 Welcome back to the Trade Hacker Mindset. In this episode, we are continuing with our series of discussion topics from the book, Trading in the Zone by Mark Douglas. And today we're going to be talking about aligning your mental environment. 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, let's jump into our discussion of aligning your mental environment. So in the last episode, we talked about shaping your mental environment. Now we're going to really start zeroing in on exactly how you can align your mental environment in order to be able to accept that risk and truly start to function like a professional trader. We're going to be talking about how to create a new relationship between you and the market and really dive into how to make this fear disappear. And as you know, once that pain is gone, this fear will just disappear. And the errors that you make based out of this fear will also disappear in your trading. And then at this point, your mind is going to be free. And it really is going to allow you to just act on the setups that occur on your charts or in the market to make you become a better trader. And I think if you really take this serious and really apply what we're going to be talking about, not only in this episode, but the next several episodes, you are going to be amazed at how easy this becomes and how simple the solution is to the problems that you currently have with your trading. So in the book, Trading in the Zone, Mark Douglas talks about your state of mind and thinking of it like a software code. Now, I'm not a coder. And if you've ever looked at the actual code that is put together to create different software, it looks just, I mean, to me, it looks overwhelming. It looks just like a bunch of jumbled mess. There's a lot of different code that what makes up the software that you use each and every day. And the problem is, if just one little piece of code is incorrect or out of place, it can create a massive issue for the entire software program. And the same thing is true about your mind. If you have a lot of different things in place, but just one little thing is off, it can really have a major effect on your trading and how you make decisions about your trading. And when you first start out, I mean, everybody has a flawed software code, meaning a flawed mindset when it comes to trading. And everybody's a little bit different psychological distance away. But if you can find where the errors in your code are, it's going to make all the difference in your trading. You know, another way to think about this is you've always heard the weakest link in a chain. Think about it. If you have this big, strong chain, but you have one little link that is weak, that is separated, it can just break apart the entire chain. And if you can find that one weak link, if you can find that one flaw in your software code of your mind, normally what we see happen is people have this aha moment, this light bulb moment, the light bulb comes on. And when you have this breakthrough, you're going to, you're going to ask yourself questions like, you know, why didn't you tell me this before? Or, you know, this was right in front of me the whole time. Or this is so simple. Why did I not just see this before? And once you see it, it's almost like it becomes a part of you. It becomes this whole new identity of you as a trader. And it actually becomes difficult for us to believe that we were ever the way we were before, that we had this experience. And the bottom line is you might already be aware of some of these things, but being aware of an issue doesn't automatically make it functional so that you can go and act on it in your trading. In the last episode, we talked about a trader who was deathly as scared of snakes. So think about this. You know, he's probably aware that not all snakes are dangerous. And even learning to make a distinction between the different types of snakes probably wouldn't be that difficult. But if he was able to make these distinctions, would that suddenly make him not afraid of snakes? Probably not, right? So if all of a sudden he made these distinctions, he did this research on snakes, realized that, you know, a certain type of snake wasn't going to harm him. If you brought that snake to him, do you think he would be just all open arms and ready to start cuddle with that snake? Probably not, right? But it also doesn't mean that he's going to be deathly scared of snakes for the rest of his life, either. It really comes down to his willingness. You know, it's certainly possible that he can neutralize this fear of snakes, but you're really going to have to work at it. Just like in trading, if you have certain fears about trading, just because you're aware of them doesn't mean you're automatically going to be, you know, jump in and not be afraid anymore. You're really going to have to work at that. Because even if you have these positive intentions, you're still going to have these conflicting ingrained deep beliefs that can be stronger than these positive intentions. We've been talking about fear and we've been talking about the threat of pain that sometimes as a trader you feel in the market. But remember, the market doesn't generate, you know, good or bad or painful information or fearful information. The market just simply provides information. And even though it might seem like the market is the one causing you to feel a certain way at a certain moment, it's actually not the case. It's your perception of that information. And it's whether or not you have the right state of mind to actually enter into the flow of the market and take advantage of what the market's offering. Super successful traders, they don't perceive anything about the markets as painful and therefore there's no threat about the market. If there's no threat, then there's nothing to defend against. And as a result, then there isn't any reason for their conscious or subconscious mind to bring up these defense mechanisms to kick in to try to battle the market. And that's why you may have watched professionals trade before. I've gotten emails and comments from our community. When I'm live streaming and I'm trading real money right in front of our community, you have people saying, man, you make it look so easy. And the reason is because I'm just looking at the information that the market is providing. I'm not perceiving that as risky or threatening or fearful or anything like that. So if your goal is to be able to trade like a professional, you have to be able to see the market from an objective perspective without distortion and you've got to be able to act without resistance or hesitation. But you also have to have that a certain amount of restraint to counteract the negative of overconfidence or euphoria. The way we always talk about it is when we're trading, especially day trading, we want to act like military snipers. We are just watching, waiting, waiting for that right moment to snipe the enemy. You know what you can't do if you're in battle, if you're supposed to be the snipers, you can't go run and hide in a hole, right? You can't do that because that's out of fear. The other thing you can't do is you can't just stand up with a machine gun and start spraying everywhere. So that's, you know, that's on one end, that's reckless. And on the other end, that's fear. You have to have that middle ground where you are patient, confident and ready to strike with complete confidence when the opportunity presents itself. So in other words, we're trying to get those bugs out of our mental software code and we got to get our minds right. And so to do this, you have to have kind of an understanding of the mental energy and how you can use that to change your perspective of the information that the market is generating. Now this can take time and there might be, you might feel like it's a lot to learn, but you're going to be amazed at how some simple changes, some simple tweaks in your mental software code can create just a huge difference in your trading results. I mentioned in the last episode, it wasn't until I really dug into this specific topic that I turned that corner from what we call that boom and bust type of trader where your P&L looks like a roller coaster into that consistently profitable trader. So to start with, let's talk about what are the underlying dynamics of perception? What determines how we perceive different information? The easiest way is to start to understand the dynamics of perception and answer the questions to think of everything that exists outside of us as traders. And forget about trading for a minute. Let's just talk about, you know, all the different categories of life from plant to weather conditions to natural disasters like tornadoes and earthquakes and other things in our environment like light and sound and microwaves and radiation. All of these things generate information about the nature of its existence. And all that information can act as a force as it relates to our personal senses of, you know, how we taste it, smell it, hear it, feel it. And this can relate to inanimate objects like a rock, for example. So even though a rock doesn't appear to be active, but we can still have thoughts, we can still make distinctions about that rock. Like what's the texture of that rock? Is it smooth? Is it rough? What's its shape? What's its color? Does it smell? I don't remember the last time I ate a rock, but does it taste? So anytime we encounter anything in the environment that expresses that it has properties and characteristics, this exchange of energy takes place. Another way to say that whatever we're seeing, hearing, tasting, smelling, feeling through our senses, it gets transformed into a form of energy in our mental environment. Now, I understand we're getting a little deep and some of you guys are like, what does this have to do with trading? But I promise if you can tap into this whole mental energy and energy structures, it's going to have a huge impact on your trading as well. Because here's the thing, there is a relationship between us and everything else that exists in our environment. And this is what in Mark Douglas in his book, he classifies what he calls energy structures. He talks about the memories and beliefs that we acquire throughout our life exists in our mental environment, in the form of a structured energy. So while memories and distinctions and beliefs are somewhat abstract, think about these things as if they had some type of physical form to them. Now, scientists can't actually feel your belief or feel your memory or anything like that, but they have dissected the actual brain tissue, both of living and dead people, and they've been able to observe individual brain cells that contain certain memories. But the bottom line is that thoughts are energy. Because you think in a language that you speak, your thoughts are structured by the limitations and rules that govern that particular language in which you think. And when you express those thoughts out loud, we call this talking, you actually create sound waves, which are a form of energy. And then you can get into the whole aspect of what our dreams not talking about what dreams mean or what their purpose is, but rather exactly what are they dreams seem to have kind of the same effect on us as if we really experienced those things in life. And I'm talking about through our senses, you know, you can sometimes in your dream, you can actually taste things or smell things or see things or feel things. And the only way this is possible is because dreams are a form of structured energy. Because remember, energy can take on any size or dimension, but that doesn't necessarily mean that it takes up any space. So if these memories and beliefs and dreams are part of kind of the result of our encounters with our external environment. And if these are actual energy, and if energy doesn't take up any space, then you could also say that we have an unlimited capacity for learning. Now, I know I know you might be thinking this is this is pretty far out there, but stay with me. Think about the development of human consciousness over time. And think about all of the things that we know now as humans that we didn't know just 100 years ago. There's really nothing out there that says that that indicates that we don't have an unlimited capacity to learn. Now, don't equate storage capacity with learning capacity. Learning and becoming aware of something is not just a function of storage capacity. Because if it were, then what would stop us from knowing everything? And if we knew everything, then what would stop us from perceiving every possible characteristic or property or trade of everything that's expressing itself at any given moment? So what I'm saying here is that the environment is generating a massive amount of information at any given time. And some of this information is just out of the realm of what we can conceive in a range of senses. For example, our eyes can't see every wavelength, our ears can't hear every frequency. So there's definitely a range of limitation. But the energy that's inside us will kind of categorize and limit and block our awareness of some of this information. Now, a lot of what I'm saying, it can be pretty self-evident, right? For example, there are a lot of ways in which the external environment can express itself that we don't perceive simply because we haven't even learned about it yet. So think about this. Think about the first time that you looked at a price chart. When you looked at that price chart, what did you see? What did you perceive? You know, for me, I saw a lot of squiggly lines and things that just, I mean, it didn't make much sense at all, right? It had absolutely no meaning. But now, if you're like most traders, when you look at a price chart, you actually see traits and characteristics. You can see trends. You can see periods of consolidation. You can see situations of trades that you may have jumped into. You see potential opportunities. So what happened over time is that you started to learn to make distinctions about this information. You know, with the day trading strategies that we trade and that we teach, we make a distinction between price action, how price is moving in relation to volume. And so now this creates a kind of a degree of significance for that information that we're perceiving. So if I asked you right now to take a look at this price chart and compare what you see now to what you would have seen the first time you looked at it, would there be a difference between what you see now and what you saw then? Of course there would. Instead of a bunch of lines that didn't mean anything, you would now see everything that you've learned about those lines between then and now. In other words, you see all the distinctions that you've learned to make as well as the opportunities that those distinctions represent. But remember, everything that you can see now that you look at in a chart and everything you know now, it actually existed back then too. So the question is what's different now? The answer is it's that structured energy that's inside of you now. It's that knowledge that you've gained. It acts as a force on your eyes causing you to recognize the various distinctions that you've learned about. Since that energy wasn't there the first time you looked at the chart, all the opportunities that you now see were there, but at the same time invisible to you. And to take it a step further, unless you've learned to make every possible distinction based on every possible relationship with that chart, those things that you haven't learned, those are still invisible to you. Most of those have absolutely no concept of the extent to which we're continually surrounded by these invisible opportunities because we just haven't learned about them. We haven't been exposed to them. I'm sure you've heard the expression, people see what they want to see. The reality is that people see what they've learned to see. In Trading in the Zone, Mark talks about think about when a child sees a dog for the first time. There's absolutely nothing in his mental capacity that tells him what he's dealing with. Sometimes it creates a situation where the child is curious. Sometimes they are fearful. Sometimes it's a state of confusion. It seems like sometimes certain kids are just automatically fearful of everything and it seems like some kids are automatically just ready to jump into anything and have this completely fearless attitude. Now think about what would happen if this dog encounters this dog for the first time and he goes up to him and the dog bites him and attacks him so bad that the dog has to be pulled off the child. What do you think that's going to do to the child's perception of dogs going forward in the future? I have a good friend of mine who is scared of dogs and the reason was because he got attacked by a dog when he was a kid. I have three dogs and every time he comes over he is so nervous even though my dogs may lick you to death. That's about the most harm that they would do but he's scared to be around him because he still perceives dogs as dangerous because of that one incident when he was a kid and now he's 42 years old. Think about this experience and how we analyze the underlying dynamics of the experience. From an energy standpoint, going back to the energy stuff that we were talking about, we want to learn about how our minds are designed to think, how we process information, how these processes affect what we experience, and lastly our ability to recognize new possibilities. So you know most likely this this child who got attacked by a dog you know they're going to store this data in their memory and it's going to create one of two types of mental energy either positively charged energy which we can think of as love and confidence and happiness and joy and satisfaction excitement enthusiasm and then you have the negatively charged energy which is fear and terror and dissatisfaction betrayal regret anger confusion stress you know all the things that we that we think of as like emotional pain and because the child's first experience with a dog was intensely painful then we're going to assume that regardless of what senses were affected all of his memories of this experience will be painful unpleasant negative energy so think about the next time that he encounters a completely different dog I mean the answer is is pretty obvious right I mean it's almost ridiculous to even talk about but the underlying implications are not so obvious so so bear with me here obviously as soon as he comes in contact with another dog he's going to experience fear right and the main point is it's any dog that he comes in contact with not not just that same dog but any dog kind of like my example of my friend it doesn't matter if it's the friendliest dog in the world that kid is still going to be afraid and that fear could quickly turn into kind of an unrestrained terror especially if the dog comes up and is really aggressive and starts to jump on him and maybe it's just to lick him and play with him but the child doesn't know that in his mind he had that really bad experience we've all been in a situation where we saw somebody experience just crazy amount of fear and we didn't we we didn't have that same perception and so to us there's like man that you know what is wrong with that person you know why is that person acting so irrational you know if you've been in that situation you probably try to point out to that person hey there's no need to be afraid but what you find is sometimes those words that you're trying to express to somebody they don't really have any impact you know you can think about the kid with the dog as being really irrational but the reality is it was his experience it's his perception of the risk but let's bring it back to trading you know is is that boy's fear of that dog any less rational than let's say your fear or hesitation of putting on the next trade because your last trade was a loser oh now it's starting to hit home with you right you know an ultra successful trader would say that your fear is irrational because this is the now moment this is the opportunity it has absolutely nothing to do with your last trade every single trade if you know as long as you have an edge with your strategy is it has a probable outcome and it's completely independent it's completely statistically independent of every other trade now if you think otherwise then you got to start to realize okay this is why you are afraid but i assure you that your fears are completely unfounded so as you can see that that everyone's perception of risk is different than somebody else's see risk is relative but to the person who perceives it in the moment it seems absolute and you know there's no question about it when the child encountered his very first dog he was probably super excited with curiosity so what is it about our minds the way they think and process information that could automatically flip into a state of fear the next time like the next time the boy encounters the dog or the next time you place a trade after you just had a losing trade and it may not be just you know the next trade in that same day it might be weeks or months or even years longer depending on the effect that that experience had on you so as as complex as these questions kind of seem maybe at first glance most of them can be answered pretty easily and i'm sure as you're listening to this you may already know the answer our minds have had kind of an inherent design characteristics that causes us to associate and link anything that exists in the outside environment that has a similar quality has similar characteristics has similar traits or properties to anything that already exists in our mental environment in other words in the example of the child being afraid of dogs it doesn't matter if the second dog or any other dog encounters thereafter it doesn't it doesn't have to be the same dog that that attacks him in order for the experience to be the same with the emotional pain there just has to be enough of a likeness or enough of a similarity in your mind to make a connection between the two and this isn't something that we think about consciously i mean this is something that's as unconscious as a heartbeat or breathing you know just like you don't have to think about taking a breath every time you breathe we don't think about linking these experiences and our feelings about them and that's why it's sometimes impossible to even talk about fear so let's talk about kind of a two-way flow of this energy again this might seem a little bit abstract might seem a little bit out there but understanding this process plays a huge role in unlocking your potential to achieve consistent results as a trader so to start with you know there's there's structured energy on the outside and there's structured energy on the inside so going back to the dog example the outside energy of the dog is positively charged you know it's in the form of a friendly dog that wants to wants to jump on you and play with you and lick you but the inside energy is that negatively charged memory in the form of mental images that represents the child's first experience with a dog so both the inside and the outside energy they have the potential to make themselves felt on the child's senses and as a result it creates two different kinds of situations for that child to experience the outside energy has the potential to act as a force that that could be very enjoyable but keep in mind these are these are things that the boy hasn't experienced from a dog so from his perspective they just don't exist so going back to the price chart example that I showed you earlier just like you're not going to be able to perceive what you haven't learned yet the boy is not going to be able to perceive what he hasn't learned yet about a dog unless okay here it is unless you are in a state of mind that is conducive to learning so the way we've talked about it you know it might seem as if the boy has a choice between experiencing fun or fear but that's not really the case right at least not right now in the moment of the two possibilities that exist in this situation he's undoubtedly going to experience the pain and the fear instead of the fund and this is true for for a couple reasons first our minds are wired to automatically and instantaneously associate link information that has similar characteristics properties and traits and if you think about it it's extremely difficult to learn anything new if you're scared if you're afraid and if what you're experiencing is a source of pain then it's going to be very difficult for you to express anything but that experience so with the child and the dog if if the child is able to self-generate its own pain and terror at the same time be firmly convinced that that this negative experience was coming from the environment it's also possible for you as a trader to self-generate your own experiences of fear and emotional pain as you interact with the market information and be thoroughly convinced that your pain and your fear was completely justified based on the circumstances so for you to learn how to stay completely focused on opportunities you need to know and understand in no uncertain terms that the source of the threat is not the market the market just generates information about its potential to move from a neutral perspective and at the same time it provides you as a trader with an unending stream of opportunities to do something with if what you perceive at any given time at any given trading moment that causes you to feel fear or pain ask yourself this question is the information inherently threatening or are you simply experiencing the effect of your own state of mind reflected back to you based on an experience that you've had in the past so let's think about an example let's say you're in a situation where your last two or three trades were losers you're watching the market and you have a setup that indicates that an opportunity exists and it's now present like your setup has happened and you know this is what you've been looking for to take a trade potentially but instead of actually just immediately executing the trade you hesitate the trade now feels very risky so risky in fact that you start questioning whether this is really a signal or not so instead of taking the trade you start going out and trying to gather information to support why this trade probably won't work out and keep in mind this is information that you normally wouldn't even consider or pay attention to and it's certainly not information that's part of your trading methodology and in the meantime the markets are moving your the trade's moving around but unfortunately it's moving away from your original entry point and at the point that you would have gotten into the trade if you didn't hesitate now you're kind of conflicted right because you still want to get in the thought of missing that trade is very painful and at the same time as the market moves away from your original entry the dollar value of the risk to participate increases you've got this tug of war inside your mind going on so you don't want to you don't want to miss out but you also don't don't want to get whipsawed of price reverses so in the end you do nothing because you're paralyzed by you're like a deer in the headlights so what do you tell yourself at that point do you justify that your state of hesitation was just because it was too risky it was too risky of a trade it was too risky to chase the market but yet you keep looking back at that trade and every tick the market moves in the direction of what you would have been you know a nice winning trade you you start to you know get more and more this FOMO feeling you know I don't know how I mean this is personal too I mean I don't know how many times I've found myself in this situation but if you find yourself in this scenario you know ask yourself whether at the moment you hesitated were you perceiving what the market was making available or were you perceiving what was in your mind that reflected back to you remember the market gave you a signal but you in your mind you didn't perceive the signal from an objective or a positive perspective you didn't see it as an opportunity but that's exactly what the market was making available to you so let me let me change it now what what if the scenario was your last two or three trades were winners instead of losers would you have perceived this new signal differently would you have perceived it as more positive as an opportunity would you have hesitated most likely scenario is no you would you would have jumped in because it was a signal that the market provided and your last few have been positive so your mental mind state is in a positive state of mind in fact to go a step further not only would have you have probably have jumped into that trade but you may have increased your size going into that trade because of that state of euphoria from the last few trades being profitable trades remember the market does not generate positive or negatively charged information the market is neutral your mind is constantly associating what's outside of you with the information that's already inside of us your mind is automatically and unconsciously linking what's happened to your past into what we call the now moment and if the last few trades that you took were positive it could create a euphoric state of mind if the last few trades you took were negative it's going to create a fear-based state of mind so if we can understand this if we can become consciously aware of this and then learn how to circumvent the mind's natural ability to associate a big part of now with what's happened in the recent or in the past and if you can develop and maintain a state of mind that perceives the opportunity of the market without the threat of pain and without the problem caused by overconfidence then your level of a trader is going to accelerate astronomically i hope you enjoyed this episode i hope it was helpful if you're interested in surrounding yourself with like-minded traders we have a community if you go to community dot navigation trading dot com uh it's free to sign up we've got hundreds of traders interacting every day not only about the mindset things that we talk about here but also sharing trade ideas and just helping each other become successful traders i hope to see you on the inside and we'll see you in the next episode