 Welcome back to the Trade Hacker Mindset. We are going to be continuing with our discussion topics from the book by Mark Douglas, Trading in the Zone. In today's episode, we're gonna talk about the nature of beliefs. 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 nature of beliefs. In previous episodes, we've been touching on these five fundamental truths about trading. Now we're really gonna start to talk about how to properly integrate these truths into your mental system to make them a core belief. Hopefully at this point, you understand these concepts, but understanding a concept is really only the first step of processing and integrating that concept at the functional level to a point where it becomes part of your belief system so it kicks out all the conflicts that may come in contact with that belief. As traders, our minds are not naturally wired to stay in this now moment that we need to be in. This means we have to actively train our minds to think from these perspectives. So in addition to the training of getting our minds to think this way, there might be a number of conflicting beliefs that we have to work through. When you have conflicting beliefs, this is a major issue that will have an effect on sabotaging the best intentions that you have from a mindset standpoint, from a state of mind, when you are trading and staying in that opportunity flow mindset that we need to be in. For example, depending on where you are in your trading journey, you maybe have spent a lot of money learning how to analyze the market or education systems or technical systems or indicators or whatever it is that you have purchased or acquired to start to become a successful trader. And now you have come to understand this concept that we've been talking about in previous episodes that you don't have to know what's going to happen next to make money in the markets. And the reality is that the more you try to know what's going to happen next, that actually works against you in becoming a better and better trader. So what you have is really a direct conflict between your old beliefs and what you thought you needed to become a successful trader and your new understanding of what you don't need to know to actually become a successful trader. So will this new understanding, will it suddenly just take away all the time and the money and the energy that you spent to try to figure out everything that you've learned to this point about the markets? Well, it's really not that easy. And for some it may be, but if you remember in a previous episode, we talked about the relationship between your mind and a set of software code. And we talked about that, some traders may be already be so close to these new perspectives that all they need to do is put a few of the missing pieces, just another line of code to create this aha experience. However, based on the hundreds and thousands of traders that I've interacted with over the year in my experience, I can say that most are not even close to these perspectives at all. So if you haven't fully grasped this concept, then it might take a considerable amount of mental work to get over these hurdles, to properly integrate this new understanding about trading into your mental environment. Now, here's the good news. Here in a couple of episodes, we're actually gonna go over some exercises that will help install these five fundamental truths of trading that we've been talking about and help you potentially resolve these internal conflicts that you may have to get over that hump that's going to get you on that path to becoming a better trader. All right, so let's jump into this concept of the origins of your beliefs. Now, there's two questions. One, do you know the origin of your beliefs and how can this make you a better trader? How can this make you a more consistently successful trader? Now, some of the things that we talk about here, we're going deep in your belief system and it might sound a little kind of woofoo to you. If you haven't done a lot of mindset trading, this might seem so abstract and like it doesn't even relate, but I promise you, if you can internalize some of these concepts that we talk about, it really is going to help you become a better trader. So let's jump in. So in previous episodes, we kind of lump together three mental components. Number one, that memories, distinctions and beliefs do not exist as physical matter. Okay, we talked about that. Number two, that the cause and effect relationship that exists between ourselves and the external environment brings these components into existence. And then the third piece is how the cause and effect relationship reverses so that we can perceive in the external environment what we have learned about. So previously we kind of bundled those all together. Now, to get to the origins of our beliefs, we really have to unbundle those three components and talk about the difference between a memory and a belief. So one of the best ways to do this is think about ourselves as if we have the mind of a newborn, of an infant, right? I would like to think at the beginning of every child's life, the memories or your experiences would exist in the purest form. And by that I mean the memories of what you've seen or heard or smelled or touched or tasted exist in the mind as pure sensory information. So it's not organized or attached to any specific words or concepts because you haven't learned those words or concepts yet. Therefore, let's define your pure memory as sensory information that's stored in its original form. So a belief, on the other hand, is a concept about the nature of the way the external environment expresses itself. So if we combine this pure sensory information and link it to a symbol or system, we call that language, right? So for example, most infants have a pure memory of how it feels to be nurtured by their mother. But it isn't until that infant is taught to link or associate certain words with that pure sensory information that's stored in your memory that you'll form kind of a concept about how it feels to be nurtured by a mother. In the book Trading in the Zone, Mark Douglas talks about an example and he says, okay, think about this phrase. Life is wonderful, okay? That's kind of just a concept, right? By themselves, the words make up kind of a meaningless collection of letters, right? Or symbols, but if a child is either taught or decides to connect these words to his positively charged feelings of being nurtured, then the letters are no longer a collection of abstract symbols and words and it's no longer an abstract phrase. The phrase life is wonderful actually becomes a definitive distinction about the nature of existence or the way that the world works. On the flip side, let's say this child didn't get nurtured or didn't get enough nurturing relative to his or her needs. He could just as easily link this feeling of emotional pain to a concept like life isn't fair or the world is an awful place. In any case, when the positive or negative energy from our memories or experiences become linked to a set of words that we call a concept, then the concept becomes energized and we actually feel this and it's transformed into a belief and it's the nature of our reality. So if you consider that these concepts are structured by the framework of the language that we speak and they're energized by the experiences that we have in relation to them, then it becomes pretty clear why we can talk about these beliefs as a structured energy. So of course we all have beliefs, right? We're constantly expressing our beliefs, both vocally, verbally and through our actions. We are constantly interacting with other people's beliefs as they express them. So think about this, if I asked you what exactly does a belief do? Well, you'd probably have a kind of a blank stare on your face and not really know how to answer that. But if I asked you, what's the function of your eyes? What's the function of your ears or your nose or your teeth? You would have no problem answering since beliefs are such an important component part of our makeup. They're also one of the least thought about or understood. And what I mean by that is, let's say you have a problem with your nose or your ear. Well, we're naturally gonna focus our attention on that part, on that body part and think about what we need to do to fix that issue. If you have an earache, you're gonna be focusing on that. Hey, you're gonna have pain, you're gonna want it to go away, so you're gonna be focusing on that and trying to fix that problem. However, it doesn't necessarily occur to us that the problems we may be having with the quality of our lives, let's say we're, we have a lack of happiness or we're depressed, these are also rooted in our beliefs. One of the dominant characteristics of beliefs is that they make what we experience seem pretty self-evident and really beyond question. I mean, think about this, if you didn't have this intense desire to experience consistent profitability as a trader, then you probably would not be listening to this podcast at all. And usually it takes years of extreme frustration before people really begin to examine their beliefs as the source of the issue with their trading. So even though our beliefs are a real intricate part of our identity, you don't have to take that personally. In other words, consider the fact that none of us were born with any of our beliefs. They were all acquired in a combination of ways, both through our DNA and through our external environment. And many of the beliefs that we have that really have a profound impact on our lives were not even acquired by us freely, right? They were kind of imposed on us or they were instilled on us by other people. So it probably won't come as any surprise to anyone that usually the beliefs that cause us the most difficulty, that create the most conflict were the ones that were actually acquired from others without our conscious consent. And the way I said that may have kind of created a little bit of a negative connotation, but it wasn't out of ill intent. I mean, our parents were trying to do the best they could. They were trying to instill the best belief system that they thought possible to us, but maybe it was in conflict with our natural way of thinking. And we're too young or uninformed to realize the negative implications of what we were being taught at that time. As an example, we see it all the time where you see parents forcing their kids to go to school, get good grades because you've got to go to college to become a doctor. That's the only way that you're going to amount to anything. And a lot of these parents put an extreme amount of pressure on their kids to do specific things because they believe that that is the best thing for their kids. And that's why you'll see a lot of these people who have become doctors or become lawyers and they're extremely unhappy because that's not really what they wanted. They wanted to go to LA and try to be an actor or they wanted to be a trader or they wanted to be an athlete, but yet the force or the instillment of these beliefs from their parents when they were very young and didn't have really a say in what they were taking in can create a very significant impact in the conflicts that they have later on in life. We've all heard the saying, you are what you eat. Well, I think a more appropriate saying is you are what you think. If you think I work hard, but I always have money problems, then guess what? You are always going to be the person who works hard but always has money problems. But if you think money is abundant and money is easily acquired, then you're going to get an abundance of money and it will seemingly come easy. You know, we all know the person who seems to have that lucky horseshoe up their ass and it seems like things come so easy, but that's because of their mindset because they think that way is what happens. You've heard the old adage, the harder I work, the luckier I get. Well, that's true too, but on the mental side, you know, it's these positive affirmations. It's the way that they think that almost tricks the mind into doing whatever it is they want. When you look at positive affirmations and the impact that that can have on you, it's pretty incredible. And there's really kind of four steps to that and this is going off the beaten path of what Mark Douglas talks about in his book, but you know, these positive affirmations, you know, if you first start thinking positively about what you want instead of the negative way to think about what you want, it can have a profound impact on what actually happens. And so the first step is you have to start thinking in these positive affirmations as opposed to negative affirmations. Once you start thinking about it on a consistent basis, then you'll start to feel the positive affirmations and once you start to feel that way, then you can start to speak in positive affirmations and when you think and you feel and you speak in positive affirmations, then your internal system will start to actually believe these positive affirmations. And so that's why I say you can kind of trick your mind into doing whatever it is you want, but if you send out into the universe these negative affirmations, the universe is going to send back these exact same negative thoughts and feelings that you're sending out. In the broadest sense, our beliefs shape the way we experience our lives. As we just talked about, we're not born with any of our beliefs. They are acquired and as they accumulate, we live our lives in a way that reflects what we have learned to believe. Think about how different your life would be if you'd been born into a culture or a religion or a political system that has very little, if anything, in common with the one that you were born into in real life. It might be kind of hard to imagine, but what would you have learned to believe about the nature of life and how the world works? It may be remotely similar to what you currently believe, yet you would hold these other beliefs with the same degree of certainty as your current beliefs. That's what cracks me up about these different religions who they all think they're right and they all have this steadfast faith, but yet, isn't it interesting how a lot of people who grew up in China, for example, are Buddhist and so they think that's right because that's how they grew up. A lot of people in the US grew up as Christians or Catholics or whatever it is and so they are just determined to let everybody know that they're the ones that are right. Well, those are the belief systems that you acquired over time and so that's what you believe and it doesn't necessarily mean that you are right. There's really four ways that beliefs shape our lives. They manage our perception and they're in our interpretation of the environment information in a way that's consistent with what we believe. Number two, they create our expectations. Keep in mind as we talked about before, an expectation is a belief projected into some future moment. Since we can't expect something we don't know about, we could also say that an expectation is what we know projected into some future moment. Number three, anything we decide to do or expression of behavior will be consistent with what we believe. And number four, finally, our beliefs shape how we feel about the results of our actions. There really isn't much about the way we function that our beliefs don't play a major role in. In one of Mark Douglas's other books, The Disciplined Trader, he wrote about an example that talks about, I think it was a game show that he watched back in like 1987. It was called Gotcha Chicago and it was about some local celebrities who played practical jokes on one another. And in this episode, they basically hired a guy to go downtown Chicago and stand on the Michigan Avenue, the busiest street in downtown Chicago with a sign that said, free money today only. So think about that. You're walking downtown in Chicago, people are everywhere and you come across a guy that says, with a sign that says, free money today only, what would you do? I mean, surely everybody just mobbed this guy and tried to get free money from him, right? The reality was, it was the exact opposite. Only one person went up to the guy and all he asked for was a quarter so that he could get on a bus. Otherwise, no one would even go near this guy. In fact, you would see people actually go around and cross the street just to avoid this guy. This guy's one of those crazy guys. I don't wanna even come in contact with him. I'm just gonna stay away. And eventually this actor, the guy with the sign, he grew really frustrated and started yelling, don't you want any money? Please take my money. I can't give it away fast enough. And he'd run up to people and say, would you like some money? And people would say, no, not today. And they would scurry off and try to get away from the guy as quickly as they could. So why wouldn't anyone ask for money? Why wouldn't anyone accept the money? If we assume that most of all of our, all these passerbys could read the sign but still didn't make any effort to get the money, then one possible explanation for their behavior is that they just didn't care about money. Well, we know that that's pretty unlikely considering how much of our lives is devoted to acquiring wealth or the pursuit of money. And the reason is, is because most people have a belief that free money doesn't exist. If free money really doesn't exist, then how can you consciously or even subconsciously relate to the fact that somebody has a sign giving away free money? In your mind, you're automatically going to dismiss that that's real. Your mind is going to go somewhere else and say things like, well, this guy is just crazy. Or the reasoning process that might go on in your mind is that saying something like, everyone knows getting money with no strings attached rarely happens. Certainly not from a stranger on one of the busiest streets in the city. In fact, if the man were really going to give away money, he would already be mobbed and robbed and all the money would be gone, right? So think about every component of your thought process that's described is consistent with the belief that free money doesn't exist. The words free money, they were neither perceived or interpreted as they were intended from the environment's perspective. Deciding the person with the sign might be crazy, creating an expectation of danger or at least a perception that caution was warranted. For the people who kind of walked out of their way just to get away from that person to avoid that person with the sign, it's an action that is consistent with the expectation of potential danger. But the beliefs that prompt any particular state of mind may not be the truth with respect to the possibilities available from the environment's perspective. Let's think about a hypothetical example of someone who believes that in this concept, like most people, free money doesn't exist, but takes kind of a what if approach to the situation. In other words, some people can get so intrigued and curious about the possibilities that they decide to temporarily suspend their belief that free money does not exist. So this temporary suspension allows them to act outside the boundaries created by a belief in order just, let's just see what happens kind of thing. So instead of ignoring this guy on the street with the sign, which would be our hypothetical person's first inclination, he walks up to him and says, give me $10. The man promptly pulls out a $10 bill, puts it in his pocket and gives it to him. Now, what happens now? How does he feel having experienced something unexpected that completely contradicted his belief? For most people, the belief that free money doesn't exist is acquired through unpleasant circumstances. You know, how many times as a child did you hear, who do you think you are anyway? Money doesn't grow on trees. You have to work hard to get money. And all the things that we know or have heard or believe about money growing up. In other words, it's probably a negatively charged belief. So the experience of having money handed to him with no strings attached without any negative comments, it would likely create kind of a state of just pure joy, right? In fact, most people would be so happy that they'd feel compelled to share that happiness with everyone that they saw that day. You're not gonna guess what happened to me. But the fact that most people believe money doesn't exist, you know, a lot of people are probably not gonna even believe the story that he tries to tell them. So let's take this example just one step further and imagine what would happen to this person's state of mind if it occurred to him that he could have asked for more money, right? He only asked for $10, what if he would have asked for $100 or $1,000 or even more? So he's in the state of pure elation. However, the moment that either the thought pops into his mind or somebody who relates to his story offers the idea that he could have asked for a lot more money, his state of mind is going to immediately shift to a negatively charged state of regret or despair. And why is this? He tapped into a negatively charged belief about what it means to miss out on something or not get enough. As a result, instead of being happy over what he got, he might kind of begrudgingly be down about what he could have had but didn't get. And to apply this example to trading, I mean, think about that's why fear of missing out hurts almost worse than a loss, right? If you have a losing trade and you're following your rules and it's just part of the process and you have a losing trade, that's not that big of a deal. But I think what hurts emotionally even more is when you knew you should have gotten in a trade and you didn't get filled or you didn't get in or whatever or you just sat there like a deer in the headlights and the price moved exactly how you thought it would and you missed out on that trade, that's even more painful than actually taking a loss sometimes. So in all of these examples, including the hypothetical one that we just talked about, everybody experienced their own unique version of the situation. If you ask them, each one of these people would have described what he or she experienced from their perspective as if it were the only true and valid version of the reality of that situation. The contradiction between all these versions that they tell of the truth suggests that a much larger philosophical issue that needs to be resolved. If beliefs limit our awareness of the information being generated by the physical environment, by the external environment so that we perceive what is consistent with whatever we believe, then how do we know what the truth is? If we're going to answer this question, we have to really consider four different things. Number one, the environment can express itself in an infinite combination of ways. When you combine all the forces of nature interacting with everything created by humans, then add that to the forces generated by all the possible ways that people can express themselves. The result is a number of possible versions of reality that would surely overwhelm even the most open-minded person, right? Number two, until we have acquired the ability to perceive every possible way with where the environment can express itself, our belief will always represent a limited version of what is possible from the environment's perspective. And this makes our beliefs a statement about reality, but not necessarily a definitive statement of reality. Number three, if you find yourself taking exception to the second statement, then consider that if our beliefs are true, you know, if a 100% accurate reflection of physical reality, then our expectation would always be fulfilled, right? If our expectations were always fulfilled, then we would be in a perpetual state of satisfaction, but that's just not the case. How could we feel anything other than happy or joyful or related with a complete sense of wellbeing if physical reality was consistently showing up exactly as we expected it to? Well, we know that's not reality, right? And then number four, if you can accept the third statement as being valid, then the corollary is also true. If we are not experiencing satisfaction, then we must be operating out of a belief or beliefs that don't work very well relative to the environmental conditions. So if you take these four components, these four ideas into consideration, now you can answer what is the truth? The answer is whatever works. If beliefs impose limitations on what we perceive as possible and the environment can express itself in an infinite combination of ways, then beliefs can only be true relative to what we are attempting to accomplish at any given moment. In other words, the relative degree of truth inherent in our beliefs can be measured by how useful they are. Every one of us has internally generated forces that compel or motivate us to interact with the physical environment. You see, the particular set of steps that we take to fulfill the object of our curiosity or our needs or wants or desires or our goals or whatever it is, it's all a function of what we believe to be true in any given circumstance or situation. And that truth, whatever it is, is going to determine, number one, the possibilities we perceive in relation to what is available from the environment's perspective. Number two, it's going to determine how we interpret what we perceive. Number three, it's gonna determine the decisions that we make. Number four, it will determine our expectations of the outcome. It's going to determine the action we take and it's gonna determine how we feel about the results of our effort. If we find ourselves in a state of satisfaction or happiness or wellbeing in relation to whatever it is we are attempting to accomplish, we can say that our truth, meaning whatever beliefs we are operating from, are useful because the process worked. What we perceived was not only consistent with our objective, it was also consistent with what was available from the environment's perspective. Because if what we did or what we believed to happen and it actually came true, there was no resistance or conflict or forces from the outside environment. And therefore there was no conflict in our mind that would diminish the outcome of what we're trying to achieve. As a result, we find ourselves in a state of this happiness, this satisfaction. On the other hand, if we find ourselves in a state of disappointment or dissatisfaction or frustration, we can say that relative to the environmental situation and circumstance, the beliefs we're operating from don't work at all or therefore they're not useful. Simply put, the truth is a function of whatever works in relation to what we are trying to accomplish at any given moment. All right, so that's the end of this episode. In the next episode, we're gonna take the nature of these beliefs and the impact of beliefs and we're really gonna tie it into the trading. I know in this episode, we kind of went out and did a lot of hypotheticals and talked about our belief systems, but next episode, we're really gonna tie it into the impact of our beliefs on trading. If you're interested in joining a community of like-minded traders, just go to community.navigation trading.com, it's free to join. We call it the trade hacker community and there is hundreds of traders interacting on a daily basis, not only about the mindset stuff that we talk about here, but also sharing trade ideas and the sole purpose of helping each other become successful traders. So we look forward to seeing you on the inside and we'll see you in the next episode.