could drive a car with confidence, chances are you couldn't probably remember each specific skill that you learned at the time that you learned it when you turned 16, right? Now, my kids are younger, but some of you might have kids who are 16 or you've tried to teach them how to drive and you were probably shocked at how much they didn't know or how much you had to teach them because you just kind of forgot what it took to learn to drive because it's been so long. Or think of an example of somebody who drives while under the influence of alcohol. On any given day or night, there are probably thousands of people who have had too much to drink and they have no idea about the awareness of how they got from point A to point B. Kind of scary, I know, but think about that. Because your driving skills are so innate because you've learned them, you don't even think about it, people can go from point A to point B on a very unconscious level because they've done it so many times. And their driving skills are now in their subconscious, they don't even have to think about it. It's almost like you don't have to think to breathe. You don't have to think about blinking your eyes. It just happens. So how this characteristic applies to our trading is pretty interesting. The trading environment, think about this, the trading environment offers us a huge, massive amount of unlimited opportunities to accumulate wealth, right? But just because the money's available and we can perceive the possibility of getting it, that doesn't necessarily mean that we have an unlimited sense of self-valuation. In other words, there could be a huge gap between how much money we desire, how much money 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 act of belief, both conscious and subconscious, that has the potential to either argue for or against accumulating or achieving greater and greater levels of success and wealth. Then take these lists of what you've listed that's for gathering wealth, for creating success in trading and take your list of what's against accumulating or what's against achieving your goals and then right next to those, how much energy you think each one has. If you have more positively charged energy arguing for success than negatively charged energy arguing against them, then you have a positive sense of self-valuation. And if not, if you have more energy towards the negatively charged, working against wealth accumulation, then that means you have a negative sense of self-valuation. Now, it's not that simple, right? I mean, there's so many complex little dynamics and beliefs within our mind that we're not even gonna be aware of, not even gonna think to write down and it could take years of hardcore mental mindset work to organize and sort these 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 your success or argue against you accumulating vast sums of money in your trading. Most of these self-sabotaging beliefs have long been forgotten and operated a subconscious level but the fact that we may have forgotten them doesn't mean that they have been deactivated. Think about things that you feel guilty about. You know, these can have an adverse effect on your sense of self-worth because usually guilt is associated with being a bad person and most people believe that bad people should be punished and certainly not be rewarded, right? Maybe this came in your culture or society or religion or just your family dynamics but a lot of people have experienced these things growing up. You know, some people have grown up or believe that making money is in some ways a wrong, right? It's a bad thing. You know, the saying that the love of money is the root of all evil. You know, those kinds of concepts in our head can create this dynamic of self-sabotage when it comes to trading. You know, this comes in all levels. I mean, you might have become a consistently successful trader but your issue might be you're trying to break through to that next level. I know this is something that I've been thinking a lot about is I have a very comfortable level of risk that I take and a very consistent, comfortable level of amount of money that I can average on a daily basis when I'm day trading, not on a daily basis but you know, if I look back over a week or a month there's some pretty consistent averages and it's because I'm very comfortable with the position sizes that I'm using. And I've been looking at and evaluating myself and doing all kinds of things to figure out, okay, why do I make different decisions when I increase my position size? Because I'd like to scale up my position size. You know, if I can easily make 5,000 a week day trading, why can't that be 10,000 or 25,000? It's just adding another zero. It's just adding another, you know, multiple of the contracts that I'm using but it's a kind of a glass ceiling. It's a mental block that I have and I know that a lot of traders have. So you might be in a position where you're still trying to become, you're trying to get the mindset to become consistently profitable and some of you might be in a situation where you're consistently profitable but you haven't broken through to that level of gaining the amount of financial success that you want yet. And a lot of this has to do with our self-worth or our self-value that we have and it comes from all of the beliefs and thoughts and things that have been pumped into our heads since we were very young. So, you know, I'm not implying that you have to deactivate every single belief that would argue against your positive sense of self-valuation because you don't but you have to be aware of the presence of such beliefs and you have to take specific steps in your trading regimen to compensate when they start expressing themselves. So I hope this episode was helpful. In the next couple of episodes, we are going to dive deep into thinking like a trader. We're gonna break that up into two different sections. In the meantime, if you wanna be around a group of like-minded traders, go to community.navigationtrading.com. We've got hundreds of traders interacting on a daily basis, not only about the mindset stuff that we talk about here but also sharing trade ideas with the sole purpose of helping each other become better traders. Look forward to seeing you on the inside and we'll see you in the next episode.